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00:01:34.640 | Hello, and welcome to another episode of All The Hacks, a show about upgrading
00:01:43.240 | your life, money, and travel all while spending less and saving more.
00:01:47.440 | I'm Chris Hutchins, and I'm excited to have you on my journey to find all the
00:01:51.000 | hacks.
00:01:51.480 | Now, there aren't too many words I could use this early in a show that might send
00:01:55.640 | people running, but I'm going to use one today.
00:01:57.640 | And I encourage you to fight that urge and stick around because I'm about to
00:02:00.840 | have an amazing conversation about budgeting with Jesse Mecham, the founder
00:02:05.080 | of what many consider to be the best budgeting process and tool in the market
00:02:08.640 | today, YNAB, or You Need a Budget.
00:02:11.240 | Jesse started this company as a side hustle back in 2004 and has bootstrapped
00:02:16.360 | it to a place where they now support over 100,000 customers in their financial
00:02:20.040 | lives.
00:02:20.400 | He's also written a book on budgeting and hosts the YNAB podcast.
00:02:24.280 | In our conversation, we'll talk about why budgeting gets such a bad rap and
00:02:28.080 | preview lots of people might just be doing it wrong.
00:02:30.360 | We'll talk about an approach to budgeting you could do in far less time than I used
00:02:34.080 | to spend categorizing every single one of my transactions and hear about some of the
00:02:38.520 | hacks Jesse's picked up raising his family of seven children.
00:02:41.880 | Also, I'm going to try to get a special deal set up for listeners who want to try
00:02:45.680 | out YNAB, so check out allthehacks.com/ynab.
00:02:51.200 | Okay, and before we jump in, I always have to remind you, Chris Hutchins works at
00:02:55.640 | Wealthfront.
00:02:56.120 | All opinions expressed by Chris and his guests are solely their own opinions and
00:03:00.240 | do not reflect the opinion of Wealthfront.
00:03:02.120 | This podcast is for informational purposes only and should not be relied upon for
00:03:06.280 | investment decisions.
00:03:07.240 | Jesse, thanks for being here.
00:03:09.560 | Absolutely.
00:03:10.480 | I'm glad to be here.
00:03:11.160 | Yeah.
00:03:11.800 | So, you know, budgeting is such a charged topic.
00:03:14.640 | I feel like people love it.
00:03:16.400 | People hate it.
00:03:17.040 | I'd love to get your take on just why is it so, so charged and is that controversy
00:03:22.280 | justified?
00:03:23.000 | I'll start with the second part.
00:03:25.560 | Yes, it is justified.
00:03:26.720 | I think it's totally justified to feel like budgeting means that you are never going to
00:03:32.840 | have fun again.
00:03:33.640 | You know, like if you think budgeting is like dieting, it's like, I will never eat
00:03:37.520 | chocolate cake again.
00:03:38.520 | Like that's a horrible way to live your life, you know, or worse, your spouse or
00:03:42.520 | partner wants to start budgeting and you're like, Oh no, no, no.
00:03:44.920 | I know what you're doing here.
00:03:45.840 | Like there's so many scary things that are associated with the word budget only
00:03:50.560 | because people have been for the most part doing it wrong.
00:03:53.040 | But we approach it that the budget is your plan and it's yours.
00:03:57.880 | It remains yours forever.
00:03:59.000 | And so that's where for me, I then can go out and play 18 holes because I said I
00:04:05.240 | could.
00:04:05.560 | And so when I'm out playing, I'm mad about my swing or sad or feel guilty that I've
00:04:09.880 | spent money playing golf.
00:04:11.800 | Like that's because I wanted to.
00:04:13.640 | So budgeting lets you spend on what you want while not feeling guilty about it,
00:04:20.520 | whether or not you actually could afford it.
00:04:23.000 | And we can unpack that if you want, but I don't blame people for hearing the word
00:04:27.160 | budget and kind of freaking out a little bit.
00:04:28.640 | Not at all.
00:04:29.440 | It's very, it's very common.
00:04:31.080 | And if someone is that person there, they're like, Oh yeah, okay.
00:04:34.680 | It's too good to be true.
00:04:35.920 | What's the first thing you would tell them to try to come over to the dark side, I
00:04:39.280 | guess, and realize that, that budgeting maybe can be more freeing than it is
00:04:43.560 | restrictive.
00:04:44.160 | Yeah.
00:04:44.760 | Well, I can walk through like what, from what most people experience and you know,
00:04:47.920 | you'll see something that you want and I don't want to, like when I say want, I
00:04:51.240 | don't mean any kind of moral judgment to it.
00:04:53.400 | Like, should you want it or not?
00:04:54.560 | It's just, you want it.
00:04:55.600 | So we're just dealing with like a pure one and someone will say, I want this.
00:04:59.400 | And then the first thing they'll ask is, can I afford it?
00:05:02.480 | You know, could I buy this if I want it?
00:05:04.640 | And can I afford this is one of the most stress inducing questions we ask
00:05:09.320 | ourselves, or we ask each other for sharing finances.
00:05:12.120 | Sometimes we don't ask each other.
00:05:13.360 | And that also is a whole other separate thing.
00:05:15.040 | So you say, let's say that you ask yourself, can I afford this?
00:05:18.440 | And then you say, yes.
00:05:19.440 | Then you buy the thing.
00:05:21.520 | You don't actually know if you can, you looked at your bank balance.
00:05:24.680 | You saw that it was high or low, whatever that means to you.
00:05:27.280 | And you gave yourself permission to buy it.
00:05:29.280 | But then after the fact, so many times people will be like, ah, should I have
00:05:33.200 | shared that they'll feel kind of this little pang of guilt, like, I don't know.
00:05:36.480 | Worse.
00:05:37.480 | They get a bill the next day that I hadn't thought about when they were
00:05:40.080 | doing the, can I afford this dance?
00:05:41.520 | And then they know they couldn't afford it.
00:05:43.680 | Then they feel really bad.
00:05:45.200 | Or the flip side is the person actually can afford it.
00:05:49.400 | They do buy it, but they don't know that they could.
00:05:52.640 | So whether or not they can't afford it or can't, they both don't know it.
00:05:56.760 | And they both feel guilty or consternation or stress because of it.
00:06:00.920 | So a budget solves that stress of, can I afford this by telling you?
00:06:05.280 | Yes, you can go buy it.
00:06:07.440 | Enjoy it.
00:06:08.120 | Don't feel guilty about it or no, you can't.
00:06:11.120 | And that still brings a lot of people peace and resolution to
00:06:17.280 | what they're trying to figure out.
00:06:18.880 | Now, does it mean you can't ever buy it?
00:06:20.920 | No, no.
00:06:21.280 | It might just mean you need to wait a little bit.
00:06:22.880 | You know, you might need to wait a paycheck or two, but it's freeing
00:06:26.640 | because it frees you from that question that you can't answer accurately.
00:06:31.560 | And that's what we're trying to tackle for people.
00:06:34.320 | Yeah.
00:06:35.080 | And does it have to be hard?
00:06:37.200 | Is there a 80/20 to get started that doesn't involve looking at every
00:06:42.240 | expense you've had for the last year and categorizing everything?
00:06:45.960 | That often seems daunting.
00:06:48.160 | When you said it's like a plan, it's like, oh man, I got to put
00:06:51.040 | together a full financial plan.
00:06:52.560 | That sounds scary.
00:06:53.920 | What's the way to get started thinking about it that maybe doesn't have to be
00:06:57.240 | so scary and you can do in, you know, minutes or maybe a couple hours.
00:07:02.320 | Let's do it.
00:07:03.160 | Well, first, first, do not look back.
00:07:05.160 | So with the first rule of budgeting, I mean, we have four rules.
00:07:08.000 | Our first rule is not actually this, but really what we're talking
00:07:10.560 | about is do not look back.
00:07:11.960 | Do not look at your history.
00:07:14.160 | It's already done.
00:07:15.000 | It's finished.
00:07:16.480 | So you can't, you can't change anything about it.
00:07:18.400 | We only are looking forward.
00:07:19.840 | That will save you countless hours.
00:07:22.840 | If you just say, oh, I'll just deal with what's forward.
00:07:24.720 | Then if you're talking about five minutes, pull out your phone, look at your bank
00:07:29.840 | balance and ask yourself one question.
