YNAB Podcast 73: Your Life on a Treadmill

Hello YNABers. My name is Jesse Mecham and this is podcast number 73 for You Need A Budget, where we teach you four rules to help you stop living pay check to pay check, get out of debt and save more money.

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I was talking with Taylor, our lead developer, a week ago and we were discussing different interviews I’ve been doing with customers that just recently purchased YNAB. And I was talking to him about events – everyone’s experienced some kind of an event. And there was a TV show called The Event – I never checked it out. But events push us toward that idea of meeting a budget. Nobody wakes up on some random day, sees the bright sun streaming through the window and thinks, “We need a budget.” I didn’t. And like I said on my blog, I’m a budgeting freak of nature.

So, my wake-up call came entirely from a big event on my own horizon, which was my marriage to the greatest woman in the history of the world. When I was 14 my dad gave me Dave Ramsey’s book Financial Peace. I read it in a few days – life insurance, mutual funds, growth value, all that stuff that was in there; get out of debt, stay out of debt. I had no debt – I had no money. So it was all really simple to set up a budget. I actually started tracking my money because of that, and I think because of a personal finance merit badge – Personal Management, I think it’s called. Another story for another time. But I was always a little bit of a geek in that regard. I read The Millionaire Next Door before I finished high school, read The Richest Man in Babylon – one of my all time favorites. My favorite book of ALL time, personal finance related, is Your Money or Your Life.

Anyway, this all made pretty good sense, all these principles that I was learning, and I became fairly indoctrinated to the idea that debt was evil. So when I was in school and had three years left and this marriage coming up, it was pretty obvious that I was not going to take on any debt. So without that as an option I thought we needed a budget. So my big event, again, was getting married.

We did need a budget. So do you. I started with this analogy in the blog of a treadmill. Almost anyone can walk on a treadmill with no degree of incline. Like two miles an hour – anyone can do that for a long, long time. Most of us are doing this with our finances. You’re not really getting anywhere, everything’s going fine, you’re not sweating. I mean, you could do it for a long time. And then some big event happens – maybe your hours are cut at work so the speed of the treadmill kind of increases, or maybe you found out you’re going to have a baby. That’s a big event, a happy event, an expensive event.

Side note… Oops – just got a text. Don’t know if you guys heard that on the mike. Side note is the cloth diaper thing. If anyone has tried cloth diapering instead of WalMart or Costco diapers, email me. I’m curious to hear your experience. I’m intrigued by the idea. Apparently they’re not as bad as I totally imagine them to be because I don’t know what… I’m not imagining when I imagine it it would make them better than chucking them in the garbage except for less waste. But seriously, anyway, I’m really curious about that. Email me if you’ve had any experience with that.

So, you’re going to have a baby – big event – and now it’s like someone hands you 25 pounds to carry with you as you’re walking. That would get tiring. Maybe you’ve outgrown your apartment and you decide it’s time to purchase a house. The house payment is a little bit of a stretch, so the treadmill’s incline bumps up. Your oldest needs braces, the kids’ summer camp bills are due and the car just broke down again, Christmas is coming again – every year, same time. The vacation that you take with your family every year – every year – is in six weeks. No money set aside for that. So the treadmill is now going faster, steeper incline AND you’re having to carry that 25 pound bundle of joy, so you’re sweating, you slip, you grab onto that railing for support and then realize that walking won’t cut it, so you break into a slow jog, and you can’t hold that pace for too long. At that moment, when you’re sweating and stressed and tired, that is the moment where you realize that you need a budget.

And then, once you begin giving every dollar a job, being conscious about it, not just automatically doing it – which is what I feel like I was doing in 2012 – treating larger, less frequent expenses as monthly bills, following Rule Two, your breathing will regulate, your leg muscles will find new life, you’ll get that second wind that I’ve never received in a real race but I hear it’s phenomenal. Even if the treadmill stays that fast and you can’t shed the 25 pound baby – as if you’d want to, but that analogy has broken down, I think… Maybe the incline won’t abate or your budget needs to be worked over a couple of times. But in the end, the budget will help you handle that new scenario, that new situation. You’ll find your stride and you’ll have the time to make any long-term financial changes that may need to happen.

Maybe you bought too much house, maybe you bought too much car. Look at the fixed stuff. What can you axe from the fixed stuff? Everyone can make the variable things move a little bit, but the harder decisions are the ones that really give you a big bang with the buck, so to speak. Those are the fixed ones. Because when you can reduce a fixed expense that change is multiplied. You don’t have to keep working on it – keep working on keeping grocery bills down or not going out to eat. If you’ve got debt, you shouldn’t be going out to eat. It just shouldn’t be a priority. So, look at the fixed costs. See if you can make some long term financial changes that will give you a springboard off of which you can then reach your financial goals.

I think that’s pretty much it. So, think about your financial treadmill. Anything you can do to adjust it? Give it a bit more manageable speed? And what events cause it in the first place?

Until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.