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Hello YNABers. My name is Jesse Mecham and this is podcast number 68 for You Need a Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.
Today I have a very special interview with J. Money of my favorite named blog of all time: budgetsaresexy.com. J. Money has been blogging for about five years, named his blog the best name I am yet to find, and I instantly liked him. And then I met him at FinCon last year and I really did like him. So, fun guy, and we cover all sorts of different topics, jumping from side gig to full-time, hustling for money with all sorts of strange tactics, and just trying to find things that you enjoy doing, understanding that money isn’t everything and having a good time while you’re making it. Here is the interview:
J: Alright, I’m here with J. Money from budgetsaresexy.com. J, thanks for coming on the Podcast.
JM: Yes, thanks for having me. This is cool, man.
J: Alright. So, where do you hail from?
JM: I am talking to you from right outside Washington DC area, the East Coast.
J: Specifically I mean what man cave do you hail from? I want you to tell people a little bit about your man cave, because I want to post some pictures.
JM: Yes! I went on a DIY Target binge with shelves and I started making a whole wall full of my personal library kind of deal. I kind of wanted that Ron Burgundy feel where it’s like old school but a little funny in a way; so I have a fake fireplace in there and some pipes, even though I don’t smoke pipes; some liquor, even though I don’t really drink that while I’m working. You know, all that kind of stuff, just to make my little blogging environment fun and cool and exciting, as much as you can be down in the basement.
J: Yes, exactly. So how long have you been blogging now?
JM: Man, you know, this month will be five years – the middle of February – all from just sharing some thoughts out there on money. I didn’t really know what I was doing, and here we are later and it’s now my full-time gig.
J: So you picked money. You seem to be a person of varied interests.
J: So why money? What was it about that topic that kind of pulled you in?
JM: I think it’s probably a couple of things, but the main thing was we bought a house in the middle… you know the peak when everyone was buying and flipping and all that stuff, and I thought, “Well, all my friends are buying a house – I need to buy a house.” And I’ve always been okay with money; I’ve never been really good or really bad, just middle line. Bought a house and I was like, “Ah crap! I don’t even have a budget, I don’t…” I didn’t put any money down; we just signed on the dotted line. We actually went to rent a one-bedroom apartment to save money, my fiancee and I at the time; and in 48 hours ended up buying a house.
J: Oh my gosh.
JM: $360,000 on a whim. Which is… My personality is very all over the place, and I grew up from the military lifestyle so I’m moving all the time. Anyways, long story short, I started researching online how do I get a budget and all that kind of stuff, and I kept coming across all these personal stories and diaries online. I was like, “What are these?!” I’ve never [?? 0:03:46] blog, and I kept getting drawn to people saying, “Hey! Here’s how much I made, here’s my story.” And I mean, I’m full of crap – I can tell my story just like everyone else did. And I don’t like writing, I don’t like editing and all that stuff; I just created a blogger profile or whatever, a blog, and started writing. That’s how I got started. But that’s why money became number one – because we bought a house. And I’ve always enjoyed talking about money and trying to figure out ways to make money, even though I wasn’t really good at it at the time. So that kind of started… you know, once you get going you get excited about stuff.
J: Yes, you kind of notice that your interests broaden a little bit.
JM: Oh yes.
J: You say you don’t like writing, but you mean you don’t proofread and make sure your commas are all squared away and…? You just throw it up there.
JM: Yes, in the beginning I just said, “You know what? I’m going to make it a point not to edit, not to… like I would not even capitalize “I”s and stuff – I was horrible! I personally liked it because I could pump out my thoughts in minutes. Then as time went on, a) a lot of people started complaining, and then I got one email from someone who had a really large website, like a news media outlet, that was like, “Dude, I love your stuff but you curse all the time, you don’t punctuate. I can never take or promote you because it’s bad for my audience.” And that one thing, in a way, made me… I guess you could say sell out a little bit; I started dedicating more time on cleaning up and polishing my stuff. I didn’t change my style of writing, but I changed how it got put out there.
J: Well, I’m glad you haven’t sworn yet! I had a webinar years ago with [?? 0:05:36], who tends to swear. I don’t swear, so apparently I also attract people who don’t care for the swears. And I had this webinar with [?? 0:05:45] on there and it was really good content; he was talking about earning extra money and giving really good tactics, but he was swearing. So in the comments for the webinar, streaming in, people were like, “Stop swearing!” because it was all for people who liked YNAB and all that stuff. So in the end we had to clean it up and, you know, make sure it was kosher.
JM: For you I made a point to try and catch myself from swearing. I’ve already caught it twice since starting! Which I normally don’t do, so…
J: We all appreciate it.
JM: I don’t like to write in… I like to get my thoughts out; now it takes me… you know, I did a post today and it took me two and a half hours. And if you look at it it’s really like, “This guy did it in 15 minutes.”
J: Was this the rollerblading post, or have you already put that one up?
JM: That one already went up, but that took me two hours. I actually wrote it in ten minutes, but by the time you clean it up and you get pictures and you edit it, all that stuff… But you know, it all helps to grow your business and that’s… if you want that, then that’s what you have to do.
J: I think if you were to look only at the internet commenter population you would be convinced that nine out of ten people are grammar Nazis, you know. So I had a guy that was yelling at me… I wrote this really great thing about Roth IRA versus traditional IRA – you know, how do you make the decision, blah, blah, blah – and the guy could not get off my use of alright as one word. It’s not one word, apparently.
JM: What?! Like a-l-r-i-g-h-t?
J: Yes! You can’t use that. It’s not allowed. So you better do a big database query, find all your posts with that in there, switch that. Anyway, he was really offended at that, so content aside, the alright usage was too much for him.
JM: Alright. Now I’m going to remember that because I say that probably two times every post. I start my sentences with “so” or “but” or “and” all the time!
J: So despite your lack of English as a professional background and all that stuff, you’ve been doing the blogging thing. And I wanted to talk about your series on your site – this is budgetsaresexy.com, in case anyone’s forgotten – but the series where you talk about the hustling for money; and to just share maybe some that you’ve attempted or some that people have shared with you that’s PG-rated. I know in your email you sent me there were some pretty weird… well, not weird, but definitely not mainstream tactics for getting money on the side.
JM: Yes. It all started with this woman… As the years have gone by, and as you know, you can say a lot of stuff about money but over time you’re like, “Ah, I need to spice it up a little bit.” I started requesting more guest posts so people can get different perspectives on stuff, and this lady said, “Hey, I want to write about my chicken farming that I do.” And I was like, “Chicken farming?! Well, there’s no farm… I mean, none of that over here.” I was like, “That is interesting and different, and I bet no blog has that!” So she wrote just a synopsis on how she makes money through chicken farming; and it was really cool and interesting and pictures. So when I saw that, that was the day I said, “Well, I’m going to call this the Side Hustle series, and I’m going to start getting more of this kind of stuff.” So that started it. And then from there it went onto, you know, I always wanted it to be like, “Hey, I’m a [blank],” you know, “I’m a sample passer-outer at CostCo,” “I work on a food truck,” “I’m a bouncer,” “I’m a yoga instructor.” So that’s the general gist of it, and I’m going through my site now to find the ones that I like the most.
One of them by Sam at Financial Samurai did one on… He’s not a watch dealer as in selling it in the store…
J: Like trench coats, open up and you’ve got watches all on the inside!
JM: So he just… his passion is watches. He loves watches, like high end ones and quality ones. So he goes… he has his contacts in the watch world, he picks them up and then he sells them – not on the street or down low or anything, but to other people that are specifically looking for a specific watch that’s no longer made but is worth $1,000 or $2,000. So he flips watches, which I thought was pretty cool.
J: That’s nuts.
JM: Yes. This week we had someone that… he’s a big… he flies all over the world, he can max all your mileage any which way you want. He charges $50 or $100 and he’ll… you’ll say, “Hey, here’s my mileage, here’s what I want to do,” and he calls and does all the legwork so you don’t have to be on the phone with him trying to figure out what miles can I use, how far, how much does it cost – all that annoying stuff. He does it and LOVES it. I didn’t even know that was a thing!
J: So he’s like a credit card miles concierge.
J: Oh my gosh.
JM: That’s actually a better way… He calls it a Frequent Flier Miles Specialist, but your way is probably a little bit more easy to remember.
J: So he obviously has experience in this little niche, and now he actually markets himself as that; people pay him just to handle the hassle.
JM: Yes, and he’s always… This guy is probably one of the only ones that’s ever done two Side Hustles for me. I think a year or two ago he did one, he bought a house and he rents all the rooms out and lives [?? 0:11:04]
J: So he’s like a boarder? Okay.
JM: He maximizes everything. But the whole point for him is… He loves money, of course, but he wants to travel and experience more in the world; so he uses all these ways… That’s what he does with his money; that’s his priority. And that’s really… I had a post saying how much, like it’s not, you know, it’s not bad to say you really want money; a lot of people say, “Oh, you’re the Devil, it’s greed and this,” but really money is a tool to do whatever. If you want to give it to charity, if you want to travel the world, whatever it is, it’s a tool to help you get there.
J: Yes, absolutely.
JM: And then some others are like, “I [?? 0:11:43] counting worms for fishermen, how many worms are in the thing. I got paid 20 cents…” every hundred she counted or something.
J: Oh my God!
JM: I mean, they’re really cool. There’s stuff that you don’t think about in a normal day. And so that’s what I liked about the series. You know, some of them are more fun and silly that people don’t want to do but… That’s the point of it – it’s to say, “Hey, there’s a billion things you can do to make money. Find what you’re good at and what you like, and there’s always some way to parlay it into revenue generating, if that’s what you want out of it.” Some people don’t. Like when I started the blog I had no intentions of making money – I didn’t even know you could make money, you know. I just wanted to write; that was fun for me at the time. And then over time it changes, so…
J: When did you decide to go full-time with the blog? You were going with it and all of a sudden it was like, “Oh, wait a minute,” you know?
JM: Yes, towards the end of the first year I started making money. People would email me, “Hey, can I put an ad up?” $50 a month or whatever. And I was like, “Oh, man, sure, yes, cool! I just get free money!” So I did that and some stuff was good, some stuff was bad as far as just, “Well, should I put these on versus these other ads?” whatever. But after the first year I realized you can make money. I was working a nine to five at a start-up, and as the years progressed and I spent more hours every day on the site I thought, “Well, can I amp this up enough so I can do this for a living?” And it was just an idea at first, and then another year went by and I made triple the money, and I was like, “Now it’s like a side job,” you know, and just money to go spend at the movies or whatever. And then towards the third year, or maybe the end of the second year – something like that – I thought, “You know what? I’m going to save up money,” like $50,000 – it was an arbitrary number. “As soon as I hit that, I’m going to put it in my two weeks.” And this was about July or August of 2010 or 2011 – I don’t know, I’m bad with time – and I said, “Well…” And I got to $40,000, and things at my company were kind of really shaky and people weren’t paying on time, and I thought, “Oh no. Something’s happening,” smelled it in the water. So I just told my wife, “I’m scared, but I’m going to go in tomorrow and I’m going to put in my two weeks,” and I think I was at $42,000 saved up. I was just going to risk it, but I was really nervous. So I go in, and… this is in downtown DC, I’m on the Metro and I get an email on my iPhone that says something like, “Hey, we need to meet. We can’t pay payroll or whatever, but don’t worry, we’re working on it,” and I was being a smart-ass and said something to everyone like, “Look, is the company going down? Tell me now,” kind of joking around. I had no idea what was going on. I get called in, the same day I was going to put in my two weeks’ notice, and I get laid off right there! And I’m like, “Holy crap! That’s my ideal!”
J: So you couldn’t quit. Did you think, when they were like, “Hey, you’re laid off,” and you’re like, “No, I quit” – did you try that?
JM: I thought about it, but I thought to myself, “Well, if I get laid off then maybe there’s…”
J: Some severance or something.
JM: Severance – not realizing I got laid off because there was no money. But it helped me because I already knew I wanted to do it; I just needed a sign or something to push me. And I was [?? 0:15:10], so this was a perfect getaway because I didn’t have to make a decision – it was done, I was out and I was like, “Now this is real.” I packed up my stuff, literally an hour later I moved into an office that my friend have, and she was like, “Hey, just rent out this desk from me and start your company here.” And I said, “Great!” So within an hour I already had the plans in the works. Yes, it’s pretty crazy when things happen like that.
J: Yes. It’s nice, in a way, it is nice to have your decisions kind of made and kind of push you a little bit into an unknown. So when you jumped full-time… Because there are people listening to this that probably have side things, and I was the same when I was working for KPMG, and it was a horrible job – I’ve never told anyone otherwise, but… But I think they start everyone out at… or back when I started it was $48,000 beginner accountant type thing, and you’re working 80-90 hours a week, so you’re making a McDonald’s wage if you break it all out. And then it’s all about, “Well, you’ve got to climb the ladder and make partner – you’ll be making whatever.” So I was having a hard time. I would work on YNAB from four to five in the morning, and then I’d usually try and get to the gym and then I’d get to work by 6.30.
JM: WOW! That is [?? 0:16:27]
J: It was awful. So I’m not seeing my two kids; my wife and I were living in this new city – we were down in Dallas – and it was awful. So I go and talk to this guy who I saw… He was through my church; I saw him as a pretty successful entrepreneur, and I’m like, “Hey…” And he would console married couples, like counseling and stuff; so I’m like, “Hey, let me set up an appointment with you.” So when I come in, he’s thinking I have marriage issues because that’s what he’s used to having these appointments about. It’s like, “Okay, we’ve got a young husband coming in. Oh great – what’s he going to say?” And I sit down and he’s pretty somber, and he’s like, “Yes, let me know what’s going on,” and I’m like, “I’ve got a question. I’m making money at my business…” and he’s suddenly like, “Wait – what?” And I said… And I was making about triple what I was doing with KPMG, and so I tell him that. I’m like, “It’s about triple what I make.” And I didn’t have any employees or anything and all that, and his face just lit up – he was so happy that I wasn’t telling him I was having marriage issues.
