17 February 2021

On today’s show, Robert Leonard chats with Jesse Mecham to talk about how abiding by simple budgeting can set you up for success in the future. Jesse founded You Need A Budget (YNAB) in 2004 while he was still in college. YNAB has grown into a leading software and proven method that helps its users get out of debt and have more control over their money.



  • How the idea of You Need A Budget came to be. 
  • If you need to raise capital to start a business.
  • What is the Four-Rule Method of budgeting, and why it works? 
  • How can you roll with the punches when it comes to budgeting? 
  • What does it mean to age your money ?
  • Why budgeting is crucial to being a successful investor.
  • And much, much more!


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Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Robert Leonard (00:02):
On today’s show, I chat with Jesse Mecham to talk about how abiding by simple budgeting rules can set you up for success in the future. Jesse founded You Need A Budget, also known as YNAB in 2004 while he was still in college. YNAB has grown into a leading software and proven method that helps its users get out of debt and have more control over their money. I’m excited to have Jesse talk about this unique budgeting strategy that he’s developed because budgeting really is one of the most important yet underrated components of good personal finance habits.

Robert Leonard (00:36):
And this might just be the budgeting strategy that you need to get your money under control. I know budgeting sounds boring. It isn’t sexy like investing is, but changing your mindset towards the money you earn can help you break free from living paycheck to paycheck, which helps you not only start investing, but also helps you become a better investor. Jesse also shares some lessons learned as an entrepreneur growing his startup, which can help you start a business or even a side hustle to start earning more money to invest. Now, without further delay, let’s get into this week’s episode with Jesse Mecham.

Intro (01:11):
You’re listening to Millennial Investing by The Investor’s Podcast Network, where your host, Robert Leonard, interviews successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

Robert Leonard (01:33):
Hey everyone, welcome back to the Millennial Investing Podcast. As always, I’m your host, Robert Leonard and with me today, I have Jesse Mecham. Welcome to the show, Jesse.

Jesse Mecham (01:41):
Thanks for having me. I’m excited to be here.

Robert Leonard (01:43):
For those who may not know who you are or who haven’t heard of YNAB, tell us a bit about your background and how you got to where you are today.

Jesse Mecham (01:52):
Born and raised middle-class and married young. And so, my wife and I were both in school. At about three years of school, left and was majoring in accounting and thought I’d get my CPA and go off to the wide open pastures of public accounting. And then along the way, we realized that we really needed to be pretty careful with our money. We didn’t want to borrow to make it through school. We had a baby that was coming. And so, all these things kind of came together to force me to think of some other way to make money besides what I was doing while in school, just working normal kind of college student jobs.

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Jesse Mecham (02:24):
And so, I came up with this idea that I could sell the spreadsheet that she and I had been using for our first year of marriage and that we figured might be able to help other people. So that was kind of how YNAB was born. It was just one guy that thought the spreadsheet might be able to help a few people, but I never had big aspirations for anything entrepreneurial. I thought I would just get a job, nose to the grindstone kind of thing and be off to the races.

Robert Leonard (02:50):
One of the most common questions I get from listeners of the show is how to fund the start of their business especially from listeners who are in college like you were, or just haven’t been out for very long. How were you able to fund the start of YNAB if you were a college student and how can others fund their ideas today?

Jesse Mecham (03:06):
I think one thing is Eric Ries made the idea of the minimum viable product, the MVP kind of a thing with the Lean Startup. It’s now kind of aging as a book, but it still holds water. And my MVP was a spreadsheet and that didn’t cost anything to build. I just had to learn how to build it and then iterate on that. So that part was really important was I found a way to test market fit without pouring a bunch of money into development, into work, into contractors, anything like that. That was key. Then the other thing that I did that was virtually free is I just started writing and self-promoting. I just started putting myself out there the way you might see someone launch their own podcast or start their own blog or now in these days, it’s more like they’ll start on Instagram or something like that. But there are these free places where if you’re good enough, you can start to build an audience and it doesn’t cost you any money or really close to nothing.

Jesse Mecham (04:03):
Back then, I did have 60 bucks that my wife and I both decided we were going to fund and kind of test with this. And at that time, Google AdWords was brand new thing. And so you could buy for five cents a click, you could buy a personal finance kind of terms. I don’t know if you could get them for $5 now. It’s a totally different ball game. So I don’t recommend that. But at that time there was a cheap option for me to start to kind of test and see, and there are cheap options today absolutely.

Robert Leonard (04:31):
You founded YNAB using a concept of the Four-Rule Method that you had created with that Spreadsheet. Before we get into what the specific method is, tell us why a new budgeting method was even needed in the first place.