00:07:31.520 | This is the question you ask.
00:07:32.680 | What does this money in my bank account need to do before more money will come in?
00:07:37.080 | Don't tell yourself, oh, more money will come in on Friday.
00:07:40.520 | So what should that money do to it?
00:07:42.680 | Resist the urge.
00:07:43.520 | When we coach people, sometimes one-on-one a little bit, they'll often
00:07:46.560 | say like, oh, well, I'll get paid.
00:07:47.960 | Jesse, hold on.
00:07:48.560 | I'll get paid in five days.
00:07:50.080 | I'm like, no, no, no.
00:07:50.760 | We only want to deal with money that is on hand.
00:07:53.320 | So if you do those two things, you forget history and you only decide to budget the
00:07:58.280 | money that you have on hand in the moment.
00:08:01.280 | Suddenly that big financial plan that looked really scary.
00:08:04.680 | It's nothing like that.
00:08:05.800 | It's just, hey, I have $800 in my checking account.
00:08:08.560 | 200 needs to go to groceries.
00:08:10.480 | 150 needs to go to this bill.
00:08:12.400 | 70 for my cell phone.
00:08:13.840 | You know, it's very clear.
00:08:15.160 | It's amazing how many times we walk people through this hundreds of thousands of
00:08:18.080 | people, and at the end of that simple five minute exercise, they will often say, oh
00:08:23.200 | my gosh, I feel so much more in control already.
00:08:25.960 | And we're like, that is a budget.
00:08:27.720 | A budget is control.
00:08:28.720 | It's awareness.
00:08:29.520 | It's intention.
00:08:30.280 | And you only get intention by looking at money actually on hand.
00:08:34.000 | And you only have that intention going, going forward.
00:08:36.400 | Well, you would have saved me countless hours of arguments with my wife because
00:08:41.240 | my version of budgeting that, you know, like dieting just totally went by the
00:08:45.680 | wayside and never to be repeated in our house was at the end of every year, we
00:08:49.560 | said, okay, let's download our mint history of every transaction.
00:08:52.600 | Let's categorize it all.
00:08:53.720 | Let's see how much we're spending.
00:08:55.200 | And the reason I did that, and I'm curious if you think it's not
00:08:59.360 | valuable, if there's an alternative was, you know, it helped me say, okay, I make
00:09:03.520 | X, I spend Y, I'm okay.
00:09:06.440 | Like I'm what I'm doing today works.
00:09:09.480 | And that actually freed me up to say, if I just keep doing what I'm doing, I'm
00:09:13.560 | probably okay and I don't need to be thinking about it every day because last
00:09:18.320 | year I did.
00:09:18.680 | Okay.
00:09:19.160 | But it was a lot of work, you know, if you just look at the money you have today
00:09:24.520 | and what its purpose is, is there any easy way to get a sense of, I don't know
00:09:29.280 | how much I'm saving this year or, uh, kind of some of those more macro ideas.
00:09:35.200 | Yeah.
00:09:35.840 | The macro is interesting because it can give you an idea of, I don't know what
00:09:41.360 | happened, what may happen again.
00:09:43.000 | The New York times ran an article years ago that still kind of makes me mad
00:09:46.080 | because they were, they came off as, as, um, this light bulb moment they were,
00:09:51.080 | they were saying, Hey, on, you know, if on annual budgets, people tend to stay
00:09:55.120 | within an annual budget, that was their point.
00:09:57.640 | And, and I just was shaking my head.
00:09:59.720 | Like an annual budget is not where mistakes are made.
00:10:02.840 | Mistakes are made on the Saturday and Sunday between two paychecks.
00:10:08.320 | That's when the mistakes were made.
00:10:09.640 | So what we're talking about is like, when I look at your, the Hutchins
00:10:12.160 | household, like macro view, I'm like, yeah, on average, they're good.
00:10:16.040 | And most people, when they come to us, they're like, I don't get it.
00:10:19.520 | I make good money.
00:10:20.480 | Like, why aren't I getting ahead?
00:10:22.040 | What's the deal here?
00:10:22.960 | And it's not because of the macro level, they aren't looking okay.
00:10:26.200 | It's because on January 22nd, they had purchased some really nice boots that
00:10:32.600 | they definitely wanted, and they're totally okay to buy boots, but on the
00:10:36.880 | 23rd, they also had a life insurance premium come due and they're like,
00:10:42.120 | oh, it was just a timing issue.
00:10:44.280 | Right.
00:10:44.720 | And so, because there was a timing mismatch of money on hand and money
00:10:48.400 | required, they had to put a little bit on the card and most, you know, we know
00:10:52.880 | the average, you know, credit card balance for Americans.
00:10:55.480 | It was honestly in 2020, it was just dropping like crazy much to the bank
00:10:59.760 | sphere, but we're heading right back where we were, you know, pre pandemic.
00:11:03.280 | And so many of those swipes are just timing mismatches.
00:11:06.480 | It's like, I didn't have the resource, but I used to have the resource.
00:11:11.480 | And what we want to have people do is just look ahead to those
00:11:14.880 | larger, less frequent expenses.
00:11:16.680 | And then when you're debating whether or not you want to buy these boots, I
00:11:20.840 | hate to use examples, Chris, because then people will be like, oh my gosh, Jesse
00:11:23.360 | doesn't think I should buy boots.
00:11:24.560 | I really don't care.
00:11:25.920 | You know, like what I do not care what you spend your money on.
00:11:28.240 | I just want you to make sure that all your big expenses
00:11:31.320 | are taken care of as well.
00:11:32.120 | So let's say you've got this insurance premium that's due in eight months.
00:11:35.720 | You divide it by eight and you have a monthly insurance bill now that
00:11:38.520 | you're setting aside for, and the software does this, you know, that's
00:11:41.360 | that's the software part, but then you're also debating like, should
00:11:44.920 | I buy these boots or not now?
00:11:46.280 | It's like, you have future Chris and current Chris that are at the
00:11:50.120 | negotiating table together and, and current Chris is like, I want the boots
00:11:53.960 | and future Chris is like, yeah, it's fine.
00:11:55.240 | Cause you've been, you've set me up.
00:11:56.640 | I'll be good with the insurance payment or future.
00:11:59.000 | Chris is like, no, no, no, no, no.
00:12:00.720 | Don't take, no, not yet.
00:12:01.960 | Wait a little bit.
00:12:02.880 | We have this due or future.
00:12:04.360 | Chris is on the side of a road and he's a tow truck.
00:12:06.400 | And it's like, come on, man, throw me a bone.
00:12:08.040 | Like car repairs really happened.
00:12:09.360 | They're really a thing.
00:12:10.480 | It's the mismatch of when we have the money available so much of the
00:12:14.760 | time that gets us into trouble.
00:12:16.360 | So I want people to pretend that they have like a future version of
00:12:20.040 | themselves that also has a say in what current money should be doing.
00:12:24.760 | I like that.
00:12:25.880 | Yeah.
00:12:26.160 | I actually think sometimes budgeting is create a bunch of buckets and then
00:12:31.400 | see what happens with the money.
00:12:32.760 | And this is flipping it and it's see where the money is and then decide
00:12:36.960 | what needs to happen with it.
00:12:38.400 | Yes.
00:12:38.880 | In many ways, it's totally different from what anyone ever thinks of as budgeting.
00:12:43.080 | So I'm curious, did you ever consider calling it something different?
00:12:46.200 | Oh yes.
00:12:47.480 | And still like literally to this day, I'm like, should we rename, you know,
00:12:51.400 | like we're this company called you need a budget and half of the country is just,
00:12:54.920 | or world is like, oh my gosh, I will not give that guy the time of day.
00:12:58.240 | And that kind of worries me, you know?
00:12:59.760 | Cause I'm like, no, no, no, no, no.
00:13:00.920 | That's not what I meant.
00:13:01.640 | It's not what I meant to say.
00:13:02.520 | You know, I feel like I'm chasing after him trying to explain what
00:13:06.240 | I really mean when I say budget.
00:13:07.560 | So yeah, I've totally like from a purely like product guy to product guy.
00:13:10.920 | I'm like, Hmm, is our name right?
00:13:12.600 | You know, like there's, there's something there to that.
00:13:14.840 | I don't know what I would name it, but, uh, every domain is taken now.
