Tag Archives: personal finance

What do YNAB and College Football Have in Common? More than You Think.

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I know a few games have already happened, but for me, college football begins today (4:00 PM MST to be exact). All of this football talk has me thinking of one thing of course: budgeting.

I just finished reading JD’s post over at the forums. He’s 1 1/2 years into using YNAB and he’s done some amazing things. He checked in to report that they’ve fully-funded their emergency fund (so if, heaven forbid, JD were to lose his job, he’d have six months to find a job he wanted, instead of just taking whatever he could get and closing the door to a better opportunity). JD was also amazed that they’re able to concurrently contribute 15% gross to retirement, fund college 529 plans, and pay down the principle on their mortgage fast enough to pay the sucker off 7+ years early.

While YNAB’s focus is purely on the budgeting (you decide what to do with all the extra cash you’ll find lying around), JD used YNAB in hand with Dave Ramsey’s Baby Steps. In short, JD found YNAB, then found Dave. I’m hoping eventually Dave finds YNAB of course.

The success of YNAB users has very, very little to do with the software. I know, the software’s fun, and with the most recent update, it’s become even more enjoyable, even invoking a few “SQEEE”s out of people. (I’m told the sound of a SQEE is similar to the sound a teenage girl makes when she sees her boy idol come out on stage).

But again, the software being what it is, the key to success is with the methodology. What it is about the methodology that breeds success such as JD’s? Why don’t we see people using Quicken, or MS Money touting the same amazing results? What is the big difference?

Let’s be brutally honest here, both Quicken and MS Money do mountains more when you compare them to YNAB on a feature by feature basis. Again, it can’t be the software. From a methodology standpoint, Quicken and MS Money both do very well in helping you track your spending, analyze spending habits, even set some budgets (heck, Quicken has a whole financial planner built in there!). Why aren’t people paying down mountains of debt and saving a ton of money when using these programs?

Or, phrased differently, what is it about YNAB that allows people to just go after this stuff and get the job done?

It’s the first Saturday of college football, and I want to share with you the similarities I see between good football (from the coaching perspective) and good budgeting.

(And, before I get into this, I should say as an aside that when we talk about good “budgeting” what we’re really talking about is good reaching-your-financial-goals-and-getting-the-job-done budgeting. Call it whatever you want — I LIKE the word BUDGET.)

Imagine a football coach who focuses solely on the progress of the ball. If he is on offense and it moves forward, he’s happy. If it moves backward, he’s mad and throws his clipboard. The team all huddles around the coach and he gives them their instruction:

“Move the ball forward.”

When they’re on defense, the instruction changes ever so slightly:

“Move the ball backward” or “Try and Grab the ball!”

The players would do their best with the instruction given and very little progress toward their vague goal would be made. The coach would be frustrated. The players would be frustrated. And the fans would boo. You would LOSE.

But that’s not how it works at all is it? That’s not how a successful team is run. Quite the opposite actually. (Disclaimer: I’m a football fan — college football specifically — not a coach.)

How many coaches are there on a typical football team? At a high level, there are a TON! You have the head coach, quarterback coach, offensive coordinator, defensive coordinator, special teams coach, kicking coach, linemen coach for defense, linebacker coach, safety coach, secondary coach, etc. Each of these coaches are giving very specific instructions to the players under their supervision. Each player knows his job and also knows all of the other players know their jobs. You have a lot of moving parts, moving in concert.

Block here, be strong on this side, fake a pass, hand it off, receivers become blockers further down field, etc. There’s a lot going on during each and every play. Every single player on the field has a specific and important purpose. If each purpose isn’t important, then there’s an inefficiency and the team won’t operate at its highest potential.

All of these moving parts, specific instructions, special exercises, training regimens, techniques, goals, statistics, KPIs… all there just to

“Move the ball forward,”

or

“move the ball backward.”

In other words, to WIN.

Your success with YNAB stems from the fact that you are acting like all of those different coaches. You’re getting down into the detail of the execution with your money and at that granular level (how granular? Food:Boneless/Skinless Chicken may be a bit overboard) is where you truly make things happen. You may not think it’s important that you’re sitting there thinking about a $50 bill that’s only due once per year ($4.17 per month set aside will get you there) or recording the fact that you just spent $.85 on tolls. You may think that type of detail isn’t necessary.

