I’m sick and tired of my grocery bill.

groceries

I’m spending too much money at the grocery store. I know I am, not only is the budget telling me that, but I can feel it. I think since I’m not struggling financially like I was when I started YNAB, I’ve let myself get too comfortable letting that part of my budget grow unnoticed. So I end up wasting food.  I buy stuff, forget what’s in, buy something again unnecessarily, and some food dies a painful death in the back of the refrigerator.

I became really horrified back in January when I spent $575.86 that month on groceries. It makes me cry a little just to type that. I am feeding one person – me. What was that even for? I have no idea. I’m just not paying attention.

Now, to be fair that does include some pet costs (and I have a collection of them) and non food items, but it’s still too much. So I made a goal to get it under $400. In February, it was $403.75 and in March it was $375.85. Better. I did that just by paying closer attention to the category balance when shopping. There’s a lot of power in that.

But recently I came across Budget Bytes, a fantastic cooking blog my good friend Dave steered me to. She analyzes her grocery budget by calculating cost per meal. But more importantly, her recipes are fantastic and it’s made me realize that I can and should be cooking more at home, because it’s healthier and cheaper.

So how low can I get my grocery bill and still eat well? How many dollars can I free up for other jobs – like paying down my mortgage. I’ve decided to put my grocery budget under the microscope for a month or two and find out.  I thought I’d share the journey and plan to update as I go along.

In the past, anything I purchased at the grocery store, I just assigned to groceries. And by the way, if you’re a newbie, we strongly recommend that.  The type of minutiae I’m about to explain is an advanced technique.  If you’re just starting out, keep things simple and just get good at entering all your spending.

So, today I made a master category called “Grocery Project” and broke out some smaller categories:

Screen Shot 2014-03-31 at 10.31.43 AM.png

The MAX is the amount I’ve been budgeting for groceries, and for now I’m going to keep that at $400. This will help me keep track and make sure I don’t spend more than that. So when I started April, it looked like this:

Screen Shot 2014-03-31 at 10.37.19 AM.png

I just want to track during April to see where specifically the grocery dollars are going. Then I can take the information and set some goals for May.

Yesterday, I went grocery shopping (yes, it was March and I cheated the transaction date to April 1st. Don’t judge me.) After splitting everything out, it looked like this:

Screen Shot 2014-03-31 at 10.39.23 AM.png

So now I need to move money from the MAX category to cover the overspending in the other categories. First I’ll just budget for the other categories:

Screen Shot 2014-03-31 at 10.40.35 AM.png

Now the total for the grocery project master category is up to $558.39 because I added $158.39 to those other categories. But that’s not really accurate. So I lowered the MAX category by that amount.

 $400.00

-$158.39

_________

=$241.61

Now the total for the grocery project is back at $400:

Screen Shot 2014-03-31 at 10.57.34 AM.png

$241.61 is what I have left for groceries this month. The next time I make a trip, I’ll go through the same process.

So on first glance, veggies looks low, but I have a ton of veggies in the freezer, so that’s fine. I plan to do some cooking and freezing of meals, so I bought some supplies for that (Ziploc baggies and containers). You might notice I don’t have a bread category. I make my own bread, so that’s essentially under cooking ingredients.

If I subtract out the non food items, so far I’ve spent $138.04 on food. I’d like to get my total grocery bill for food and non food items down to $250. Possible? I don’t know. This will help me see where the dollars are going and I’ll have to decide what’s worth it and what’s non-negotiable.  For instance, good fresh fruit is really important to me, so while I might shop for better prices, I won’t sacrifice quality.

I think a lot of us struggle with the almighty grocery bill, so I thought I’d share my process as I work to get this part of my budget under control.

Stay tuned!

 Quick Update: I don’t plan to maintain this level of focus forever.  I’m hoping after a few months I’ll have learned some things and implemented some sustainable change.  By summer, I’m sure I’ll have moved back to a much simpler structure.

YNAB Podcast Episode 60: No More Harvard Debt! How One Guy Paid of $90k of Debt in Seven Months

Hello YNABers. My name is Jesse Mecham and this is podcast number 60 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.

Today I will be interviewing Joe Mihalic. He is the author of ‘No More Harvard Debt’, and I am just pleased to have him on. He basically saw that he had $90,000 in student loan debt and decided to tackle it, beat it in seven months. He was intense, insanely intense about it. He basically passed on everything, sold a lot of stuff, and we kind of get into the philosophical around consumption and your wants and happiness, things like that. He has a great book on Amazon – it’s $2.99 – and it’s called ‘Destroy Student Debt: A Combat Guide to Freedom’, and I recommend it. It reviews well, and Joe – as you’ll see in the interview – is a smart guy with a lot of insights when it comes to psychology and debt pay-down.

So, without further ado, here is my interview with Joe:

J: Alright, I’m here on the phone with Joe Mihalic. Thanks, Joe, for coming on the podcast.

JM: You bet, Jesse. I’m very glad to be here today.

J: Alright Joe, so you are an average Joe, right? But you did something pretty crazy back in 2010 or so.

JM: What’s that? When I took on a bunch of debt or…?

J: Well, yes. Just give us… give us just… These listeners probably don’t know you by name, so give them a little history on what your story is and, yes, just what kind of makes you not average, I guess, in this day and age.

JM: Okay, sure. I got my MBA from Harvard in 2009 and took on about $100k of debt to pay for it. And about two years later, after paying off roughly $21k of that debt, I still had $90,000 left to go because of all the interest that I had paid down. It only put really a $10k dent in the overall principal. So I decided in August, the end of August, to try and pay off $90k in ten months. And I didn’t really know how I would do that, but I just felt like there was a better use for the $1,067 I was paying every month on these loans. And I wasn’t really sure what I wanted to do with the money, but you know, it ranged from such noble things as saving up for my future kids’ college funds. I don’t even have a girlfriend, but I felt like that would be one good use of the money. But then more selfishly I was thinking, you know, I could go on more trips if I got rid of this $1,067 monthly payment. So I embarked on this mission to try to pay the loans down, and I was actually successful and I did it in seven months instead of ten.