JM: Awesome. Having triple is a great…
J: But he… I should have done it earlier, I guess is the end of the… The end result is I never should have taken the job. I should have just worked on my side thing and gone after it. But I don’t know – to each his own, you know. I’m kind of risk averse. You sound kind of risk averse as well – you saved up a big pile of cash and…
JM: Yes. I think, you know, it’s funny; because you look back and you’re like, “What I would have changed differently.” But at the time, like with you, you know, having triple the amount. For me, I just wanted to break even – that was [?? 0:18:10] risky. Like, I think I was at 80% of what I was making at my job. I think my job, I was making $75,000, and I think my blog – and I had some other sites at the same time too – was maybe $60,000 bringing in. And I said, “Okay, that’s close.” And then I get fired so it doesn’t matter anyways, but… But I think that was for me. So for you, having three times… Maybe some people are like, “Oh dude! You’re crazy!”
J: I know. That’s what I was feeling.
JM: Yes, you know, we’ll get there when we get there. The important part is that we do reach our dreams, or at least have the dreams to shoot for.
J: Absolutely. I like this… I want to encourage everyone to check out the Side Hustle thing, only if it kind of opens your mind to, “What could I do?” And it’s important, I think, for people to realize… I mean, when I first started the software on the side it was a couple of hundred bucks a month, I would just pour it back in. It doesn’t have to be a big amount to really change… have a big impact on your finances. And it can be… $500 is big. You can make some serious headway with debt or putting it away or whatever; or just having fun with it. It could be impactful.
JM: Yes. Well, I’ll tell you this too. At first, for me the blog was just fun and games and stuff; then when I made money it started to be like, “Okay, now it’s half fun, half money.” But now, I mean, I do have fun, I do make money – that stuff is great; but now, four or five years later or whatever, the most important I’m realizing is it opens you up for so many other opportunities. I’m not like a big, “Oh, you have to go network and schmooze,” and all that kind of stuff – that stuff is good in any business. But to give you an example, two weeks ago I got asked to apply to a public radio, to be a host for a radio show that’s nationally syndicated. That’s just an interview – it wasn’t a job offer or anything – but I was like, “Holy crap!” I would never even have guessed about this! And I realized it wasn’t for me, which is fine. And then last week I get an email from a talent agent in New York City that’s asking me if I want to apply for something; but these are all things that you can’t plan for and you can’t say, “Oh, I’m going to sit down and build a blog and then I’m going to go, and this is going to come from it.” So the opportunities, like meeting you at the Financial Blogger Conference – you know, we just sat next to each other, it just happened to be that way – and now we’re becoming closer and more friends… But I think it opens up for so many other things outside of money and outside of the actual tasks you’re doing. Like my best friends are all because of blog and Twitter. My best friends are from Twitter – which is CRAZY talk.
J: And there are some people that definitely… When you just said that, they do think you’re crazy.
JM: I know! But my wife… You know, more people call my house and email me under J. Money than my real name – because, surprise, that’s not my real name! And I’ve actually this week – because my goal for 2013 is to focus and simplify – I’ve just been getting rid of all the clutter… You know, I have double the email accounts for my real life and all my blog email alter-ego; so I got rid of my personal Facebook this week, personal Twitter, personal LinkedIn – which is HUGE, because that’s a part of you. And I have to say, I mean, it’s only been a week, but I feel SO good because I decided I’m going to concentrate on this alter-ego which I love and enjoy more anyway. And it’s still me; it’s just not…
J: It’s more anonymous
JM: Yes, it’s more anonymous. I can do more stuff and not have to worry if it’s going to affect my other life. And it’s a divider, because as you know, we work hardcore, all hours of the night.
J: It’s just what criminals do. It makes perfect sense!
JM: Actually, when we… Not to get off topic or whatever, but when we started…
J: Like we have a topic! But yes, go ahead.
JM: Last year when we did Love Drop – that charity were raising… going round the country or whatever – one of the biggest things that I had to deal with was putting my face out there, because we filmed everything. Like we’d go to someone’s house, give them a card, film it right there, and that was our way of letting people know, “Hey, your money you’re giving us, you can see us giving it to them,” to motivate them more. But that was the number one concern from a lot of people. Like, “There’s this anonymous guy taking our money – how do I know what he’s going to do with it?” Filming helped, but then my face was everywhere. And if we got media stuff, a lot of people don’t want to use your anonymous thing. But I had to consciously make the decision, “This is important to me to have this.” And in a way it helps me…like on my site I do my net worth every month and I put it out there; “I have X thousands of dollars in debt, thousands in savings,” you know, my whole financial history on my site. And if I had my name out there, it just gets a little…it’s already a little creepy, but that really changes things. So I can be more open because I’m anonymous.
J: Otherwise it’s like awkward Thanksgiving dinners, you know…
JM: Yes, it’s already awkward. Some friends now have… I accidentally slipped in, said something about my site, so… unfortunately.
J: Yes, that’s something that’s impossible to… Hey, I was one time, I was in a restaurant… this is talking about… I’m moving into celebrity sightings now. I was in a restaurant and I’m wearing one of my YNAB shirts – like this Nike golf shirt my wife gave me with a little logo on it – and the cashier, when the food was ready, they were like, “Hey, Jesse,” and I could go up and grab it. And this guy comes up to me – because he sees my shirt, hears my name called – and introduces himself, tells me he loves YNAB. It was my first celebrity… I got to be the celebrity! So that was pretty cool.
JM: That’s awesome! I love that.
J: Man, I think that’s cool you shut down your personal on your Facebook. So, I just yesterday morning deleted Facebook from my iPhone.
J: I’m doing baby steps, you know. Because I get home at 5.30 and the kids go to bed at 7.30, and yesterday my wife’s like, “Hey, this is really… this is like sacred, holy time, from 5.30 to 7.30. So if you’re pulling out your phone, even if it’s legitimate or whatever, it cuts into it.” And she called me out on it in a nice way, and I was like, “Yes, she’s right.” So I get home, I put my phone up in my bedroom, and then I’m ready to go for the evening – and it feels good.
JM: Yes, it feels good. It’s really hard to do, but it feels good.
J: So, simplify – you’ll have to tell me more about your simplification when we chat at FinCon, because you’ll have months under your belt.
JM: I’ll have my Facebook accounts back online!
J: I’m going the other direction – I have 4,000 friends and counting! Well, it was fun to talk. I love the name of your site – budgetsaresexy… yes, I almost said it wrong, sexybudgets.com – that’s probably owned by someone else.
JM: I think I own it, actually!
J: Oh, good! You’re cornering the sexy budgets market domains.
JM: That’s right.
J: So, how did you pick the name, really quick?
JM: Actually, you’ll probably like this because it’s more… not a religious thing, but when my wife and I were engaged we went to… I think it was called Engaged Encounters or something, like where you go for a weekend just to make sure everything’s good before you actually get married, and you talk about living situation and money – it’s all really good stuff. Anyways, on our break there I’d been, of course, thinking about blog stuff and wanting to do one; so in my 20 minute break I just listed a billion names. The top one, I think, was Saving is Sexy – that was taken. And budgets, you know, I didn’t have one but I knew I needed one, so I just chose that. And I thought because it starts with a ‘B’ that maybe if everyone puts it in their blog roll I’d be at the top! That was pretty much the basic [?? 0:26:15] and that was that. The important bit was the “sexy” though, because for me, I like information out there… Like if I’m looking to open up a Roth IRA account or something, I would like to read this in-depth thing but I don’t necessarily do it for joy or entertainment. So my site is more fluffy or motivational and more fun to read; so I wanted something that’s catching and something that says, “Hey! This has flair – it’s not going to be your ordinary site.” And then from there, of course, it was good.
J: I think my favorite part about your site is the quote from Ben Franklin.
JM: A lot of people do ask if it’s real!
J: It was awesome – when I first saw it I was laughing. That was good.
JM: Oh, that’s good. I was thinking of changing it because it’s been there for a couple of years.
JM: Maybe I’ll just leave it for a little bit longer.
J: You’ve got to, at least for a little while longer.
JM: There you go! Awesome.
J: Okay, cool, man. Well, have a good weekend. Thanks for doing this very topically-focused podcast interview. And yes, we’ll get this out there, and everybody visit J’s site – budgetsaresexy.com – and you get to see some pretty creative, light-hearted, fun stuff about money. I like it.
JM: I like that too. Thanks, guys.
J: And we’ll see you at FinCon if not earlier.
JM: Alright, buddy. I’ll talk to you later.
J: Alright, later.
Until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.
Many of us have applied significant, sustained force to our finances – in the wrong direction. We’ve spent carelessly, procrastinated saving, and borrowed to make it all “work.” This force in the wrong direction has created velocity on the path to more stress and fewer options in life. What a drag.
Reversing our course requires us to apply equal and opposite force to slow our negative financial momentum, eventually bringing us to a state of rest. In this restful state we’ve stopped borrowing and achieved awareness of our life’s true expenses.
After achieving “rest” we can finally build positive momentum in the right direction; this is when we experience fat checking accounts, buffers, and debt freedom. The good news is the positive momentum builds steadily as we employ the power of a functional budget and compounding interest.
Every day we sustain our positive financial momentum we’re that much further from a state of rest (“just getting by”) and heading in the wrong direction (borrowing).
Which is the most difficult phase? Having gone through it over the last eighteen months, I found it hardest to slow the negative momentum and achieve financial rest – that point where I’m not saving much, but not borrowing either.
What makes this phase so hard? The fact that my previous bad decisions and habits kept applying force in the wrong direction long after I’d resolved to go in the right direction. I had to maintain high focus, resolve, and optimism to overcome the negative momentum.
This post may have gone a little too abstract, but I know some of you are wondering why you can’t seem to build up your cash and move further from $0. Be patient. Use your budget to spend smart, work on your earning power, and hang in there. You’ll make it.
1. Bookkeeping for a Buddy
When I sold my share of the business to my former partner (and still good friend), he lost his “books guy” – me. He never got into the habit himself, so when it was time to do the books for this year’s taxes, he hired me. Once I’d built his P&L and Balance Sheet for him, I offered to contininue maintaining his books for $100 per month.
He uses YNAB in his personal finances, making it easy to set up a business budget file, share it through Cloud Sync, and keep his transactions current. The gig takes me about two minutes per day, five days per week. And it’s nerdy budget fun.
2. Website Disaster Prevention and Recovery
This is a reasonably simple gig with a technical-sounding name.
My clients all use WordPress (same platform as this blog). I charge them $25 per month, which covers:
1. A full daily backup of their website.
2. Monitoring for malware attacks by hackers.
3. Emergency support if anything on their site breaks.
Sounds complicated, right? It isn’t. Yes, you do have to have the technical skills to fix a broken WordPress site. I’ve been working with WordPress for a few years; I rarely run into a problem I can’t solve (and I’m not a programmer).
The sneaky part of this service is the fact that I just go to third parties to buy the backups and malware monitoring. I set up accounts for each client, tack a little extra onto the price to cover the emergency support part of the business, and bundle the whole thing as my “WordPress handyman” service.
My clients know they could set these services up for themselves, but they choose to pay me because it reduces their mental overhead and time risk. If something – anything – breaks down with their site, they just email or text me and I’m on it. That’s the value-add. Nerdiness for fun and profit.
3. Website Assembly and Customization
The niche here is working with clients who need a clean, presentable website but don’t have thousands of dollars to invest in someone with Adam’s experience and ability. They hire me to assemble a functional site from existing components (WordPress plugins and WordPress themes). It’s only a few hours of work for me, so it’s only a few hundred dollars for them. And, again, it’s nerdy fun.
I’ll also have clients hire me for one-off tweaks or cutomizations to their sites. I bill $50/hour for that kind of thing.
I realize many people don’t have the skills (today) to run with my second and third side gigs – but many (most?) of you could do “bookkeeping for a buddy.”
There’s no need to overstate your ability or your value, either. I’m not claiming to be a tax professional (gig 1) or a full-blown web developer (gigs 2 and 3). I’m using skills I’ve developed to save my clients a little time and headache.
Think you could run with any of these ideas to make a couple hundred bucks each month?
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Hello YNABers. My name is Jesse Mecham and this is podcast number 69 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt, and save more money.
And you save money with the big wins, and one of the big wins – the biggest win of all big wins in saving money – your biggest expense in your life, without question, unequivocally, is taxes. And it is tax season. You’ve heard the H&R Block commercials on the radio: “Hi, my name is Jim. I’m a former CFO and now I do people’s taxes.” And then, they give a disclaimer saying if there was an error and we didn’t do this correctly, they’ll do some kind of a refund guarantee. Everybody focuses on the refund, enter it with their Turbo Tax, maximize your refund; TaxACT, maximize your refund; maximum refund guaranteed. Well, the fact of the matter is what you put in is what you get out.
And today I am interviewing my tax advisor, Casey Murdock, author of the book ‘Tax Insight,’ really nice guy. I mean, he does taxes so he’s a little weird, but beyond that, super nice guy and super, super smart when it comes to taxes. You’ll hear in the interview how he saved me over $20,000 back when I had one guy do my taxes and then I brought them to him, and then he did a little “switcherooski,” waved his magic wand, all the stars aligned, and yes – it was $20,000 that I immediately used to help pay down my mortgage.