But that is where you win. When you become the coach that works with a quarterback for days on their foot position, or the coach that implements a flexibility regimen for the punter, or the team physical trainer that makes sure the team’s rotator cuffs are healthy, etc.

Will foot position win a game? Will rotator cuffs win a game? Absolutely not. But in concert, with all of those details worked out and focused toward a common goal…that will win the game. And that’s how YNAB helps you win the money game. You get focused on the execution of the details and the big picture all comes together:

“We have gone from aimlessly living paycheck to paycheck up to our necks in debt to properly managing money and now planning for our family’s future. If I had a five year goal when I first started out [one and a half years ago] this is where I would have hoped to be.” – JD

Hey Budget Hater – Admit It. You Already Have a "Budget"

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Hello there Budget Hater. I know who you are. You’re the type that snickers when I ask for a receipt after purchasing one bag of Great Value Seasoned Fries (excellent with some grilled hamburgers) for less than two dollars.

I need that receipt so I can record it, you fool!

Yes, I know who you are. You’re the type that claims it’s “all up here”, pointing to your head as you nod, apparently confident in your ability to budget in your head. Though that’s a stretch. Because if I said, “Oh you budget in your head?” You’d certainly be quick to respond that you don’t “need a budget” but you’re well aware of all of your spending (and you nod and point to your head again..It’s all up–enough of that!)

I most certainly know who you are, so let me take it from here.

You don’t admit to budgeting, but you have one. You have a list of priorities for your money, you just don’t admit it — not even to yourself. You always pay the rent, right? You always pay your electricity, right? You always buy groceries, right? You have priorities and your money does things to fit those priorities. You’re budgeting — you’re just doing it in a by-the-seat-of-your-pants way that’s terribly ineffective and will leave you with, well, less than you could have had (and by less I’m not talking about raw dollar numbers, I’m talking about the intangible stuff like peace, confidence, and flexibility).

Yes, you budget. All you people out there that say you don’t need a budget? You do need one and you’re already doing one. Yours just isn’t very good, so you don’t recognize any benefit from it.

You’re reactively budgeting. An emergency strikes and the van needs its power steering pumped fixed. So you budget — right then and there — and do with your money what you can. It’s almost never enough and you surrender to the Plastic, chipping away at your confidence and increasing your minimum payment just a wee bit.

You’re invited to hang out with some friends and realize that you’re a bit short on cash at the moment… so you charge the night out. You knew you were going to be doing something social…but you chose not to think about it until it actually happened. And social stuff like entertainment isn’t so much in the budget in your head, so you kind of didn’t have a plan for it.

Christmas rolls around and you dig your hole a bit deeper.

Gas prices keep rising and you don’t know where you can cut back to compensate.

Food prices seem to be climbing, but you have no plan of action.

Your reactionary methods have gotten you this far. Why not try something different?

Maybe you could sit down with each paycheck, just twice a month, and look at what you have available and allocate ALL of those funds to a purpose — give every dollar a job I like to say. You’d have some preset categories and they would spur the thinking for you: “Oh, entertainment’s a category…I’m sure we’ll be doing something this weekend so I’ll budget $30 for it.” Would the $30 had been there if you weren’t budgeting? Maybe. But a few months from now when something else on the van breaks, that $300 wouldn’t have been there. It came from the fact that you socked away $100 per month toward car repairs.

Not because you had any big repairs planned — only because you knew there would be repairs eventually.

Yes, you are a budget hater. You hate that you feel “controlled” but that feeling won’t actually be there when you start. You’ll feel in control. You’ll feel confident in your decisions. You’ll see your dollars stretch further. You’ll see communication in your marriage improve. You’ll be budgeting.

And you’ll happily take a receipt from the cashier when you purchase seasoned fries.

YNAB for Lazy People

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I use the term lazy only for headline punch. You are all very hard-working individuals. :)

No, actually it’s because of this article: “Budgeting for Lazy People” written by Dayana Yochim over at the Fool.

Here are some tips if you’re just feeling lazy about YNAB (either starting or continuing).

Use Fewer Categories

I am on a quest to get our categories down to eight. Right now we’re somewhere around 35! I’ve been whittling almost every time we use the budget (which is now almost exclusively on Sunday evenings, unless of course I’m betatesting).