J: Seven months, $90,000. So, how was… I mean, you looked back, you saw the debt, you saw that the interest was substantial. How did that affect your outlook? I mean, you had a job at the time, I would imagine; you’d been graduated for a little while.

JM: Yes. I had a job, a good paying job, and I had managed to buy a house, furnish the house, buy a couple of cars and a motorcycle and some other cool toys; and you know, I was living pretty well – travelling, going out on the town here and there. But then I sort of realized… I looked at my finances and I looked at where this $1,000 was going every month and I decided, you know, I’ve already got the education, so this debt is really unsecured. I already benefitted from it, so there’s got to be a better use for this $1,000. I felt sort of stuck with it, and I thought if I can just tighten the belt for ten months, cut back a little bit here and there and put a dent in it, then I’ll be better off for it. You know, maybe the monthly payment goes down. Maybe I don’t pay the entire thing off, but I put a dent in it and I can spend… put less money towards it every month, and free up some of that debt payment and use it for something different.

J: So, what did you… where did you cut? I mean, it sounds like you had… you know, you said you had a motorcycle and you bought a house and furnished it, so you obviously consumed quite a bit. But on the cutting side, what happened there?

JM: So, on the cutting side I just basically did a lot of repairs around the house by myself. So my car got a hole in the convertible because it’s an older car, so I put duct tape on it instead of buying a new $2,000 top. I actually took a flask out when I went out with my friends to the bars instead of paying for drinks at the bar – probably one of the more controversial things I did, based on the feedback I’ve got, but my friends thought it was brilliant. I didn’t go to lunch with my co-workers or friends whenever they invited me; I just ate at my desk. I basically ate spaghetti at my desk every day. I didn’t go on any dinner dates with anybody, and I didn’t go to the movies either as a date or with friends. When movies came out and friends wanted to go and see them, I would just say, “Thanks, but no thanks.” I didn’t buy any clothes for those seven months. At one point my favorite shoes got a hole in them, but I just… I lived with the hole and I just hoped people didn’t notice it.

I made things last longer; so for a while there I was basically hydroplaning all over the road because my tires were so bald and I refused to buy new ones – which, you know, I can’t recommend for anyone. But it did save me some money for a little while. And then I made my contacts last longer – they’re bi-weekly, I think I stretched them out to four to six weeks. I didn’t want to pay for contacts because it costs $200-$300. I didn’t go home for Christmas. I basically stayed in Austin, at home for Christmas. And then I didn’t go to a couple of bachelor parties or weddings during this time either to save some money.

J: So no travel, basically.

JM: Zero travel. I bought tickets to Ann Arbor before I started off this mission, and you know, the cancellation fee is pretty steep there. So I just bit the bullet, went to Ann Arbor, reunited with my friends. I’m glad I did it, but while I was there it was hand-to-mouth; I was living very, very frugally. No meals out or anything like that; protein bars and any food I could get from friends, basically.

J: I see. So what were… You know, you mentioned kind of your two-step plan that you cut costs… You obviously cut tremendously; you just basically weren’t doing anything. If someone hears, “Okay, yes, he didn’t fix his convertible,” they get one idea; but then when they hear, “Well, he also didn’t go home for Christmas,” then people start to get it. That’s some real sacrifice that a lot of people just wouldn’t be willing to make. Looking back, is there anything that you would have done differently in the whole seven months?

JM: That’s a great question and I actually haven’t gotten it before, so it made me think when you sent the questions over earlier. And you know, it started out as… So the short answer is yes, there is. I would have sold my car and my… I would have sold my second car and my motorcycle and my road bike and some other miscellaneous stuff earlier in the whole process. But also no, there’s not anything I would have done differently because when I went into it it was just… it was very simple. There was nothing really more meaningful or deep behind my mission; it was just to literally have an extra $1,000 in my pocket every month that I could spend or put towards something different than unsecured debt. So it took me… so I started cutting back in certain areas of my life–like taking the flask out or missing movies, missing dinners; and I started cutting back on those areas and I realized I didn’t really suffer because of that. I just looked for fun things elsewhere – hikes, for example, instead of the movies or dinner.

And so when I realized that I wasn’t really suffering by being frugal, and in fact was just as happy if not more happy in certain situations doing these frugal things, I took a look at the car and the motorcycle and the road bike which I had been swearing up and down that I would never get rid of because they meant a lot to me at the time; I took a look at them and I just, you know, tried to dare to think about what life would be like without them. And, you know, after living frugally in other areas of my life, it was pretty easy to think about what life would be like without those things; because I didn’t think I could miss dinners and movies and yet I did. I couldn’t imagine taking a flask downtown at the bar and filling it up, filling up a Sprite or a Coke with the flask in the bathroom, but I did. So I was like, “What the heck?! Let’s sell these off.”

So I sold them off and it took me a few months to sort of wrap my head around that and get used to that idea. But once I did it was fine. I had a car and I got around just fine with it. I didn’t need all of that other stuff. And so, you know, looking back it would be great if I’d just done that right off the bat; but I think that that would have been maybe a shock to the system, if you will, and that I needed to sort of take baby steps on my road to living below my means.

So now I’m several months out – I think five… actually probably seven/eight months out now – and I’ve got money in the bank, I’m investing money, I’m saving my money, and I could afford a second car and a motorcycle and a road bike. I could buy all that stuff back, but I’ve got absolutely no interest in doing it because I’ve learned how to become content with what I have and live below my means. And that actually feels a lot better than where I was a year and a half ago when I was living at my means.

