How to be Less Stressed Out About Money with YNAB’s Jesse Mecham
Jesse Mecham, found of You Need a Budget joins us with a fantastic list of ways we can be a lot less stressed out about money, communicate better about money with out loved ones, and in the end feel and be more in control of our finances.
Jesse’s Money Tips
Bobbi Rebell:
You are the founder, CEO, and creator, creative mind, I should say, behind You Need a Budget, affectionately known by many as YNAB. Congratulations on all the success of this product, and really, it's more than a product. It's really a whole suite of tools to help grownups.
Jesse Mecham:
Yeah. We're focused on anyone that thinks at some moment in time, "I think I might need a budget," and then we try and convince them that a budget is fun and useful and productive. Then we just teach them kind of a new way of thinking about their money and have them go on their way.
Bobbi Rebell:
Well, the backstory of this really started with you.
Jesse Mecham:
Yeah. I was the first one to realize that I needed a budget, at least that I knew, and my very new wife and I, we were both just newlyweds, broke, both in school. We wanted to get through school. We wanted to do it without taking on any debt, and we weren't making a lot of money at all. So I just thought, "Well, we need to watch this carefully." So I built this little spreadsheet for just me and my wife, Julie. A year later, it had done a lot of heavy lifting for us. We were on the same page. We were saving money.
Jesse Mecham:
Then this little baby came along, and our two big goals, we didn't want to borrow any money for school and we wanted Julie to be able to step out of the workforce and just focus on this baby, and she was the breadwinner at that time. I was still mainly focused on school. So the whole impetus was like, "Well, could we figure out some way to just kind of close that gap?" That was where I thought, "Well, maybe other people would want to use this spreadsheet that Julie and I have used." So we launched it and iterated for the next 17 years, and here we are.
Bobbi Rebell:
A lot of people are working from home, but they're thinking or they're being told that they're going to come back in some form. So much is up in the air. Give us some money tips for managing this time in our lives.
Jesse Mecham:
Structure. That is the word. You want to build structure in. It's not so you can be uber super productive, right? We're not saying, "Oh, now you can be Superwoman because you've got work right there. You can go sit over there and just start plugging away." Not that at all. It's actually structure to be able to stop working and find time to close things down. So anything you can do, if it's a morning routine and a shutdown routine, our team swears by that, if you have the luxury of finding a separate space with maybe a door that you can close, that's excellent. Headphones that you can pop on and mute things, that's excellent. Anything where you can create structure around your work, but most importantly it's so you can shut things down. We saw a lot of burnout from 2020, not because ... Well, I mean, yeah, because of the pandemic, but because people didn't know how to not be at work when work had come home.
Bobbi Rebell:
All the rules changed when the pandemic hit. It became kind of okay to have kids in the background, but at a certain point, there is a productivity cost. So give us some money tips for parents balancing work and family, especially in this transitional time.
Jesse Mecham:
Yeah. We're promoters of remote work, and it's been kind of unfair for remote work to have the pandemic come along with the experiment, because what you were dealing with, it's like, "Oh, we don't like working from home because my kids are here." I'm like, "Well, they won't always be there. They'll probably be back in school, and it'll feel different," or suddenly someone's having to just on a whim work from their kitchen table. That's not ideal for basically most everyone. I say most because I do know one person that loves the chaos, and he works, codes right in that. But he is the exception.
Jesse Mecham:
So we don't want to combine our experience of working from home with the fact that we had all these other dynamics with the pandemic, number one, and maybe only, because you'd start here and then see what happened. You've got to have conversations with your spouse. You're probably both working, and you kind of have to say, "Okay, how do we divide and conquer this situation?" But Julie and I, when I used to work in our home, we had to have just straightforward conversations. I would say, "Hey, I'm going to go down." It's like I'm gone, just gone, and she was clear on that. Then she also needed to know from me, "Hey, are you going to come up for lunch? Should I eat without you?" She didn't want to just miss out on something. But it was a little bit of a burden for her if I wasn't very communicative on what my schedule looked like. She's like, "Oh, should I wait around, or should I take off with the kids and go somewhere?"
Jesse Mecham:
So just overly communicating as far as the boundaries go has been really helpful, but you have to recognize you're always going to iterate on this. Everything's changing. Life will change. The kids will get a little older, and they can understand things like, "Hey, don't come in when the door's closed." I lock my door here when I'm doing something like this. It's recording where I'll hear Faye, my little five-year-old, run across the garage floor, and I'll hear her coming. She knows if the door's locked, that means don't knock. That means just give Dad a little bit of time, and I can pop out at some point. But you've got to communicate those boundaries like, "Hey, this is real. I'm really at work."