A few of my thoughts going forward. I’m going to get the biggest bang for my buck by consolidating all of our insurance into one category: Insurance. That’ll kill homeowners, car, life and health. I’ll drop from four to one.

I used to have the kids’ clothing categories all separate. I’m going to get those down to just Clothing. I may keep a separate category of clothing for Julie because she likes to know how much she’s spending specifically. I don’t buy clothes, so I don’t need a category.

Now, you may be wondering how I’ll be able to keep all of the insurance payments straight if they’re in one big category? A few things: 1) homeowners is monthly, car is monthly, health is monthly, life is annual (or monthly divided by 12). I’ll be dealing with the same total to be budgeted every month. 2) a new feature in the beta version makes this very nice, because I can write notes about specific categories, or specific Budgeted amounts.

I think I’m going to expand the reach of our Miscellaneous category and also consolidate Date, Family Night, and Recreation down to just one: Entertainment.

Why all the work getting to fewer categories? I don’t want to have to make as many decisions when recording transactions. Instead of having to think, “Okay, this shirt was for Porter…those shorts were for Harrison…now I need to split the transaction…” I just record it in Clothing and I’m done.

Fewer categories means you don’t need to split transactions as often. That means you’ve saved some time.

Import Your Transactions from the Bank

OFX, QFX, QIF…YNAB Pro imports them all from your bank. I just grab the same date range every week (First of the Month through Today) and import. It disregards transactions already imported and I categorize the new ones. I very rarely deal with matched transactions because I very rarely input spending except through importing.

This saves a bit of tedium and time.

Use the Batch System

Decide on a set time once or twice per week to enter all of your spending. Just cutting down on the frequency of the process will save you time.

I implemented a batch system for email several months ago and love it. (I was prompted by Tim Ferris’ excellent book, The Four-Hour Work Week). I do emails at four, noon, and four again. (Early to bed, early to rise, makes a man healthy, wealthy and wise…) The time savings has been measurable, and productivity has increased because I’m distracted far less.

My Thoughts on the Fool Article

It’s funny, because the beginning of the article really caught my attention but then as I read it, I realized what the author was suggesting was actually quite a bit of work :) One aspect I really liked that they talked about: the absolute key being that you spend less than you earn (Rule Two certainly helps you in this regard) and, in the end, that’s it. That’s all you really need to worry about.

Yes, it may be nice to look back in 10 years and see how much you spent to bring your golf game from horrible to horrid (which is worse?), but in all honesty, you probably won’t ever look back and need to know that information. Bear that in mind when you’re debating about “going granular” or just wanting to make sure you’re staying on top of the Big Picture: Spend Less than You Earn.

Conclusion: To All Those Who are Out of Control

These don’t apply to you. You need to get with it. I would suggest almost the exact opposite from what this article suggests:

1) Plug leaks. If you’re spending a bunch of money on coffee then you need a coffee category. DVDs? You need a DVD category. Do you find yourself constantly purchasing books? You need a book category. As you isolate, you’ll evaluate and when you evaluate, you’ll mitigate (useless spending).

2) Record things manually. Force your spending to be something you really have to work for. Recording your spending manually will make you (dreadfully) aware of what is going on. Yes, it’s nice to have beautifully-designed aggregators of all of your spending data, but looking back at your spending nicely categorized doesn’t have near the psychological effect of sitting down with a receipt, recalling the moment of purchase, seeing the amount, t-y-p-i-n-g that amount in, deciding where to categorize it, and then feeling slightly sick to your stomach.

3) Increase frequency. You need to be recording your purchases every day. At least once per day. Frequency breeds awareness and that’s what we’re after.

As you develop the habit of budgeting, you’ll be able to adjust these three things accordingly.

I'm Done Budgeting. I Quit.

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I Quit BudgetingI’m tired of it. Sick about it. Through with it. Finished. Fertig. Done.

I can’t stand knowing exactly what my money is doing at all times. It’s so obedient! My money just sits there, looking up at me like some dependent, too-young-too-realize-how-things-work puppy just out of obedience school waiting for me to give it some type of command — just so it can march off and execute my plan to a level of perfection found only in military brigades and the Von Trapp family.