J: Yes, absolutely. So, where do you… I mean, without the debt and with, I think, something even stronger than the $1,000 in the bank each month extra, what is your outlook? You know, your perspective has changed dramatically, so what does that mean for your life goals in comparison to what they were before? I mean, I’m just kind of curious if it changed your trajectory at all.

JM: Yes, good question. So, with my new model of… you know, my new model of living below my means I’m saving half of what I make and I’m spending half. But the thing is, I’m not even interested in spending the other half, so I’m saving more than half, just because I’m comfortable living below my means. And so what that’s allowed me to do… and so I’m projected to retire well before the age of 65, which is nice. You know, obviously there’s a lot of assumptions baked in there, so we’ll see; but that’s the trajectory right now. But what it’s allowed me to do is it’s actually allowed me to quit my old job and find a new one. Now, I’m still in the tech industry in Austin, but I’m in a completely different company in a completely new function – something I’ve never done before. So, I’m in supply chain. And I took the job and I knew there was a risk involved. Like, if I’m not good at this then I could get fired and then I don’t have an income. But because I was living below my means, because I had savings in the bank, I wasn’t as concerned. So I went out on a limb, I took the risk and it ends up, thankfully, I love the job. You know, I’m decent at it, my work is respected and I’m quite happy where I’m at – and it doesn’t look like I’m going to be terminated anytime soon. But it allowed me to take that risk, and it also allowed me to expand my skill set and experience another company. So, that’s one thing and that was shortly after I paid off the debt and had saved up some money and was able to take that risk.

J: It is interesting when people talk about luck or having opportunities to do this or that. It’s amazing what happens when you increase your flexibility by relieving yourself of that debt.

JM: Absolutely.

J: It’s pretty much… you know, you can’t really calculate it because a job is not just about maybe a bigger pay check, but it’s your life’s work. So it’s always kind of disheartening when you have someone say, “Well, I can’t leave this job. I’ve got to pay off this or that and make these payments,” and then you’re just thinking, “Man, that’s your LIFE,” you know.

JM: Absolutely.

J: It’s a life decision. So it’s cool. What was the… I mean, I guess I was expecting for you to say you had some epiphany, like I don’t know, some parting of the clouds; but you basically just saw what little progress you’d made over those past two years, I guess, and just decided.

JM: Yes, it was [?? 0:13:03]. I mean, I came out of it being sort of this… not anti-consumer, I wouldn’t call myself anti-consumer, but certainly I consume less these days. But really, it was… the auspice of it at the beginning of it was very… I mean, it was very… it was fairly superficial. I really just thought, “I don’t want to spend $1,000 on something I’ve already earned. Like I’ve already got the education, I’m sick of spending this money every month. There’s got to be a better use for it.” So I came out of it realizing that life’s not all about money and we don’t have to spend every single dollar that we make to be happy. But yes, there was no parting of the clouds.

And people ask me, you know, “What advice do you have for me?” And I used to say, “It’s not rocket science. Just spend less money than you make.” But really it’s actually more difficult than rocket science, spending less money than we make – at least in America, I think. Because number one, you’ve got an incredible amount of peer pressure. You’re with your group of friends – your comparison set, if you will – and you’re with people who are slightly better off than you; and you’re constantly comparing yourself to the people you’re surrounded by and the people you perceive as better than you. And so there’s this incredible amount of pressure to keep up with these people – keeping up with the Joneses, right? So in order to spend less than you make, number one, you have to say no to peer pressure, and that’s incredibly difficult. You just have to find ways to say no to peer pressure. Number two is you have to say no to yourself. So, everybody battles their own insecurities and I found that I was fairly insecure. And the way that manifested itself was in buying a lot of things because I thought that would make me happier or better – but it certainly didn’t.

So, you know, I think that it’s difficult, but on the flipside… It is a lot of saying no; it’s also a lot of saying yes – saying yes to what we have and saying yes to being happy with what we have in our lives already, and finding happiness in those things and just living a simpler life.

J: Yes. I like that you mentioned, you know, as part of the self-esteem, I think a lot of people that would say, “I don’t have a self-esteem issue, I’m confident…” I mean, you graduated from Harvard, you obviously… it’s no small feat to do that. So you would expect, and a lot of people I think believe, that these accomplished people – that most of these podcast listeners are – that they would be confident. But a lot of times I think we hide… some kind of questions of self-worth, we hide behind stuff to just avoid answering that.

JM: For sure. I mean, a lot of people are so successful because they’re driven, but what are they driven by? I personally was driven by… I moved around – Colorado, Oregon, New Hampshire, Upstate New York, Michigan, Italy, back to Michigan – all before I was 13, and so I didn’t really have a very good support network growing up outside of my family. I didn’t have a lifetime friend or lifelong friends or anything like that; I never really felt like I belonged. And then I had a birthmark on my face that I got bullied for constantly. People would say, “Ah, you got beat up. Ah, you spilled Kool-Aid on your face,” you know, they’d throw chewed-up gum in my hair and they’d bully me a lot. And so I had those two issues. And then I got acne – like a super-bad case of acne – all over my back, my face, my ears. I had to get syringe injections for my back just so I could take a shower, otherwise it was too painful to take a shower.