Jesse Mecham (04:45):
Yeah. I didn’t come at it from that angle. I actually kind of backed up into it. So I had built the Spreadsheet first, my wife and I were newlyweds and we’re like, we got to watch our money really closely. And then as I iterated on the Spreadsheet, that was just for the two of us at that time, I just noticed like, oh, I should change it and do it this way. And I should have it behave like this and have this mechanism here. And then when I launched the Spreadsheet, I still didn’t have a concept of those four rules. It was only about six months into the business where I was rewriting my sales copy and I was thinking, man, how do I pitch this to people? How do I tell them that all about what this is actually doing for me?

Jesse Mecham (05:21):
I just kept talking about the Spreadsheet and here’s how it does this and here’s how it does that. But then I latched on to this idea. I thought, wait, the Spreadsheet is really just enforcing a way of thinking about our money. So it’s really not about the spreadsheet, it’s really about what we’re doing behind the scenes. The tool is just kind of the means to the end. And that was really the breakthrough. So I discovered the rules as I sold. And then once I found them, I iterated far more on the rules for quite some time, making sure I could teach the rules effectively. And then the Spreadsheet was just kind of always second fiddle. And now even our software, the fancy software that we have now, it’s still just second fiddle to that way of thinking that really is the game-changer for people.

Robert Leonard (06:06):
As a college student, since most college students don’t really have much experience with personal finance, how did you know that your strategy was even going to work?

Jesse Mecham (06:16):
I didn’t know but you just launch it and hopefully you launch it with as little money as possible. And then one by one, you start to kind of say, oh, I sold something or oh, I sold a little more when I launched the new version of my website six months in leading with the four rules, it worked. Meager as they were, I saw my sales double and I thought, oh, there’s something here. And then it was just kind of finding that spot that’s working and doubling down on those areas. And that’s what we still do to this day. We try things all the time where we think, gosh, is this going to work? And you only find out when you take action and you roll the dice a little bit.

Robert Leonard (06:52):
About the personal finance strategy, how did you know that that was even a viable way to go about your finances? It was something, it sounds like, you created. So how did you know that that was going to work for you?

Jesse Mecham (07:02):
Yeah. I think part of it was kind of cobbled together. I mean, the idea of envelope budgeting isn’t new at all. It’s super old. So that idea of put money into categories now, digital envelopes, that’s nothing new. Where I started to really kind of latch on to things was teaching people that they should only do that with money in software that they actually have and stop kind of projecting and forecasting money that they would eventually earn. I found that when they only dealt with money they had, their scope in which they needed to make decisions shrank. And they started to feel scarcity sooner. And we discovered that that was a good thing that people would recognize, “Oh, I’m out of money.”

Jesse Mecham (07:40):
And when they realized that… I guess I’m kind of rolling into rule one here where we’re saying give every dollar a job, when we’re doing that, we’re really telling people, if you do this and do this, you can’t do that. And when you have money run out on people, then it really does help them say, “Oh, well, I don’t care about that thing. I actually want to do the other.” And that’s what’s key for us is recognizing when we’re giving something money, we can’t give it to something else as well. And as simple as it sounds, that rule is really powerful because it flushes out priorities for people. That’s where they start to feel peace, they start to feel like they’re in control. They start to feel a little bit of power maybe. And that’s where their magic starts to happen.

Robert Leonard (08:18):
Let’s get into the four rules. You mentioned rule number one is give every dollar a job. Dive a little deeper for us, what does that mean? What does it mean to give every dollar a job?

Jesse Mecham (08:27):
You got to only deal with money you have on hand. So if your checking account balance has $300, 3000 or 30, it’s the same thing we would say, what does that money need to do before you’re paid again? And then once you answer that, you’re done. That’s it. Every single dollar that you have in your possession, you have said, “I want it to go here. I want that to go there.” The problem is, people want to say, “Oh well, I will earn money in two weeks in three weeks or tomorrow.” They’ll all bring that in as well. And we always will stop people and say, “No, no, no, no. Tomorrow when you get new money or in three weeks when you get new money, we’ll do the same exercise again. What does that money then need to do before you’re paid again?” But you always deal with money you actually have on hand.

Jesse Mecham (09:04):
And then you’re experiencing those trade-offs and you’re starting to say, well, what really matters to me? So much of the time when people are saying, well, how do I free up money to invest? How do I do this? How do I do that? What you’re really talking about is where are your priorities and when they are true and clear, or I guess not true, but when they’re clear about what their priorities are, their spending usually decreases because they realize I’ve been spending money on things I don’t really care about. And so rule one is that exercise of prioritization with money that you have. And every other rule that we’ll talk about is really just a derivative of that first rule.

Robert Leonard (09:38):
What if we’re talking about money that we don’t necessarily want to spend? What if we have $10,000 sitting in a savings account, that money technically needs to go somewhere, right? Because we’re allocating every dollar that we have. What if that’s money we don’t want to budget for, we don’t want to spend, that we just want to save or invest.