Can you… Doesn’t that make you feel a little bit sick to your stomach, to think that you could be overpaying and you have no idea? And you can’t tell me you don’t pay taxes, and if you tell me I get a refund so I don’t pay taxes and we’re sitting face to face with each other, you’ll probably hear me scream LOUD – because you DO pay taxes. When you get a refund, all that means is you paid more than you should have and they’re giving some of your money back. So please, you pay taxes. You have a pay check; you pay taxes. Your employer pays your taxes on your behalf as well. You pay taxes all the time. When you’re pumping gas, you’re paying taxes. When you die, you pay taxes. When you’re born… I don’t know if you pay taxes then. It might be the only event, the only life event, where you don’t pay taxes.
So, without further ado, because that was quite a bit further and of the ado, here’s my interview with Casey Murdock, my tax advisor. If you want to talk with Casey, shoot him an email at email@example.com [or firstname.lastname@example.org], and ask him to do your taxes for you. His rates are awesome, his knowledge is awesome, his thoroughness is awesome, and I use him for my taxes. So, what else can I say?
With that endorsement, let’s go over to the interview. I’ll see you guys on the other side. And ladies, please try and resist my sexy voice. I have a serious head cold. Here we go.
J: Alright, I’m here with Casey Murdock. He is my tax advisor and I want to welcome him to the program. Thanks for coming on, Casey.
CM: You bet. I’m glad to be here, thank you.
J: So Casey, you… Give us a little background on who you are and how you got mixed up in taxes.
C: Alright. Well, my first delve into it was when I became… when I was in college and decided to do accounting, and taxes were the part that I really liked about. So, I went from there. I’ve worked for a couple of CPA firms, and for the last six years I’ve been doing it on my own. I’m an enrolled agent with the IRS and I also do investment advice and things like that. My firm is [?? 0:04:17] advisors. I’m a partner here, and I lead the tax practice.
J: Cool. So you liked taxes when you were in college and kind of got involved that way. It is… You’re kind of… how should I say this? You’re an odd man out because most people can’t stand taxes. And, they’re probably happy just to have something or someone do it for them. Right now we’re seeing a lot of advertisements where people… you know, these different ads for TaxACT or Turbo Tax or H&R Block – they all have these advertisements that say, “Maximum refund guarantee,” or, “Maximize your refund,” or even worse is “Refund Loan Places.” But, a lot of emphasis is put on the refund from all this software and they try and entice people to jump on board with that software. How do you… I mean, what’s the difference for you being a tax advisor, between you and someone doing it on their own with any of the number of options of tax software out there?
C: Well, I think the first, the biggest thing that comes to mind is the tax software can only ask you the questions that it’s been programmed to ask. And, it can’t really probe very well, or hear something that you say, and think about other things. And so, the biggest difference that I see is the software asks…
“Do you have a W2?”
“Okay, put in the information and do this.”
… and you go from there. Whereas, if I am preparing a tax return for somebody and see something that’s a little out of the ordinary or a little different, then I can delve into that; or if I see a planning opportunity, I can talk to them about that for the current year or for the coming year, and help them find ways to improve their situation.
So, let me give you just a brief example that happened last year. One client that I’ve been working with for several years had a rental and had some other things going on. They had a self-employed business and the other spouse was an employee; they had a bunch of different things going on. But, the rental property was kind of status quo, had always been the same each year, and their income had been roughly the same. He was going to school and doing a little bit of part-time work. She had the little side business that she did on her own, and their income was really low, while he was in college. And this particular year, they did a couple of things with the rental in the way they took the deposit – and a few other little things like that that I won’t go into – that actually bumped them over investments or passive income limit that eliminated them from a significant credit that they could have received. And so instead of getting a $5,000 refund like they had seen each year, a couple of hundred dollars’ difference in this type of income made it so that they owed some money instead of getting the $5,000 back that they thought. It’s nearly a $6,000 difference, and that difference could have been easily avoided had they talked to me. And, we’d talked exactly about what they were doing differently. And so as we worked it through, I was actually able to find a way that worked and we were able to get that credit. Turbo Tax or whatever, TaxACT or whatever, would never have asked them. It would have said, “Here’s what your refund is,” or, “Here’s what you owe,” and there’s no explanation and there’s no analysis done to figure out what was the difference here from year to year; what caused it; is it something we can fix or change?
J: Yes. Now, I have… I had an advisor doing my taxes – I can’t remember when you started doing them, maybe it was my 2008 returns, maybe – but, it was a while ago and I had an advisor doing it. I hadn’t done any hiring of him; I had just kind of found one, gone with him, hadn’t shopped around. And, I’ve told this story a lot to people that have read the blog about how you basically… I can’t remember if you took… I think he had already prepared my business returns, is that right?
C: Yes. He’d done your business but not your individual.
J: Not my individual. So I had you do the individual, and then when you were looking. Maybe explain to people how that happened, because it would have been a SIGNIFICANT, like a $20,000 plus tax difference – tax liability difference.
C: It was, and what had happened was I looked at some of the things that were on your personal return and some the things that had been done on one of your business returns. And, just realized that had you accounted for things a little bit differently on the business return, in a legitimate way – it’s just a matter of where you show it, and I don’t want to get into the details of that for these people – but where that expense was accounted for could have happened either way and the tax code then would have been just fine. But it made a very… like you said, it was about a $20,000 difference for you tax-wise, because what happened is you were right at the cusp of reducing many of your deductions, eliminating them, some credits and things like that, and right at that line you were over it having done it the way that the original accountant did. And if we switched it taking those deductions out of your personal return instead, you were below those limits and therefore could take advantage of the deductions that had been eliminated. So, I went back and amended that business return and saved you a lot of money.
J: Yes. It was… At the same time I was very happy and disturbed. Because you realize, you don’t know what you’re missing necessarily.
C: Exactly. And that’s another example: a software program is not going to analyze that for you. It’s going to ask you a question, it puts in the answer, and it doesn’t say, “Oh, wait a minute, but if you did it this way, look at all the money you could save.” That’s where the advantage is in meeting someone who’s actually paying attention.
J: Now, clearly I didn’t do a good job picking an advisor in the first place. Because what you were doing wasn’t like crazy rocket science as far as tax advisors go, so it’s not like saying you were the only one that had some exclusive patent and strategy on this thing. But clearly the guy was using… either missed it or had a lot of other returns to do, I don’t know what it was; but I was sad that he had done that. I don’t know if I had missed… if I had maybe overpaid in prior years because of that. But what’s scary is it’s like going to a car mechanic – you know, you don’t really know because you don’t understand your car and the engine and how everything works. It’s tough to know how to hire a good advisor as well. Would you have any advice for people…? I mean, clearly I’d tell everyone to work with you, and you work with people not just in California where you are, but… But what would you tell someone if they were going to say, “Okay, I’m going to go look for an advisor?”
C: Well, there are a lot of things that are important. I actually really… I have two pieces for the answer: one’s directly from what you’re saying, one’s another piece to it. I think it’s important, regardless of whether you use software or you do it on your own and you’re actually reading the manuals and making the calculations, or if you go to a professional tax preparer, it’s important for you to have an understanding of your tax picture. It’s important to not put blinders on and just say, “I don’t want to deal with this or think about it.” And, to get a decent knowledge of how taxes work – not to learn all the little minutiae, but a decent knowledge of it so that you can recognize situations in your personal situation that are important for your tax consequences. So, to me, that’s one of the first things to do, even before going to look for a professional preparer, is to know what questions to ask, is to understand a little bit about what’s going on.
Then when you go and you talk to them, I think you definitely want to have somebody who has a decent amount of experience, who has some credentials; but I don’t think those are the end all/be all of it. To me, more important is asking them about how they go about preparing your return. Do they… How many clients do they have personally whose returns they’re preparing and things like that? And if they have 1,000 people that they’re preparing tax returns for…
J: Is that real? Are there guys that really do have 1,000 clients?
C: Yes, there are. I know several of them personally. And the chances are that it’s going to happen like what happened with you. I don’t think that the CPA that you were working with originally didn’t know about what I did – I’d be shocked if he didn’t. I think that it’s just a matter of so many of them have so much that they’re trying to do so fast in the tax season, they ask you for the information, you give it, they stick it in and that’s done. And that’s where it makes a big difference in what you want to understand about the preparer you hire – to be sure that they actually are going to take the time with you to really analyze what’s going on, to ask you a lot of questions about your situation each year, because it does change and little things really make a difference. And maybe they do that before tax season starts – you know, the end of the previous year. Or maybe they do it a couple of times mid-year, and maybe you pay them a little more to do that. But if that’s important to them, then they’re going to take the time to really pay attention and help you. That would be part of their natural process of what they do.
J: I see. Well, that’s great, that’s good advice. I think people listening could use that. We’re kind of changing gears a little bit from the advisor side, and you’d mentioned that people maybe need to get a better understanding of their tax picture, which is why you wrote the book ‘Tax Insight’ originally, and now it was picked up by a publisher. What’s the name of your publisher? I’ve forgotten.
C: They’re called A Press.
J: A Press, that’s right. And, available on Amazon and on taxinsight.net. So, pretty exciting. But the book that you sent to your publisher and the book that you and I promoted to YNAB people back in the day, they are two very different things. Tell me a little bit about what you added to the book this time, and just kind of how it’s evolved now that it’s gone to a real publisher and will be available in bookstores and all that.
C: Yes, the first version we did – this is the fourth version, so three years ago, I guess – was just a little… you know, 80 pages or something, [?? 0:16:11] and it was really just trying to get something out there the first time. And then the next year we put it up to about 200 pages of information, and that’s when I felt like it started to develop into a little more what I wanted it to be. So when the publisher found it they liked it, they liked how I explained things in an easy to understand way, and the only thing they wanted was for it to be doubled in its size again. So, our aim was 400 pages. The way it worked out, the page proof issues ended up backing it down to 375. But there’s just a lot more information and guidance. I actually thought I was just going to take the first 200 pages and add another 200, and as I went through it I basically rewrote the first 200 pages too.
So I can’t say it’s a 100% new book, but it’s been rewritten completely, what was already there, and then added a lot more information – more strategies, more deductions and credits and things to be aware of. And a lot of the rework that I’m most excited about is actually the basic, simple stuff at the beginning. There’s five chapters that really help you understand just the ins and outs, the real nuts and bolts of taxes and how they work; and also how the tax code, in a lot of ways, is kind of rigged against you unless you understand it – and if you do understand it, then you can take some of those things to your advantage to get in a better situation.
J: Tell me a little bit about that. I haven’t read that new chapter. I know that your publisher wasn’t super-… Was that the chapter where you’d kind of… your publisher kind of pushed back, they weren’t super happy with it and then you convinced them? Is that the one?
C: Yes – I think you were probably the only one that knew that until now, but… I think the gut check reaction was that, “No, that can’t be right, and I don’t like that, and I don’t want to think the tax code’s really set up that way.” So he really challenged me and he looked up a lot of information and kind of threw it at me and said, “It can’t be this way.” But as I explained it to him more clearly – and maybe I’ll find a better way to explain it in coming times – but he recognized that that really is the case and that… The difficulty in the tax code, it’s set up to help people who are poor or somewhat help people who are middle class, but the way it’s structured is very difficult for people who are trying to improve their situation – it’s punishing in that regard.
J: So are you talking about someone that’s maybe a higher income earner, trying to break into a new level of wealth – it’s rigged against that person? Or is it just anyone trying to move up the economic ladder, like middle class to upper middle class, or upper middle class to whatever’s next after that?
C: No, it’s really anyone that’s trying to move up. I mean, people who are already up in upper class, the tax code is written very advantageously. If you’re at a point where you can live off of investment income and do it right, you’re in great shape – the tax code isn’t going to touch it. All this stuff we heard about Warren Buffett doesn’t have to do with how much money he makes or how much money he has; it has to do with the kind of income he has and the sources of it. Even from the lower class moving into middle, the middle class moving into upper middle, or upper middle to upper, what you have to do to do those things is earn more money than you’re spending and be able to start putting money away and getting ahead. And as you try to do that, the more you earn, the more all these things are taken away from you in the tax code. And there are some critical points within the tax code – quite a few of them, actually – where you will have a significant difference based on an insignificant amount of income once you cross certain thresholds.
J: And that doesn’t just happen for people that are earning… I know that some of these credits things phase out – I can’t remember numbers now, obviously – but you’re not just talking about upper middle class, like someone making $120,000 or something like that, that those kind of points of… I don’t know what it is, but bigger… a big disadvantage coming down from just a marginal increase in that person’s earning, that can happen at even lower income levels?
C: Yes. Some of the most dramatic ones are at the lowest income levels. $15-20,000 or $25,000 of income can trigger major changes. And then you see it again in the $30-60,000 range depending on single or married or what other things are going on. And then you see it again in the $80-90,000 range, and then again in the low hundreds. There’s these certain areas, and depending on what’s happening in your tax picture they can be significant, where the effective tax rate on that little bit of income in the margin there is WAY higher than what your actual tax bracket is at the time, because deductions and credits are being pulled away from you and the overall effect can be pretty big.
J: Interesting. And that’s where we have about savings. For me, I was obviously at one of those points where they’re going take things away, and you brought me behind, back past or off that point some – which made all the difference.
C: Yes. That was one year it happened to be the cards played out right in that situation. If you had been earning significantly more or significantly less, the savings from that would have been much different. So that’s… again, that’s another reason why being aware of what’s going on in your situation and potentially working with somebody who’s going to pay attention to that can make a big difference. Because what you think is not a whole lot different year to year; sometimes there are little things in there that are very different.