And so, you know, I got bullied quite a bit. I was eating lunch in high school in the cafeteria and just had no friends, and my goal in high school was to literally just graduate high school graduate college and land a job with a $100,000 salary. That was literally my goal. And it was so superficial, but looking back I didn’t have a lot of friends so it made sense. It sort of made sense, you know, looking back that I would try to seek solace or seek friendship in material goods, material possessions and money. Thankfully the acne cleared up and the birthmark got lazered away, but those are scars that tend to stay with somebody – at least they did with me. So it took a lot of time to develop a healthy amount of self-esteem and a high degree of self-worth – as you pointed out. And so I think part of this process, again, it’s more difficult than rocket science because self-esteem is so organic; it’s not something that you can just learn. You can’t pick up a textbook, attend a lecture and learn how to love yourself.

J: Yes. It’s deep, you know. I mean, you’re mentioning things that happened when you were 13/14 in high school – that’s years ago. And I think a lot of times people are saying, they kind of beat up on themselves – “Why do I do this? Why are my finances this way?” – and there are some underlying behavioral issues that I think we can get to the heart of and give people some reasoning, and then say, “Okay, I can’t beat that. I understand this now, and this is what I’m going to do.” This is cool. I’m glad you came on, Joe, just because I know everyone would want to hear, “Okay, how did this guy do this in seven months?” but I think to talk about the deeper issue of it is what will really bring people more results in the end. So, you know, you’re finding your motivation, discovering a real motivation underneath what was initially just kind of a gut check – like, “Hey, this isn’t right” – and then yes, just… I mean, it changes your life. You know, different job and…

JM: Yes. And Jesse, I’d go so far as to say that without developing a healthy level of self-esteem I would never have been able to be successful. It wouldn’t even have occurred to me to pay off the debt and to start cutting back in areas of my life; I just wouldn’t have been able to. So I really do think that is absolutely fundamental to anyone who wants to… who is entertaining the idea of paying off their debt. I mean, clearly they already see the value in that and they probably are seeing just the fact that you don’t need a lot of things to be happy or to have a high level of self-esteem. So, you know, they’ve already started if they’re already thinking along those terms of wanting to live a debt-free life. It’s just getting to the bottom of the issue and then pushing forward.

J: Awesome. Well, I appreciate you coming on, Joe. This is great. I’m sure it will help a lot of the podcast listeners, so I really appreciate it and wish you a Happy Thanksgiving.

JM: Thank you, Jesse. I’m very glad that you had me on. I really appreciate the chance to talk to you and your listeners.

J: Hey, is there a website that everyone can check out, maybe read more of your story? I forgot to ask you that at the beginning.

JM: Sure. Swing on by nomoreharvarddebt.com and check out the blog. I’m not really updating the blog anymore, but it is chock-full of stories from my adventure between August when I started and March when I finished, and even has several more posts after that – some reflective posts – and other ways to cut back and live a fuller life without debt.

J: Awesome. Yes, nomoreharvarddebt.com – we’ll definitely make sure everyone checks that out. I appreciate it, Joe. You have a great rest of the day.

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

YNAB Podcast Episode 61: Friction

This episode aired on December 17, 2012.

Hello YNABers. My name is Jesse Mecham and this is podcast number 61 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.

I want to get back to the basics today and chat a little bit about the budget. We’ve had the opportunity, getting a lot of awesome applications for our Rails position – Ruby on Rails position – to basically build out some very cool stuff for YNAB in the coming months and years. And as I read the job applications, it’s fun to see people wanting a job not for the money but for other intangible benefits – you know, work/life balance, a challenge, wanting to learn something, wanting to make a difference, have an impact. You see all those things in these interviews with these great candidates, and it’s exciting.

I was thinking about that the job application is kind of a way to articulate what you want to do with your time. You’re saying, “I want to spend my time in this way. I want to spend it building something great that other people can use to improve their finances.” And you enter your contract with an employer and you say, “I am willing and ready and would love to spend my time, my life – a portion of your life – to do this work,” and then you’re compensated for it. And I love in these cover letters that I’m reading and different things, I love seeing that so clearly articulated; people caring about their life and their accomplishments and how they feel about their work. And I wonder often if we couldn’t look at the budget in the same way; if we couldn’t say that a budget is simply a clear articulation of what you want your money to do, with no judgment attached to it whatsoever. So when you REALLY, really want that thing, then that is perfectly appropriate.

What we find happens in our culture, where we’re just marketed to constantly, is that we end up having our money do things that we don’t really want. It’s kind of like being hired for a job where they told you, “Hey, this is what you’re going to be doing, it’s going to be great, you’re going to feel so fantastic,” and then you end up doing some monotonous, mind-numbing, brain-dead type of task for 40 hours a week – or worse, for 60 or 80. And you start to feel dissatisfied; you start to feel some friction. Like what you’re spending your time doing isn’t really bringing you fulfilment. That same friction that you feel in your life in a career that maybe isn’t quite the right fit – and I can relate to that, having been in that position myself and now having seen the flip-side, running this whole little YNAB thing – that friction you feel in life when you’re in a job that just isn’t quite doing it for you; that’s the same type of friction you feel as your money does things that you don’t really want it to do.

Julie and I are in the market to purchase a new van. We’re kind of aiming to purchase it right toward the end of the year so the dealers are really excited and anxious to hit their quota for the year, so kind of timing it that way. But as we’re looking at all these options for a sweet van, another van obviously, you can kind of look at it and see, “Do I really care about that? Do I REALLY, really care?” And we don’t care about a lot of things that we spend our money on – so just think about that.

Where there’s friction with your money, it’s usually just because your money’s a little bit out of alignment and it’s rubbing up against you in a way that’s bothering you. The budget is a great way to clearly articulate to yourself. Or if you are in a shared finances situation, even better because you are clearly articulating that to each other and combining forces to where there is no friction and you feel good as your money does things that you care about. No judging, no feeling bad, no guilt in any way; just money doing what you want. It’s a great place to be, a fantastic way to live. Just make that happen. Use your budget constantly to clearly articulate what you want your money to do – and you will love it.