Bobbi Rebell:
Yeah, that's an area that is ripe for improvement in my home, for sure.
Jesse Mecham:
Oh, yeah.
Bobbi Rebell:
So okay. So your product is YNAB, and I'm sure some people are super fans and some people give you the eye roll. Part of it is that there's a perception that budgets are all about being restrictive. I'd like you to share an experience you had with your wife when you had a certain amount budgeted for groceries, but it wasn't working for her because it wasn't about the money.
Jesse Mecham:
Yeah, it's almost nothing is ever really about just the money. There's always something at least a few layers deep, and in this instance, I regret to say that it was a 10-year evolution of my learning on this and Julie also learning it as well. But for the most part, when we were first early on married and I was not even working just on YNAB, I had a real job and stuff, I mean, I was swamped doing that, and she was swamped doing these little kids. So we were both pretty swamped. I do still the heavy lifting of the budgeting as far as running the software and making sure everything's reconciled, and then she comes over and I'm like, "Hey, I'm ready for you." She comes over and she looks at it all, and we make sure we're on the same page.
Jesse Mecham:
That was always how it worked, and one of those categories in there was the groceries category. Our third rule of budgeting is to roll with the punches, meaning you can overspend. You just adjust. It's flexible. So every month, we would overspend in groceries, and then literally 10 years in, one day ... So this would mean we had four kids, probably, at the time. I was like ... Same old conversation. It was like a light bulb went off for Julie or something where she's like, "For me, a successful grocery trip doesn't mean I'm under budget. It means that the kids don't meltdown. It means that it's just smooth. It means we're in and out. That's success."
Jesse Mecham:
I was trying to have the old school Julie, when we were first married and she knew the price of every brand of can of corn. But over time, we had evolved, and she didn't have the brain space for it, nor should she have. So it was her recognizing the value that she was placing was on the experience, not on just, "Oh, look how little we spent." Way back when we were first married, it was vital that we spent so little because it was so tight. So I bumped our budget up quite a bit, and we haven't overspent since. That was a big lesson for me. There's usually something behind the scenes when we're talking about money.
Bobbi Rebell:
Well, and you're speaking to something that hits home for so many of our grownup listeners, that it is an evolution as you go through the different stages of being a grownup. At the early times, when you made that budget initially and the decision about how much money you would have for groceries, she was in a position where it made sense with her time and her attention to be looking at every little price. There sometimes is a time in life when the price within that budget is not the most important thing. It might be the time, that it's not worth her time, resources, especially now, as you have seven children, to know the price of corn or whatever it may be. So I think it's really important that financial grownups understand that things change and that's okay. It's important to be able to adjust things.
Bobbi Rebell:
You're a big believer in not having debt. Obviously, you say it's not inevitable, but there are a lot of people that point out that debt can be used for good, like education. You were able to avoid debt for your education. Tell us about that, and give us some tips about avoiding debt, especially for people that are looking at student debt, credit card debt, what have you.
Jesse Mecham:
Yeah. The student debt, I'll kind of set aside for just a moment. Credit card debt, for the most part, at least as it's reported, you see a lot of people say, "The worst situations are someone declares bankruptcy." They'll say, "A lot of the time, it's a medical debt that will kind of tip the scales," but we don't recognize all of the little debts that come along that kind of pile up. Then it's like the straw that broke the camel's back. This final one is a medical bill or something a little bit larger than is the norm. Most people, it's kind of death by a thousand cuts with that credit card balance. So it goes up a little bit. They pay it down, but not quite all the way. It goes up a little bit. They pay it down, but not quite all the way.
Jesse Mecham:
It's really because they're making spending decisions now, not considering future expenses that are going to happen, that are very much going to happen. The car will need to be repaired at some point or an appliance will need to be replaced. So when these abnormal kind of ... Someone will say, "Oh, it's this one-off thing. This isn't a normal month, but we had this one-off kind of 'Ah' experience. I just had a water heater go out. Well, just the pipe for it, where it started shooting a little stream of water in your face if you walked by. We were like, 'Well, we've got to get that fixed.'" That just happens. So that's all real, and there is no such thing as a normal month. So every time we see a new expense pop up, we're like, "Oh, that's abnormal. That's not normally what happens. So I'll just put it on this card because it's a one-off." You find out that that abnormal stuff happens all the time. So we're always kind of telling ourselves that story, and that story isn't true.