J: Yes. I’ve always said that… Since I started kind of promoting the idea of being aware of your taxes, I’ve told people it’s their life’s single biggest expense. And some people have called me out on that and said, “Well, no. I only make X so it’s really not.” But a lot of times, taxes that we pay we don’t necessarily feel. And one of the common myths – I don’t know if I’d call it a myth, but a misunderstanding – is where people will say, “Well, I don’t pay taxes. I get a refund.” And it’s like nails on a chalkboard to me hearing them say that, where they’re missing the fact that they are paying, they just happen to have overpaid and now the Government’s paying them back. And actually, that was said by someone that was a CPA, so that really threw me off! But what are some common tax myths that you see as you work with clients that come in?
C: Oh, there are quite a few of them, but I’ll tell you two that come to mind. One is there’s really a misunderstanding for what deduction means. You know, it’s a deduction, so… And it may sound silly to the people listening, but I’m amazed at how many people in their minds, even if they know it’s not really this, in their minds a deduction means it’s free. Right? “If I spend money on this and it’s a deduction, well, it’s like I didn’t spend the money. And best case scenario, that deduction is going to save you however much you spend times your marginal tax bracket. Now, if you’re in the 15% tax bracket, okay, you’ve got a 15% off for spending that if it’s a deduction. Sometimes it’s a deduction, really it means it can be a deduction. If you listen carefully on the radio, for example, let’s say it’s solar energy and they say, “Yeah!” often what you’ll hear in the little disclaimer at the end when they talk fast is “potentially a deduction” or “could be a deduction” or something like that. But consult your tax advisor, because a lot of times deductions actually don’t help you. It’s depending on what’s going on in your tax return. That deduction may make no difference in your taxes because you’re already to the point where the standard deduction is taking control or whatever.
That leads me to the second example, real quick. People think, “Well, you know, if I go buy a home I get the mortgage interest deduction, and that’s great. It’s going to help me, it’s going to make it that my mortgage payment is cheaper effectively.” And you’ll hear… Well, that would take me on a different tangent – maybe I’ll say that in a second. But the reality is, that’s only the case if you itemize your deductions. So for a married couple this year, the standard deduction’s going to be $12,200, and if your total interest you’re paying on your house is $8,000 and you don’t give a whole lot to charity and you don’t have a whole lot else that’s going on, you’re not going to itemize. And so you receive zero benefit from that interest. There’s no deduction for you because you’re taking the higher standard deduction anyway. There’s no additional benefit.
J: And it’s not like you can recapture that later or something, obviously. It’s gone forever.
C: And so what you thought was really going to benefit you may be based on decisions that really didn’t have any effect at all.
J: What was the tangent you were going to run down with that?
C: I forgot!
J: That’s what tangents are there for.
J: What’s one piece of… We’ll just kind of close with this maybe. What’s one piece of actionable advice that you could give the podcast listeners? Besides going and checking out your book, which I think is… I can only recommend that because, well, I had one guy on Facebook when I posted about your book, he said, “Well, I don’t know if it’s really that clear or simple of a book to understand because it’s 376 pages,” and I said, “Well, that’s a function of the tax code, not how simple the book is.” You know, there’s just so much to digest. And I think that’s where people are sometimes scared to dig in with the taxes, but I can only recommend that people get to know it a little bit, at least to a degree that you can, because it is your life’s single biggest expense. And it can mean massive savings over the long haul. So my recommendation would be for everyone to check out your book on Amazon. Just search “Tax Insight”, or go to taxinsight.net. But I wanted to ask you if you had anything actionable for these podcast listeners that they could take away? Some piece of advice that you could give that maybe is commonly ignored but is something they could implement.
C: Well, really, my biggest advice is what I’ve said and what you just said. Not necessarily… be it my book or something else, but really understanding the ins and outs of the code. The book is 376 pages, but those first four chapters really are the essence of the tax code made simple, and that’s the kind of stuff you want to get a hold of. And then the details, the specifics that each individual deduction you can start to understand – it’s advice to you after that. Wherever you find that information, I think you have to do that because nothing in taxes… what you think you understand is not going to be the reality unless you really put forward the effort to learn it.
But beyond that – and maybe this is another part of the myth or whatever – but if there is a specific strategy that you’re going to engage in, make sure that you understand how to apply it to your personal tax return. If you decide, “I’m going to save money in an IRA,” or, “Should I do it in a traditional or a Roth IRA,” understand what that means and will a deduction help you, how much is it going to save you, is that worth the type of taxes you’re going to pay when it comes out, and would it be better off to do a Roth, and how they’re going to play out in your return. Because the tax code is a crazy beast, and because of that and because there’s so many moving parts it becomes very individual. And I think that’s the most important thing for people to understand, is there’s not a catch all/be all scenario or great tax tap because every single thing that is offered out there in the tax code really has a different implication and application for each person as they do it on their own – how it’s really going to help or not help. And there are actually some tax strategies that will help some people and they will harm others; and so understanding those things and how they specifically apply to you is probably the best thing you can do.
J: So this is more like a doctor giving a prescription based on an in-depth knowledge of the patient’s health versus prescriptions given out willy-nilly over news channels or something; where everyone says, “Oh, you’ve got to do this strategy or do this thing,” but kind of what you’re saying is it’s extremely individual and people just need to be aware. That’s what we teach a lot – just being aware. Be aware of what your money’s doing, be aware of what your taxes will be, and just be in the know regarding your finances in the end.
Well, Casey, I’ll have you on again and we can talk maybe some specific strategies. I want to talk about HSAs next time, and then maybe we could also talk about pros and cons of Roths versus traditionals. I have some interesting thoughts on that that I’ve kind of distilled since I’ve been working on this other product, so we’ll talk about that later. But it was good to have you on. I appreciate the time you took and everything. And everyone, check out taxinsight.net when you get a chance and educate yourself on your life’s single biggest expense. Thanks, Casey.
C: You bet. Thank you.
Until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.
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Hello YNABers. My name is Jesse Mecham and this is podcast number 70 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.
Today I want to specifically talk about saving money and how you do that in YNAB. Why you shouldn’t just save money, but should save money with a purpose.
I was talking to my sister – my sweet, sweet sister – and she said, “I’m saving money. Where should I put it? Should I invest it?” So I said, “Well, what’s the money for?” “Well, it’s just savings.” I said, “Well, what are you saving for?” “Well, nothing. I’m just saving it.” And I told her I really couldn’t give her an answer because I’d have to know more about what she was going to use the money for. So I said, “Well, is it for retirement? Is it for a house down payment? Is it for a vacation? Is it for a crock pot? What exactly are we saving for?” Until you decide that, you can’t really save with the same focus and the same intensity you could otherwise.
Savings that don’t have a job, savings that are just savings, will be raided at the first sign of an emergency, or an excuse. So you’ll say, “Oh man, this came up. Well, let’s just use our savings.” Well, if that savings was for a new MacBook Pro or it was for a vacation or for Christmas, you’d think twice about raiding the savings to bail yourself out of some perceived emergency. That emergency is probably an under-funded rainy day fund from Rule Two. Sometimes there are legitimate emergencies where an emergency fund would need to be utilized, and an emergency fund is savings. You’re saving for an unforeseeable emergency, not for a larger, less frequent expense like Christmas.
So, make sure your saving has focus. YNAB handles that really well for you. There are a lot of different ways you can handle savings in YNAB. You can keep the savings completely off-budget and simply when you transfer money, let’s say, from checking to an off-budget savings account you would categorize it as savings for car, savings for vacation, whatever category set-up you have. And the money flows out of the budget and then it’s gone. It goes into that savings, and you don’t see the savings on your… in YNAB at all. It’s not even an account, not even an off-budget account, it’s just not there. So it’s like an outflow.* The category is like a gatekeeper for your budget. Categories let money come in and let money go out of your budget. If it never enters the budget, it obviously doesn’t get a category; and if it’s never leaving the budget, it doesn’t get a category there either. So one way that you can do savings is to not have your accounts in the YNAB software at all.
*Check out this helpful tutorial video about on and off-budget accounts in YNAB.
Another way is to have your savings as an off-budget account. That way you could record transfers, but you just want to make sure that your transfer out of your checking account is categorized because it’s leaving the budget, it’s going off-budget. And any transfer from your savings back to your budget would be categorized because it’s entering the budget, and those categories are the gates for the budget.
Another way you could do it is to keep your savings on-budget, where you’re transferring money from your checking to your savings account and neither is categorized because the money is staying within the budget. In that regard, you can just use your categories and set… fund those categories – say $400 for car replacement. You put that in your car replacement category, you budget for it, and you watch that category balance grow. And then you do the transfer – physically when it happens at the bank, and then also virtually in YNAB. Transferring on-budget to on-budget obviously means there is no categorization. So, that’s another way to do it.
Finally, you don’t have to use a separate savings account physically at all, and you simply use your category balances to track all your savings. Your checking account will grow to a size that you likely have never seen, and it’s kind of cool. That’s what we do. Our emergency fund sits in our checking account. Our new car fund, before it was massively depleted, sat in our checking account. We just have a big, flush checking account. And then if little, niggly things happen like Rule Three and having to roll with the punches, it makes it much easier to actually roll with those punches.
So, there’s four different ways you can handle savings. We have a best practice way – I can’t recall it off the top of my head which one of those it is. But if you have any questions you can check out our support page, and go to the video and see Erin, our lead teacher, explain that much better than I just did, with some visuals and everything.
So, I just wanted to make everyone aware, you know, be aware of how you can manage those savings, and also talk about why it’s important to have a purpose with your savings. Savings without purpose is savings with a target on its back.
Until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.
A Note from Jesse (3/3/14): I meant to write this last week, but was out of town. I apologize that I didn’t write it quite a bit sooner. I want to make clear a few things: 1) We understand that we slowed down the workflow of many users. 2) We do hear your feedback. We may not always agree with user feedback, but we do listen. I feel like that distinction needs to made. 3) To address the workflow we’ve made worse, we are working on an update that will be better than what we had before, and better than what we have now. It will also improve the workflow (even more) for those confused users whom we were originally trying to help. Thanks for your patience as we iterate. We mean no malice. To fewer keystrokes for all. – Jesse
This post is for a very specific type of YNABer:
(If the following doesn’t describe you, carry on, and have a great weekend!)
1. You update your Budget Accounts frequently, and you know your YNAB ‘Cleared Balance’ matches your online account balance.
2. You’re thorough, so you like to use YNAB’s Reconciliation feature to officially lock down transactions as soon as the bank has cleared them.
3. Because you updated your Budget Accounts frequently, and because you knew your YNAB balances always matched your bank balances, you could trust YNAB’s suggested Reconciliation number.
(That was a mouthful, but you understood it if you’re this type of YNABer.)
4. YNAB’s new Reconciliation workflow has thrown off your game, and you’re mad.
I’m not part of YNAB feature conversations, so let’s just talk user to user for a second. I used the new workflow to reconcile accounts this morning, and I found it pretty straightforward.
I went into my credit card’s online account and manually entered a few missing transactions. I made sure the card’s current cleared balance matched my ‘Cleared Balance’ in YNAB.
I clicked ‘Reconcile Account,’ and saw this (click to enlarge):
I knew the account was current as of today, and I knew the cleared balances matched in YNAB and in the online account. The old YNAB Reconciliation would have filled -$773.54 in for me, so I just typed it in myself and clicked ‘Begin Reconciliation.’
Couple clicks later I was finished.
In other words, the new reconciliation process does cost me a few extra key strokes. But given my habit of frequently updating accounts and visually matching cleared balances and online balances – the few extra keystrokes are all it cost me. Right around five seconds per account in added work.
Trust me, nobody on the YNAB team likes to disrupt users’ flow, but the old reconciliation flow was positively wrecking the budgets of newer users way too often. Might there be a happy medium? I imagine so. But if this feature stays as is forever – just speaking user to user – I’m feeling fine about it.
Update: Jesse tells me that he and the product team recognize the need to serve both types of workflow. They hear the feedback and plan to address this in a future release.
The more comfortable you feel with YNAB the software, the more likely you are to live YNAB the philosophy. The education team already serves up hundreds of knowledge base articles, video tutorials, and live classes. Erin and team have decided to add some lighter fare to the support menu: a steady series of 30 second (or so) tutorials to help you shave clicks off your YNAB work.
The Quick Tips’ beauty is their brevity; a one or two minute weekly investment will turn you into a YNAB ninja.
You’ll never miss a Quick Tip if you hang out with us on at least one of our social media channels (although we’d love to have you on all of them, of course):
- Subscribe to YNAB’s YouTube channel, home to the Quick Tips and other useful YNAB videos.
- Like YNAB on Facebook, where Erin will be sharing each new Tip.
- Follow YNAB on Twitter.
- Follow the blog, where I’ll publish a roundup of Tips every couple of weeks.
Let’s kick things off with Tips 1 through 5:
I bet you know your checking account balance. I bet you check it daily, maybe multiple times daily. I bet it’s the first number you look at when you or your significant other ask that not so useful question, “Can I afford it?”
I’m sorry you have to look at your checking account all the time, because I know how much stress that number produces.
But I wonder if you realize why your checking account balance stresses you. “Because it’s low,” you say? Fair enough. But that’s not why it’s a stressful number. It’s stressful because it gives you vague, incomplete information.
Your checking account doesn’t know whether you can/should buy something. All it know is whether you’ve run out of money.
Wouldn’t it be cool if you didn’t know your checking account balance, because you didn’t need to know it?