Oh sure, I can tell you how much I spent on groceries during 2004, 2005, 2– anyway, I can tell you those things. Easily. But what do I have to show for it? A keen sense of how my life plays out financially? An uncanny ability to forecast (to within ten dollars) what we’ll spend in any given category during virtually any given month? (On average, we all know there are no perfectly normal months).

Really. What do I have to show for it? Instead of filling my head with this useless information (wow, housing costs are how much in relation to the rest of our spending, is this a problem we should talk about?) I could have been really getting to know the new people on Survivor. Now I can’t even name them!

Oh, it gets worse. My wife and I we…we talk about things like what kind of financial goals we have. She actually openly shares her feelings about things like retirement goals, aspirations, kids’ college etc. And you know what? It gets much worse. She spends money and doesn’t feel guilty about it.

How am I supposed to handle that? Huh? So yeah, when we were budgeting we would sit down at the beginning of the month and plan where to spend our money, and then yeah–uh–I guess she felt fine about buying the stuff we had planned to buy. Okay, when I write it out like this it doesn’t seem that hard to handle, but — eh — you get my point right? I mean, spending = guilt. We learn that as soon as we get our free t-shirt from those Visa people on campus.

Budgeting’s making me lose my edge. That’s one of the big problems. I used to be able to tell you exactly how much money I had in my checking account.

$10.12. Boom.

$18.45. Bam!

($25.40). Zing! (Yeah, it was overdrafted a few times. I didn’t think they’d cash the check. It had been three weeks!)

Now though. Seriously, if I want to know my bank balance I have to login to my bank and check. It’s in the thousands, I know that. But beyond that I’m not sure. Wait — yeah, it’s something like $6,000 (well, $1.5k is for property takes, which are due in six weeks, $200 of that is for groceries for the rest of this month, and we’re saving for Christmas so we can pay cash — that’s $800 of it, with a goal of hitting $1,000 before The Season rolls around–UGAHHHHHH! YOU SEE WHAT’S HAPPENING? WHAT KIND OF PSYCHO AM I? WHO DOES THAT?)

Whew! Anyway, that six grand, that’s a ballpark figure. And that’s what’s killing me! Every morning, first thing, I used to check my bank balance. And then again when I got to work because I had just bought some stuff on the way and wanted to be sure there was still enough to be able to buy lunch that day and — OH NO I TOTALLY FORGOT I NEEDED TO BE ABLE TO PUT IN AT LEAST 2 GALLONS OF GAS TO GET HOME.

Where was I?

Right. So I miss that daily “interaction” with my bank balance. It’s like it doesn’t even know I’m there anymore. It just “does its own thing” making me feel all secure and confident — as if money could make me feel confident. Everyone knows confidence comes from looks–the main contributors being well built-out delts and rippling pecs.

So I quit. I’m through. It’s done. We are OVER.

When I first started, it felt okay, you know? I would still enter transactions daily and look at my bank balance a lot and all that stuff. But then this totally weird thing started happening:

I think we started spending less money. I couldn’t tell you for sure because before we started budgeting I have no idea how much we were spending… but I noticed that I didn’t need to enter as many transactions after several months. Maybe each transaction was just a larger amount? No… OH! That’s probably where the 6 Gs came from that are in my checking account! That’s like “old spending” that I haven’t gotten around to spending yet!

Yeah, this budgeting thing, it’s just completely changed my life. I’ve got to stop. I think there’s a 12-step program out there somewhere for people like me, you know, people that are reaching their financial goals, don’t feel guilty about spending money, have great communication with their spouse, etc.

Hi. My name is Jesse and I’m a budgeter.

“Hi Jesse…”

One Tip to Establish Yourself as "The Boss" When it Comes to Your Money

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Lately I’ve felt like our money has begun asserting itself a bit more. It’s talking back. It drags its feet. It slouches at the dinner table. It ignores me when I’m talking to it. (The purchase of our first home has everything to do with the new bad attitude).

And yes, I often think of my money as a teenager.

“We’ve Seen the Enemy. It is Us”

You need to show your money respect and recognize its inherent value. Ah, but its deserving respect goes much deeper than that. You must also recognize that money is a part of you — an extension of you — no, a reflection on you. Not completely, but also not in a small enough way that you’re allowed to ignore its behavior.