Jesse Mecham (09:54):
Yeah. I mean, if you were to say this is money to invest, I’d give it the job of going off to the investments, I’m going to send this off to Schwab or Vanguard or whatever. So that’s the job of that money. That money is purely there just for safety. So you’re saying, I just want to have a $10,000 pad in my checking account, then call it that. Be like padding, safety, anything, my feel good fund, anything you want. But you’re acknowledging the job of that $10,000 is to help me feel a little safer. And that’s it. And you never do anything with it. You don’t touch it. You don’t say, “Oh, but if the fridge goes out, then I’ll raid that.” Well no, that’s not what you’re talking about because you weren’t saving for a fridge or an eventual appliance breakdown, you were saving just for safety and that’s totally legitimate.

Jesse Mecham (10:34):
But what happens is people treat their savings. They know they should save. So like, oh, I got to save. I got to save. I want to save more. It’s 2021, I want to save more. And then what happens is as soon as something pops up, they’re like, “Oh, I got to raid my savings.” And so you have this revolving door of savings, money in money out. And they’re like, why isn’t it growing? The problem is people aren’t clear on giving the savings dollars more specific jobs like is that for an eventual car repair? Is that for a new computer? Is it for safety like you mentioned? Is it for the roof eventually caving in?

Jesse Mecham (11:03):
I mean, you own rentals and things like that, you know that stuff’s going to happen. There’s wear and tear. And so you’d be setting aside saying, “I know the roof’s not going to last forever. So I’m going to put a little here. I know that appliances go out way sooner than they should, I’m going to put some money over here.” So it’s savings. It’s an emergency fund with purpose. And that helps people be really clear on what it is they’re doing and then not rate it for something that isn’t actually spoken for.

Robert Leonard (11:28):
Rule two is to embrace your true expenses. Someone might hear this and wonder if I’m already budgeting, aren’t I embracing my true expenses. Why might this not be the case? And how is rule two different?

Jesse Mecham (11:41):
We’ve kind of hit on it a little bit, but it’s acknowledging that your expenses aren’t just monthly. So it’s not just about rent and groceries and a cell phone bill. It’s about the vacation you want to take eight months from now, that’s an expense. It’s about paying property taxes, life insurance premiums. It’s about the car tires blowing out and you need to replace those. It’s any number of larger, less frequent expenses. And what you want to do is acknowledge that those are coming. Let’s take a good one for example. Let’s say in nine months, everyone will be gone on vacations because it’ll be allowed, right? So we’re saying in nine months we’re going to go on vacation and we want that vacation to be great. It’s going to cost $4,500.

Jesse Mecham (12:17):
That means that you’d want to set $500 aside each month for those nine months. And it’s essentially like you’re saying, I have a vacation bill every month for the next nine months, that’s $500. So when you go back to rule one and you’re saying, hey, should we order in, should we do this? Should we do that? How do we want to spend this current money? You’re also considering the vacation nine months from now. You’re considering holiday spending 12 months from now. You’re considering an appliance repair two years from now, all those different sinking funds that you’ve got going and you’re saying, “Well, should we go out to sushi or pizza?” But you’re considering these kind of longer term perspectives.

Jesse Mecham (12:53):
It’s like there’s Robert from the present and there’s Robert from the future and you guys are both at the table negotiating and future Robert’s like, “Well, I got an appliance repair on a rental,” and you’re like, “Okay, I won’t eat out at the price of your place. I’ll eat out somewhere cheaper.” But it’s that kind of conversation between future you and present you that has present you making good decisions, not leaving future you stranded on the side of the road. Sometimes literally where people are like, ‘What am I going to do?” That’s key. Your true expenses are all of your outflows. The ones you can’t predict, the ones you can, the ones that have unknown amount, the ones that are fixed and you consider all of those as you’re following rule one, giving every dollar a job.

Robert Leonard (13:30):
The next rule is to roll with the punches. And it sounds like we’ve probably briefly touched on that here and there with the tire examples, right? That’s rolling with punches. Nobody expects that, but our budget’s really supposed to be strict and inflexible so that we can stick to them. How are we going to roll with the punches?

Jesse Mecham (13:45):
It’s very common for people to say, “Okay, I’ve got a budget and I’m going to buckle down.” And they’ll buckle down for like three days and then it’s just back to normal. Budgets are just plans. They’re not about restriction. They’re not about less fun. They’re not about not spending or spending fast. I’m not going to spend for 30 days. I’m not going to eat out ever. None of that, a budget is just, what do I care about? And you spend all of this energy trying to earn money. And then as soon as that energy is converted into money, people are like, “Oh, I’m not good with money.” And so it’s this weird thing where I want to just carry people’s intent a little further into that equation where they’re exchanging life for money and then say, “Okay, now that the life has become money, that money, still that life, what do we want it to do?”