It’s possible – all you have to do is detach your financial decisions from your account balance. How? By assigning your available dollars to individual needs and wants in your life.
It’s called envelope-based budgeting because many of the people who use the concept actually take cash out of the bank and divide it among correctly-labeled envelopes (“Groceries,” “Clothing,” etc). When the cash in an envelop is gone, they’re finished spending.
It’s a brilliant system, and YNAB didn’t invent it. YNAB took envelope budgeting and made it digital, allowing you to take your meaningless checking account balance and turn it into near-perfect awareness of your needs and wants.
It’s a beautiful system that produces a couple desirable results in your life:
1. Reduced stress as you’re able to let go of obsessive account balance checking.
2. Fat-approaching-obese checking accounts.
A couple of years ago, before I adopted the YNAB way, Jesse (YNAB founder) and I were having lunch. I’m sure my financial stress came up in conversation, and Jesse happened to mention he had no idea what his checking account balance was.
“What do you mean, you don’t know how much you have in checking?”
“No idea. Lots of thousands.”
Sure, you say, Jesse had lots of thousands in checking because he’s the fancy-pants founder of a successful company.*
Wrong. Well, sort of right. He is the fancy-pants founder (the fanciest!), but that’s not why he had lots of thousands in checking, and it’s not why he had no idea what his account balance was.
It’s all about the digital envelopes Jesse – and all YNABers – use to maintain high awareness of our money.
Jesse didn’t know what he had in checking because that wasn’t the important number in his life. Every time he got paid he divided his dollars among his family’s needs and wants, assigning the money to virtual envelopes called budget categories.
Budget category balances give useful answers to important questions:
“Can we buy a new car?” Check the “Car Replacement” category.
“Can I buy some new running shoes?” Check the “Clothing” category.
No more vague, contentious conversations about “Can we afford it?” – only rational chats about whether the category balance is big enough to buy it, whatever it is.
My tax refunds hit my checking account this week, and I laughed when I noticed the new balance: $24,436.97.
For pre-budgeting me, $24,000 might as well have been $24,000,000,000. I was equally likely to have either amount in checking in those days, in spite of much higher earnings.
Of course, my budget categories – my envelopes – have already spoken for the money. Some for needs and a good amount for wants. But thank goodness I don’t have to think about the number itself anymore.
If you’re a person who has to monitor your checking account balance like Keanu Reeves watching an airport shuttle’s speedometer, take our 9-day money management course by email.
Life’s circumstances produce plenty of stress; don’t let low-awareness money management compound your worries!
*I kid. Jesse is one of the least fancy people I know.
You don’t want to look at them.
Opening my bank and credit card accounts online (at least) every couple of days requires me to review, categorize, and mentally own every one of my transactions.
And mental ownership isn’t fun (until you realize how powerful it is).
Taking mental ownership of your transactions means acknowledging that buying this meant giving up that, and not many of us enjoy reminders of the strict limits on our consumption.
Which is why I don’t really buy it when people tell me they’re too busy to maintain their budget. It takes me between one and three minutes to check my online accounts for any missed transactions, enter and categorize them, and ensure YNAB’s balances match the banks’ numbers.
I get it – taking ownership of your transactions feels restrictive. It’s easier, in the short run, to pay the credit card off at the end of the month (or not, in unfortunate cases) without having to acknowledge individual outflows.
Unfortunately, ignorance is not bliss. Every un-owned transaction is a mental open loop – an unanswered question: “Where did all my money go?”
The honest non-budgeter eventually admits the weight of all those open loops is a much bigger drag on today’s happiness than the “restriction” enforced by a budget.
All Together Now: “No Shame, no blame.”
Struggling to keep your budget current doesn’t mean you’re dumb, lazy, or “not a numbers person.” It just means you haven’t allowed yourself to experience the benefits of an up-to-date budget.
Try this simple mental re-frame to help you get past your budgeting block:
No shame; no blame. Vicki and Joe (who’s pictured above) have begged us (since the ’70s!) to separate our sense of self-worth from our spending. The amount we do or don’t spend has nothing to do with our value!
Embrace the truth: your spending impacts your mood and your options in life – not your worth.
Then, download a trial copy of YNAB and use it to take your money stress closer to zero than it’s ever been.
Use a budget to understand and improve your spending. Give yourself a chance to discover what you really need and want, then spend like crazy on those things.
Prefer audio? Click the play button.
Hello YNABers. My name is Jesse Mecham and this is podcast number 71 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.
I floss daily. I was at the dentist a little while ago and got to tell them for the first time in 32 years that I floss every day – no lying, nothing magical about it. I implemented BJ Fogg of Stanford’s Persuasion Technology Lab, implemented his program called Tiny Habits. It is life changing. And I interview him now. It’s simple but profound stuff that will change your life. Here is the interview.
BJF: I’m going to close my door or my dog might bark. We’ll see.
J: You bet.
J: The last podcast I was on was just me and I sneezed really loud – I couldn’t hold it back. And then I was like, “Oh, just edit it out,” and then after I’d published I realized an hour later, “Oh, I didn’t edit out the sneeze.”
B: People are like, “Oh my gosh. Jesse’s a real person!”
J: Exactly! No mistakes, no sneezes, nothing. Well, let me have you give listeners just a brief background on who you are, what you do and… yes.
B: I’m BJ Fogg. I run a lab at Stanford University and I work in industry, and I focus on how human behavior works, and especially how to design systems, products, services that change behavior.
J: And I saw in your… I don’t know where I was reading this in your website, where people thought it was maybe a little bit evil.
B: Yes. My work always seems to be a little bit on the edge. When I first started the Persuasive Technology Lab at Stanford, oh, in the late ‘90s – and even before that I was doing scientific experiments to show how computers could influence people – yes, the reaction to that wasn’t all positive. Some people thought that was either crazy or very dangerous. And now I’m using more and more the phrase “behavior design”, and to me it’s a very, I would say, upbeat and positive phrase; but some people see that as kind of manipulative. But that’s not how I see it.
J: I would love to design awesome behavior for myself. I think it’s positive. One thing where you’re kind of negative, though, and pretty vocal on Twitter – as vocal as someone can be on Twitter – but you’re kind of negative on New Year’s resolutions. And we’re well past, I think, all of those failing at this point. But just kind of speak to that. Why is it that you…?
B: New Year’s resolutions and other kind of received wisdom about changing behavior, a lot of that is just wrong or damaging. And so I’ve decided not to be quiet about that. What I don’t do is I don’t attack other people’s theories or other people’s approaches or what have you. Going after these old wives’ tales or these untrue myths about behavior, I think that’s important. And you know, once people hear it they’re like, “Yes, you’re right.” I don’t have to work too hard at getting it out there because people recognize the truth of it.
For example, the idea in the New Year’s resolution that you could pick something big and abstract, like “reduce my stress in 2013”, well, unless you drill down and get really specific, and unless you specifically design behaviors that get you to that goal, you’re probably not going to make much progress on reducing stress or weight loss or be healthier or make more money. All those things are just sort of dreams in the cloud if you don’t do the right things – if you don’t design behavior to achieve them.
J: Yes. And I hear a lot of talk of goal-setters and things like that where they would say, “Oh yes, you have to be specific. You would never say ‘be healthier’, you would say ‘run three times a week’,” or something like that. But I think you would take that, if I were to say, “Hey BJ, my New Year’s resolution is to run three times a week,” you would take it much further than just me stopping right there.
B: Yes, absolutely. I still think things like run three times a week, eat more vegetables, even walk 30 minutes a day, I still think that’s an abstraction.
J: So tell me how you would help someone walk 30 minutes a day, down to the nitty-gritty.
B: Good question, because this, in my last Stanford class, this was the main project that all 40 students worked on for the quarter. And to walk 30 minutes a day, you can do that by going to the gym and walking 30 minutes on a treadmill every day after work – so that’s a specific behavior. You can do that by walking in the morning before work for 15 minutes and then walking after work for 15 minutes – that’s a different behavior. You can walk 30 minutes by walking five minutes during six work breaks – you’ve got a different behavior. So, those are all different ways. So the way to sort through that is, “Which specific type of walking fits my life?” And so I had my students create what I call walking wizards that would help people answer questions and then end up with, “Oh, here’s my walking style.”
For example, me, my walking style is as soon as the phone rings I put on my headset and I start walking. Just think about it – it’s instinctive. So I’m one of these multi-tasker, “walk while I work” kind of people. Now, I wouldn’t ever think of going to the gym and walking on the treadmill. That, to me, would just be a huge waste of time. So I would walk out in nature and enjoy that. So there’s probably seven or so main genres of how you can walk. You’ve got to find the one that fits how your life really is.
J: Yes. And that’s where it gets more specific. And that specificity is what helps… what’s helped me floss every day – which I brag about all the time.
B: I bet your dentist and hygienist are very happy.
J: Yes. For the first time ever, I went to the dentist three weeks ago and they said, “Are you flossing?” and I said, “Yes, I am, every day.” And she said that she could tell. She said that was why she asked. Maybe she was covering because she was looking to pounce, I don’t know. But she… I was pretty proud of myself to be able to say that. And the way I did it was by using your Tiny Habits program. So maybe explain that, because people are hearing, “Oh man, BJ just took walking and really specified a behavior that would fit someone’s specific lifestyle,” but the framework you have would work for any behavior, and that’s that Tiny Habits framework. So maybe explain that a little bit.
B: Yes. And you know, going back to the received wisdom that’s wrong, I don’t believe that you can only work on one habit at a time, and I don’t think it takes 21 days to quit a habit. I think they’re theories and so on. And I think the ways that people often try to create habits is they pick something huge like “I’m going to work out for 30 minutes a day”, and things that are difficult require motivation and sometimes willpower. So that means you always have to be motivated or you’re tapping into willpower, and those things are very slippery and they go up and down. And guess what? One day it’s not going to be there and you’re not going to walk and you haven’t made the habit. So the tweak, the hack that I figured out maybe two or three years ago was if you make the new behavior really, really small – if you make it so small and so simple – then you don’t have to rely on motivation to do it, and you don’t have to tap into willpower. And all you need to do is remember to do it.
So, say you picked something super-simple like one push-up – not 20 push-ups, but one. Then say, “Okay, I’m going to make this a habit of doing one push-up. Well, where does it fit in my day?” And in the Tiny Habits method, you find something you are already doing, an existing routine that will be the reminder, what I call the anchor to get you to do the one push-up.
In my own life – and I will share this – I started doing two push-ups every time… after I peed, I would do two push-ups. I normally worked at home, so that was fine. And I washed my hands, so that then became the routine, so it was just automatic. Now, over time I started doing more push-ups.
Same thing with flossing your teeth. Well, where’s the right place to floss in my routine? Well, probably after you brush. That’s probably what you did, Jesse, right?
J: Yes, absolutely.
B: Bam. And then so once that gets easier, then you can do more and more in your routine. So in other words, you’re working on not the big behavior but making the class of behavior automatic. And even if it’s small, once it becomes automatic then you can grow it. It can expand on its own to 20 push-ups or floss all your teeth or walk for 30 minutes, and that doesn’t require a lot of effort. It just kind of grows naturally. It kind of feels magic.
J: It did feel magical, and I was… It’s funny that I talk about the flossing, but it’s critical that people understand that it doesn’t have to be big and it doesn’t have to be impactful, like I’m going to lose weight or make more money. But the effect is… Seeing it work is all that it takes to really make you a believer.
But I remember you had said, “Just do one tooth,” and I at first thought, “That’s absurd.” And YOU know it’s absurd, but you know that it’s absurd in that I’ll do one and then I’ll do probably the rest; but it’s important… it was important that I told myself, “You just have to do one.” And then the motivation is gone, the willpower is gone, and it is just a reminder. And that was a breakthrough for me. I actually remember I would floss before I would brush, and my trigger was – and I don’t know why I did that – but I thought, “What’s my trigger? Walking into the bathroom? That’s not going to do it. What if I get distracted and go into the closet?” So I made the trigger wetting my toothbrush before I put the toothpaste on. So I would wet the toothbrush, put it back down, and then grab the floss.
B: Oh, great.
J: And then I’d go about doing my thing. And it’s been… I don’t know, it’s been probably a year or something that… maybe even more where it’s just instinctual. And that is awesome.
B: Yes. And you know, I think there is value in just flossing one tooth or doing one push-up or wiping one kitchen counter. Even though your other teeth are lacking, what you’re showing yourself is, “I can change,” learning how to create habits. And that’s super-valuable.
J: Yes, that learning, that ingraining, this works. And then you apply it to other things. I had another tiny habit that I want to reintroduce because I didn’t have the right trigger for it, but I wanted to tell my wife how good dinner was. Or I just searched for something and I struggled. And I’m still… I haven’t thought about it much, but I want to find another trigger where I can say, “Man, every time at dinner this happens,” but I was finding out it was too… the environment is too varied. Dinner is sometimes out and sometimes in and sometimes a different place in the house. And so I really need to think of… If I want to tell her, compliment her on dinner, I should probably say, “Well, it’s got to be around something like getting into bed,” because I KNOW I’m going to get into bed – or something like that, but…
Specifically to people… A lot of people listening to this, they are trying to change their money behavior, and they want to manage their money better – very abstract. And I teach people that awareness is the key in changing their behavior with money. So, I don’t dictate what they do with their money, I just want them to be aware; and then magically they start to make things happen.
So, let’s assume we have a listener that spends far too much eating out with friends, and that’s their own realization. How would you apply the Tiny Habits program for that person saying, “I spend too much on eating out. How do I change that?” And they don’t want to use willpower and they don’t want to use motivation.