00:13:18.640 | So if you have any ideas, let me know.
00:13:20.080 | Yeah.
00:13:20.720 | I mean, I at least liked it.
00:13:22.440 | YNAB doesn't, you know, it could just be a name, right?
00:13:25.360 | If you need a budget in its long form, obviously bring some kind of emotions
00:13:30.240 | out, but if you just call it just YNAB, it's it's you, maybe you don't think
00:13:33.120 | about the word budget out the gate.
00:13:35.120 | I've also thought like, maybe, maybe we're trying to purposely exclude people
00:13:38.800 | that aren't ready to hear the news, you know?
00:13:41.440 | So I don't know, but that's the marketer.
00:13:43.880 | That's like always, always debating.
00:13:45.560 | Like, is this, is this working or not?
00:13:47.400 | It's a pretty good filter.
00:13:48.600 | It gets a laugh when I tell people, yeah, I, you know, my company's name is you
00:13:51.600 | need a budget and they're like, uh, like nervous, you know, but, uh, everybody
00:13:55.760 | does regardless of income level.
00:13:57.200 | I've tested it.
00:13:57.960 | I've tested not having one and I make pretty good income and it wasn't, it
00:14:01.280 | wasn't good.
00:14:01.760 | So everyone needs one.
00:14:03.560 | So everyone, what would you say to the person that's saving on track for
00:14:08.600 | retirement, not using a budget and spending money and enjoying life and
00:14:14.080 | feeling like everything's working?
00:14:15.720 | What could a budget do for that person?
00:14:17.880 | I would argue this might be semantics.
00:14:20.360 | I would argue that they already are budgeting.
00:14:22.400 | It's just very high level.
00:14:24.320 | So they've budgeted for savings.
00:14:25.840 | They probably have an idea of what they want to spend on like large purchases,
00:14:31.160 | vacation, holiday spending, things like that.
00:14:33.480 | And also they would naturally in this circumstance have to have lots of wiggle
00:14:37.960 | room because they need to have enough money where those timing issues don't
00:14:42.360 | pop up.
00:14:42.840 | And that does take, that takes a good bit of income above your expenses.
00:14:47.480 | I mean, there's a good gap of living within your means for people that don't
00:14:50.640 | deal with timing issues.
00:14:51.680 | I'm one of those people.
00:14:52.760 | I don't deal with, with timing issues now.
00:14:54.920 | You know, if you were to be like, Hey, eight of your big bills came at once.
00:14:57.880 | I'd be like, Oh, that was uncomfortable, but.
00:14:59.880 | We, it would be fine.
00:15:01.000 | But most people, especially for the first while, as they're working the budget,
00:15:05.280 | they, they are definitely dealing with a timing problem.
00:15:08.000 | So I'm someone that's lucky enough to not have to budget so specifically that
00:15:14.640 | that's fine.
00:15:15.240 | Their budget is optimized for their circumstance, but most people do not have
00:15:18.520 | that circumstance.
00:15:19.840 | So I tested it in 20, was it 2020?
00:15:23.720 | Yeah, it was, it was just last year.
00:15:24.920 | Cause I just ended it.
00:15:26.120 | I tested doing a very high level budget for me and Julie.
00:15:30.160 | And like we had an other category that was just massive.
00:15:34.240 | And I would just update once a month and be like, did checking account go up or
00:15:37.960 | down?
00:15:38.400 | And I would make an adjustment and then budget money.
00:15:41.480 | And I lost thousands and thousands of dollars somehow.
00:15:45.880 | I don't know what we spent, but like for the first time in seven years, our
00:15:49.760 | checking account didn't stay at this level that it's like boring how it just
00:15:53.520 | stays there for the first time in like years after 2020.
00:15:58.120 | And it wasn't because of the pandemic.
00:15:59.320 | Cause we didn't eat out.
00:16:00.040 | We didn't travel.
00:16:00.640 | Like there was some things going for us to make that number go up.
00:16:03.000 | It was interesting.
00:16:04.280 | Cause yeah, money was gone.
00:16:05.480 | And I'm like, oh my gosh, first time in so many years that our checking account
00:16:08.960 | is down probably 18, 25%.
00:16:13.200 | And I couldn't say why.
00:16:14.800 | And it might be the recovering accountant in me that just is really bothered by not
00:16:19.640 | having the accountability for it.
00:16:21.480 | But I did find it interesting without that awareness, without that intention,
00:16:25.640 | like the money just kind of did what it did.
00:16:27.680 | Yeah.
00:16:28.880 | That's fascinating.
00:16:29.600 | If you ever find out what happened to it, let us know.
00:16:31.720 | Maybe it's in that unclaimed money stuff.
00:16:33.840 | Like maybe that in that hack that, you know, you talk about with unclaimed money
00:16:37.000 | that they're like, oh my gosh, Jesse's unclaimed money is with the state of Utah.
00:16:39.720 | He just doesn't know it.
00:16:40.640 | So I don't know what happened to it.
00:16:42.440 | It seems like with every business, you get to a certain size and
00:16:48.120 | the cracks start to emerge.
00:16:49.960 | Things that you used to do in a day are taking a week and you have too many manual
00:16:54.440 | processes and there's no one source of truth.
00:16:57.000 | If this is you, you should know these three numbers.
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00:19:49.840 | Now, I noticed one interesting thing.
00:19:52.240 | When you say, you know, the company, it's YNAB, you need a budget.
00:19:55.320 | You're not saying you need YNAB as a customer and software, like you don't
00:19:59.920 | think it's for everyone, but you think the process of budgeting is, and you're
00:20:03.320 | willing to share how you guys do it.
00:20:06.240 | Could you talk a little bit about the difference between this kind of style of
00:20:10.600 | budgeting you've created and the company and the software?
00:20:13.560 | Yeah, we teach four rules.
00:20:15.440 | We teach to give every dollar a job.
00:20:17.160 | And we mentioned that already, like only money you have on hand, not money you're
00:20:19.960 | going to get, and you're facing forward.
00:20:22.040 | What jobs will this money do?
00:20:23.520 | The second rule, we call it embracing your true expenses, which means
00:20:27.520 | Christmas is a true expense.
00:20:29.040 | Like Christmas is a monthly bill.
00:20:30.480 | Car repairs are monthly bills.
00:20:33.360 | They just don't come that way.
00:20:34.760 | But as you start to take large, less frequent expenses, break
00:20:37.520 | them up into monthly amounts.
00:20:38.880 | You can see that your real expenses aren't just cable, groceries, and all
00:20:42.600 | those like monthly standard stuff.
00:20:44.800 | That's rule two.
00:20:45.840 | So you have rule one and rule two, where you're giving every dollar a job,
00:20:48.280 | including future you in this equation.
00:20:50.920 | Rule three is to change your mind.
00:20:53.000 | We call it rolling with the punches.
00:20:54.400 | But it's just like when life happens, you end up having visitors come to the house.
00:20:58.000 | You have to catch a flight somewhere for an emergency.
00:21:00.920 | Life happens.
00:21:02.640 | And, and so you need to be able to adjust the budget as needed.
00:21:05.200 | A lot of people think budgeting is like, I don't know, like it's just set in
00:21:09.440 | stone and rigid budgets, they, they break.
00:21:12.080 | And so we, one of our rules is to be flexible.
00:21:15.240 | You're, you're more like a, a coach making adjustments to how the
00:21:19.440 | opponents are playing all the time.
00:21:21.520 | Versus just being some clairvoyant person that can guess and predict
00:21:27.480 | every single spending move you'll make.
00:21:29.520 | Our fourth rule is called age your money.
00:21:32.000 | And it's essentially the idea that when you follow the first three rules, you
00:21:35.400 | will get to a point where the money you're spending today, you earned
00:21:38.040 | 30, 40, 50, a hundred days ago.
00:21:40.760 | It's people that you mentioned, Chris, earlier on that have that
00:21:44.520 | pretty good slush in their budget.
00:21:46.200 | They'll have an age of money that is far higher because they aren't
00:21:49.520 | living paycheck to paycheck.
00:21:50.640 | And so our fourth rule is basically a metric that the software tracks that
00:21:54.080 | tells you like how close to that paycheck to paycheck edge are you?
00:21:56.920 | So I mentioned those four rules in brief.