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

When it Comes to Coffee, Twenty is Plenty

1024px-A_small_cup_of_coffeeTwenty bucks. That’s all I’ve got in my coffee budget, meaning all coffee consumed out of the house. It includes hangouts with fellow authors, meetings with clients, and visits with friends. Twenty bucks.

It took a bit of training and practice to let go of the vanilla latte habit. But see, when one can get eight cups of drip coffee for the price of four lattes, well, you understand at a glance how much richer one’s social life can be.

Another sad fact? I used to be unable to enjoy a coffee without a little snack to go with it. Usually I liked a muffin or a scone. But I found my coffee budget didn’t go half as far. So I took it in baby steps, swapping the $3 scone for a $1.50 biscotti. And then one day, I just…ate beforehand, so I wasn’t running on empty when I got to the coffee shop. And I found I could be completely happy with just a coffee and some good company.

It was a very Buddhist moment. Simplicity and contentment and all.

Sometimes I get lucky and a client treats me. And every so often I’ll have a good run on a gift card that someone has given me in exchange for doing a presentation on writing. All of this generous goodness means I can squeeze a few more coffee dates into a given month. And I do love that.

But generally speaking, twenty is plenty.

And I have to admit: part of the fun of being a YNABer is seeing just . . . how . . . far . . . you can get your money to s t r e t c h. I see it as a challenge now, rather than a restriction.

It’s addictive, isn’t it?

Budgeting: We’re only human

piggy bankI got a private message this morning from a fellow YNABer. It was a confession of sorts; this person had dutifully put a nice chunk of money into savings and then, almost immediately, had depleted it to cover various unbudgeted expenses. Some of them, like a car repair, were unavoidable, but one item — draining nearly a third of the savings — could only be called a splurge. The message ended with this: “Every attempt I make to budget and save I find a way to fail.”

I responded with the idea that maybe the problem wasn’t that the budgeter had failed to save but that the budget hadn’t allowed for the expenses (and the splurge) in the first place.

I think many of us come to budgeting with the understanding that if we aren’t suffering, we’re not doing it right. To succeed, we believe, we must do without all the things that make us happy. We vow never to eat out, buy a video game, get a massage or, essentially, do anything that brighten our lives until all of our other financial goals are met, in 10 to 20 years.

This would certainly be effective. If we could stick to it.

The budgeter who wrote to me was doing the “responsible” thing: putting every extra dollar into savings. But that plan left no funds for discretionary spending or unexpected needs.  (On a side note: “savings” is a very broad name for a category. Dollars seem to be more loyal when they have very specific job titles. But that’s a post for another day.)

Had a third of the savings money gone into in a “fun money” category and some into care repairs to begin with, the splurge and the repairs would have been budgeted for. No guilt. No failure. The overall spending would have been exactly the same, but the psychological effect would have been completely different.

I am not advocating reckless spending over careful budgeting. I’m saying that while our budgets should reflect our long-term financial goals, they also must be realistic about our actual spending patterns.

It’s admirable to create a budget that holds us to high standards; it gives us something to strive for. However, a budget that pretends the car will never break down or that we will never be too tired to cook dinner — or even be in the mood to just treat ourselves now and then — is almost certainly doomed to failure.

We are, after all, only human.

More YNAB Quick Tips, Including How to Hide Reconciled Transactions

The more familiar you are with YNAB, the better it will help you take total control of your money. Here are five more very Quick Tips to help you master your favorite budgeting software. Make sure you subscribe to our YouTube channel to get all future Quick Tips and other YNAB videos.

Quick Tip 06: Change the number of months you can view.

Quick Tip 07: Collapse and Expand Master Categories

Quick Tip 08: Search by Cleared and Uncleared Transactions

Quick Tip 09: Hide Reconciled Transactions

Quick Tip 10: Date Filter for Transactions

YNAB is Now Free for College Students

The headline basically says it all.

We’re fighting free with free.  I was given a free t-shirt when I signed up for my first Visa credit card while in college (charged a mattress on it, forgot about the payment, paid it off, and cut it up in disgust—the card, not the mattress).

More kids are graduating from college absolutely weighed down by student debt. I don’t know what portion of their debt is avoidable, but I’m confident that if those students were following YNAB’s Four Rules, they would graduate with less debt.

Starting today, if you’re a college student (even only part-time), we’ll let you use YNAB for free while you’re in school.

How to Obtain Your Free Copy of YNAB

  1. Write to us at support@youneedabudget.com and include proof of registration at your college.

  2. We’ll send you a special license key, good until the end of the calendar year.

  3. At the end of the year, just shoot us another email if you’re still cranking away on your schoolwork, and we’ll send you a new license key that’s good for the entire next year.

Answers to a Few Questions

If I’m still living at home, but am attending college, do I get a free copy?

Yes! Instead of having a household license (the kind we sell every day), you’ll receive a special license key that is good for your personal use, through the end of the calendar year.

Why not have the license key run for the entire school year?

Different countries have different “school years” and we thought it’d be easiest to handle them all with an easily-remembered calendar year. It’s 2014, you’ll need the 2014 Key. It’s 2015? Grab the new 2015 Key.

Can I share my license key with my friends that are also students?

Instead of having your friends use your license key, send them over our way (support@youneedabudget.com, with their proof of registration) and we’ll set them up properly. This helps us in a few ways: 1) We can send them a few emails re: getting started with YNAB. 2) They’ll receive an invitation to our spring free online class we run for college students re: student loan debt and, 3) We’ll know how successful this program is. If it’s successful and gains some traction, we’ll hopefully be able to get some media muscle behind it and let even more schools know.

What about Making YNAB Free for [some other well-deserving group]?