B: Right. Well, let me give an example that relates from my class. One of my students decided he wanted to promote walking meetings; so instead of going to friends’ and hanging out in the Coho café at Stanford, to walk with his friends and chat. And so the habit that he worked on is every time a friend said, “Hey, let’s go to the Coho and get a coffee,” he would automatically – or try to automatically – say, “Hey, how about if we go walking and talk.” So in other words, rather than getting in the situation where he’s in the Coho saying, “Well, what do I buy? I can’t buy very much. Oh, the pizza looks really good,” he just headed it off, really, and had a way to change it into a walking experience. And what he found – and he just did small scale research, like 20 people – virtually everybody said yes to that and it ended up being a great experience. So it was self-reinforcing. It wasn’t like… People didn’t say, “Hey, you’re crazy,” they’re like, “Good idea! It’s different.” So he kept actually going with that after the class and it’s kind of a little bit of a project he’s doing.
So, one of the things… One way to answer the question is to understand the sequence of behaviors. If here’s a behavior I don’t want to do, that I want to change, track the sequence back and perhaps make the intervention earlier on in the sequence.
J: Oh, okay. Because I would be too weak at the restaurant to resist the pizza – it’s over at that point.
B: Yes. I know for me, for example, I love Mexican food and I love chips and all that kind of stuff. So if I’m at a Mexican food restaurant and they bring chips and salsa and if it gets on the table, I will eventually eat those chips. [?? 0:14:51 - glitch] no, no, no. Okay. So, the habit now – and it’s rock salt and we do it with bread too – is as soon as they bring it it’s like, “No chips. No chips. No, we don’t want bread.” Or ordering, even ordering an omelet for breakfast, the habit is, “No potatoes, no toast. I just want…” In other words, you’re designing your environment so you don’t have to tap into willpower, you’re [?? 0:15:17 - glitch] upstream.
J: And the trigger is the server bringing it out, not you going in there saying, “I’m not going to choose…” like willing it, “I’m just going to resist it.” It’s you’re avoiding the environment altogether.
B: Yes. And that’s… So when I’m there at breakfast, eating an omelet, they didn’t bring toast, they didn’t bring home fries. Guess what? I’m not eating toast and home fries because it’s not there on my plate saying, “Eat me!”
J: I’ve just read a book called ‘Mindless Eating’ – loved it. And it was amazing how much we eat without… just all these other triggers that… We have triggers acting on us too that I guess we need to be aware of or counteract. It was fascinating. I don’t know if you’ve seen that, but…
B: Yes, I have the book right here. Brian Wansink’s book, yes. He’s legendary in the “our relationship with food” world.
J: It’s tall glasses, you’ll drink less than short, squatty glasses. I thought that was just so great. I mean, all I have to do is buy tall glasses!
B: Well, I’m here at my home office right now, and by design I have a glass of water right here – so that’s a tiny habit. By design I have this little… it’s a little glass cup. It’s tiny, bigger than a thimble – that’s where I put my vitamins in. And so it’s just I put the water right there, I put the vitamins there, I end up drinking a lot more water, sometime during the morning I take vitamins, and so on. Also right here I have some sunflowers I sprouted. I’m kind of doing a lot of sprouting.
J: Oh, cool.
B: And so I’ll eat some of the sunflower tops – which sounds kind of insane, but all of this is… I’m a big fan of playing around with behavior change, and even though I’ve done a lot of it and I’ve studied a lot, I’m just constantly practicing, constantly trying things, because the more you do it the better you get.
J: Yes. I’ve got to think of some more now – a handful of them. More water is always a good one.
B: Well, let me suggest one to you and other people listening to this. And it’s a trivial one, but I started doing it because at some point you’re sort of like, “What other habits do I want?” and it’s like, “Well, I’ve got to think harder about it.” So a couple of weeks ago I decided I was going to put my socks on inside out. I don’t know – just to play around with, changing my behavior. So it doesn’t really change how the socks function – maybe a little bit, but not much – but as I’m turning my socks inside out I’m like, “Yes, I’m continuing to practice behavior change.” And that is… that’s important to me.
So if you can’t think of anything else, pick something that is benign like your socks on inside out and play around with it. And if four weeks from now you’re like, “Yes, I did that. That’s not interesting to me anymore,” stop. That’s okay. I think it’s okay to stop habits when they’re no longer useful for you, or you want to replace them with something else.
J: You know one, I just thought of it – I was thinking of benign or really simple – I was thinking of smiling. And a lot of the research that has been done about how smiling literally makes you feel happier. I thought, “Man, if I come home from work and my foot hits the first step in the garage leading up to the door before I see mayhem…” which is what I’ll see with five kids, so I want to change my mood and make sure I’m a happy dad when I walk in. I could say when my foot hits the first step, I’ll smile and I’ll walk in. I would be willing to bet – I might have to report back to the podcast – but I’ll be willing to bet that I would notice a difference.
B: And I think that’s a great one. Now, some people might set that up – every time my foot hits the step I’m going to smile – but they would forget. So you know, I’ve worked with about 10,000 people now over the last year in the Tiny Habits method. When people say, “How do I remember?” there’s two things you can do.
So, let’s take your example. I think you practice behavior change a lot so you’re a little bit ahead on the game, but let’s say people who haven’t. What I would do is I would rehearse it. You know, take about five minutes and just pretend like you’re coming home from work, step on the step and smile. And after you do that, you can … positive. Then back up and do it again, and back up and do it again. So about eight times – it’s not going to take more than five minutes. And the deeper your emotion when you do it and you think, “Yes, that was great,” the deeper you can feel that the faster it will become automatic. And here’s why.
If you can generate that good feeling inside – and some people do it by doing a little dance, some people go “Bravo!”, some people clap their hands or whatever – it’s changing how your brain works. And your brain’s thinking, “Wow! That made me happy.” And so the next time you step on the step, your brain is going to say, “I want to be happy, so I’m going to step on the step, I’m going to smile,” and it’s going to get really automatic. So the combination of rehearsing it and then after each rehearsal to do what I call a celebration. And the celebration is simply find a way to make yourself feel awesome. You know, find a way to fire that positive emotion.
J: I love it. I’ll do that. I’ll close my garage before I do it, but I will do it. So it will be in private.
Okay, last one and then I’ll let you go. This is fantastic. So, in this awareness mission that we go on to just try and raise people’s awareness, I think overspending, credit card debt, I think most of it is just a function of… It’s not people don’t… they don’t go out with intention and say, “I’m going to run up my credit cards,” it’s just kind of automatic. So part of that on this awareness is I want people to record their spending on their iPhone or Android as it happens, versus going back later and doing a post mortem where there’s… it’s done, it’s in the past and it’s over. So if there’s a listener out there struggling with remembering to enter their transactions on their phone, how could we apply the Tiny Habits for them?
B: I would advise the celebration technique. After you do it, think one of these things, or something that works for you. I might think, “Wow! I’m really nailing this!” I might think, “Yes! This is becoming a habit! I rock!” Or, “Boom, I got it!” Or, “Jesse would be so happy with me!” Anything like that every time you do it, try to fire off the celebration and then you will find, I guarantee, you will find that it gets more and more automatic.
J: Cool. Well, that’s is… that’s good stuff. If anyone wants to check out what you’re doing, BJ, I know I pushed this in the newsletter probably last year and we’re probably due to have another push with all the new customers and everything, but what’s the address for it?
B: If you want to do Tiny Habits, it’s tinyhabits.com and it’s a free five day course on… It’s not so much about creating habits but teaching you how habits work. It’s sort of like I’m not teaching to catch… I’m not giving you fish, I’m teaching you how to catch fish. I’m showing you the method so then you can take it away and apply it in tons of areas of your life.
J: So, tinyhabits.com. It’s fantastic. I’m going to be a happier dad when I come home, and that’s very cool.
B: You know, I’ll just keep putting on my socks inside out and practicing behavior change.
J: Thanks, BJ, so much. I appreciate it. I hope we can do it again. And tinyhabits.com for everyone to check out. Yes, thanks – this is awesome. I look forward to more of your work.
B: Thanks, Jesse.
J: We’ll talk to you later.
B: Bye bye.
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Hello YNABers. My name is Jesse Mecham and this is podcast number 72 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.
Today I’ve had the thought, a wish… I wish… You know when you play video games? I have to confess that I haven’t played video games for a long time, but back in the day when you were fighting an opponent they’d have a little bar that would go down as you would win the fight. You’d take away their power or their health, whatever it is, and the bar would maybe be green at first and then as you’re beating your opponent it would go yellow and get smaller and smaller, and then go red and then be empty. And the bar was always hovering over your opponent, so if you had a group of opponents you could see which of those monsters or whatever were healthy and which were hurting.
And we kind of have that today, but it gives us wrong information. And the thing that people use for those financial health meters is cars and houses. Cars more than houses because you’re driving around, you’re seeing people in their cars and you’re making value judgments. And you’re able to look at a person’s car and say, “Oh, that person makes money. That person’s healthy financially,” or, “That person just cut me off,” or, “Man, that person doesn’t make a lot of money.” Maybe they’re driving a really old car or whatever. But you make judgments like that.
You do the same thing when you see where someone lives. You make judgments. And you do the same thing when you see what people wear. You think you don’t, but you do. And a lot of times you’ll try not to judge people – and I think that’s a good ambition – where you’ll say, “Well, I don’t want to judge a book by its cover. I don’t want to make assumptions,” because you feel bad about it for whatever reason. But what’s tough is the fact that we make these judgments all the time on auto-pilot, probably a lot subconsciously. And we end up being misled because people can look healthy – the monster can look like it has a lot of strength and power and it doesn’t have any. And when we use externalities like a car that’s being driven, clothes being worn, house being lived in, when we use to gauge where we’re at, that’s where we get seeds of discontent sown in there. And those grow and pretty soon you’re feeling unsatisfied with your current situation.
These comparisons happen all the time. There are a few ways to combat them. One is education. Read ‘The Millionaire Next Door’ so you can learn what people that are genuinely financially well off do as far as consumption goes. The other thing you can do is examine your friends, your circle of friends, and ask yourself if you are trying to keep up with your friends. And some people have very honest friends – and the relationship dictates how honest you are with your finances – where everyone’s very open and they talk about it and what they’re struggling with, what they’re doing poorly with, what they’re really acing. And then you have other friends or acquaintances where you don’t talk about money – maybe it’s a little taboo. Either way you go about it with your friends, whether it’s very open or very closed, you have to recognize that their wants, their consumption cannot dictate yours.
I was just camping over the weekend and we went out to do this survival stuff. And you realize quickly that all you really care about is shelter, food, clothing to keep you away from the elements, and everything else just kind of falls away. I was reading the book ‘Hatchet’ to my kids, and in the book there’s a 13 year old boy, a plane crash, he’s the only survivor, he has to live off the land in some Canadian forest out in the middle of nowhere, and he’s successful. He ends up finding some food and just feeling like it’s Christmas times a thousand. He’s just feeling overwhelmed. And his needs were all just brought back down to bare basics. And then from that point his contentment was just totally rewired.
I wonder if sometimes we couldn’t do something where we can kind of rewire ourselves. Maybe we do a spending fast where we just go insanely, insanely tight for a month. Added benefit – you’d probably get to your buffer or darn close following Rule Four. But do something where you just say, “We will not spend any money for two weeks.” Automatic bills, maybe make an exception, make sure all that’s done on that. But just say, “We will spend nothing.” See what happens. Or do a purge of your house where you’re saying, “Okay, we’re going to get rid of all this superfluous stuff. Everything that just is kind of dragging us down.” And we’ve talked about this on the podcast before with Claire. But getting rid of all this stuff, purging, feeling like you’re dialing it back to where you’re very content.
I told Julie – this is hilarious because I want a camper, so I actually want something – but I want to camp instead of going on other vacations because I want to kind of get back to some basics with the kids and discover other ways of entertaining, other ways of having fun, other recreational activities that don’t involve spending as much. And we don’t spend a lot, and we always save for it and enjoy the benefits of Rule Two in doing that. But I just thought, “Man, could we not kind of discover some more minimalist approaches to family recreational activities?”
All this being said, I just want you to be aware of what is influencing you and your desires. I want you to be aware of where potential discontent comes from, and I want you to be proactive in removing those things that cause that discontent with your stuff. So whether it’s a purge or a spending fast, or just a really introspective evaluation, any of that can work in having you realize, “Okay, this doesn’t define who I am, but who am I? And what will make me content? What would make me truly happy?”
One more point of education that you could look to is to read the book by Joe Dominguez – and I can’t remember his co-author, I apologize – ‘Your Money or Your Life’. An excellent book. A little bit dated on the investment side – they may have come out with a new edition that I’m yet to pick up. An excellent book on helping you rewire and look for what would truly make you content. Even happy. And you’ll be surprised how little money has to do with that.
So, until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.
Adam and Graham have been putting in the hours on YNAB for Android, putting finishing touches on a fancy new interface and slick updated features. They need a group of tech-loving, Android-using testers to put the app through its paces.
You’re a great fit for the beta if at least a couple of the following criteria describe you:
- You use one or more devices running Android 4.0 or later.
- You’re tech-savvy – maybe even a software developer or tester (you don’t have to be developer, of course).
- You run more than one budget and find occasion to switch between them on your Android device.
We’re also hoping to find a good mix of Cloud-sync users and Wi-fi sync users. And we’d love to have a nice blend of individual users and multi-person households.
If you’d love to join the beta, do us a favor and fill out a very short survey describing your YNAB and Android use. We’ll get in touch with survey respondents to fill out the group.