00:21:59.040 | We dive into them with classes and podcasts, everything under the sun
00:22:02.800 | to teach people those four rules, because it's, it's about how
00:22:06.320 | you're thinking about the money.
00:22:07.840 | And then you can run off to mint or what, yeah, you could probably do it
00:22:11.800 | with mint or your own spreadsheet.
00:22:13.240 | Like this whole company came about because I started it with a spreadsheet.
00:22:16.440 | So I would never fault someone for building their own.
00:22:18.960 | You can run it with ledger paper that your grandma might have in
00:22:22.440 | like an old drawer or something.
00:22:24.240 | Like there are places where you could run the method and you don't need to
00:22:28.760 | worry about the software.
00:22:29.680 | Our software is killer best in the business.
00:22:31.360 | But for some reason, if someone's like, Oh, I I'd like to roll my own.
00:22:34.520 | I mean, my word, go for it.
00:22:35.760 | You know, there are enough people that will buy our software.
00:22:37.720 | I'm not too worried about it.
00:22:38.720 | Yeah.
00:22:39.480 | Are there specific things that software does that you think are worth calling
00:22:42.760 | out that makes it hard to do on your own or things like that tracking that age of
00:22:46.600 | money number, which now I'm sitting here like, ah, I want to track that.
00:22:49.440 | That seems like a good metric.
00:22:50.520 | Yeah.
00:22:51.240 | It's a, well, one thing on your phone, I mean, the apps on your phone, obviously,
00:22:54.880 | and on the web and all of that it's with Alexa, you could ask Alexa, how much is
00:22:58.080 | in your grocery category, but she'll tell your friends and neighbors to like, you
00:23:00.800 | have to be careful.
00:23:01.400 | She's not like super discreet.
00:23:02.880 | So you, you know, on your phone, like I can be in home Depot and go to add a
00:23:06.680 | transaction and the phone recognizes like, Oh, Jesse's in home Depot.
00:23:10.200 | Last time you were, you know, he put this as home maintenance cause I'm buying air
00:23:13.680 | filters or something.
00:23:14.640 | And so it like pre-populates all of that.
00:23:17.200 | It's, it's like a two second thing.
00:23:19.120 | Um, you could probably build some kind of a Google form that route to like a
00:23:22.960 | spreadsheet of your own and maybe get smart and do something like that as well.
00:23:26.440 | But the phone itself just on the go is dynamite.
00:23:29.440 | You can share it with your spouse or partner, and then you are both on the same
00:23:33.680 | page.
00:23:34.120 | And so, you know, you and your wife are like, Hey, how much do we have to, to work
00:23:38.160 | within two different categories?
00:23:40.160 | And you can both make decisions independent of each other that will be totally
00:23:44.160 | appropriate and fine.
00:23:45.400 | And then, you know, monthly you can get together and kind of make your plan.
00:23:48.760 | So the sharing of information we've nailed, and then the obviously grabbing bank
00:23:54.880 | transactions, that is a quagmire of politics and tech and like old tubes of old
00:24:02.440 | banks.
00:24:02.760 | Like it's a mess of a place, but we do our absolute best and I don't want to give
00:24:07.840 | away the farm, but we use multiple providers.
00:24:10.200 | We do very smart things behind the scenes to make sure that we're really trying to
00:24:14.440 | give the best experience we can.
00:24:15.760 | And so for users just to be able to pull in their bank transactions and catch those
00:24:20.360 | that they didn't do on their phone, that's something that would be real tough, real
00:24:24.320 | tough to build on your own.
00:24:25.360 | So much so that I think paying the annual fee for us might, as far as hacks go,
00:24:29.360 | might be a pretty good hack at that point, you know, so I don't know.
00:24:32.080 | Yeah.
00:24:33.200 | And how much time do you think a YNAB user can get to needing to spend on
00:24:38.600 | budgeting each week or month or day?
00:24:40.440 | Yeah, I, at this year, I do experiments every year.
00:24:43.960 | 2020 was my experiment of basically no budgeting.
00:24:46.440 | The year before I did an experiment where I was all manual.
00:24:49.240 | I didn't connect to any bank accounts.
00:24:50.600 | Every morning I would sit down and literally type in each
00:24:54.320 | transaction from the prior day.
00:24:56.160 | You know, we've got a big family, seven kids, and we got some churn in the
00:25:00.040 | house as far as transactions go, but it took me, it was a little ritual.
00:25:04.360 | It was like a five minute thing each morning.
00:25:06.320 | And, you know, staying on top of it daily was, was dynamite for as far
00:25:11.120 | as like behavior change goes.
00:25:12.560 | For anyone that's saying, I'm kind of a little bit of a train wreck.
00:25:15.680 | I would like to do this better.
00:25:17.440 | The more frequent visiting of your budget is key because we're
00:25:20.600 | trying to get behavior change.
00:25:22.000 | But if things are on autopilot, I do it like weekly on my phone,
00:25:26.360 | sitting somewhere, you know, lazily.
00:25:29.080 | And I'm just going through and categorizing and I think probably an
00:25:33.920 | hour a month on kind of maintenance.
00:25:36.040 | I'm, I'm pretty good at it, but I mean, I'd like to think so.
00:25:39.680 | I'm not like trying to go fast or anything.
00:25:41.680 | It's just, it's pretty, pretty straightforward.
00:25:43.920 | So now I will say my, my finances are very, very simple.
00:25:47.160 | I have one credit card, one checking account.
00:25:48.880 | I'm not trying to manage my entire financial life.
00:25:52.000 | We're just trying to manage our inflows and outflows.
00:25:54.760 | Yeah, that makes sense.
00:25:56.480 | Yeah.
00:25:56.680 | I mean, sitting in the line at a grocery store, scrolling through Instagram, you
00:26:00.560 | know, those small bits of time is probably, you could use it like this.
00:26:04.360 | You don't need one hour sitting straight at a computer.
00:26:06.800 | You can kind of do it in pieces throughout the month.
00:26:08.600 | Is that, give us a little bit of your Instagram time.
00:26:10.920 | That's what I'll, that's, that's going to be a hook now.
00:26:12.480 | Just like, can we have 10 minutes of your Instagram time each week?
00:26:15.320 | I think we can do this.
00:26:16.760 | Yeah.
00:26:17.040 | And I love that you are, are building a company around convenience.
00:26:20.880 | I know something we've done at Wealthfront is like, look, if you want a
00:26:23.800 | portfolio, we'll give it to you.
00:26:24.840 | Uh, we're not trying to make a secret out of how we invest your money.
00:26:28.440 | The value we offer is that we make it easier, faster, and more
00:26:31.960 | convenient to do what you want to do.
00:26:34.000 | And if you don't want that, you know, come here, read our blog, look at our articles.
00:26:37.760 | So I love that you guys have a similar approach to focusing the value on making
00:26:43.320 | life convenient and doing it at what I think is a very reasonable price to pay
00:26:47.960 | to get back the time it would take to use a grandma's ledger paper.
00:26:51.720 | You said you have seven children.
00:26:54.640 | I've one child and there's a lot of costs, seven, obviously, hopefully
00:26:57.960 | you get some economies of scale, but running a family that big, are there
00:27:01.840 | things you've had to do or, or hacks you've had to introduce to your life,
00:27:06.360 | your spending, et cetera, to make everything run more smoothly?
00:27:09.280 | So obviously hand-me-downs become much more valuable when there's
00:27:13.240 | like a downline for kids.
00:27:14.640 | So you got to do the hand-me-down thing that goes without saying
00:27:17.520 | you store those clothes.
00:27:18.640 | I mean, there are tiny things like we don't fold laundry at all ever.
00:27:22.760 | Because more, I feel like that, that might sound like a crazy thing to people.
00:27:28.080 | Yeah.
00:27:28.800 | We have photos of the kids folding their laundry and we would all be in a big
00:27:31.840 | basket and we'd be in the living room.
00:27:33.280 | And I snapped a photo from years ago when they were probably like six, four, two
00:27:37.920 | and zero or something like that.
00:27:39.360 | It was a big chore every week, like a huge chore.
00:27:42.400 | And the kids hated it.
00:27:43.480 | And so now we teach them to use the washer really, really early.
00:27:47.440 | And it's super easy.
00:27:48.920 | And the dryer's just as easy.
00:27:51.000 | And then as soon as they can reach the soap, it's like, okay,
00:27:54.760 | you're old enough to do this.