Jesse Mecham:
So when we get to our second rule, we are embracing those true expenses, we want people to be able to look ahead to those larger, less frequent expenses that surprise them and break them up into monthly amounts and start saving up for the car repair, the appliance repair, or the vacation, kids' summer camp or whatever it may be, not always just bad things. Then when they're choosing to spend money in the moment, they're considering the future as well. So that thinking shift, and I should say I'm not talking about people that are truly in dire straights. They know how to stretch. I mean, you talk about financial grownups, financial tips, they know how to stretch a dollar in ways that would just blow our minds. So I'm talking about people that make good money. They don't have good information, and so they're just not choosing in the moment based on information that's fit to really give them the answer they need. That's how we slowly get into the credit card debt.
Bobbi Rebell:
So where can you get that information?
Jesse Mecham:
You need to stop looking at your checking account balance as the end all, be all point of information. Say, "Well, how much money do I have? Can I go out to sushi, or are we going to get some cheap pizza? Can I do this? Can I buy these shoes that I just saw or not?" People will pull out their phone. They look at their bank balance. If they just got a paycheck, they're like, "Oh my gosh. I'm flush." If the paycheck comes in in a few days, they're like, "Oh, I can't buy that." The bank balance is the sole indicator of, "Can I buy this? Can I not? Can I afford this? Can I not? Should I buy this?" It's super stressful.
Jesse Mecham:
So instead, we want them to follow our first rule. You take that bank balance, you break it up into jobs, and you say, "This month" ... Say we have $1,000. "400 of that is for groceries for the next little while. The 200 of it is for this thing. 100 of it is for a car repair that I know will happen, but I don't know when and I don't know how much, but 100 bucks would be better than zero. I'm going to set that aside this month." You just start breaking that pile of money down. 50 bucks will be for sushi. Then you live according to that plan.
Jesse Mecham:
When your friend says, "Hey, we should go get some sushi," you look at your phone, and instead of seeing that you have $1,000 and you're like, "Oh, yeah, sushi, slam dunk" or you see $1,000 and you're like, "Oh, should I? I don't know," you still don't know, still stressful, you look at the sushi category and you're like, "Oh, I've got 50 bucks. I'm sitting pretty. Let's go do sushi," or you see that your eating out category is $2 and you're like, "You want to just come over? I'll make you some tea or something." But you're not choosing something now without considering all of those future obligations that are going to hit you. That's the key.
Bobbi Rebell:
I want to get through a couple other tips we have prepared for our listeners. You talk a lot about embracing your true expenses, and I feel like you were alluding to that in the last answer. What does it mean to embrace your true expenses?
Jesse Mecham:
You have to recognize that expenses are not even. They're not steady. They're like, I don't know, a really unhealthy EKG, maybe, where it's just like, "Boom, here's a big surprise. Boom, here's a big surprise." You always think, "Oh, that's the exception." It's not. It's real. Christmas comes every single year. So if you celebrate Christmas, if you do the gift thing, then you'd say, "Well, how much do we want to spend on that? Maybe it's $600." So you set aside 50 bucks a month. For all of 2021, you're setting aside 50 bucks a month, and then when Christmas comes, you have $600. Instead of flipping it around and starting to say, "Oh, well, I don't have any money, so I'll just put it on a card and then I'll pay that down," think about it this way, Bobbi. It's always you and future you that are sitting there with the pile of money. Future you needs to have a voice at the table.
Jesse Mecham:
If you think about the debt situation that you asked me about earlier, when you say someone's like, "Oh, we'll put that on a payment plan. We'll put this on a payment plan. That's the name of the game," that person, that company is thinking about future them. They're like, "Oh, man, it'd be great if you'd finance this car. Absolutely. It'd be great for us." They're totally thinking about future them, future quarterly earnings things for shareholders, future bank balance. I mean, they're all over the future. Then you have the person that signs it away saying, "Oh, yeah, I'll do that. I'll do that note for this car." They're not thinking about the future. I'm trying to flip that around. I'm trying to have people think about their future and position themselves to be future-oriented, where then they're making decisions with both of you in mind, future Bobbi, present Bobbi.
Bobbi Rebell:
Yeah, and it's hard, because the truth is one of the things that worries a lot of us right now is that things like you talk about a car, car loans are getting longer and longer in term to make the payments look lower, but ultimately, you're paying more, and it's over your head for a very long time.
Jesse Mecham:
Yeah, absolutely. I mean, they're orienting where they know. Well, don't even look at the repo situation. I mean, how many times people will get cars repossessed, and the same car will get repossessed five times. There is someone making money in that scenario, and it's not the person driving the car. So that seven-year note that you see on cars now, they used to be three, then five. Now they're seven. All that is is an evolution of the financing of that GM, Ford. Every car company makes most of their money, most of their profits from the financing side of this, not from the manufacture of the car. They're putting it out to seven years because they know that future Toyota, future Honda, no knock on any of the companies, but they are future- and profit-oriented, and people that are buying the car are now-oriented.