I will readily admit there are times when money truly is out of control. That just happens. It’s to be expected to a certain degree. However, there are so many things that can be done to reduce those times of bad behavior, that it does much more good to focus on the things to be done and be assertive, rather than adopting some type of “woe is me” attitude.

Establish Yourself as “The Boss” over a 72-Hour Period

I propose you do something a little radical to regain your authority. I wrote about this a while back for a non-profit organization, but only as a passing idea, part of a list — now I want to flesh it out a bit.

You will not spend a dime for 72 hours. It’s called a Money Fast.

Don’t start formulating your excuse — you don’t have one.

Plan ahead. By that I don’t mean to go on a spending binge (you all know the Monday diet drill, right? You know that “Monday [you're] going to start eating better” so Sunday you just eat whatever you can get your hands on to fill up the tank, so to speak?). However, if you’ve been waiting for the price of oil to come down and your car’s running on fumes, you should probably fill up before you start. If your refrigerator’s stock consists of half a bottle of ketchup and some old cheese, you should hit the grocery store. If one of your bills would normally be paid during those three days, pay it early. If you’re going out with friends you’re not allowed to say you’ll pay them back. Borrowing money during your fast is the same as spending your money.

I was reminded of the Money Fast after reading Trent’s post over at The Simple Dollar on 100 Things to Do During a Money Free Weekend (this is really great stuff and must’ve taken a ton of time to put together, if YNAB readers find the list helpful, digg it and say as much!).

I think the weekend is a great place to start at trying your money fast, but the real challenge lies in bucking old habits that are ingrained because of your normal weekday routines.

A Money Fast Has Nothing to Do with Saving Money

Yes, you’ll save money doing your fast, but we’re not worried about saving money here, we’re worried about regaining, or gaining for the first time, some control. We’re talking about asserting your authority as The Boss.

This has everything to do with your psychology and very little to do with anything else. I’m talking about a 3-day sprint, being totally radical, and just turning off the leaky faucet. Just Say No comes to mind. No restaurants. No movie rentals (library has them for free). No stopping and grabbing a coffee.

Your bank balance will thank you, but the psychological win dwarfs the benefits of a few dollars saved because that psychological win can stick with you — impacting hundreds (or thousands) of future purchasing decisions. The next time you’re tempted to buy that _______________? You’ll recall how you went three days without spending a dime and you certainly don’t need to spend any right now.

Take control. Reverse the bad attitude that your money’s been displaying for the past little while. Go on a money fast! Who’s with me?

The One Secret to Money in Marriage

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I don’t have an answer for the wife of a husband that won’t listen to your worries when it comes to paying the bills, buying the necessities, etc. It boggles my mind that people can be married and live together but still be living (or at least attempting to live) completely separate financial lives. I’m not talking about how you actually manage the day-to-day funds — which accounts you use, who pays bills out of what, etc. — I’m talking about mentally leading separate financial lives. How is that possible while still being productive?

I don’t understand why money is such a touchy subject for a couple. Why do you take offense when your spouse asks about XYZ expense? Why do you assume you’re being attacked? Is it because you feel guilty? Is it because you immediately mentally turn the question around and start holding your spouse up to the same scrutiny, spouting off that they spend on XYZx2?

What do you hear when your spouse tells you “money is tight.” Do you hear blame or shared concern?

What do you hear when your spouse mentions that “this could be a bad month.” Do you hear an accusation that you aren’t earning enough or a message from a trusted friend to ‘hang in there’?

Why do you attempt to exercise control over your spouse through your finances? Do you not trust them? Why?

Why do you hide spending from your spouse? Is it because they’re so controlling? Why?

Why do you make your spouse do all of the financial paperwork? Why do you stick your head in the sand when there’s a financial crisis? Why do you have such a hard time facing the reality that your spouse has been trying to tell you about for the past six months?

Why can’t you talk about money openly with your spouse? How is it that you can talk about your childhood, raising kids, religion, fears, sex, aspirations… but can’t manage to throw together one productive conversation about money without taking offense, or going on the offensive?

Why is money the number one cause of divorce? Why do we tie everything else in life back to money? What makes money such an emotionally-charged topic? Do you feel that money is a reflection on you?

Why?

Talk.

About.

Money.