00:27:55.800 | They put in their own load.
00:27:57.160 | They change it over.
00:27:58.280 | Julie will harp on them like, Hey, change it over.
00:28:00.400 | Hey, go change over the laundry.
00:28:01.600 | Hey, go, you know, she does that.
00:28:03.040 | But then they just drag it back down to their rooms.
00:28:05.880 | And that's the end of us caring about laundry.
00:28:10.000 | And I know they don't fold it independently.
00:28:11.880 | Like, I know I'm not lying right now.
00:28:13.200 | You know, like we just, we don't fold.
00:28:14.840 | Even you, your shirts just thrown in the drawer unfolded or?
00:28:18.400 | I mean, I fold, but I, it's like, for me, it's like, it takes me five minutes.
00:28:22.800 | You know, I'm like, this is nothing, but to manage it for seven people, I'm like,
00:28:27.520 | you know what, you know what, well, you have a one-year-old what it's like to
00:28:29.760 | fold like a one-year-old onesie.
00:28:31.640 | You're like, this thing is so small.
00:28:33.200 | Like, what are we doing here?
00:28:34.760 | So yeah, that's, that story ended a long time ago.
00:28:37.320 | We just, it saves so much time not folding laundry.
00:28:40.160 | It's unbelievable.
00:28:41.320 | And the kids don't care.
00:28:42.400 | They don't care.
00:28:43.120 | Yeah.
00:28:43.920 | Yeah.
00:28:44.600 | If the onesie is a little wrinkled, it's like not a big deal.
00:28:47.200 | Come on.
00:28:47.560 | Yeah.
00:28:48.080 | They're not going to important business meetings.
00:28:49.560 | What about food?
00:28:51.200 | How do you manage meals for a household of nine?
00:28:54.520 | Yeah.
00:28:55.480 | So we don't do leftovers.
00:28:57.000 | Cause there is nothing left over.
00:28:58.560 | You know, people will say like, Oh, you know, cook on Saturday and make
00:29:01.960 | like all of your lunches or do like make all of it.
00:29:04.760 | I'm like, you gotta be kidding me.
00:29:06.040 | We need like a commercial kitchen to knock that out.
00:29:08.160 | Like it, so we, we, the leftover thing isn't a hack for us.
00:29:11.120 | I have noticed some, a few small things.
00:29:13.240 | Um, well, one is we, we'd never put the food on the table because to have seven
00:29:20.760 | tiny voices and some that sound like man children now, but like to have those
00:29:24.720 | people be like, Hey, it's past this.
00:29:26.600 | And like, they won't use the person's name.
00:29:28.000 | It'll just be like, pass this, pass the salt, pass it.
00:29:30.600 | And like, it's just this cacophony of past this.
00:29:33.160 | And then it's going to be like, Hey, I asked three times or like someone grabs
00:29:36.080 | it before they pass it and they take some, and then someone else gets upset.
00:29:39.080 | Cause they, it's called a shortstop, Chris.
00:29:40.800 | I don't know if you've dealt with that, but if someone, you know,
00:29:42.560 | intercepts it, it's a shortstop.
00:29:43.800 | And you're like, Oh my gosh, we cannot do this.
00:29:46.040 | This like, we can't converse and we're big on dinner.
00:29:49.080 | Like we're big on eating together.
00:29:50.520 | Like that talk about life hacks.
00:29:51.800 | I feel like that's like top three.
00:29:53.840 | It's like eat dinner together as a family.
00:29:56.040 | Like, it's just so it's like this great touchstone for you.
00:29:58.600 | So I don't want to throw dinner out.
00:30:00.440 | So we bring all the food over to the Island, leave it off the
00:30:03.280 | table and it's all buffet style.
00:30:05.760 | And that, that helps tremendously.
00:30:09.000 | The other thing that like, even gosh, tinier hacks, like Julie and I, when
00:30:13.040 | we're plating the kid's food, because that's faster than having tiny
00:30:17.040 | hands using large spoons, we years ago decided we would lay all the plates
00:30:22.160 | out, like top to bottom, left to right age order.
00:30:25.080 | So I would always be bottom right.
00:30:26.480 | And Julie's just next to me, you know?
00:30:28.120 | And when we would have guests, this is what's funny.
00:30:30.240 | I like, if you were over at our house, Chris, I'd be like, Chris, how old are
00:30:32.720 | you?
00:30:32.880 | And maybe you say like, I don't know, you're 39 or something.
00:30:35.600 | I'm guessing I'd be like, oh, well, you're younger than me, but you're older than
00:30:38.720 | Julie.
00:30:39.080 | So I would stick you between me and Julie.
00:30:40.600 | Like we're very, like we, we stick with the age thing, even when we have guests
00:30:43.800 | over, but that helped me and Julie not have to be like, who's plate is this?
00:30:47.160 | Who's plate is that?
00:30:47.920 | You know?
00:30:48.280 | And because you're, you're portioning.
00:30:49.960 | Proportionate to the mass of the individual.
00:30:52.400 | And it's, you know, there's, there's a big variation until dessert comes.
00:30:55.760 | And then for some reason, the proportions don't matter anymore to those little
00:30:59.840 | kids.
00:31:00.160 | They're like, why isn't my piece as big as that kid?
00:31:02.240 | That's four times my size.
00:31:03.440 | You know, you have to explain it.
00:31:05.080 | We've discussed growth rates and things, but it's still a fight.
00:31:07.960 | So, yeah, can't figure it out, but yeah, those are a few it's a, it's a fun, I
00:31:12.800 | mean, there's, it's always lively, you know, can I give you another one on the
00:31:16.480 | family stuff?
00:31:17.200 | Absolutely.
00:31:17.920 | I, uh, you know, dinner was one that's like family together time.
00:31:21.280 | And I know you're big on like intentionally making sure relationships are
00:31:25.120 | solid.
00:31:25.480 | Another one that I love, I call it parlor time with the kids and the parlor is an
00:31:30.760 | old room, you know, that people don't know about anymore, but like the parlor was
00:31:33.800 | where the family would go when like the day's work was done and maybe there
00:31:37.000 | wasn't even electricity or something.
00:31:38.520 | And it's this very romanticized idea.
00:31:40.440 | And I probably have cattle at that point.
00:31:42.240 | And you know, like there's a lot going on in my head with parlor time, but at the
00:31:45.440 | end of the day, it's where we all sit and I tell the kids, you can read, you can
00:31:49.520 | play a game with someone, but we're all in this room.
00:31:52.040 | Like you can do whatever you want, but we're all in this room, obviously no
00:31:55.240 | screens, like that would kind of suck someone away.
00:31:57.720 | And I love parlor time.
00:31:59.360 | So you'll have kids that are, uh, you know, sitting there playing a game.
00:32:03.160 | Lot, my kids are readers.
00:32:04.400 | A lot of them will read.
00:32:05.440 | I, at that point, I love the reading and you just have all your kids kind of in
00:32:09.800 | that little spot for a little bit of time, 30 minutes, 40 minutes.
00:32:13.560 | That feels good.
00:32:14.480 | That's one of my favorite acts.
00:32:15.840 | No, no.
00:32:16.600 | It just, I mean, honestly, it's just like, I call for it.
00:32:18.840 | Sometimes like guys were doing parlor time and you know, like sometimes there's
00:32:22.480 | a little bit of groaning, but everyone comes up and they'll have something that
00:32:24.880 | they can do.
00:32:25.440 | It's mostly for like Sundays where things are a little more chill already.
00:32:29.400 | And, uh, I love it.
00:32:31.160 | Love that.
00:32:31.920 | So the kids like it too, once they settle in, you know, if we go back in time a
00:32:36.440 | little bit, how did you end up, uh, becoming the, the YNAB guy?
00:32:40.640 | Like the, the guy who's like, I love budgeting.
00:32:42.760 | I start a company telling people they need a budget.
00:32:44.920 | What's the origin of that story?
00:32:47.320 | Yeah.
00:32:48.200 | I wish I had some grand vision of entrepreneurial, you know, I don't
00:32:53.640 | know, swagger or something, but it was nothing of the sort.
00:32:56.560 | I, Julie and I were married pretty young and then scraping, you know,
00:32:59.880 | making 10 bucks an hour in school.
00:33:01.600 | I had three years of school to get my master's in accountancy.