Jesse Mecham:
That's where we have to just try and get that shift to happen. So you start paying yourself a car payment, saving up cash for it over time. It might mean that you buy a car that's beneath you for a little while, but then you trade up over time and you start paying cash for that. You get out of that car payment trap. It's not a given.
Bobbi Rebell:
Or you don't trade up. A lot of really wealthy people drive really crummy cars.
Jesse Mecham:
It is absolutely. Yeah. They're hiding in plain sight.
Bobbi Rebell:
All right. One final tip. What does it mean to age your money?
Jesse Mecham:
So we're essentially talking about if you were to earn a dollar today that it would be 30 to 60 days before you actually spent that dollar. So when a dollar enters your system, the clock starts ticking, and that dollar starts getting older and older and older. Right now, most people that are living paycheck to paycheck, they are spending dollars. I mean, they have a pile of bills just waiting for money to land, and we want to flip that around. We want to have a pile of money where bills come and land and you're like, "Oh, okay, I've got the money here set aside."
Jesse Mecham:
If you follow our first three rules, which we talk about ad nauseum, if you follow our first three rules, that fourth rule where you start to spend money that's a little older, a little older, a little older, it almost just happens automatically. It's a way to step back from the financial edge. You sleep better. You can talk more effectively about money with your partner because the stress levels are much lower. You make better decisions because of those stress levels being lower. You probably live longer because your stress levels are lower.
Jesse Mecham:
That's the aging your money concept. Spend money that is old. When you think about swiping a card, you actually spend money that ... Well, the metaphor breaks down, but it hasn't even been born yet. You haven't even earned it yet. The shift that we're seeing where companies are paying people for that day, for that shift, and they think that's going to help people break the paycheck to paycheck cycle, that's not going to do it. We're just pushing that can down the road. We have to have people start to orient themselves around thinking a little further ahead.
Bobbi Rebell:
I love the way that you are reframing this and the different perspectives that you're giving, because I'm sitting here listening, and my mind is turning. It's so interesting to come at this from a different perspective. So thank you so much for joining us.
Follow Jesse!
Instagram - @youneedabudget
Facebook - @iYNAB
Twitter - @ynab
YouTube - @YouNeedABudget
Website - https://www.youneedabudget.com
Podcast - https://podcasts.apple.com/us/podcast/you-need-a-budget-ynab/id477248343
Follow Bobbi!
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Twitter- @bobbirebell
LinkedIn- Bobbi Rebell
Website- http://www.bobbirebell.com
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Full Transcript:
Bobbi Rebell:
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Jesse Mecham:
People will pull out their phone. They look at their bank balance. If they just got a paycheck, they're like, "Oh my gosh. I'm flush." If the paycheck comes in a few days, they're like, "Oh, I can't buy that." The bank balance is the sole indicator of, "Can I buy this? Can I not? Can I afford this? Can I not? Should I buy this?" It's super stressful.
Bobbi Rebell:
You're listening to Money Tips for Financial Grownups with me, certified financial planner Bobbi Rebell, author of How to Be a Financial Grownup, and you know what? When it comes to money, being a grownup is hard. But together, we've got this.
Bobbi Rebell:
Hey there, grownup friends. Do you guys stress out about money? I do some of the time. I do. Do you check your bank balance before you make a purchase? Do you get anxious worrying about something unexpected coming at you, whacking your delicately balanced finances that are okay for now, but maybe not as strong as you would like, especially if those unexpected things should happen? But we have you covered with this week's financial grownup, Jesse Mecham. He is the founder of the You Need a Budget app and software, I should say, AKA, YNAB. Jesse has a lot to say about how we take the stress out of our grownup financial lives. The father of seven is remarkably calm. Yeah, I said the father of seven, in part because he has been able to separate his work from his family life, something we also talk about. I think you're really going to love his work from home tips as well. So with that, here is YNAB's Jesse Mecham. Hey, Jesse Mecham, you're a financial grownup. Welcome to the podcast.
Jesse Mecham:
Thanks for having me.
Bobbi Rebell:
You are the founder, CEO, and creator, creative mind, I should say, behind You Need a Budget, affectionately known by many as YNAB. Congratulations on all the success of this product, and really, it's more than a product. It's really a whole suite of tools to help grownups.
Jesse Mecham:
Yeah. We're focused on anyone that thinks at some moment in time, "I think I might need a budget," and then we try and convince them that a budget is fun and useful and productive. Then we just teach them kind of a new way of thinking about their money and have them go on their way.