Openly.

Take off the gloves, step out of the ring, (remove the mouthguard), towel off, and talk. Better yet, simply ask very open-ended questions and listen. Don’t respond to answers, just listen. Don’t begin formulating your next question, just listen to the answer being given. Don’t think of the past wrongdoings (yours or theirs), just listen. Understand what it is that your spouse is telling you. If they aren’t talking a lot, listen to that. And listen hard because it’s a lot tougher to listen to someone that doesn’t (want to) say much.

Confess.

Confess that you take offense too quickly because you’re insecure about money (but don’t, for the life of you, know why!). Confess that you offend too quickly. Confess that you question your spouse’s spending too harshly. Confess that, in your feeling frustrated about money, you’ve carelessly shifted the blame completely to your spouse.

Apologize.

Apologize for not doing more to help with the financial stuff. Apologize for not wanting to talk earlier. Apologize for being a jerk about spending money (apologize for being a hypocrite about spending money). Apologize for always blaming and never taking some of the blame for yourself.

I am not a marriage counselor. Trained as an accountant, I learned to read financial statements, not women (oh that there were a major for that). I do not understand all of the intricacies that make up a relationship as complex as the one you’re currently in.

I do understand budgeting. I have a handle on it. I’ve seen what it can do for marriages. No, I can’t tell you what behavior you’re exhibiting when you do A and your spouse does B and together you get C… but I can tell you what behavior will put your finances back on track.

Sit down every month and give every dollar a job together.

Maybe one person does most of the actual day-to-day entry of expenses, that’s fine. We’re starting small here. But make sure that both of you sit down every month and give every dollar a job. Face reality together.

Your communication will improve. Your guilt will go away. Your finances will recover. Your anger will subside. Soon your goals will begin to be realized.

You’ll be dealing with the same bills, the same income, the same crises…but you’ll be dealing with them together. And there is the secret!

Carnival of Personal Finance #160

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Just sending a quick link over to the carnival at MightyBargainHunter. He did a great job hosting and there are a bunch of great articles. A few of my favorites:

Are We Raising Generation Y-Me?

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Lydia, our four-month old little girl, can’t quite roll over yet. She’s getting close. She’ll rock quite a bit. I wonder what would happen to her learning to roll over if Julie or I held her all the time.

I’m sure several months from now she’ll have seen enough walking to also want to try it. She’ll need to learn to balance on those two (wobbly) legs. I wonder how long it would take her to learn that necessary balance if Julie or I constantly held her hand.

If we’ve done some things right, several years from now, Lydia’s going to head off to college. She’ll need to learn to manage her money with a whole new set of obligations. I wonder what would happen to her learning about managing money if Julie or I were to simply give her money to live on, no strings attached.

Love Hurts (And So Does Life)

I’m sure it’s partly my own biases, seeing things through my own lens, but it seems society is bent on making our kids the softest, weakest, most selfish, spoiled brats the world has ever known. Are we raising a Generation Y-ME?

Now in little league, everyone gets a trophy. In spelling competitions, nobody has to go sit down at their desk if they misspell a werd. The Wii is replacing the We in “We’re going outside to play hard, for hours, because we’re kids and wii we have boundless energy.” The word allowance is fundamentally flawed. Is the rising generation going to be a bunch of spineless pushovers? Let me rephrase: are we raising the rising generation to be a bunch of spineless pushovers?

Hold that thought, because we’ll get back to it in just a second.

A Dwindling Perspective from a Wiser Generation

The crowning achievement in personal finance for my grandfather and his generation was to “own your home” (and it was likely 1,000 square feet — not 2,000+). It seems the Baby Boomer changed that clarion call to something along the lines of, “leverage what equity you do have in your home to fit a lifestyle you can’t afford.”

(Now generations don’t live in bubbles, and we’re seeing plenty of the grandfathers out there adopting the “enlightened” way of thinking. It’s sad and extremely frustrating. Don’t touch that reverse mortgage!)

You Big, Impatient, Selfish Baby

This trend is dangerous. Treacherous.

I want things now. Now. NOW. NOW!

And there’s no sacrifice to get it. If we screw up, we look for a bailout. If we’re duped, we look for a regulator to prevent us from being duped again. (Failing to mention the fact that we had huge dollar signs in our eyes and the LARGEST of fine print wouldn’t have deterred us from signing on the dotted line.) If we want it, we swipe for it. We have no patience.