Thanks in advance for your willingness to help!
A Quick Note for iPad, Windows Phone, and android tablet Users
Adam, Sebastian, and Jeff are up to their eyeballs in iPad development. It’s coming, and it is oh-so-shiny. All good things to those who wait…a bit longer.
Windows phone folks: I’m not aware of any plans to develop a native Windows app.
Android Tablet users: also no plans to develop a native app for Android tablets.
“When I first started YNAB I had $4 to my name,” says YNAB user ‘HolyMythos’ in a January 30th forum post. Check out the rest of the story:
“After five months I’ve finally reached my buffer! I put all the numbers into YNAB which will take effect on the 1st [of February]. All I have to do is wait until then to hit the transfer button on my bank account and it’ll all be in place. I’m looking over my budget now and… it’s boring. There are no moves left. Back when I first started YNAB I had $4 to my name. Every paycheck I had to create categories, split money, find places to take money from, look at the zero’s and try to find out how I was going to fill them with the next paycheck. Now I look at it and see all the money everywhere, covering every category with ease, and any financial moves I need to make I already have planned out. It’s somewhat like a game of chess. All of my opponent’s pieces are my bills. At the beginning I had a bunch of moves to make. Over the months I defeated all of their pieces and now I’m left with their king while I’m already three moves ahead of him.”
‘HolyMythos’ has climbed off the paycheck-to-paycheck roller coaster. It’s a good thing, too, because roller coasters – exciting as they are – go in circles.
But therein lies the problem: roller coasters are exciting, and so is living paycheck to paycheck.
Hear me out – I’m not saying living paycheck to paycheck is fun. I said exciting, as in turbulent. There’s always a bill to pay, a reason to scramble, a need for creative problem solving.
Climbing off the check to check roller coaster is great for your ability to sleep at night, but leaves you wondering what’s next.
That’s exactly what happened to HolyMythos. Two weeks after his buffer celebration, he was back in the forum asking, “I’m buffered – now what?”
I was glad to see him asking the question; it means he’s not using his buffer as an excuse to get complacent, to stagnate.
If you’ve always been check to check and in and out of debt (as I was), becoming buffered in the YNAB way feels like a major victory. The problem is it’s only a major victory, not the major victory. Getting buffered only qualifies you to tackle the real goal: financial independence.
Having extracted myself from the check to check mess, I’m in a position to stop wondering whether I can make it and start thinking hard about how to make it better.
Instead of fighting my way toward stability, I can focus my energy on acceleration.
That’s my advice to anyone who’s achieved Rule 4 status with YNAB: replace the stressful turbulence of breaking the check to check cycle with the positive, intense focus of achieving your real financial goals. Reaching “buffer land” took determination; don’t discard it just because you’ve left that particular problem behind.
Erin here. From my experience teaching YNAB’s live classes, I see a lot of people who downloaded YNAB so they could take control of their money and reduce financial stress. Maybe you’re one of them? You read the testimonials and felt excited, empowered, and optimistic.
Then you opened the software and weren’t sure what to do next. When I started YNAB seven years ago, I remember feeling overwhelmed by my financial situation (tons of credit card debt) and that made it hard to get going.
YNAB is a powerful and simple money management tool, but I know how hard it can be to climb over those first obstacles. That’s why we’ve created a thorough support structure:
- A knowledge base with articles covering every aspect of YNAB’s features and philosophy.
- About one hundred free live webinars each month hosted by one of YNAB’s expert teachers.
- Hours of video tutorials that walk you through the software’s key features.
I hope you’ll use these resources – they cover both the YNAB method and the software.
At the same time, I know some of you don’t want to figure YNAB out on your own. You’d prefer to do it once and do it right. I know when I started it would have been perfect if a YNAB expert had been willing to sit down with me at my kitchen table and walk me through it step by step.
That’s why I’ve created YNAB’s Quick Start Workshop. It’s the closest I can get to actually sitting next to you during your crucial first hour with YNAB.
Here’s how Quick Start works:
After registering for the workshop, I’ll send you a few assignments to prepare you for the live sessions. Don’t worry – it won’t be anything too difficult. I’m talking about gathering financial information available in your online accounts, and maybe reviewing some YNAB orientation material just to make sure we’re all on the same page when we start.
Once you’ve finished your pre-workshop assignments, you’ll sit in on a live webinar with me and a few other new YNABers. Many of our free classes have as many as one hundred attendees. For the Quick Start Workshop, we’re capping attendance at 20. That will allow us to really dig in deep and answer your questions directly.
You’ll open YNAB and I’ll walk you through setting up your budget file, one step at a time. It’s that simple: I’ll give you a YNAB task, then pause while you implement it in your own budget file. You can ask questions as you’re working, as they come up, and get them answered in real time.
We’ll spend 60 minutes in the first live session, covering as much ground as possible before turning you loose for a week to budget on your own.
During the week following our live session, I’ll send you a few emails reviewing what we covered, and giving you small tasks to help you feel more confident with your budgeting process.
After you’ve had a week to practice budgeting, we’ll get back together for our second live session. This class will be less formal; you and your classmates will have plenty of questions after spending a week on your own with YNAB. Those questions will drive the second session. We’ll spend another 60 minutes together, making sure your questions are answered before you strike out as a fully operational YNABer.
Summing up the Quick Start Workshop, participants will:
- share two live 60-minute webinars with a YNAB instructor and a few other YNAB users.
- receive personal guidance on setting up and using their budget.
- have a week of budget practice between the live sessions.
- graduate with a fully functional YNAB budget file and the confidence to maintain it.
We’ll be running the Quick Start Workshop for the first time on Monday, March 3rd at 8pm with the follow up Q&A on Monday, March 10th at 8pm. I look forward to personally interacting with you in our first session!
YNAB Education Lead
Common Questions about YNAB Quick Start
How does Quick Start differ from YNAB Coaching?
YNAB Coaching participants work with their coach for over a month, exchanging emails and usually sharing at least one phone call. The typical Coaching client has already spent time with YNAB and is mostly looking for insight into their personal workflow. The price ($179) reflects the length and format of personal coaching.
We see Quick Start as a tool to create a solid foundation for YNABers who are just getting used to the software and method.
Is Quick Start only for “new people?” What if I’ve had YNAB for a while and just want to make a Fresh Start with an instructor’s help?
Yes, we’ll be making a fresh start with new budget files. This is a great fit if you’ve had YNAB for a while and haven’t settled into a good budgeting habit. We’ll be happy to have you!
Do I have to connect a mic and headset to my computer to participate?
No, you can just listen through your computer speakers or dial in from your home or cell phone. Either works great. You’ll type your questions over through a chat window. We’ll send connection instructions well in advance of the first live session.
Will I have to share my budget or personal financial details with other participants?
No. Participants will be able to see the instructor’s demo budget file on the screen, but none of the participants’ budgets will be visible.
What if I have questions between the live sessions?
If it’s a technical issue, YNAB Support is always ready and happy to help. If your question relates directly to Quick Start, save it for the second live session – Q&A is its main purpose!
Okay, maybe not.
I’m sure my first day budgeting (March 17th, 2013 according to my YNAB file) started like any other: with my wife and me pretending to be asleep in hopes the other would get up to take our three year-old daughter to the bathroom. Glamorous stuff.
Actually, my decision to budget wasn’t random, and it wasn’t an epiphany. One specific event pushed me into budgeting:
I talked with Jesse about joining YNAB.
That’s right – I didn’t start budgeting because I was ready to be a savvy money manager, taking ownership of my financial present and future.
I started because the company was going to pay my bills, so I probably ought to be using the software.
I’d known about YNAB for years – owned it for years – but it took a significant life event to finally push me into the budgeting habit.
I know I’m not alone. A while back Jesse interviewed many of you to find out what led you to YNAB. He confirmed that basically no one has a dramatic, sun-radiating-off-determined-face budgeting epiphany.
For nearly all of us there was an event (or series of events) that guided us toward budgeting. The event finally made it clear that the pain of not controlling our money would be greater than the perceived* restriction of budgeting.
*Heavy emphasis on “perceived.”
I’m curious – what event led you to YNAB? I guarantee it’s not as simple as “a friend told me about it.” Dig further – what event helped you realize you need(ed) a budget?
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Hello YNABers. My name is Jesse Mecham and this is podcast number 73 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.
I was talking with Taylor, our lead developer, a week ago and we were discussing different interviews I’ve been doing with customers that just recently purchased YNAB. And I was talking to him about events – everyone’s experienced some kind of an event. And there was a TV show called The Event – I never checked it out. But events push us toward that idea of meeting a budget. Nobody wakes up on some random day, sees the bright sun streaming through the window and thinks, “We need a budget.” I didn’t. And like I said on my blog, I’m a budgeting freak of nature.
So, my wake-up call came entirely from a big event on my own horizon, which was my marriage to the greatest woman in the history of the world. When I was 14 my dad gave me Dave Ramsey’s book Financial Peace. I read it in a few days – life insurance, mutual funds, growth value, all that stuff that was in there; get out of debt, stay out of debt. I had no debt – I had no money. So it was all really simple to set up a budget. I actually started tracking my money because of that, and I think because of a personal finance merit badge – Personal Management, I think it’s called. Another story for another time. But I was always a little bit of a geek in that regard. I read The Millionaire Next Door before I finished high school, read The Richest Man in Babylon – one of my all time favorites. My favorite book of ALL time, personal finance related, is Your Money or Your Life.
Anyway, this all made pretty good sense, all these principles that I was learning, and I became fairly indoctrinated to the idea that debt was evil. So when I was in school and had three years left and this marriage coming up, it was pretty obvious that I was not going to take on any debt. So without that as an option I thought we needed a budget. So my big event, again, was getting married.
We did need a budget. So do you. I started with this analogy in the blog of a treadmill. Almost anyone can walk on a treadmill with no degree of incline. Like two miles an hour – anyone can do that for a long, long time. Most of us are doing this with our finances. You’re not really getting anywhere, everything’s going fine, you’re not sweating. I mean, you could do it for a long time. And then some big event happens – maybe your hours are cut at work so the speed of the treadmill kind of increases, or maybe you found out you’re going to have a baby. That’s a big event, a happy event, an expensive event.
Side note… Oops – just got a text. Don’t know if you guys heard that on the mike. Side note is the cloth diaper thing. If anyone has tried cloth diapering instead of WalMart or Costco diapers, email me. I’m curious to hear your experience. I’m intrigued by the idea. Apparently they’re not as bad as I totally imagine them to be because I don’t know what… I’m not imagining when I imagine it it would make them better than chucking them in the garbage except for less waste. But seriously, anyway, I’m really curious about that. Email me if you’ve had any experience with that.
So, you’re going to have a baby – big event – and now it’s like someone hands you 25 pounds to carry with you as you’re walking. That would get tiring. Maybe you’ve outgrown your apartment and you decide it’s time to purchase a house. The house payment is a little bit of a stretch, so the treadmill’s incline bumps up. Your oldest needs braces, the kids’ summer camp bills are due and the car just broke down again, Christmas is coming again – every year, same time. The vacation that you take with your family every year – every year – is in six weeks. No money set aside for that. So the treadmill is now going faster, steeper incline AND you’re having to carry that 25 pound bundle of joy, so you’re sweating, you slip, you grab onto that railing for support and then realize that walking won’t cut it, so you break into a slow jog, and you can’t hold that pace for too long. At that moment, when you’re sweating and stressed and tired, that is the moment where you realize that you need a budget.
And then, once you begin giving every dollar a job, being conscious about it, not just automatically doing it – which is what I feel like I was doing in 2012 – treating larger, less frequent expenses as monthly bills, following Rule Two, your breathing will regulate, your leg muscles will find new life, you’ll get that second wind that I’ve never received in a real race but I hear it’s phenomenal. Even if the treadmill stays that fast and you can’t shed the 25 pound baby – as if you’d want to, but that analogy has broken down, I think… Maybe the incline won’t abate or your budget needs to be worked over a couple of times. But in the end, the budget will help you handle that new scenario, that new situation. You’ll find your stride and you’ll have the time to make any long-term financial changes that may need to happen.
Maybe you bought too much house, maybe you bought too much car. Look at the fixed stuff. What can you axe from the fixed stuff? Everyone can make the variable things move a little bit, but the harder decisions are the ones that really give you a big bang with the buck, so to speak. Those are the fixed ones. Because when you can reduce a fixed expense that change is multiplied. You don’t have to keep working on it – keep working on keeping grocery bills down or not going out to eat. If you’ve got debt, you shouldn’t be going out to eat. It just shouldn’t be a priority. So, look at the fixed costs. See if you can make some long term financial changes that will give you a springboard off of which you can then reach your financial goals.
So, I’m curious. Check it out on the blog – you’ll see if you just go to ynab.com/blog and scroll down a little bit – Your Financial Life on a Treadmill. And leave a comment for me there telling me what event or events pushed you to the idea that you needed a budget. I’ll give you a hint. The event was not, “Well, I was tired of Quicken.” That was not the event. And it has nothing to do with the software. It has everything to do with your life and what’s happening in your life that caused you to say, “I need a budget. I’m going to check things out.”
So, I’d love to hear it, and we can chat over there on the blog. You can catch us on Twitter. I don’t say this very often, but we’re @ynab or you can catch me personally @jessemecham. I don’t Tweet tons because I removed it from my phone, but every once in a while. And you can catch us on Facebook, where I am more active – facebook.com/iynab. And by more active, not personally. I removed that from my phone as well. I just mean on our Facebook page. We post stuff there, so catch us there, like us, friend us, fan us.