Jesse Mecham (14:31):
And when we’re clear on that, then we recognize that a budget isn’t about restriction. It’s just about achieving whatever you want to achieve. So that being said, when something happens and you recognize, “Oh man, I thought I was going to spend $1,200 on groceries, but then I ended up hosting two different guests that came in with their large families.” So it was actually more like $1500. Well, at the time you set the budget, you didn’t anticipate those unexpected guests, but once you realize they’re coming, you just adjust or yeah, the car tire blows out or something fun happens and your buddy’s like, “Hey, I got this one-time shot to go to this race and watch whatever. And it’s an overnighter and it’s going to be great.” And you’re like, “Man, I didn’t know that was coming up but that sounds really fun. I’m going to move things around in the budget. I’m going to acknowledge that my priorities have shifted a little bit and I’m going to go to the thing.”

Jesse Mecham (15:19):
It’s all about just making it your own. It’s like a coach making halftime adjustments. They do the best they can setting up a game plan, studying film, all of that and then as soon as they see what the opponent is doing, they’re adjusting and that’s how it is. We set up the plan, we do our best to set up a really nice budget that’s realistic, that we can work within and then as soon as life starts happening, we’re like, “Oh, okay, adjust here, adjust there.” So you’ve got to have it be flexible, rigid things break. And I know you saw that in racing. It was like you had to adapt to what things were going on constantly. I mean, that was probably what separates the good from the mediocre is just the adaptability to be like, okay, here’s where I can go, here’s where I have to lay off a little, what’s this rider doing, all of that plays into it. You got to be flexible or you just get tanked.

Robert Leonard (16:04):
Related to racing it’s funny because that’s exactly right. The way we think about it is being stiff on the bike or being loose. And so to continue that analogy, my brother, who’s a little bit younger than me, he’s a pretty fast rider, but he rides really stiff. And I tell him all the time, I said, you need to ride more loose and that will help you be faster. I tend to ride very loose and I tend to go a little bit faster than he does. It kind of relates to budgeting, right? You need to be a little bit loose on the bike. You need to be a little bit loose with the budget and be flexible. You’re not necessarily riding over your limits in this case where you would crash on a dirt bike or overspend your budget, but you’re just being loose. You’re making changes as you need to.

Jesse Mecham (16:43):
Yeah. You still have the constraints. Like you’re still holding on. You’re still centered. You’re very conscious of your weight and all of that. And that’s the same with the budget. Like we have constraints, we have reality that we’re dealing with, but within that, there’s some flexibility, some give and take that has to happen or we last two, three days and then it’s like, oh, budgeting doesn’t work. Well no, you just approached it incorrect.

Robert Leonard (17:05):
Yeah. That’s actually a really good analogy. I never would have thought that we could have used motocross racing and how loose or stiff you are on the bike to explain budgeting but that’s true. And I actually see it in the corporate world. So in my day job, I’m a corporate finance manager and we do the same thing in the corporate world for the company as a whole. So at the beginning of the year, we’ll set our AOP, which is our annual operating plan. Just think of that as your budget for the whole year. So we just did that and now that’s our goal or target. If we were going to be strict, that’s what we would stick to throughout the whole year. But then each month we update it with a forecast, which is being flexible. We say, okay, we realize we’re going to go a little bit away from the budget that we set at the beginning of the year and we’re going to update it periodically monthly into a forecast and we’ll continue to use that forecast going forward. So whether it’s personal finances, businesses do it as well.

Jesse Mecham (17:53):
Yeah, absolutely. Yeah. You’re always adjusting. I mean, look up at the past year, what company didn’t say, “Oh, our model is different.” And I mean, some companies did great, other companies horribly, but all of them were changing their models and their forecast and trying to be flexible given the circumstances.

Robert Leonard (18:11):
The fourth and final rule in your Four-Rule Method is to age your money. This one is interesting to me because you wrote that once your money is at least a month old, you’ll have finally broken the paycheck to paycheck cycle for good. Tell us a bit more about this rule and what it means.

Jesse Mecham (18:28):
The paycheck to paycheck cycle is essentially people usually have a pile of bills and they’re waiting for money to arrive so they can pay them. And we just want to flip that around. We want to have a pile of money that’s waiting for bills to arrive and then you pay them. And if you’re really doing it right, you just have them on auto pay. And it’s almost a non-issue, it’s like, “How much was your electricity bill?” You’re like, “I don’t know.” Or, “When is it due?” “I actually don’t know.” I know it’s paid on time, but it’s just automatic. So we want to get people to a point where the dollar that they earn today, they won’t use that dollar for at least 30 days. And if you follow the first three rules, you’ll get there. It almost can’t help but happen.

