You Need A Budget (ynab)

They are prepared for emergencies, for setbacks, for unexpected life changes. In fact emergencies don’t seem to happen as often to them. YNAB’ers are a lucky set, it seems, but maybe there’s more to the truth than a roll of the dice.   Survivorship bias is a logical fallacy in which you focus on a group of people or things that made it past a selection process, without considering those that failed. This bias can lead to a number of erroneous conclusions. In finance, survivorship bias occurs when evaluating the returns of, say, companies in a certain sector of the economy. If you only look at current technology firms, you might look at the technology sector and determine that it radically outperforms the market… but those same returns may look very different if you consider all the technology firms within the same time period that went bankrupt.   Survivorship bias appears everywhere in life, and YNAB’ers are no exception. At first glance it may seem like those in good financial health just didn’t have the sa

In episode 411, Jesse decried the ubiquity of credit cards and the fact that they enjoy a number of benefits that plain old debit cards do not... at the risk of getting yourself in debt. Since then, he's learned of a few strategies for managing fraud risk with debit cards.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com   Also, go to https://www.youneedabudget.com/bootcamp/ to sign up for the YNAB Debt Bootcamp!

Jesse admits he's got an itch to scratch. He likes to invest gamble in the stock market from time to time, using an app that allows him to trade at the swipe of a finger.   At least he's honest -- it's gambling with fun money, not investing. And that's the key. It's money he can afford to lose, and it's not much.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com   Also, go to https://www.youneedabudget.com/bootcamp/ to sign up for the YNAB Debt Bootcamp!

Wealth is not a dirty word. After all, wealth can allow us to do many interesting and fulfilling things with our lives. At the very least, it provides options, opening up the range of possibilities before us. Simply put, wealth can allow us to live the life we want to live.   The only problem is that the accumulation of wealth is often followed by increasing expenses. Some of these are obvious -- a bigger, newer house usually costs more than a smaller, older one -- while others are insidious. A larger house requires more energy to heat and cool, more time and effort to clean and landscape, and more things to fill it up. That's just one example. We could say the same about cars!   Left unchecked, these growing expenses can once again eat into our wealth, robbing us of the optionality of wealth. As Thoreau once wrote, "he who owns little is little owned."   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com   Also, go to https://www.youneedabudget.com/bootcamp/ to sign up for the YNAB Debt Bootca

Save money for known future expenses, or pay down debt? It's a challenge many people face while trying to eliminate their debt. It's a conundrum too -- you could take your savings and pay down debt now, or hold onto to those savings for the new tires you know your car needs next month, or the Christmas gifts you want to buy for the family. If you do that, though, the debt balance stays the same while you continue to pay interest...   Jesse argues that optionality is the key here. Obeying rule #2 -- embracing your true expenses -- means setting aside money for those known expenses and eventualities in your life. It's tempting to pay down as much debt as you can now, but setting aside cash for your true expenses gives you options.   What if your true expenses are bigger than you anticipated? What if you get hit with unexpected expenses on top of that? If you've set aside the cash, you are in a position to handle those expenses when they come. If you've already used the cash to pay down debt, then you won't have

Jesse reflects on a Senate bill -- now signed into law as the Setting Every Community Up for Retirement Enhancement (SECURE) Act -- which will require a greater amount of employers to offer 401(k) plans to employees. The new law also makes it easier for annuities to be included in 401(k) offerings by easing the fiduciary rules around fees and expense ratios.   401k) plans are excellent vehicles for saving for retirement because they allow employees to put away a lot of money every year -- up to $19,500 in 2020. Some employers offer matching on 401(k) contributions, further boosting savings rates.   However, the inclusion of more annuities in 401(k) plans has a darker motivation. Annuities typically charge higher fees than mutual funds and index funds -- sometimes a percentage point or more -- making them an inefficient and expensive way to save for retirement for most people. On the other hand, they are very profitable for insurance companies! Not surprisingly, insurance companies lobbied hard for the relaxat

For better or worse (probably worse), credit cards are a major part of our financial world now. Cash is becoming less and less convenient to use every year, and debit cards continue to lack the same level of fraud protection that credit cards enjoy.   This isn't coincidence either. Jesse attended a "payments trends" conference in 2019, where the main topic was how to make payments easier, to remove as much friction as possible from the process of buying things. Why? Simply put, when you spend more money, more often, payment vendors make more money.   The problem is, you can't win the credit card game. Not only do payment vendors make money when you spend, the banks that underwrite credit card debt know (because they have studied human behavior) that when you swipe a credit card, you tend to spend more money. Credit card points and rewards are carefully designed to entice you to spend more money, because banks know that you will likely carry higher debt levels with a credit card.   So if you can't win the game

It's time to blow it all up! Every January, Jesse takes time with his family to "blow up" his budget and all the assumptions that drive it. He takes a fresh look at the dollars in the budget, and starts to question everything.   Need to set aside $400 for a new set of tires in March? That's a responsible Rule #2 line of thinking. But the burndown is your chance to think deeper... do we even need a car? Could we sell it and ride our bikes to work instead?   This is your time to think big, re-evaluate your priorities and life goals, and then question everything about your money. Nothing should be off the table at this point, because you're just talking. In the process, you may discover that your priorities have shifted, and it's time to take some new steps with your budget.     Sign up for a free 34-day trial of YNAB at www.youneedabudget.com   Also, go to https://www.youneedabudget.com/bootcamp/ to sign up for the YNAB Debt Bootcamp!