Bobbi Rebell:
Well, the backstory of this really started with you.
Jesse Mecham:
Yeah. I was the first one to realize that I needed a budget, at least that I knew, and my very new wife and I, we were both just newlyweds, broke, both in school. We wanted to get through school. We wanted to do it without taking on any debt, and we weren't making a lot of money at all. So I just thought, "Well, we need to watch this carefully." So I built this little spreadsheet for just me and my wife, Julie. A year later, it had done a lot of heavy lifting for us. We were on the same page. We were saving money.
Jesse Mecham:
Then this little baby came along, and our two big goals, we didn't want to borrow any money for school and we wanted Julie to be able to step out of the workforce and just focus on this baby, and she was the breadwinner at that time. I was still mainly focused on school. So the whole impetus was like, "Well, could we figure out some way to just kind of close that gap?" That was where I thought, "Well, maybe other people would want to use this spreadsheet that Julie and I have used." So we launched it and iterated for the next 17 years, and here we are.
Bobbi Rebell:
A lot of people are working from home, but they're thinking or they're being told that they're going to come back in some form. So much is up in the air. Give us some money tips for managing this time in our lives.
Jesse Mecham:
Structure. That is the word. You want to build structure in. It's not so you can be uber super productive, right? We're not saying, "Oh, now you can be Superwoman because you've got work right there. You can go sit over there and just start plugging away." Not that at all. It's actually structure to be able to stop working and find time to close things down. So anything you can do, if it's a morning routine and a shutdown routine, our team swears by that, if you have the luxury of finding a separate space with maybe a door that you can close, that's excellent. Headphones that you can pop on and mute things, that's excellent. Anything where you can create structure around your work, but most importantly it's so you can shut things down. We saw a lot of burnout from 2020, not because ... Well, I mean, yeah, because of the pandemic, but because people didn't know how to not be at work when work had come home.
Bobbi Rebell:
All the rules changed when the pandemic hit. It became kind of okay to have kids in the background, but at a certain point, there is a productivity cost. So give us some money tips for parents balancing work and family, especially in this transitional time.
Jesse Mecham:
Yeah. We're promoters of remote work, and it's been kind of unfair for remote work to have the pandemic come along with the experiment, because what you were dealing with, it's like, "Oh, we don't like working from home because my kids are here." I'm like, "Well, they won't always be there. They'll probably be back in school, and it'll feel different," or suddenly someone's having to just on a whim work from their kitchen table. That's not ideal for basically most everyone. I say most because I do know one person that loves the chaos, and he works, codes right in that. But he is the exception.
Jesse Mecham:
So we don't want to combine our experience of working from home with the fact that we had all these other dynamics with the pandemic, number one, and maybe only, because you'd start here and then see what happened. You've got to have conversations with your spouse. You're probably both working, and you kind of have to say, "Okay, how do we divide and conquer this situation?" But Julie and I, when I used to work in our home, we had to have just straightforward conversations. I would say, "Hey, I'm going to go down." It's like I'm gone, just gone, and she was clear on that. Then she also needed to know from me, "Hey, are you going to come up for lunch? Should I eat without you?" She didn't want to just miss out on something. But it was a little bit of a burden for her if I wasn't very communicative on what my schedule looked like. She's like, "Oh, should I wait around, or should I take off with the kids and go somewhere?"
Jesse Mecham:
So just overly communicating as far as the boundaries go has been really helpful, but you have to recognize you're always going to iterate on this. Everything's changing. Life will change. The kids will get a little older, and they can understand things like, "Hey, don't come in when the door's closed." I lock my door here when I'm doing something like this. It's recording where I'll hear Faye, my little five-year-old, run across the garage floor, and I'll hear her coming. She knows if the door's locked, that means don't knock. That means just give Dad a little bit of time, and I can pop out at some point. But you've got to communicate those boundaries like, "Hey, this is real. I'm really at work."
Bobbi Rebell:
Yeah, that's an area that is ripe for improvement in my home, for sure.
Jesse Mecham:
Oh, yeah.
Bobbi Rebell:
So okay. So your product is YNAB, and I'm sure some people are super fans and some people give you the eye roll. Part of it is that there's a perception that budgets are all about being restrictive. I'd like you to share an experience you had with your wife when you had a certain amount budgeted for groceries, but it wasn't working for her because it wasn't about the money.
Jesse Mecham:
Yeah, it's almost nothing is ever really about just the money. There's always something at least a few layers deep, and in this instance, I regret to say that it was a 10-year evolution of my learning on this and Julie also learning it as well. But for the most part, when we were first early on married and I was not even working just on YNAB, I had a real job and stuff, I mean, I was swamped doing that, and she was swamped doing these little kids. So we were both pretty swamped. I do still the heavy lifting of the budgeting as far as running the software and making sure everything's reconciled, and then she comes over and I'm like, "Hey, I'm ready for you." She comes over and she looks at it all, and we make sure we're on the same page.