00:33:04.040 | She wrapped up her schooling, but it was in social work.
00:33:07.680 | So her full-time job, she was making $11 an hour.
00:33:10.960 | And we were actually pretty thrilled with that.
00:33:12.680 | You know, we're like, oh my gosh, 11 bucks.
00:33:14.160 | This isn't too bad.
00:33:15.000 | Rent was 350 bucks a month, including some of our utilities.
00:33:18.760 | Like, you know, we lived on the cheap, which I know you can appreciate,
00:33:22.080 | but we wanted to have a baby.
00:33:24.360 | And so when the baby was coming, Julie also wanted to be able
00:33:29.000 | to step out of the workforce.
00:33:30.800 | She's just like, I just want to focus on this baby, new mom,
00:33:33.560 | you know, obviously new baby.
00:33:35.240 | And so that was a big deal for us.
00:33:36.760 | The other big deal for us was we didn't want to borrow money for school.
00:33:39.760 | I had a little scholarship that helped with tuition some.
00:33:42.160 | And I kept crunchy numbers.
00:33:44.480 | Like, how can I, can I work more hours?
00:33:46.280 | But my accounting program already really frowned on lots of work.
00:33:50.040 | So I was working more than what they allowed even, and I just
00:33:53.560 | couldn't squeeze out any more.
00:33:54.720 | And at least not structured in that way.
00:33:56.960 | And so we had been using a spreadsheet that I had built for just the two of us.
00:34:01.040 | And it had worked well.
00:34:02.680 | Like we had gotten some savings together and we just weren't going to be able to
00:34:07.400 | get those last two years without borrowing.
00:34:10.160 | And I was kind of mad because I'm like, man, we've been budgeting.
00:34:13.200 | We can't live any more cheaply than we are.
00:34:15.320 | And it wasn't going to be enough.
00:34:17.560 | And so I had this just kind of crazy, a little bit egotistical idea.
00:34:21.280 | I was like, Oh, maybe, maybe people would just buy this spreadsheet from me.
00:34:24.960 | And so I launched with a spreadsheet, like, you know, September of '04 launched
00:34:31.360 | and sold little bits at a time, enough to keep the interest of me.
00:34:37.120 | And then in February of '05, I discovered that the spreadsheet had enforced rules
00:34:42.600 | that I hadn't known were there.
00:34:44.320 | And so I turned it around and started talking about the rules and a lot less
00:34:48.600 | about the spreadsheet and our sales doubled and then doubled again.
00:34:52.400 | And I mean, doubled like, you know, 500 to a thousand, a thousand to 2000, it
00:34:56.040 | wasn't crazy number, but that was enough for me to think, Oh, the rules are kind
00:35:00.280 | of the key here, the spreadsheets kind of second fiddle.
00:35:03.520 | And then I met a guy named Taylor, who's now my business partner.
00:35:06.200 | And he said, Hey, I can improve the spreadsheet.
00:35:08.680 | I'm a developer.
00:35:09.680 | And I said, no, how about just real software?
00:35:12.360 | You know?
00:35:12.960 | And he said, I can do that too.
00:35:14.120 | So we launched the first like windows only, like paste in your license key
00:35:19.600 | type software back in the day.
00:35:21.960 | We launched that had never met each other in person and launched that at the end of
00:35:26.280 | '06, by that time I was a CPA and doing my CPA thing for about 10 months before I
00:35:32.040 | realized I do not like doing this.
00:35:33.720 | And I really liked this little side gig, the side hustle, you know, and I was
00:35:38.680 | making more from my side hustle than I was from my CPA job.
00:35:41.760 | So it still took me a little bit of time to get up the guts and realize that I
00:35:45.600 | could support a family on my own business.
00:35:47.880 | Only years later, do you realize that there's no super secure way to make money.
00:35:52.440 | Like there's always risk of things, but yeah, that was kind of the Genesis.
00:35:55.360 | And we've just iterated on that little old spreadsheet since then.
00:35:58.480 | So now that, you know, the spreadsheet died, gosh, 15 years ago, but, uh, the
00:36:04.320 | software just keeps getting better and better.
00:36:05.880 | And I think we keep getting better and better at teaching people how to think
00:36:09.840 | differently about their money.
00:36:10.880 | So it's, yeah, it's been a fun business to run.
00:36:13.160 | It's been fun to see people make changes.
00:36:15.480 | You know, that like, they'll write and be like, Oh, our marriage is better.
00:36:18.640 | Or I took this, I took a job that had a pay cut, but the job is way better.
00:36:22.080 | And it's like stuff like that, where you're like, man.
00:36:23.920 | And then they're like, my family life is better.
00:36:25.640 | You're like, how do you put a price tag on that type of win for somebody?
00:36:29.200 | You know?
00:36:29.560 | So it's, it's a fun business to, to be involved in.
00:36:32.560 | Yeah.
00:36:33.120 | Do any of those stories include cool ways people have managed to uplevel their
00:36:37.360 | finances outside of just, you know, budgeting hacks they've learned or shared
00:36:41.720 | or things they've done?
00:36:42.600 | I'll give one.
00:36:44.200 | I mean, this might be obvious and this is maybe too close to budgeting to be
00:36:47.840 | appreciated by your audience perhaps.
00:36:49.400 | But the biggest hack of all is when you realize that some of your money has been
00:36:55.760 | doing things you don't actually value, like that, that, and it's like the, it's
00:37:00.560 | like a, it's a high level optimization you're doing there.
00:37:03.000 | And so the budget at the end of the day is a tool to let you know that your money
00:37:08.280 | is, is going toward the things you value.
00:37:10.360 | We spent all this time, like hacking our careers, you know, like making sure that
00:37:14.320 | we're making the most, that we love our job.
00:37:16.080 | We've gone to school and then we're like day to day, we're getting up early.
00:37:19.760 | We're like grinding, we're adding value.
00:37:22.080 | We, we put all of this energy into the time to money creation, right?
00:37:26.760 | Where we're converting our time into money.
00:37:28.200 | As soon as the money is in our hands, for some reason, so many people don't just
00:37:34.360 | extend that effort a little bit further and say, okay, now that it's money, how
00:37:39.320 | do I optimize it to be in line with what I truly care about?
00:37:44.000 | They stopped.
00:37:44.920 | They've optimized their career like crazy.
00:37:46.600 | They're killing it.
00:37:47.320 | They're high performing, but then it's become money.
00:37:50.520 | And they're like, oh, I'm not a money person or whatever that, I hate that.
00:37:54.080 | You know, we, I want people to just extend a little bit of effort a little
00:37:58.000 | further along, like take a surgeon, for example, someone who's just like high
00:38:01.440 | performer, you know, saving people's lives every day.
00:38:03.920 | And then there's like, oh, I'm not good with money.
00:38:05.840 | I'm like, come on, man, you replace someone's heart.
00:38:08.480 | Like you're good.
00:38:09.400 | You're good at anything you decide to attack with that brain of yours.
00:38:12.480 | So like, you're good with money.
00:38:14.040 | You're good with whatever, just, you just got to learn how to make sure that
00:38:17.400 | it's doing what you really care about.
00:38:18.800 | That's the biggest hack of all.
00:38:20.040 | Of course, in our forums, in our Reddit, like we have an awesome subreddit.
00:38:23.680 | Our Facebook fans group is, they're the ones where you can go and then be like,
00:38:27.120 | hey, everyone, you know, I got this health insurance bill, totally caught me off
00:38:30.960 | guard and people will be like, oh, I can tell you a story.
00:38:34.440 | Here's what you can do.
00:38:35.600 | So our community is full of them.
00:38:37.520 | But for me, I, I just focus on that big one.
00:38:40.960 | Money, priorities, perfectly in alignment, magic.
00:38:43.840 | That's great.
00:38:45.000 | Sometimes the smallest changes make the biggest impact and Trade Coffee is a
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00:39:55.760 | Do you all remember episode 122 when I spoke to chef David Chang about leveling
00:40:02.680 | up your cooking at home?
00:40:04.120 | If not, definitely go back and give it a listen.
00:40:06.320 | But one of his top hacks was using the microwave more.
00:40:09.720 | I'll admit I was a skeptic at first, but after getting a full set of microwave
00:40:14.520 | cookware from Anyday, I'm a total convert and I'm excited to partner with them for
00:40:18.840 | this episode.