Perhaps some day. We’re new at this, and want to see where this goes!

What should I send as a proof of registration?

You can send a scan or screenshot (PDF, jpg, gif, etc.) of a document issued by your college, with your name, the college name, and information that shows you’re currently enrolled.  This may include a school ID card, a report card, a transcript, or a tuition bill or statement.

How Does YNAB Benefit from This? You Don’t Run a Charity.

YNAB has been growing by leaps and bounds over the past several years. That growth has come almost entirely from word of mouth. We think that having a bunch of super-savvy, money-smart, socially-active, recent college graduates—all hooked on following YNAB’s Four Rules—will only increase that word of mouth. Also, we really like the idea of college students graduating with less debt, even if it means they miss out on a free t-shirt from Visa.

Please Help Us Spread the Word!

Use the buttons below to share this post on Facebook, tweet this post on Twitter, or forward this blog post to college students you know (or, parents of college students you know)!

7 Steps to Getting Your Spouse On Board: Step 1

Screen Shot 2014-03-24 at 10.54.29 AMIf you’re familiar with Dave Ramsey at all, you’ll know that he talks about couples in terms of the nerd and the free-spirit. There is usually one of each in every couple. If you’re the exception and you’re both nerds, then you’re probably running your finances like a well-oiled machine. If you’re both free-spirits, well, God help you. But, since you’re reading this, something tells me that you’re probably not a free-spirit but rather a…well, you know. (Be proud, y’all – own it.) 

I mean, right? You care enough about your budget to read blogs about it, just sayin’. (And I think you’re absolutely right to do so!)

So in the beginning of our marriage, my husband was the nerd, and I was the free-spirit. Frustrated and resentful, he needed to get me on his team.

I told you about how he managed that in my last post, and after my husband read that post he said, “Well, you left out a few things.” He proceeded to divulge his secrets, making me feel so used but impressed with his shrewdness and skill at the same time.

Defeated and disheartened about being the only one that cared about the finances, my husband decided to use a 7 phase process to get me onboard. (He only realized after the fact that it was 7 phases; he’s not that nerdy.)

Okay, so without further ado, Step 1 (in my husband’s words):

Make sure you have your stuff together with the budget and that you reflect reality. Know the four rules. Keep your Budget Accounts current. Take the classes. Get on the forums. Read this blog.

Easy enough, right? It’s so important, though, because if you don’t have a strong system in place, your spouse won’t trust you or your silly, little budget.

Now, if you’re already doing this and you’re chompin’ at the bit to get to the next step, just hang on.

Write out everything that you’re doing to “have your stuff together”. Write out your plan for your finances – your debt-payoff goals, your savings goals, your plan to increase income, your plans for lifestyle simplification, etc.

Bring these things up in conversation, but don’t make your spouse feel like he/she has to act on what you’re saying. You’re just happy about what you’re doing.

“Hey honey, guess what I did today? I decided to start making my lunch during the week instead of going out so that I can use that money to save for an anniversary trip. Be thinking of a quaint B&B in the area that you’d like to go to.”

Or…

“Hey guess what? I decided to not buy that new bike so that I could pay the rest of the Capital One off and get that payment out of our lives!”

Or…

“Hey, look at this. It’s a thermometer that I’m going to color in as I pay more and more off of the house.”

Just build excitement and trust, and strengthen your knowledge. No bossy-bossing or squirreling away resentment. We can only really change ourselves! The rest is just building trust.

More phases to come, but be patient.

YNAB Podcast Episode 62 – Bought a car; broke both my rules.

podcastmicPrefer audio? Click the play button.

Hello YNABers. My name is Jesse Mecham and this is podcast number 62 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.

I went into debt yesterday, and I’ll tell you more about that in just a second. I broke two of my rules that I thought I had in one day – two of my financial rules. They were never borrow money for a car; never buy a new car. I broke both of them yesterday. This is the car edition. This is the “Jesse broke both of his car buying rules” edition. Let me tell you how it went down.

It started five years ago – let me tell you a little bit of history. Julie and I bought a Chevy Prism a few months after we were married; before that we didn’t own a car. The Chevy Prism is one of the best kept secrets in used car-dom. It’s a Toyota Corolla built in the same factory as the Toyota Corolla, except it had Chevy on it so you didn’t have to pay for the Toyota symbol – and that car rocked. I mean, it was awesome. So we bought that. It was… Anyway, we bought that, it was a great car. Then on our way to Dallas when we were moving to work for that accounting firm, I ran over something and it totaled the car. So then we went to Dallas planning to buy two cars instead of just… Well, we were planning on buying one car, a family car, and then have the Prism for me to commute in, but that was totaled. So we bought two cars. We bought a Honda Civic and a Toyota Sienna – sweet van. And it was a white Toyota Sienna. I was with my friend, driving my Civic to work one day, and that thing was pulling so hard to the right and we realized that one of the tires was like grossly over-inflated – lucky it didn’t explode on me. The dealer that I bought it from probably wasn’t very reputable. Well, I know he wasn’t.

Anyway, that Civic we still have, although the Toyota Sienna we do not still have. A couple of weeks after the move and after having that van, Julie was on her way to the gym at five in the morning, she was turning left, there was a stop light at our apartment complex, she was turning left on her green light at a freeway, and this kid who had been drinking was also driving and hits her – luckily she was totally fine, luckily – and totals the van. So then we’re buying another… we’re buying our third car in like three weeks. And we buy this AWESOME Chrysler Town and Country limited edition from a friend’s parents. The friend that I worked with at this accounting firm, he said, “Hey, my parents are selling this van,” and he had a lot of fond memories of the van. I may contact him and ask him if he wants to buy it from us now. But anyway, I flew out to Huntsville, sight unseen, picked up the van and drove it back home. So, that was our van. It’s 12 years old; it’s served us very, very well. Unfortunately, lately it’s started having more problems than we care to put into it.