We are acting like a bunch of spineless pushovers and our kids are following suit, becoming a bunch of selfish, spoiled, now-oriented, spineless pushovers.

Just like my four-month-old baby Lydia. If she wants to eat, she cries. If she gets too tired, she cries. If she is sick of lying on her back while Julie desperately tries to get things done around the house, she’ll cry (the Baby Einstein Musical Octopus toy distracts her for about 9 seconds).

But if we always carry her, she’ll never roll over.

If we always hold her hand, she’ll never learn to walk.

If we give her handouts, she’ll never learn to work. Sacrifice. And win.

Take offense, or take action — it’s a choice. I vote to raise a strong, independent, take-no-prisoners generation that thrives on difficulty, loves a good fight, and has instilled in them down to their very core the knowledge that school is tough, kids are mean, work is brutal, money is tight, life isn’t fair — and they’ll be just fine.

A Four-Year Old, a Light Saber, and an Invaluable Lesson in Personal Finance

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Today is Porter’s 4th Birthday. For two years he’s asked me why I have to go to work. For two years I’ve told him the same thing:

To earn money, so we can buy food and have a place to live.

When he was really little he actually started to leave money out of the picture. I’d say I’m going to work and he’d respond, “to buy food?” And that, my friends, is how the world works. His first exposure to money and he just forgot about it. Food was the important part.

Last year for Christmas he was given a wallet with a five-dollar bill inside. I was amazed, but he actually kept that money in his wallet for the most part. A few times I found it among the toys in their toy box and I’d bring it to him and tell him how important it was that he keep track of his money (you can’t start ‘em too early). His aunt came and visited a few months ago and we headed off to Target because Porter had decided to assign those five dollars a job: buy a toy light saber.

Julie and I went off to do some other Target-errands while Porter and his aunt headed to the toy section. When it came time to checkout I was keenly aware of the entire process. This was his first transaction and I wanted it to hurt when he spent that five dollars. (The total was actually $7.50 and I made up the difference – a moment of weakness perhaps).

I made sure Porter handed the cashier the five dollars, and waited with baited breath to see his signs of hesitation, perhaps a furrowed brow and a longing look at his wilted piece of currency.

Nope. He handed it to her so fast and didn’t blink an eye. Money was a means to an end (end = light saber).

I used my new found knowledge a few weeks later when I came home from gathering food and was told that the basement apartment below us was now dealing with a broken window, compliments of Porter’s (awesome) ability to huck anything he can heft further than kids twice his age.

I didn’t so much care about the broken window, or even really about the money it would cost. I did want to teach Porter a lesson about what this loss would mean. I sat him down and told him that because it was going to cost money to replace the window, we wouldn’t be able to buy a Wii. His eyes got big and he got the lesson. The Mecham Pie is finite buddy, and you just ate a slice.

[We still haven't purchased a Wii even though I still really want one for, you know, Dad-Son bonding time and things like that. Porter still mentions the fact that we don't have a Wii because he broke the window. The lesson that just keeps on teaching!]

For Porter, the End was the Wii and we didn’t have the Means because he had broken a window.

As an adult with these little dependents running all around me, my Ends are different. Or at least they should be. And I suppose that is where the lesson lies.

This list is not exclusive, but as an adult, your Ends should include:

An Emergency Fund – Guys, give your wife a break and let her have a bit of breathing room! She’ll thank you for it.

Savings for Retirement – Don’t depend on anyone for your retirement except your own ingenuity, creativity, and sweat.

Minimal (or no) Debt Load – Pay off all of your debt as fast as you can and reclaim all of the time, sweat, thought, stress, and tears that create that precious income.

A kid gets bright-eyed with the prospect of spending $5 on a light saber. A guy gets bright-eyed with the prospect of spending $500 on a “modest” gas grill (the one that really caught my eye yesterday was over $900 though – yeah right!). Does the same guy get excited about throwing $500 toward unsecured debt? Or stashing $300 in his emergency fund?

At some point, the earlier the better, your Ends have to change. You’re no longer a kid. For Porter, Money equals things. For you, an adult, Money should equal Security and Peace.