Jesse Mecham (19:05):
But it’s really a situation where it’s like, when you earn that dollar, the first day, it’s like a baby dollar and you don’t want to send it out into the world. It’s like it’s not ready yet. But you wait a little while and you let the dollar age and then pretty soon you’re like, “Okay, well yeah, let’s go out. Let’s use it.” But we tend… I mean, honestly, people even spend money before they’ve… I mean, they’re using credit cards and they’re actually spending money. They don’t even have on hand yet at all. I mean, they’re pre-spending future money. And so what we’re saying is no, let’s flip it all around. Let’s have you spend money that you earned at least 30 days ago. And the YNAB software calculates that, but it’s really a mindset for people.

Jesse Mecham (19:42):
So it’s about just saying, “Oh, I’m going to wait a little bit.” So at the beginning of February, I’ll be able to fund my entire February budget with money that I earned in January. And then during February you’re spending that money, but you’re also earning February money that you’ll use in March. And that cycle just continues. Once you’ve hit it, it doesn’t take any extra work. You just maintain being one month ahead of your paychecks and man, the sleep is better, the stress is less, conversations with a spouse where you’re sharing finances are easier. Like it just dials back the decibels a little bit. And it’s like, okay, we’ve got time. I mean, you now have the value of options, right? One of the ways you value an option is with time, time is a large input on the value of an option.

Jesse Mecham (20:27):
And you think about that in personal finance, all we want is just to buy ourselves a little bit of time so that we can make sure that when we do need to make some changes, roll with the punches, something happens, we can make a good decision. A rushed job where you aren’t prepared, where you just like, “I got to react,” it’s never as good as being able to have a little bit of time to say, “Okay, here’s my new situation, what do we do here?” And then go from there. So just separating yourself from that financial edge by 30, 40 days, it makes all the difference in the world.

Robert Leonard (20:56):
I actually just got off another podcast interview with Tom Sosnoff, who is the founder of Thinkorswim and also TastyTrade, which he’s one of the pioneers of options trading. And we talked a lot about how time is such a valuable input and bottle or input value in the Black Sholes Model for pricing options. So that’s funny that you mentioned that as well. I want to talk about two things. I want to talk about implementing this strategy tactically outside of the software and then I also want to talk about doing this with a spouse and getting them on board. I’ve used the software, I’ve used the YNAB software, and I like it a lot. What I have a little bit of a hard time with, and I think maybe some other people might as well is, how do we match up what we’re doing in the software with our bank accounts. Maybe we have this money in different accounts, how do we align our bank accounts with what we’re doing in the software and this philosophy? Is there a way to kind of make those two work together well?

Jesse Mecham (21:49):
The easiest ways… The simplest example is someone with just a checking account. And then they’re seeing that their checking account and then their budget categories total balance are the same. So you’re like, “Oh, okay. That makes sense.” It’s like you have your checking account and then you’re kind of overlaying a budget on top and you’re saying, “Okay, here’s how it all works.” If you were to say, “Well, I’m maybe sharing finances with the spouse or not.” But you’re like, “I’ve got a savings account and a checking account.” It’s the same thing where you’re saying, “Well, we’re just going to overlay a budget over both.” What happens is a lot of the time people will organize their categories in ways where they’re saying, “Here are my savings categories.” And they know that belongs in a specific savings account, but YNAB proper doesn’t really care physically where the money is as long as the account balances are accurate and correct.

Jesse Mecham (22:32):
So once YNAB notes, okay, in checking we’ve got a 1000 and in savings we’ve got 10,000, we have $11,000 of budget and you can break that down on your categories to tell you, “Oh, they’re physically in these different spots.” Most people end up just saying, “I don’t really care about the physical location of the money, I just care about my category balances.” And instead of making decisions about spending on how much is in my checking account or how much is here, they just look at how much is in my restaurants category and then they’re deciding what they should spend there. It’s the same with credit cards, credit cards operate the same way. We do some tricks there where if I spend on a credit card, I actually will… Let’s say I bought some groceries on credit card, I’m getting points or whatever, I swipe the credit card, we actually move money from the groceries category into your credit card payment category.

Jesse Mecham (23:19):
So we’re just saying you didn’t actually spend cash, but you did say this cash is now going to be sent to a credit card. And so it’s moved out of groceries into this payment category. And then from there, you just wait until you pay your credit card and it goes out there. So it’s tough for people to sort of wrap their head around but when you swipe a credit card, no cash has changed hands. Behind the scenes, your credit card company paid the merchant, but your cash situation is exactly the same. And so we represent that in the software. But at the end of the day kind of high-level YNAB doesn’t care physically where the money is. We just want to make sure that the accounts you have in there are all accurate and what the bank says you have, what YNAB says you have, they’re the same.

Jesse Mecham (23:59):
And then from there, it’s a matter of you saying, “Okay, I’m going to put all this money. Regardless of where it is, I’m going to put it into different categories.” And you can organize your category groups in ways where you say, “Okay, here are all my savings categories if you want.” We land on more personal preference as we get onto that side of things.