If you made it through the last few weeks, you know why Jesse hates debt and why you should too!   Start the New Year by putting those feelings into action. Jesse has created a "debt bootcamp" for YNAB users to help you get serious about getting rid of your debt for good. Best of all, it's FREE for all YNAB software subscribers.   The Debt Bootcamp will be an intense, 8-week challenge to get rid of as much debt as possible. The camp will be run through a private Facebook group where you can stay accountable with other YNAB'ers and share your successes and challenges.   Go to https://www.youneedabudget.com/bootcamp/ to sign up now!    

The corporations are playing a game, and you can't win. So opt out and stop playing the game! In the part 4 of the "Why I Hate Debt" miniseries, Jesse explains how behind every credit card is a clever system of points, travel miles, and other "free" rewards designed to keep you spending and in debt.   Credit cards are a very profitable industry. Would banks and finance companies be giving away rewards if they weren't making a profit from it? Of course not! They've got the data, they've studied the statistics, and they know people will drive themselves into debt, where they can rack up fees and interest.   So join Jesse, stop playing the game, and start hating debt!   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

Jesse hates debt, and you should too! In Part 3 of anti-debt miniseries, Jesse argues that debt is not just a drain on our cash flow and creativity, it also restricts our future opportunities!   The burden of debt keeps us from realizing our full potential in many ways -- starting a business, taking a lower paying job for more fulfilling work, moving to a new state or country -- often in the early phases of life when we are most energetic and open to growth.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

In Part 2 of the Why I Hate Debt miniseries, Jesse explains why debt is a non-negotiable for him, and why is should be for you too.   At 22 years old, trying to finish his Masters degree and expecting his first child, Jesse found himself caught between two non-negotiables: 1.) Living without debt, and 2.) Allowing his wife to quit work to focus on raising their child. The problem? They didn’t have enough money to last until Jesse started working his new job after graduation, even living a very frugal existence.   At this point, it would have been so easy to simply sign for a student loan to cover the shortfall. It was only about $7,000. Other students around him were borrowing far more. The interest rates were low, the payback period would be short… debt was the easy way out.   But choosing to borrow would have blinded Jesse to the possibility of another solution, another way to make up the shortfall. The constraints of his non-negotiables led him to start selling his budgeting spreadsheet, which eventually t

Jesse hates debt, and you should too. Debt service constricts our cash flow, limits out ability to do other things like savings and investing, and generally introduces more stress into our lives. In this first part of a mini-series on debt, Jesse makes a case for living completely debt-free.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com  

Some of you may be thinking, YNAB sounds great, but what if I don't get a regular paycheck? How am I supposed to budget with that? Well, first off, you definitely need a budget! Planning to fund your expenses in future months becomes more critical the more variable your income is.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

Jesse is thinking about launching a separate podcast to discuss small business, internet marketing, and how you can use YNAB to manage your business cash flow, and he wants to know what you think!   Would you be interested in a business-focused podcast? What kind of topics would you like to hear about?   Email Jesse at podcast@youneedabudget.com and share your thoughts!   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

Jesse asks the most important question about your reasons for getting out of debt, saving money, and achieving your financial goals. Why?   Why do you do it? What's the reason behind the goals? If you could write a mission statement for your life, what would it say? Answering the simple question "Why?" might be the most important thing you do after you complete the blocking and tackling of paying off debt and building an emergency fund.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

"FI" is an acronym that has steadily grown in popularity over the last decade, though the concept is much older than that. It stands for financial independence -- some people call it early retirement (the longer acronym FIRE stands for financial independence, retire early) -- but the idea is simple. Live below your means, drastically increase your savings rate and accumulate enough wealth to "retire" or perhaps better said, until you can do what you want to do.   Time and savings rate are the key components of financial independence. What if you could save half of everything you make? What if you started doing that from the beginning? Jesse shares some lessons he's trying to instill in his kids as they take their first steps toward financial independence.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

It's common to set milestones for paying down debt. They're usually big, round numbers like $500, $1k, $5k, $10k. At the end of the day though, the goals are arbitrary. It's just a number, a stepping stone, toward the greater goal.   So if the day to day grind of fiscal responsibility is getting to you, change your milestones! Maybe it's $749, or $362.54. It's all arbitrary, right? Have fun with the game, and make it work for you. Set a new milestone -- whatever you like -- and celebrate when you reach that new number.   Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

How do you order your categories? What's on top? What's on bottom? And how did you decide that?   Categories are easy to order once you understand your priorities. Rent, utilities, food -- these are non-negotiable. You can and should, however, drill down into the details of each category and ask yourself whether you could live without some of the expenses in that category. You need utilities to live, clearly, but if pushed, what would you keep and what would you cut? Could you live without internet if you had to?   Once you understand which categories sit above the line (necessities) and which sit below the line, then you can total up how much you spend on "below the line" items. Then ask yourself: do you want any of this money to go to above the line items?   Try this exercise to clarify your budget and see whether your budget is in line with your priorities.     Sign up for a free 34-day trial of YNAB at www.youneedabudget.com

Why do we become desensitized to the upticks in price of just about everything?     Sign up for a free 34-day trial of YNAB at www.youneedabudget.com