00:40:19.480 | Anyday is glass cookware specifically designed to make delicious food from
00:40:23.840 | scratch in the microwave.
00:40:25.280 | And honestly, using it feels like a kitchen cheat code because it speeds up
00:40:29.840 | and simplifies the process so much.
00:40:32.400 | The cookware is a hundred percent plastic free and you can cook, serve, store, and
00:40:36.840 | reheat all in the same dish that happens to be dishwasher, freezer, and oven safe
00:40:42.240 | too.
00:40:42.600 | And if you need a recipe suggestion to kick off your Anyday adventure, I highly
00:40:46.840 | recommend David Chang's Salmon Rice.
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00:40:55.080 | year, you have to check it out.
00:40:57.160 | So to get 15% off our new favorite cookware, go to allthehacks.com/anyday.
00:41:03.600 | Again, that's allthehacks.com/anyday for 15% off.
00:41:09.040 | I just want to thank you quick for listening to and supporting the show.
00:41:14.160 | Your support is what keeps this show going.
00:41:17.000 | To get all of the URLs, codes, deals, and discounts from our partners, you can go to
00:41:22.360 | allthehacks.com/deals.
00:41:25.240 | So please consider supporting those who support us.
00:41:28.360 | And outside of budgeting in your own life, are there things you're doing with savings
00:41:33.160 | investing that, you know, what does that world look like for you?
00:41:36.000 | So one that I found that's kind of like a nerdy, I like just heard about recently.
00:41:40.920 | I mean, you're, you're familiar with like the Roth, like the mega backdoor Roth type
00:41:44.960 | stuff that people will be able to get tax-free growth.
00:41:47.400 | I'm in a tax bracket where the Roth isn't available to me anymore.
00:41:51.680 | And we did this deal with our 401k when we switched providers and they have a, they
00:41:56.440 | have a setup where you can contribute after-tax money to your 401k and immediately
00:42:01.520 | convert it to a Roth.
00:42:04.360 | And so there's no gain on that after-tax money.
00:42:07.120 | There's no growth gain that you would then have to actually pay taxes on because
00:42:10.520 | they've converted immediately.
00:42:11.720 | So we went from being able to save, what is it?
00:42:14.520 | 19.5 or something.
00:42:15.520 | Um, I can put away like pre-tax.
00:42:18.120 | I can go all the way up to, I think 50 grand that difference, uh, for after-tax
00:42:24.320 | and then convert it to a Roth.
00:42:25.960 | So I can get in to a Roth, even though I am technically allowed, but I'm, but I'm
00:42:30.880 | not easily allowed.
00:42:32.160 | And, uh, so that was one that like just this year, I discovered a lot of, a lot of
00:42:37.240 | our employees at YNAB jumped on that, um, trying to, you know, maximize that savings
00:42:41.960 | that they can get.
00:42:42.560 | So you get this tax-free growth.
00:42:43.800 | Then later on down the road, we're talking years later.
00:42:46.560 | I now have this tax-free money that I can use and strategically time with
00:42:50.800 | deductions and other things.
00:42:52.200 | It gives you room to maneuver and make your income go up or down as needed, you
00:42:56.280 | know, to optimize your tax bill.
00:42:57.480 | So that was one that, yeah, there's two, two, two things I'll tack on that.
00:43:01.640 | So yeah, look, if your employer offers it, there's something called the mega
00:43:05.520 | backdoor Roth.
00:43:06.320 | If your employer doesn't, and you're not eligible for Roth, you could still do a
00:43:09.720 | backdoor Roth.
00:43:10.640 | And, you know, I would say Google around.
00:43:13.120 | There's a lot of things to be careful of.
00:43:15.160 | If you already have a lot of traditional IRA assets, it can be a real tax problem.
00:43:19.840 | But if you don't have an IRA at all, and you're not eligible to contribute to your
00:43:24.080 | Roth, you can contribute after-tax money to just a traditional Roth and roll it
00:43:27.840 | over.
00:43:28.320 | Or if your employer allows, and the question to ask is, do you allow me to
00:43:33.240 | make after-tax contributions to my IRA and do, I think it's called an in-plan
00:43:38.560 | rollover, but if you just Google mega backdoor Roth, there's so much stuff out
00:43:42.080 | there, it's really cool and lets you really boost your retirement savings.
00:43:46.000 | The other thing, if you build up a really big Roth IRA balance, if you're already
00:43:51.040 | set for retirement or you're already saving enough to be on track and you have
00:43:55.480 | enough and you want to take a little bit of risk, something that people don't often
00:43:59.680 | realize is, you know, we say, look, if you want to take risk in your investment
00:44:02.880 | portfolio, let's keep that to like 10% or less, and you could go pick stocks or you
00:44:07.760 | could invest in crypto and that kind of stuff.
00:44:10.000 | Well, it turns out that a lot of those risky things, uh, you know, are high risk,
00:44:13.760 | high return, and most people do them in their taxable account, but if you search
00:44:17.920 | around online, there's a handful of companies that let you do self-directed
00:44:21.240 | IRA investing, which means you can start to do some of those risky things in your
00:44:25.280 | IRA, which I will give this huge caveat.
00:44:28.520 | They're like, this is only if you're on track for retirement, otherwise, like you
00:44:32.520 | should not be risking your retirement money.
00:44:34.720 | Uh, but if you're on track for retirement, you can actually self-direct your IRA
00:44:39.920 | and use that to invest in stocks or invest in cryptocurrency or invest in
00:44:45.280 | things that are higher risk, higher return.
00:44:47.160 | And if you Google around, there's a handful of people that have been doing
00:44:50.880 | this who have tens of millions of dollars in their IRA, which based on
00:44:55.840 | contribution limits seems impossible, but because they were using their
00:44:59.480 | IRA to make the more risky bets.
00:45:01.240 | So I'd say if you've already decided, I can take some risky bets with this amount
00:45:05.960 | of money and, and you're diligent about saving for your future, you could use
00:45:10.000 | your IRA to lower your tax bill.
00:45:12.480 | If those risky bets pay off.
00:45:14.080 | Yeah.
00:45:14.360 | There's another one kind of speaking to the people that maybe haven't maxed out
00:45:17.480 | their kind of plain vanilla retirement.
00:45:19.000 | Like I should, I should tell everyone just out of the gate, I'm
00:45:21.880 | allocated like a 90 year old grandma.
00:45:23.720 | Like I am, I'm in bonds up to my ears because my business is such a risky
00:45:27.760 | venture, right?
00:45:28.600 | Like all of my, my work and net worth is tied up in this business essentially.
00:45:32.880 | So everything else is very, very safe and, and that's appropriate.
00:45:36.360 | But for those people that are maybe not caught up on retirement or they're
00:45:40.600 | feeling like they can't find the money.
00:45:42.440 | I introduced years ago on my podcast, the idea of what I call the 1% rule.
00:45:47.400 | And then something about the 1% in politics started coming out, like
00:45:51.000 | that, that started to become a phrase.
00:45:52.280 | And so I was like, Oh man, I just got to name it something else.
00:45:54.320 | But regardless of that, the idea is that every quarter you increase your
00:46:00.480 | retirement contribution by 1% and the next quarter you do it again.
00:46:05.920 | And the next quarter you do it again.
00:46:07.520 | And we're exercising the pay yourself first muscle, just no matter where you're
00:46:12.160 | at, whether you're saving 10% now or zero, just do 1%.
00:46:15.800 | I've had several people run that for now four years and they've just kept doing it.
00:46:21.440 | And after a while, if you do that math really quickly, you know, five years in
00:46:25.080 | you're saving 20% of your income.
00:46:27.400 | And I would encourage people to just bump it a percent and see if you don't make due,
00:46:31.880 | you know, see if it doesn't just work itself out, it, it will.
00:46:36.520 | So that that's one little hack.
00:46:38.320 | That's like out of sight, out of mind.
00:46:40.200 | Every quarter you could even tell your employer, if you have a cool,
00:46:43.760 | like a cool payroll office, they could potentially do this for you where you
00:46:48.280 | just say, Hey, I would like it to be raised 1% and then next quarter 1%.
00:46:52.240 | I will not come back and ask you.
00:46:53.640 | I just want you to do this for me.