At about the same time we bought the van… maybe about a year later, for the past five years, we’ve been saving for a new van; and we have this category in our budget and it’s called “New Car”, and that’s what treated it for. So we would just pay ourselves; every month pay ourselves, pay ourselves, pay ourselves. Then when we paid off the house that freed up some money, so we actually were paying ourselves a lot more. Then we were getting to the point where we were setting aside enough money in this car category, I thought, “We could buy two cars” – not new cars, but two used new cars. And that seemed pretty good. We actually stopped making our car payment to ourselves because the amount was getting so high Julie was starting to talk about, “Hey, we could buy this type of car,” and it was some insanely, gaudy car, you know – it wasn’t a van, it was some kind of an SUV. So we stopped making contributions to our new car fund. I was actually using Betterment for it just recently, because I’m just a big fan of that one. So we were using Betterment, REALLY conservative allocation for the investment, and it was actually making pretty good money for us. Not to guarantee that you’re going to make money – I’m just saying that’s what happened with us. So we stop making payments there and then we have this money. Then we’re just sitting on the money but we’re thinking, “Man, how cool would it be if we just kept driving this gold Chrysler Town and Country limited edition?” But things kept going wrong with it. $150 a month for repairs is my standard fare with a ten year old Civic and a twelve year old Chrysler Town and Country limited edition; but that was starting to kind of catch up to us – the $150 was starting to not be sufficient. And so Julie and I kind of said, “Well, let’s go look at vans.”

So, we went to a Honda dealership, looked at the 2013 Honda Odyssey – which is just like the 2012 Honda Odyssey – and that thing looks like a car. I don’t know what to tell you guys. I think it’s really cool. I wish I was cool enough to say that vans are lame, but I’m not – I think they’re cool. I think it’s cool that all my kids fit in it really well and that it has a cooler in it where you can put cold drinks; and I think it’s cool that the doors open on their own. Who thought that? I know that’s been around for a lot of years, but not for us; not for the Mecham family. So, apparently in the last twelve years they’ve made some significant strides with car technology because we were looking at that van and thinking it was pretty sweet. Julie wasn’t sold, though; and of course, it’s her final call.

So we go back, I don’t know, Friday, and we test drive. And we’re there with all the kids, but the dealership here in Utah, where they’re selling vans… it’s like the number one Honda dealership in the country. I guarantee we sell more vans here than any other place in the country – guaranteed. So, we’re there, free popcorn, free soda, we’re watching Cars. I’m thinking, “This dealership, they really know how to handle all these kids,” because the kids were thinking, “How is this possible that there’s all this free stuff here?” Well, it’s not free, kids, but let’s pretend it is and enjoy ourselves. Julie goes on the test drive, she comes back. Test drives, apparently, basically seal the deal, because she came back and suddenly she’s… you know, she’s always so aloof on purchases, always ready to walk away on a whim, and she has the will of, I don’t know, just an iron will. I’m weak. I’m so soft. I’m just thinking, “Oh, I want that,” but not my wife. She is a rock. So when she comes back and just kind of gives me like this raised eyebrow look, I knew we were sold. So I just took it for a test drive, just as like a symbolic test drive at that point. Come back, I tell our salesman Ray, I said, “Ray, we’ll be back tomorrow.” He’s saying, “Hey, we’ll give you this deal.”

What we were doing, he’d called me earlier in the week and said, “I’ve got these 2012 Honda Odysseys, top of the line, everything under the sun loaded in them,” and the only thing I didn’t want personally was the DVD player. I like having my kids stare out the window on long car trips – I think it builds character. But that’s kind of built into that. So, he’s saying, “Hey, these are 2012s and we’re giving you seven grand off.” I looked, I’ve tried to do my research, I’m not a big car guy – I don’t want to spend like an equivalent full-time work week doing car research. But I did look at invoice pricing on Edmond’s and True Car or something from American Express; I called Costco, I got the membership dealer price there; and it was coming in under what everyone was quoting, like two grand underneath, or about $1,500 underneath invoice. So I thought, “This is pretty sweet, and we’re not paying a premium on the new one, but we are getting the new body style.” And I didn’t want in ten years to be selling this van and have it be the old body style; I wanted it to be the more recent body style, even if it was an old van. So I thought it would help the resale value. So, I’m saying, “Well, yes, we’re going to buy a new one – a year old, but still never been driven type of new vehicle.” So, strike one against my rules. Not the four rules – you can’t have strikes against those things; but you know, my car buying rules.

Second time now. We go in and we’re ready to basically ink it up, and we’ve got the money obviously – we’ve been saving forever for it. And Ray says, “I forgot to tell you…” Oh, I’ve got to tell you guys this one thing. This other dealer… you know, I contacted a couple of other dealers because I wanted to make sure we were actually getting a deal. He tells me what the price is, I tell him what these guys are pitching for the price, and he’s like, “Well, it must be a mistake,” and I said, “Well, yes, you probably say that to everybody.” And he’s like, “No, really, seriously, that’s a mistake. They must have told you wrong or missed a digit.” And I was like, “Well, I’m going back there today.” So we go in there and Ray says, “Guys, I forgot tell you…” he’s like, “Well, I didn’t forget to tell you, I just didn’t know. I apologize, but in order to get this seven grand off deal you have to finance it.” So immediately I’m thinking, “This is it. This is that sneaky part of the sales tactic where they get you.” And I thought, “Dang! I don’t want to walk away and I don’t want to borrow money.” So then I said, “Well, we’re not financing the vehicle. We just want to pay with cash. What’s the difference to pay with cash?” So he comes back with a cash price. He gives me the cash price and it’s good – you know, it’s what I would have gotten with the other dealer through a couple of membership programs, that’s the kind of deal. So I’m sure hard drivers can save another $800; I have no desire to spend a week of my time to save $800. But I’m looking at that and he’s like, “Yes, it’s basically…” it was like a $2,500 difference to finance it. And so I’m saying, “”What’s the rate?” He said 5%, which is insane, but… Hey, you know, you can buy a house now at, what 3%. And he said, “Well, here’s how you work it out. You make a big payment upfront and then three more payments of X to close up the balance.” So, to make four payments, meaning that we save $2,500.