Robert Leonard (24:16):
How often does somebody need to stay up to date with this type of strategy? Is it something you need to check in with every week, every couple of weeks?

Jesse Mecham (24:24):
I’ve experimented personally. I’ve experimented with just monthly. I have like the wiggle room personally to do that where I can be like, well, nothing’s going to blow up on me. We’ve been doing this so long. We have pretty good kids. I’ve also experimented in 2019. I did all daily like manual entry. I didn’t connect it with my bank. I didn’t do anything fancy. I wanted to see what it was like to be in it every day. I actually liked that more. If you’re just starting out, you should lean toward more frequent.

Jesse Mecham (24:49):
And then as you get your feet under you and you get kind of a rhythm, you can maybe back it off a little bit. A lot of people do it. It’s like a Sunday routine, a Saturday morning routine. They get kind of their rhythm but when you’re first starting, more frequent is better just to establish that habit and kind of that muscle memory of like, okay, when I spend money, I’m going to plug my phone and check before I actually spend that kind of thing. We want to reinforce that when you’re just getting started so you can get that behavior change we’re looking for.

Robert Leonard (25:14):
How did you get your spouse on board? I know you mentioned that you got married early and so it sounds like you both might’ve agreed to it, but if you didn’t, how did you come to the same place? And if you did was one person the brainchild behind it, and you kind of convinced the other person to come along or did you both just mesh well or how did that work?

Jesse Mecham (25:32):
We were in the honeymoon phase, like literally honeymoon phase. And so when I said, “Hey, let’s use this budget and follow it,” she was just like, “Cool.” Because I could do no wrong in that little window of time. She was like, “Man, you’re the best.” And I’m like, “Okay, cool. We got it.” But over the years, we’re still evolving. And I’ve noticed that there are budget categories that she cares a lot about. And then there are others that she just couldn’t care less about. She doesn’t do the reconciliation, I do that. I do kind of the heavy lifting, like the tedium. I like to be in the software and clicking and doing. And all that I ask her to do is, “Hey, when you spend money, can you record it on your phone?” She’s like, “Yeah, I can do that.” And then I’d reconcile it.

Jesse Mecham (26:10):
If I’m not doing an experiment, we’re usually on kind of the weekly train. So in that instance, she cares a lot about how much we put in towards our next family trip, how much is in groceries because she loves to cook. It’s a huge hobby of hers and clothing for the kids. If they were naked, I don’t even know if I would notice, but she’s pretty on the ball with it. So she’s like, “So-and-so needs jeans.” I would have never noticed.

Jesse Mecham (26:33):
So she’s kind of aware of those categories where I’m much more focused on what’s our savings rate and what are we doing here and how do we optimize this. I tried years ago to optimize grocery spending on her behalf, I mean, it just blew up in my face. Issues like, man, my grocery trip is a success if the kids… We have seven kids. She’s like, “If the kids…” At the time, I think we had four. She’s like, “If they don’t melt down in the grocery store and I’m in and out as fast as possible, that is success.” There’s no couponing, there’s no price shopping, matching, checking. She’s like in and out, that is grocery success.

Jesse Mecham (27:05):
And that helped me realize like, “Oh, I was prioritizing minimizing spend, and she was prioritizing ease of the trip, and they’re completely different things.” But when… Because we had conversations about it where I’m like, “I feel like we keep overspending in groceries.” And she’s like, “Because I’m not trying because I don’t care.” And I say that in a 30-second soundbite, but that was three years of me kind of being like, “What’s going on?” To myself and then friction. I’m like, “Hey, why can’t we?” And she’s like, “Oh, I’ll try and do better.” But then she kind of realized, and I realized like, “Oh, we thought about those things completely differently.” And then, I just bumped up the grocery budget and had to move some things around permanently though.

Jesse Mecham (27:48):
I was like, oh, she wants wiggle room there. She wants to not know how much the price of a can of corn is. The girl I married, it was like I’m like, “What’s the price of this? What’s the price?” She just, boom, boom, boom, just rattle it all off. Her priorities shifted. We’re always evolving. The most important thing about that is talking. You got to talk about it. So you budget together, you allocate money and you find out like what do you care about? And it’s not clean, but if you recognize like we’re in discovery mode here, how does this other person tick? How are our priorities shifting? When you approach it that way and not why do you do this? Why don’t you do that? It goes a long way. So I mean, we’re in like straight up just relationship communication territory now, but you got to make sure that the budget is this common ground where you say, what do you really care about? What do we want? It’s not really about money at that point. It’s about what you value, what you’re trying to achieve.

Jesse Mecham (28:39):
And sometimes you take money out of the conversation and it becomes a little easier, right? So yeah, don’t give up, but figure out what makes your spouse tick and also what drives them crazy. And just recognize you’re not going to change them and that’s okay. Like Julie’s never going to be the one in the software cranking away and that’s okay. Like she just won’t be. And I also won’t ever know if my kids need new shoes, that’s just the way it is. Everyone kind of falls into those natural division of roles and you just figure out what works for you, the couple.