I think that’s pretty much it. So, think about your financial treadmill. Anything you can do to adjust it? Give it a bit more manageable speed? And what events cause it in the first place?
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Hello YNABers. My name is Jesse Mecham and this is podcast number 74 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.
Today I want to talk about money and kids. I am not… well, when you’re a parent for the first time you don’t know what you’re doing. Your only experience is what your parents did with you. Hopefully it was great. Mine was. Anyway, you don’t know what you’re doing, and I certainly don’t know what I’m doing. But I will still share with you what we do when it comes to our kids and money.
First I want to talk to you about what we’ve tried in the past and what we’re doing now and how, and maybe a little why that’s working. So, one, I think it’s important that kids earn money so they have to manage it and get in the habit of that – having money pass through their fingers, maybe a little bit stay in their fingers. So with the kids, we at first tried cash where they would earn money doing various… it was pretty random stuff, and we would say, “We’ll pay you a quarter or 50 cents to do this.” But we try and teach them to tithe, and so if you give one of the kids a quarter and then you’re trying to teach them to tithe, that means if they would want to give two and a half cents… and that got kind of dicey. So if you’re giving them 50 cents that’s easier because it divides evenly. You can do five cents out of the 50. We’re trying to teach them to save half of their money for school and when their money will be important to them later on, and then spend the other half.
So, with the tithing at 10% and then the giving and saving, they end up 45% for their own and 45% for the saving. I don’t know how long we’ll keep doing that. I think when the kids get older I don’t think I would mandate some kind of a savings rate or anything like that. I just want to teach them that saving money feels really good, then hopefully they can pick something reasonable for themselves. But for right now, I am the dictator and they are all young enough that I can pull that off without any issue whatsoever. So, when the rebellion comes I will amend this podcast.
This was pretty unwieldy for us having cash, and it bugged me to no end when I would give them cash and then I would find the cash had been – by cash I mean change – had been left around the house, “Whose quarter is this?” “That’s my quarter,” “No, that’s my quarter.” It was a disaster. Or it just kind of made me think, “We’re screwing things up,” because they would get this money that they’d worked for and then they would lose it. Maybe it wasn’t intentionally leaving it around, but they would just unintentionally lose the thing and they’d be sad about it. We got them wallets – that didn’t work very well.
One of the kids was stealing money from the other kids, so that was a teaching moment for the whole house or something. Then we got banks so that the stealing couldn’t happen. But the banks were… When they wanted to get their money out to spend it, it didn’t work very well – the accessibility of their money was poor. And we’d go out and be around maybe Target or something – the kids love Target and the toy section – and they would see a toy but they couldn’t buy it because they didn’t have their money with them. And if they brought their money everywhere they went, they would lose it. So that was a problem.
We still had a little bit of theft of just things in general, and so for Christmas two Christmases ago we got the older boys what they call safety kits. I’m not sure why they call them that, but they’re just fireproof safes and they have keys, and I keep a copy of the key and they keep a copy of the key. They have both lost their keys, so now we’ve just relied on my keys that have not yet been lost to gain access to the safes. Anyway, three boys sharing a room – I think it’s a little too tempting for the three year old to not play with their stuff. So they cram everything they can in those safety kits.
This wasn’t working for us. About… I don’t know when it was, maybe a year and a half/two years ago, I heard about a service where you could kind of be your own kids’ banker and they could earn interest and things. The name is escaping me… FamZoo. I don’t even know if they’re still around. They probably are – they’re probably doing really well. Anyway, it was all about managing kids’ money and you’re the banker, and you can pay them interest and things. Pretty interesting set-up, and I checked it out for a while. The only thing that kept me away from it was I didn’t want to manage two different money systems.
So I thought, “Okay, what would I do if I already use YNAB? I don’t want each of the kids to have their own version of YNAB – that would be just total overkill.” So what I did is I set up a master category called Kids. And then for each of our five kids, I set up three categories. So they’re all under one master and I ordered them by age, and I ordered them… named them Porter-Tithing, Porter-Savings, Porter-Fun, because those are his priorities – tithing, savings, fun. And then Harrison, same thing: Harrison-Tithing, Harrison-Savings, Harrison-Fun. So out of the five kids, three categories each, you’ve got 15 categories all under one master category that remains closed most of the time, and you get this long list.
Now, when the kids are paid, we just budget money into those categories. If they’re paid 50 cents, I can easily drop five cents into tithing, 45 cents… Oh, let’s see. Five cents into tithing, and then 13 and 12 into… My math is off. Okay, let’s hold the phones for a second. 50 cents. Five cents goes into tithing, leaves me 45 cents left over. So then you have a difference of 23 cents here, 22 cents here. The conservative side of me always rounds up toward the savings. And the kids understand this – they get it, they see that their savings category balance is growing. Every once in a while their tithing balance will grow enough that we could actually make the donation, otherwise you’re just giving pennies and the people that have to do all the finances for the church probably would prefer to have it consolidated. Anyway… It’s also kind of to help our sanity too because we can batch process that situation where we’re doing a lot of showing them how to literally do everything.
Then their Fun category is the important one to the kids. The nice thing is everything’s virtual, so you’re just assigning money to those categories. And the best part is that when they’re at Target and Julie’s with them and they’re looking at toys, I’ve never liked not telling them they could buy something. I want it to be their money that they have control over. I don’t want it to be their money except they have to have dad’s approval to actually use the money. That doesn’t sound like their money, it sounds like mine; and I want them to actually have their own.
I’ve had Porter plenty of times – because he’s the oldest, he’s had the most opportunity – waste his money. And it was killing me inside because I knew it was waste. But he was so excited about it, the money’s burning a hole in his pocket, he just thinks in his mind, “I want to buy something today, I want to buy something when we go to the store.” And no matter what, he will buy something. He’ll just settle. And it’s been a learning lesson for me to back off, let him make the mistake and just be okay with it. And he’ll learn over time.
So, as we’re in Target or whatever and they said, “Hey, I want this,” all that Julie has to do – she’s normally there with them – all she has to do is just whip out her phone, check the category balance, show it to the kids and say, “Well, see Harrison, on the fun you’ve got $7.19. Remember you just spent $5 on X, so you’d need a little more to be able to buy this $10 thing.” Harrison’s totally okay with it. It’s the easiest way I’ve ever found to say no to things because we simply have them check the budget. We say, “Okay, well let’s check your budget, because you totally can buy this if there’s money there.” They look, there’s enough, they’re totally jazzed about it, and then you’ll maybe give them a cautionary sentence or two like, “Hey, remember if you buy this here, you mentioned a couple of weeks ago you were saving for X. Are you still planning on saving for that or is this new thing what you really want?” “Oh, this is the new thing! This is what I really want!” “Okay, cool.” So they buy it and it’s all good. We record the transaction to their category, it flows out.
Money never changes hands in the sense that I’m never handing them cash, change, they’re never having to split quarters and do all that to be able to manage it. They know to check the budget. They’re being taught it at a really early age, “You check the budget to see if you can spend.” They see they have money there in savings and they see they have money there in tithing, but they know that money is earmarked for other jobs. And the one they care about is that fun money, and they want to see it grow. It’s worked well for us for this last while that we’ve been using this.
Tonight we’re going to have a little family meeting and I’m going to reiterate the whole chore thing – Spring’s coming, yard work will need to be done, the kids are getting older and will be able to help me. Plus, if you’ve been keeping up with my 2012 budget rehash, I want to fire my lawn care company and I will hire the youngest lawn care company ever, which is Porter and Harrison with my help. So, it has me pretty excited having them earning money. I think it’s important that kids do. I think some jobs they should… This is me personally, but I think some jobs they should do just because they live in the house, and other jobs I think that they should be paid for. So that’s kind of what we’re working on.
Until next time, follow YNAB’s four rules and teach your kids about it, and they will win financially. You have not budgeted like this.
YNAB is a high-touch tool; the more you use it, the sooner you’ll find your budgeting rhythm. While you’re getting in the groove, you may hit a few of these stumbling blocks. Use the recommended reading (and videos) to help you stay on track.
“I can’t get ‘Available to Budget’ to match my current account balances.”
This was tripping up one of my coaching clients. In his case it was because a) he was riding the credit card float, and b) he still hadn’t wrapped his head around the concept of ‘Available to Budget.’ If you share this struggle, check out these two articles:
- Deconstructing ‘Available to Budget:’ Clarity on One of Your Budget’s Most Important Numbers
- Are you riding the credit card float?
“I don’t know how many budget categories is ‘right,’ and I don’t know how broad/how narrow they should be.”
There’s not a right or wrong number of – or approach to – your YNAB categories. Your categories’ job is to help you maintain high awareness in each area of your budget. Read through these posts to help you form your own best approach to categories:
- Master Category Madness
- Getting Granular: How Adding Six Categories Helped Me Discover a $200 per Month Leak in My Budget
- Using Hashtags in Your Transaction Memos for Improved Budget Granularity Without Needing 153 Categories
“I keep ‘falling off the wagon’ and getting behind on transaction entry. Then my account balances won’t match and my budget falls apart.”
If you have a hard time maintaining your budget file, try this 14-day experiment.
“Expenses keep sneaking up on me and wrecking my budget.”
This happened too often in my first few months as a budgeter. Three ways to avoid it:
- Scour your online transaction histories (credit card, checking account) for infrequent-but-expected expenses you’d otherwise forget. Add them to your Rainy Day categories and assign enough dollars to handle the expense when it arrives.
- Don’t try to be a hero. Budgets fail when the budgeter tries to simultaneously learn to budget and drastically reduce spending. Develop the budgeting habit, then let the budget naturally (magically) reduce your spending.
- When you’re new to YNAB, create a category called “Stuff I Forgot” and assign it a chunk of money from every paycheck. Not only will this help you establish the saving habit, it acts as cushion when expenses do sneak up on you (credit to the YNAB teachers for this one).
“I’m slowly paying down a credit card balance, but still using the card. I can’t figure out how much my payment should be to cover new transactions, my snowball payment, and interest charges.”
(Unless, of course, I can talk you out of using the credit card while you pay it off.)
If you’re struggling with any of these hangups, hang in there. The only two things you have to do to succeed as a budgeter are 1) Start and 2) Don’t Quit. If you’ll persist, mess up, start over, and persist again – you’ll get it. And it’s oh so worth it.
The budget reviews we used to do on the blog generated great discussion, benefited the person whose budget we analyzed, and let other members of the community see situations similar to their own.
That’s why I’m bringing them back – with a twist.
I’d like to feature your budget on the blog and the podcast.* We’d use email to establish some background, then get together on the phone to talk about your primary budgeting successes and struggles.
Think of it as getting YNAB Coaching for free in exchange for your willingness to share with the community.
The benefit is in having an official YNAB Coach spend time with you and your budget, creating breakthroughs you wouldn’t have on your own.
The obvious concern is protecting privacy, which is why:
1. All content would be totally anonymized. We would avoid names, cities, and any other detail that would reveal more than you felt comfortable sharing. Of course, we couldn’t hide or mask your voice on the call.
2. Featured YNABers would review and have veto power on the final cut of all content before it went live. If any part of it makes you uneasy, we’ll edit that piece out.
I guess this could flop; it takes a certain kind of person to share – even anonymously – their financial wins and losses. But I’ll risk it because I’ve benefited so much from transparently sharing my own budgeting journey (as in posts like this one, this one, and this one).
If you feel like you’re on a financial plateau and would benefit from my and the community’s support and insight, leave a comment on this post (or email email@example.com). I look forward to visiting with you!
*Jesse will continue to produce his own podcast episodes; these would be additional.
I spent an hour sharing screens with a coaching client on Thursday. We spent the last 15 minutes or so going through her categories, simplifying wherever possible. We eliminated ten (or so) and moved a few others from one Master Category to another.
I could tell the exercise lightened her mental load, and it occurred to me: understanding your budget categories’ role is crucial to moving from expense tracking to budgeting.
When we name and arrange our budget categories, we’re not just setting ourselvses up to “tag” transactions. We’re deciding what jobs we want our dollars to do before we decide how many dollars to assign each one.
Rather than talk about individual categories, I thought I’d review YNAB’s default Master Categories. Some of you may have looked at them as filler or placeholders, but the YNAB Team added them thoughtfully – with the 4 Rules in mind.
Pre-YNAB Debt: credit cards you use in daily transactions that have balances.
Budget Role: promote awareness of the debt emergency.
Monthy Bills: Fixed (or only slightly variable) bills, paid monthly (Internet, cable TV, Rent/Mortgage, etc). Some YNABers choose to bundle their fixed bills into one category, adding a note to help them remmber exactly which bills – and what amounts – account for the category total.
Budget role: promote awareness of the “fixed costs” we’ve built into our lives.
Everyday Expenses: variable categories that comprise most of your day-to-day transactions (groceries, household goods, restaurants, entertainment).
Budget role: promote awareness of how we’re using our discretionary dollars.
Rainy Day categories: Other-than-monthly bills, including both those whose due dates you know (life insurance premium in September) and those whose due dates you don’t know (car repairs).
Budget role: promote awareness of infrequent-but-expected expenses.
Savings Goals: Categories where you hope to build big balances. Money goes in and doesn’t come out except to fulfill its assigned job.
Budget role: promote awareness of our progress toward Rule 4 and other delayed gratification priorities.
Debt: Outstanding loans, except credit cards with balances (because those live in Pre-YNAB debt).
Budget Role: promote awareness of the cost of borrowing.
You see the common thread: your budget categories’ role is to promote awareness. That could mean following YNAB’s default setup or going with something more creative.
Make sure your categories help you decide where you want your dollars to go, not just see where they went.