You Need A Budget (YNAB)

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!

Direct download: 416_Opting_Out_of_Credit_Cards_A_Bit.mp3
Category:general -- posted at: 12:00am EST

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!

Direct download: 415_Scratching_the_Gambling_Itch.mp3
Category:general -- posted at: 12:00am EST

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 Bootcamp!

Direct download: 414_Optionality__Managing_Fixed_Expenses.mp3
Category:general -- posted at: 12:00am EST

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 any to cover unexpected expenses. This makes you much more likely to put those on the credit card and then... now you are in debt again.

 

Jesse often meets people whose finances look like their diets -- they yoyo in and out of debt constantly. It's a mentally and emotionally draining prospect. But by giving yourself options, you can have it both ways. You can prepare to pay your true expenses in the future AND pay down debt. And you'll be more likely to stay out of debt, which is the ultimate goal!

 

 

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!

Direct download: 413_Optionality_Rule_Two_Instead_of_Debt_Paydown.mp3
Category:general -- posted at: 12:00am EST

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 relaxation of fiduciary rules in the SECURE Act.

 

Just like Jesse discussed in last week's episode #411, wherever there are incentives, there are people making money. The wise investor follows the money!

 

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!

Direct download: 412_Incentives_and_Your_401k.mp3
Category:general -- posted at: 12:00am EST

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, maybe the solution is just to opt out.

 

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!

Direct download: 411_Opting_Out_of_the_Credit_Card_Game.mp3
Category:general -- posted at: 12:00am EST

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!

Direct download: 410_January_Burndown_2020.mp3
Category:general -- posted at: 12:00am EST