Robert Leonard (29:12):
It’s funny you and I are so similar in that respect because I’m a CMA, not a CPA, but very similar, we both have the accounting background. My MBA is in accounting. So I’m the one that’s in the software. I’m the type of guy that’s always…I love checking the apps every day, doing all of the spreadsheets even and all that type of stuff. So I definitely fall on the same side as you. You mentioned that you asked her to just track the expenses in the app when she spends it, is that something you have to do every time you spend money with this type of strategy?

Jesse Mecham (29:42):
You should do it. If you want real behavior change, you should have a moment with your money every time you spend. And every marketer is going to try and not have you have that moment. So eventually we’ll be able to drive up to a gas station and some robots going to come out and pump the gas and you won’t even know, it’ll be like, oh, okay. You just wave you and through you. Everyone wants to have you on a tab. Everything needs to be easy. One click purchasing, waive your RFID chip, whatever it is, everyone, every marketer, anyone that’s ever trying to get you to spend money is trying to have that transaction be as smooth and seamless as possible. Apple Pay, double-click, Face ID, boom, done, little bing, little happy, little sound like, oh man, I’m accomplishing things. Well, you just spent money. All of that is engineered to have you feel less of a connection to the money.

Jesse Mecham (30:29):
So we need to fight back a little bit and just recognize I want to have a little money moment. And that is you pull out the phone, you’re at Home Depot like I’m buying a drill, we’ll check beforehand how much is in my tools category and you see there’s enough. That’s step one. Step two is when you check out, you hit add transaction, it recognizes you’ve been in Home Depot before, it recognizes it was the tools category last time. All you’re doing is saying, here’s the amount, it’s done. It’s super fast, but it’s a little moment where you can say, okay, I’m spending this money and I like this. I want this. I’m intentional. Then on the backend, you do all this fancy stuff to make sure that we’ve grabbed bank data. We match it up like, oh, we grabbed the bank data.

Jesse Mecham (31:09):
You manually recorded it. We sync those up. Those are match and it’s like we’re good. If you miss one, we pick it up off the bank’s website and you just categorize it. So there’s a little bit of that manual intention that I really love, especially for people that want to see a change in their behavior, that’s important. If someone’s like, “I’m hitting all my goals. I just really want a tidy place to track things.” Okay. Maybe you just let the bank do the work and YNAB do all that heavy lifting. But if you’re looking for really changing the way you think, and really making sure that your spending is in line with your priorities, make it as manual and intentional as you can. We don’t make you do that. But I highly recommend it. You will see a shift in your mindset. It’s worth it.

Robert Leonard (31:50):
That’s one of the reasons why I’ve kind of stuck with a Spreadsheet for so long. I use a combination of Mint and a Spreadsheet to be completely honest, but I’ve been using YNAB the last couple of weeks to prepare for our conversation. So I could have a good conversation about it. And I love how easy it is. But like you just said, I like the manual aspect of it so that I’m really being conscious of what I’m doing and what I’m thinking. And I’m thinking about it every time I spend money that way.

Jesse Mecham (32:15):
Everything about money and marketing is built to do the opposite. So we’ve got to fight back a little.

Robert Leonard (32:21):
One of the things I want to ask you, and I’m not saying by any means that you shouldn’t be doing this, but I’ve wanted to ask this of someone such as yourself or even Dave Ramsey or anybody that charges money for a budget software mostly just because I’m curious, but we talk about minimizing expenses, we talk about making sure people spend as little money as they can on X, Y, and Z, and really spending it where they want and then we charge for a budget software. I think yours is totally affordable. I think the value is there for the $84 a year that it costs, but do you ever get people that push back on that?

Jesse Mecham (32:55):
Yeah. Like why would I spend money on a budgeting app? Like, well, why would you spend money on sushi? You spend money hopefully where you find value. What’s interesting is the value that we bring is that people realize they were spending money where they didn’t have value. It’s bizarre, but they’ll say, “Oh my gosh, I feel like I’ve gotten a raise.” And well, you aren’t making any more money or they’ll say, “Oh, I can’t believe all this extra money.” I mean, we take people that they’re overdrafting regularly in their account, average checking account balance $300 average. So you know it’s high because they get these deposits and then it just plummets. So it’s like these highs and lows and it’s totally a stressful situation. Within six months, we can get them to thousands in their savings account.