Jesse Mecham:
That was always how it worked, and one of those categories in there was the groceries category. Our third rule of budgeting is to roll with the punches, meaning you can overspend. You just adjust. It's flexible. So every month, we would overspend in groceries, and then literally 10 years in, one day ... So this would mean we had four kids, probably, at the time. I was like ... Same old conversation. It was like a light bulb went off for Julie or something where she's like, "For me, a successful grocery trip doesn't mean I'm under budget. It means that the kids don't meltdown. It means that it's just smooth. It means we're in and out. That's success."
Jesse Mecham:
I was trying to have the old school Julie, when we were first married and she knew the price of every brand of can of corn. But over time, we had evolved, and she didn't have the brain space for it, nor should she have. So it was her recognizing the value that she was placing was on the experience, not on just, "Oh, look how little we spent." Way back when we were first married, it was vital that we spent so little because it was so tight. So I bumped our budget up quite a bit, and we haven't overspent since. That was a big lesson for me. There's usually something behind the scenes when we're talking about money.
Bobbi Rebell:
Well, and you're speaking to something that hits home for so many of our grownup listeners, that it is an evolution as you go through the different stages of being a grownup. At the early times, when you made that budget initially and the decision about how much money you would have for groceries, she was in a position where it made sense with her time and her attention to be looking at every little price. There sometimes is a time in life when the price within that budget is not the most important thing. It might be the time, that it's not worth her time, resources, especially now, as you have seven children, to know the price of corn or whatever it may be. So I think it's really important that financial grownups understand that things change and that's okay. It's important to be able to adjust things.
Bobbi Rebell:
You're a big believer in not having debt. Obviously, you say it's not inevitable, but there are a lot of people that point out that debt can be used for good, like education. You were able to avoid debt for your education. Tell us about that, and give us some tips about avoiding debt, especially for people that are looking at student debt, credit card debt, what have you.
Jesse Mecham:
Yeah. The student debt, I'll kind of set aside for just a moment. Credit card debt, for the most part, at least as it's reported, you see a lot of people say, "The worst situations are someone declares bankruptcy." They'll say, "A lot of the time, it's a medical debt that will kind of tip the scales," but we don't recognize all of the little debts that come along that kind of pile up. Then it's like the straw that broke the camel's back. This final one is a medical bill or something a little bit larger than is the norm. Most people, it's kind of death by a thousand cuts with that credit card balance. So it goes up a little bit. They pay it down, but not quite all the way. It goes up a little bit. They pay it down, but not quite all the way.
Jesse Mecham:
It's really because they're making spending decisions now, not considering future expenses that are going to happen, that are very much going to happen. The car will need to be repaired at some point or an appliance will need to be replaced. So when these abnormal kind of ... Someone will say, "Oh, it's this one-off thing. This isn't a normal month, but we had this one-off kind of 'Ah' experience. I just had a water heater go out. Well, just the pipe for it, where it started shooting a little stream of water in your face if you walked by. We were like, 'Well, we've got to get that fixed.'" That just happens. So that's all real, and there is no such thing as a normal month. So every time we see a new expense pop up, we're like, "Oh, that's abnormal. That's not normally what happens. So I'll just put it on this card because it's a one-off." You find out that that abnormal stuff happens all the time. So we're always kind of telling ourselves that story, and that story isn't true.
Jesse Mecham:
So when we get to our second rule, we are embracing those true expenses, we want people to be able to look ahead to those larger, less frequent expenses that surprise them and break them up into monthly amounts and start saving up for the car repair, the appliance repair, or the vacation, kids' summer camp or whatever it may be, not always just bad things. Then when they're choosing to spend money in the moment, they're considering the future as well. So that thinking shift, and I should say I'm not talking about people that are truly in dire straights. They know how to stretch. I mean, you talk about financial grownups, financial tips, they know how to stretch a dollar in ways that would just blow our minds. So I'm talking about people that make good money. They don't have good information, and so they're just not choosing in the moment based on information that's fit to really give them the answer they need. That's how we slowly get into the credit card debt.
Bobbi Rebell:
So where can you get that information?