I don’t know if the dealer was being sneaky or if they actually… I think he was being honest with me and that he just missed it; or he’s such a good salesman that he just appeared honest. I’m going to call it honesty. So, we did it. I now owe money on a car. And I’ll report back when it’s paid off. I don’t like the hassle factor of having write one more… pay one more bill and all that, but for four payments… I promised to do the first payment and Julie promised she would do the next three. I made her promise that. We should have it paid off, so… Money’s sitting there just waiting, and my calculation was we’d pay $80 in interest or something on it.

So, that’s how I broke two of my rules, purchasing a car. I bought it new – well, a year old model but never been driven before – and I financed that sucker. And I can’t wait to pay that sucker off. And I feel okay about it. I try and be fairly pragmatic in my approach, with my advice. I try not to be super-dogmatic in how I feel about things. You guys know I use a credit card for most of my transactions. I trust the budget. I trust where it’s gotten me so far; I trust that the money I have saved for that car is really money I’ve saved for that car; and I trust myself that I won’t blow it on something else. I haven’t for five years – I won’t now. So, the budget ends up giving you a lot of information about yourself and it teaches you that what you can do… I mean, basically it shows you what you can do with your money. It shows you your habits, it shows you your weaknesses, your strengths. And you can play certain games, I think, if you’ve been doing the budgeting game long enough and you’ve been doing it well. So you follow YNAB’s four rules and you learn that not everything is black and white. You can do certain things because they’re convenient or whatever, and you’re fine with it because the budget makes the decisions and the budget is kind of your guiding light.

Tomorrow is Christmas,* so Merry Christmas to everyone – best day of the year. I’m looking forward to it. I wish everyone also a Happy New Year. Although, no, I’ll be doing one more podcast, so I take that back; I rescind my Happy New Year – I’ll give it to you later. Use the break during this Christmas time to talk about, you know, what we did last time; just use it to kind of regroup a little bit and see where you got caught red-handed, so to speak, with some big bill this last year, see if you can’t ready yourself for it this next year. We’ll be doing our “Cash for the Holidays” program; in January we should start doing the sign-ups for that. I kept it fairly small this year, going to keep it small again next year. It’s where I kind of personally coach people in saving up cash for the holidays. There are about 400 people that all paid cash for their holidays this year, and they’re merrier, I’m sure, because of it.

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

*This podcast originally aired December 24th, 2012.

YNAB Podcast Episode 63 – The Farmhand Who Slept Through Anything

podcastmicPrefer audio? Click the play button.

Hello YNABers. My name is Jesse Mecham and this is podcast number 63 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.

Today I wanted to share with you a parable that I ran across, twice actually in the last month or so, and saw it as a sign that I should share with you guys.

There once was a farmer looking for a young man to help out at the farm. There were several young men who interviewed for the job, and as far as the farmer could tell they were about equally well-qualified. He then went and asked them each one final question. “Tell me,” he would say, “why should I hire you above the others?”

Of all the applicants and their replies, there was one that was really different. One young man said, “Because I can sleep through anything.” At first the farmer thought it was just strange; then the more he thought, the more he was intrigued and mystified by the response. So he figured, “Well, I will give this young man a chance,” and he hired him.

Weeks went by and the farmer was pretty happy with the young man’s work. He still wondered sometimes what the young man had meant by his strange reply, but he never got around to it. Then one night he was awakened in the middle of the night and got a phone call from a neighbor. “There’s a big storm suddenly come in with lots of wind and maybe a tornado. Better get ready for it,” was the quick message.

Indeed, as the farmer went and looked out the door, he found that the wind was strong and rising, and rain had started. He quickly ran and tried to wake the young man up to start getting everything ready for the blow, but try as he might the young man couldn’t be stirred. Muttering to himself about what a stupid thing he had done in hiring a lazy boy who wouldn’t wake up when he really needed him, the farmer went out to the farm.

He went out to tie down the hay, but discovered that the hay was already tied down securely. Next he went to the barn and the corrals, and every time he looked everything had already been prepared. After a while of just wandering around the farm, of discovering that there was nothing that needed to be done at the last minute because it had all been done before, the farmer returned to the house. But instead of muttering, he actually found himself singing the praises of this young man. He had realized, to his great joy, that the reason that the young man could sleep through anything was because before he went to bed each and every night, he had already prepared for the very worst.

And so the farmer followed the example of the young man, since everything was already prepared. He undressed and was soon fast asleep with a huge smile of peace on his face.

I shared that on the blog a little bit ago, posted it on our Facebook page – facebook.com/iYNAB, if you haven’t caught us there yet. I like that. And at the turn of the year, which will happen tomorrow,* it’s a great time to basically look back at the prior year and say, “Okay, what caught us off-guard? Where was there a financial tornado, so to speak? What could we have secured down – the barn, the corral, the hay?” And then look ahead to 2013 and say, “Okay, what would we do different? Were we surprised by this or that? Could we prep for it better?” to where you really can sleep well at night.

So, be like that farmhand. Be ready for the worst so that you can have financial peace.

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

*This podcast aired December 31, 2012.