Jesse Mecham (33:36):
And within a year, we’re usually around the nine to $12,000 mark. This is not for people that make tons of money. This is like pretty plain vanilla. We aren’t talking about the truly poor that can stretch a dollar in ways you and I can’t even imagine. And we’re also not talking about people that are making half a million dollars. We’re just having people make good money. It’s just slipping through their fingers. So at the end of the day, we charge for something that we want people to basically go through the same calculus they do with everything else. You want to say is this worth it? And we get people that’ll push back, but it’s a little bit… I’m so used to that at this point and we get so many other people that are saying, “I can’t believe how much I’ve saved during my trial.” That it’s very easy to let that kind of just slide because we’re always evaluating whether something is worth it, a new pair of shoes, something new for the bike, I mean, name your thing.

Jesse Mecham (34:26):
And this software purchase or a candy crush or anything else is the same deal. It’s like is this worth it? Now, the marketers would have you not really ask yourself that where before your annual subscription comes up again, we’ll send you an email like, “Hey, we’re going to charge you in a week. Don’t be one of those schmucks.” I don’t think we say we that in the email, but don’t be one of those people that forgot that you were buying this and then you pay for it automatically and you’re like, “Oh.” We don’t want to take people’s money if they aren’t really getting value out of it.

Jesse Mecham (34:55):
So there’s that side that I’m like, come on, don’t be lame with your money. But at the same time, recognize you got to be always asking yourself like is this worth it? Is it really worth it? And if it is, go for it. And we find it’s worth it absolutely. Hundreds and hundreds of thousands of people can attest to that. But, I’ll say this caveat like an anti sales pitch, if you’ve got listeners that are hitting their goals, you’re one of them, right? You’re hitting your goals. You’re aggressive. You’ve got a good thing going, don’t mess with it. Don’t switch to a new tool just because you get this feeling that you’re making progress. Don’t fool yourself. You’re not. Stick to the plan if it’s working.

Robert Leonard (35:35):
Shiny object syndrome.

Jesse Mecham (35:36):
Yeah. Do not do that. And YNAB could be a shiny object for someone, whether they’re saving a great amount of money, they’re investing well, it’s like, man, don’t mess with it all. Go watch a Netflix show or something.

Robert Leonard (35:46):
What’s one piece of advice you’d leave the audience with after they listen to this episode, it can be about personal finance and budgeting, it could be about business, entrepreneurship, even just life in general.

Jesse Mecham (35:57):
The way we live with… The way we do money is to teach people to be intentional. And you really have to take that intention further up the chain. And you’ve got to be intentional about your day and really have a plan for each day, because what we’re talking about with money, I’m just kind of saying use your time well. It doesn’t mean exhaust yourself. It doesn’t mean maximize, but use it well, use it with intention. And then when your time is converted into money, continue to use that money with intention, but everything we should do, whether it’s parenting, a new relationship, a relationship we need to salvage, a job, everything should be done with a level of intention that you’re saying, this is worth it. And I think we need more of that and less of just the new shiny, the whip sign, the fad, be genuine and honest with yourself, introspective and be like, where should I be most intentional and how do I go about it? And money is just one aspect of it.

Robert Leonard (36:57):
Ramit Sethi was one of those people that really got me to think about that. In his book, he talks about really spending lavishly on things you care about and not on things you don’t. And for me, I couldn’t care less about food honestly. It’s one of the… I don’t really like going out to eat. I try to keep my grocery bill as cheap as possible. I don’t really care what I’m eating. I mean, I like healthy food, but it doesn’t need to be anything extravagant, but I love spending money on dirt bikes and that’s expensive. So extremely tight on food and I’ll spend a lot more money than I think people think I should on dirt bikes. And so it’s just one of those things. It’s a balancing act.

Jesse Mecham (37:29):
Yeah. And my wood shop is the same way. Someone’s like, I can’t believe you bought another client. It’s like you can’t have too many.

Robert Leonard (37:34):
Yeah. And I feel the same way. Well, Jesse, thanks so much for joining me today. I really enjoyed our conversation. Where can everyone listening go to learn more about you and what you’re working on.

Jesse Mecham (37:44):
The best thing to do is just go to youneedabudget.com. And if they want to see kind of the method applied in the software, they should definitely do one of our 20-minute workshops. They’re live, you can ask questions and they really help connect kind of where we were talking about theory quite a bit to the actual practice. I think it’s 20 minutes well-spent and it’s totally free. They don’t just hop on and check that out. We have great instructors that run those. They must run 150 a week. I mean, they’re running them all the time. So I recommend that.

Robert Leonard (38:11):
I actually jumped on a 20-minute webinar last night at 7:30. I can attest that they are high quality and they answer a lot of questions in a short period of time. So I’ll put a link to those in the show notes if you guys are interested. Jesse, thanks so much for joining me.

Jesse Mecham (38:24):
Thanks for having me, Robert. I appreciate it.

Robert Leonard (38:26):
All right, guys. That’s all I had for this week’s episode of Millennial Investing. I’ll see you again next week.

Outro (38:32):
Thank you for listening to TIP. To access our show notes, courses or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by The Investor’s Podcast Network, written permissions must be granted before syndication or rebroadcasting.


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