Jesse Mecham:
You need to stop looking at your checking account balance as the end all, be all point of information. Say, "Well, how much money do I have? Can I go out to sushi, or are we going to get some cheap pizza? Can I do this? Can I buy these shoes that I just saw or not?" People will pull out their phone. They look at their bank balance. If they just got a paycheck, they're like, "Oh my gosh. I'm flush." If the paycheck comes in in a few days, they're like, "Oh, I can't buy that." The bank balance is the sole indicator of, "Can I buy this? Can I not? Can I afford this? Can I not? Should I buy this?" It's super stressful.
Jesse Mecham:
So instead, we want them to follow our first rule. You take that bank balance, you break it up into jobs, and you say, "This month" ... Say we have $1,000. "400 of that is for groceries for the next little while. The 200 of it is for this thing. 100 of it is for a car repair that I know will happen, but I don't know when and I don't know how much, but 100 bucks would be better than zero. I'm going to set that aside this month." You just start breaking that pile of money down. 50 bucks will be for sushi. Then you live according to that plan.
Jesse Mecham:
When your friend says, "Hey, we should go get some sushi," you look at your phone, and instead of seeing that you have $1,000 and you're like, "Oh, yeah, sushi, slam dunk" or you see $1,000 and you're like, "Oh, should I? I don't know," you still don't know, still stressful, you look at the sushi category and you're like, "Oh, I've got 50 bucks. I'm sitting pretty. Let's go do sushi," or you see that your eating out category is $2 and you're like, "You want to just come over? I'll make you some tea or something." But you're not choosing something now without considering all of those future obligations that are going to hit you. That's the key.
Bobbi Rebell:
I want to get through a couple other tips we have prepared for our listeners. You talk a lot about embracing your true expenses, and I feel like you were alluding to that in the last answer. What does it mean to embrace your true expenses?
Jesse Mecham:
You have to recognize that expenses are not even. They're not steady. They're like, I don't know, a really unhealthy EKG, maybe, where it's just like, "Boom, here's a big surprise. Boom, here's a big surprise." You always think, "Oh, that's the exception." It's not. It's real. Christmas comes every single year. So if you celebrate Christmas, if you do the gift thing, then you'd say, "Well, how much do we want to spend on that? Maybe it's $600." So you set aside 50 bucks a month. For all of 2021, you're setting aside 50 bucks a month, and then when Christmas comes, you have $600. Instead of flipping it around and starting to say, "Oh, well, I don't have any money, so I'll just put it on a card and then I'll pay that down," think about it this way, Bobbi. It's always you and future you that are sitting there with the pile of money. Future you needs to have a voice at the table.
Jesse Mecham:
If you think about the debt situation that you asked me about earlier, when you say someone's like, "Oh, we'll put that on a payment plan. We'll put this on a payment plan. That's the name of the game," that person, that company is thinking about future them. They're like, "Oh, man, it'd be great if you'd finance this car. Absolutely. It'd be great for us." They're totally thinking about future them, future quarterly earnings things for shareholders, future bank balance. I mean, they're all over the future. Then you have the person that signs it away saying, "Oh, yeah, I'll do that. I'll do that note for this car." They're not thinking about the future. I'm trying to flip that around. I'm trying to have people think about their future and position themselves to be future-oriented, where then they're making decisions with both of you in mind, future Bobbi, present Bobbi.
Bobbi Rebell:
Yeah, and it's hard, because the truth is one of the things that worries a lot of us right now is that things like you talk about a car, car loans are getting longer and longer in term to make the payments look lower, but ultimately, you're paying more, and it's over your head for a very long time.
Jesse Mecham:
Yeah, absolutely. I mean, they're orienting where they know. Well, don't even look at the repo situation. I mean, how many times people will get cars repossessed, and the same car will get repossessed five times. There is someone making money in that scenario, and it's not the person driving the car. So that seven-year note that you see on cars now, they used to be three, then five. Now they're seven. All that is is an evolution of the financing of that GM, Ford. Every car company makes most of their money, most of their profits from the financing side of this, not from the manufacture of the car. They're putting it out to seven years because they know that future Toyota, future Honda, no knock on any of the companies, but they are future- and profit-oriented, and people that are buying the car are now-oriented.
Jesse Mecham:
That's where we have to just try and get that shift to happen. So you start paying yourself a car payment, saving up cash for it over time. It might mean that you buy a car that's beneath you for a little while, but then you trade up over time and you start paying cash for that. You get out of that car payment trap. It's not a given.
Bobbi Rebell:
Or you don't trade up. A lot of really wealthy people drive really crummy cars.
Jesse Mecham:
It is absolutely. Yeah. They're hiding in plain sight.
Bobbi Rebell:
All right. One final tip. What does it mean to age your money?