00:46:55.440 | Here's my signed piece of paper or whatever that says you can.
00:46:58.240 | And then, um, set it on pure autopilot because it's interesting when we don't
00:47:02.960 | know what has happened and when we aren't in our way, we can make really good
00:47:06.560 | decisions.
00:47:07.160 | And so it's a step beyond just being automatically defaulted into a 401k.
00:47:11.520 | And we're automatically increasing that rate and just see if you don't die.
00:47:15.320 | You know, I think it'll work out.
00:47:16.680 | I love that.
00:47:17.760 | Yeah.
00:47:18.120 | I mean, automation is so easy when it comes to saving nowadays.
00:47:22.800 | Like I think about what parents and grandparents had to do to automate their
00:47:25.960 | savings and write checks and move money.
00:47:27.880 | And now it's never been easier to say, sweep this money before I get to think
00:47:32.280 | about it before I get to spend it and put that away.
00:47:35.360 | So, yeah.
00:47:36.120 | And, and I love that your kind of investment portfolio is so boring.
00:47:39.960 | I feel very similarly, and I keep talking to people who have been very
00:47:43.840 | successful and most people's investment portfolios are kind of boring because
00:47:48.600 | they're doing, taking a lot of risk with their work or their business, or maybe
00:47:51.840 | their job's really boring and they take a little bit more risk, uh, with
00:47:55.120 | investing, but I think too often there's the hype of, you know, getting in on the
00:47:59.560 | next meme stock and all of that.
00:48:01.240 | And everyone assumes that that's how everyone's making money.
00:48:03.920 | And I'm like, no, I just have some diverse passive, uh, index funds and I'm
00:48:08.720 | just, you know, spending my free time thinking about things that could level
00:48:12.120 | myself up like you did starting this business.
00:48:14.400 | Yeah.
00:48:14.920 | I mean, I do a little bit of risky for fun entertainment type.
00:48:18.520 | Uh, I wouldn't even call it investing.
00:48:21.120 | It's like, I'm not going to call it gambling, but it's somewhere in the,
00:48:23.880 | between those two.
00:48:24.760 | Yeah.
00:48:25.080 | And that's purely for fun and to chat about with my buddies, you know, but
00:48:28.720 | yeah, everything else, it's the, uh, 90 year old grandmother that goes to a
00:48:32.600 | bridge game.
00:48:33.120 | That's my asset allocation.
00:48:34.720 | That's awesome.
00:48:35.440 | Any other hacks, tips, things you've learned in the space worth sharing?
00:48:40.160 | Oh man, I live a pretty regimented life in the sense that I wake up to an alarm
00:48:46.960 | clock and I get going first thing.
00:48:48.720 | And I exercise first.
00:48:49.680 | I feel like that's a hack for me that helps tons.
00:48:51.480 | I eat the same thing for breakfast six out of seven days because you know, you
00:48:56.040 | just start to kind of find that you don't want to keep recreating the will.
00:48:59.280 | I wear the same hat all the time.
00:49:00.880 | You know, the, uh, it's, it's interesting because if you were to probably, if I
00:49:04.840 | were to like follow myself around for a day, I'd be like, Oh wait, that is
00:49:08.160 | interesting.
00:49:08.720 | I've given up a few, you know, over the years I used to have everyone turn off
00:49:12.960 | lights and be like the lights are, you know, like kids turn off your lights.
00:49:16.560 | Cause I grew up dealing with 60 watt bulbs.
00:49:19.280 | Like it did make a difference, but now, you know, you've got two watt bulbs and
00:49:22.960 | I'm like, I don't know if I should keep harping on the lights thing, you know, I
00:49:27.280 | think, and now you start installing switches to turn off lights when you leave
00:49:31.920 | rooms anyway.
00:49:32.640 | So there are things that I've ended up just not caring about as I've gotten a
00:49:37.760 | little older, things have changed.
00:49:39.200 | But, um, I like my family hacks.
00:49:42.000 | I, if I were to end on one, it'd be the dinner one.
00:49:44.360 | Try and make dinner happen with the kids.
00:49:47.000 | You know, if you don't have kids, just have dinner happen with your significant
00:49:49.680 | other.
00:49:49.880 | Like it's, it's just a quieter time, you know, don't watch TV during dinner.
00:49:53.680 | Obviously don't pull your phones out during dinner.
00:49:55.560 | Obviously just eat slowly and chew your food 35 times or whatever that number is
00:50:00.680 | that people say is good.
00:50:01.480 | Yeah.
00:50:01.640 | And, uh, yeah, converse a little bit slow down.
00:50:04.640 | I think that's done wonders for our family over the last 18 years.
00:50:07.400 | That's awesome.
00:50:08.520 | Yeah.
00:50:08.880 | We try to do that, uh, with the kid every day and then without the kid once a week.
00:50:13.400 | Uh, yes.
00:50:14.240 | The weekly date.
00:50:15.040 | That's a killer relationship hack.
00:50:16.400 | We do that as well.
00:50:17.160 | Yeah.
00:50:17.400 | Like religious about that thing.
00:50:19.800 | Weekly date.
00:50:20.560 | Yeah.
00:50:21.400 | Cool.
00:50:22.200 | Well, where do you want people to find you online and everything you're working on?
00:50:25.400 | Yeah.
00:50:26.160 | So if you liked my voice, the you need a budget podcast, you know, YNAB is
00:50:30.040 | available on, on all the iTunes, Spotify, all that, um, you need a budget.com.
00:50:34.160 | If you're in a hurry, YNAB.com, we got that four letter domain years ago.
00:50:37.560 | And so you can type that in quickly.
00:50:39.240 | I'm not on the social stuff, so anyone can email me.
00:50:42.360 | Um, there's a hat, Chris.
00:50:43.960 | I'm not on any social stuff.
00:50:45.200 | So, um, but, uh, yeah, you can email me Jesse@ynab.com and, uh, I'm happy to
00:50:50.320 | write back, uh, Mondays and Thursdays or when I jump back into email.
00:50:53.840 | So cool.
00:50:55.120 | Well, thank you so much for being here.
00:50:56.520 | Absolutely.
00:50:57.600 | That was amazing.
00:51:00.920 | Thank you so much for listening.
00:51:02.560 | If you want to check out YNAB, I'm trying to get a special offer set
00:51:05.760 | up at all the hacks.com/ynab.
00:51:08.840 | So head there if you're interested and to everyone who's been writing in to share
00:51:13.320 | ideas, ask questions or offer to help out with the show.
00:51:15.960 | Thank you so much.
00:51:17.200 | I love hearing from listeners and I try to write back to everyone as soon as I can.
00:51:21.360 | I know I'm a little overdue right now, but I'm back from traveling.
00:51:24.640 | So I'll be catching up soon.
00:51:25.800 | Finally, if you're enjoying the show and want to help out, please consider sharing
00:51:30.160 | your favorite episode to a friend or family member.
00:51:32.280 | Thank you so much.
00:51:33.520 | See you next week.
00:51:34.280 | I want to tell you about another podcast.
00:51:51.040 | I love that goes deep on all things money.
00:51:53.520 | That means everything from money hacks to wealth building to early retirement.
00:51:57.280 | It's called the personal finance podcast, and it's much more about building
00:52:01.440 | generational wealth and spending your money on the things you value than it is
00:52:05.320 | about clipping coupons to save a dollar.
00:52:07.400 | It's hosted by my good friend, Andrew, who truly believes that everyone in this
00:52:11.680 | world can build wealth and his passion and excitement are what make this show so
00:52:16.000 | entertaining.
00:52:16.720 | I know because I was a guest on the show in December, 2022, but recently I listened
00:52:22.240 | to an episode where Andrew shared 16 money stats that will blow your mind.
00:52:26.400 | And it was so crazy to learn things like 35% of millennials are not participating
00:52:31.320 | in their employer's retirement plan.
00:52:32.960 | And that's just one of the many fascinating stats he shared.
00:52:36.600 | The personal finance podcast has something for everyone.
00:52:39.560 | It's filled with so many tips and tactics and hacks to help you get better with
00:52:43.320 | your money and grow your wealth.
00:52:44.800 | So I highly recommend you check it out.
00:52:46.960 | Just search for the personal finance podcast on Apple podcasts, Spotify, or
00:52:51.320 | wherever you listen to podcasts and enjoy.