Jesse Mecham:
So we're essentially talking about if you were to earn a dollar today that it would be 30 to 60 days before you actually spent that dollar. So when a dollar enters your system, the clock starts ticking, and that dollar starts getting older and older and older. Right now, most people that are living paycheck to paycheck, they are spending dollars. I mean, they have a pile of bills just waiting for money to land, and we want to flip that around. We want to have a pile of money where bills come and land and you're like, "Oh, okay, I've got the money here set aside."
Jesse Mecham:
If you follow our first three rules, which we talk about ad nauseum, if you follow our first three rules, that fourth rule where you start to spend money that's a little older, a little older, a little older, it almost just happens automatically. It's a way to step back from the financial edge. You sleep better. You can talk more effectively about money with your partner because the stress levels are much lower. You make better decisions because of those stress levels being lower. You probably live longer because your stress levels are lower.
Jesse Mecham:
That's the aging your money concept. Spend money that is old. When you think about swiping a card, you actually spend money that ... Well, the metaphor breaks down, but it hasn't even been born yet. You haven't even earned it yet. The shift that we're seeing where companies are paying people for that day, for that shift, and they think that's going to help people break the paycheck to paycheck cycle, that's not going to do it. We're just pushing that can down the road. We have to have people start to orient themselves around thinking a little further ahead.
Bobbi Rebell:
I love the way that you are reframing this and the different perspectives that you're giving, because I'm sitting here listening, and my mind is turning. It's so interesting to come at this from a different perspective. So thank you so much for joining us. Where can people find out more about you and about your company?
Jesse Mecham:
You can just go to youneedabudget.com, and we are on all the social stuff. We're even on TikTok, which I don't even understand, but we're there. I personally am not on any of the social stuff. I stay plenty busy not doing that. But you can find us on Instagram, Facebook, all over the place. My podcast is called You Need a Budget as well, and if you loved listening to this silky voice, you can listen to it all you want.
Bobbi Rebell:
So great having you. Thank you.
Jesse Mecham:
Thanks so much.
Bobbi Rebell:
Okay. Let's review some of what we learned from Jesse. First of all, it took 17 years for Jesse to get his business where it is now. So be prepared to play the long game with your goals. If you are working from home for the long haul, make sure you create structure to put up guardrails and protect your time so you don't get burned out. Remember, the kids are going back to school. Because kids were home at the same time, remote work was very different during the pandemic. With the kids back in school, it likely will be easier, but make sure to communicate with your family about exactly how things are going to run. Be prepared for abnormal expenses, which are actually kind of routine. We just don't think of it that way. Start putting money aside for unexpected expenses that you know to expect.
Bobbi Rebell:
Consider the future. When you were about to buy something, are you considering future you and how that will impact future you, the decision you make today, right? Break up your money and give every dollar a job to start getting control of your money. Think it through. When you borrow money, like for a car, know that the companies stretch out the length of the loan to make those payments lower. Do the math, but I'm going to bet you probably are going to pay more in the end. Age your money. Try to wait and have money in your account for a period of time before you spend it. It'll take a lot of anxiety out of your life. How do you lower the stress levels when it comes to money? I'd love to hear your ideas. DM me at bobbirebell1, and let me know.
Bobbi Rebell:
A reminder, if you are shopping for gifts, please check out grownupgear.com. I will be eternally grateful for your business. As a special promotion, we are going to give away one $50 gift card to grownupgear.com each week until July 4th, which is Independence Day. We could also call it Financial Independence Day, I hope. I don't know. Maybe. There are two ways to enter to win. Take a screenshot of this podcast, post it on social media, and tag me at bobbirebell1. Then also email that screenshot to us at hello@financialgrownup.com. That's hello@financialgrownup.com. The second way to enter to win a $50 gift card to grownupgear.com is to write a review of the Money Tips for Financial Grownups Podcast on Apple Podcasts. Take a screenshot and send it to us at hello@financialgrownup.com. So easy, right?
Bobbi Rebell:
Grownup Gear, as I like to say, is it's a micro business. We really do need and appreciate all of your support, so check it out and, of course, tell your friends. Big thanks to Jesse Mecham of You Need a Budget for helping us lower our stress levels and be our best financial grownups.
Bobbi Rebell:
Money Tips for Financial Grownups is a production of BRK Media, LLC. Editing and production by Steve Stewart. Guest coordination, content creation, social media support, and show notes by Ashley Wall. You can find the podcast show notes, which includes links to resources mentioned in the show as well as show transcripts, by going to my website, bobbirebell.com. You can also find an incredible library of hundreds of previous episodes to help you on your journey as a financial grownup, the podcast, and tons of complimentary resources associated with the podcast is brought to you for free. But I need to have your support in return.
Bobbi Rebell:
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