This isn’t a time for you to put on your hard-nosed, negotiating face and see if your spouse has the mettle to withstand your tricks and tactics all toward getting your way. This is a time to talk. As a matter of face, I’ll even say it’s a time to chat. However, there’s still some communication strategy that’s well worth learning.

The other day a good friend of mine (who doesn’t use YNAB fully, but does love and follow Rule One) told me he, “had to have a talk with my wife again about being frugal.”

I didn’t ask what he said exactly. I had a pretty good idea how the conversation went based on how my friend had framed it for me with that one sentence.

First, it may very well be that a “talk” was needed.

However, the way in which that talk — especially a talk about frugality — was given could have been improved to really deliver results.

The key is to communicate like a marketer. Budding marketer that I am, I do know that you always want to talk about the benefits of product X to your customer. You don’t worry that it can do 60 revolutions per second — you simply tell them that its speed will save them time. Bad marketers focus on the product and what it does, instead of focusing on what the product does for the customer.

When discussing frugality, how could we approach the topic differently? We talk about the benefits. Those benefits would be the goals you’ve agreed to during the monthly budget meetings. Those goals have buy-in from both parties and your spouse wants to follow them. So instead of saying, “Hey, we’re (or worse, you’re) spending too much money here, let’s try and cut back,” you’re saying, “I’m so excited that we’ll be able to pay cash for Christmas this year. It’s going to require some sacrifice, but MAN! This will be our first year where we haven’t gone into MORE DEBT to celebrate Christmas!”

Just paint those benefits all day long and my guess is that the frugality will follow.

Yesterday Julie and I dragged the kids down to the credit union, stood in line for an hour, and voted. Harrison, our 2 1/2 year old, had had enough by the time we were actually voting. He purposely yelled as loud as he could while Julie was holding him (and attempting to vote). I got lucky because I was holding Lydia (alright, here’s a picture already — stop twisting my arm!).

Anyway, the volunteers (and everyone else) handled it well. Harrison was simply expressing what everyone else was feeling. The wait was long.

But man was it worth it! Voting is special. Please, everyone, make sure you vote.

However, do not, under any circumstances, believe that someone else is going to make all of your wildest dreams come true. Only you will.

We’ve heard so much, from every single possible direction, about how the government’s going to do this, our elected official will do that, a committee will be called, a commission will be formed, a study will be published…your congressman will be there to give you job training, your senator will watch the kids while you go to work, and the President himself will pick up the tab at the grocery store… “No really Mr. Mecham, let me get that for you.”

“Why, thank you Mr. President.”

Nah.

As a matter of fact, Nah Thanks.

Make sure you vote for yourself. Ultimately, YOU will affect your life in ways far greater than any elected official ever could. YOU will decide what’s right and YOU will make the tough decisions (perhaps you’ll get a call at 3AM?).

At the end of the day, you know who’s REALLY in charge. You are! So go and vote, rain or shine, in a long or short line.

And then, every day wake up, and cast your ballot again (you’re a write-in candidate).

There is some value in looking backward. You can pull together reports to help you prepare your taxes (a non-value added exercise, obviously, but a must) and you can pull interesting tidbits out of your reams of data:

Hey honey! Did you know that 15% of our food purchases last year were soy-related?

However, the tremendous value in a financial application comes not from the powerful, fancy, interpolating graphs that tell you everything that’s happened. It comes from the day-to-day managing of the now, and planning for the future.

We spent $45 on iPhone accessories during October.

..is not nearly as valuable as this question:

How much will we spend on iPhone accessories during October?

Why? I have no idea. Honestly, the more I see the results people are getting with the YNAB Methodology, the more it becomes clear to me that it works, yet I do find myself struggling to articulate exactly why it works.

I suppose this is why I’ve known that Reporting is a weakness in YNAB Pro (though our current beta lets you export to a spreadsheet application in oh, about 2.2 seconds) and I’ve always let other features jump ahead of it in line.

Which features took (take) precedence?

I’ve tried to focus on cutting down the minimum time required to use the software. I’ve focused on the managing and planning side of the equation (Quick Budgeting, bank transaction downloading, and with an upcoming beta, automatic payee cleanup…WALMART ABC123 becomes Walmart…it’s in alpha, etc.).

I really want to get people connected on those two aspects. Get their money in front of them more, not less. Have them be involved in the mangement and plan. I don’t want it to be automatic, I want it to be habitual. I want people looking forward and answering the right questions, not wincing from something that’s already happened.

In the event that you are given a raise, don’t let your standard of living rise needlessly to the level of your new income.

The wisdom in that counsel has hit home recently (literally). As those of you who have read my introductory bit on this blog may know, I just had a baby, which fact is related to the bolded statement above because as we’ve waded through all of the baby-related expenses, (and they are many), I’ve had several occasions to think to myself, “I am so glad we’re not living at the edge of our means.”

My husband took a new job in February and where money had been pretty tight before then, we suddenly found ourselves with a few unassigned dollars at the end of our budget pow-wows. UNASSIGNED DOLLARS!? What ever will we do with them we asked each other in slack-jawed disbelief. The possibilities! We spent some (new blinds, dentist appointments for all (!), a new bookshelf), but mostly, we just tucked those dollars away for what we knew was coming. What we were careful not do was increase our fixed costs. We didn’t sign a cable contract. We didn’t strap ourselves with a monthly pest control bill. We didn’t join a gym. And looking back, we’re glad we didn’t, because adding to the family a person who goes through a dozen diapers a day has brought us almost up to the edge of our income again. Almost. (Bear in mind that a certain percentage for savings is always the first to come out of the pay check, so when I say we’re back at the “edge” of our income, we’re at the after-savings edge.)

We’re seeing on a national level the consequences of people extending themselves to the nethermost reaches (and beyond) of their income — people living so close to the edge of their means that increased fuel and food prices (and interest rates) put them in the red (or further therein as the case may be). Not a good place to find one’s self.

Please don’t misconstrue what I’m saying to mean “consign your soul to a life of depravity.” That’s not it. Just be wary of needlessly increasing your fixed costs. In a nutshell, it’s a seductive temptation to increase your standard of living right along with your income at every raise; resist that temptation. Even if you don’t have another little human on the way, life will provide you with unexpected costs aplenty. And if it doesn’t, the peace of mind that comes with the “just in case” money will bate the sting of luxuries foregone.

1. Go to http://virtualbox.org/wiki/Downloads and download the “VirtualBox 2.0.2 for OS X hosts” version for Intel Macs

The file is only 35 MB, so it downloads fairly quickly.

2. Unpack the contents of the .dmg file by double-clicking on it.

3. Run the installer:

4. From your Applications folder, click on the VirtualBox icon.

5. Click the New button (you don’t have any other options).

6. Follow the Wizard’s steps. I stuck with the recommendations (Base Memory Size of 192 MB):

7. I chose to boot to a hard disk.

8. Chose to use a dynamically expanding image for my hard drive:

9. The Image File Name can be the same as the name of the virtual machine you’re making:

10. Once the hard drive disk is created, you’ll see it populate your main Wizard. It has a .vdi extension (VirtualBox Disk Image):

11. Now click the “Finish” button.

12. Everything should be looking good, so go ahead and click Start.

13. You’ll get the Auto capture keyboard notice, just explaining that the keyboard will be sending strokes to VirtualBox unless you click out of it or press the Left Command key (Mac).

14. You’ll now be ready to go with your First Run Wizard. Follow those steps.

MAKE SURE YOUR WINDOWS INSTALLATION CD IS IN YOUR CD/DVD DRIVE

15. Follow the OS Installation Setup (in my case I’m installing Windows XP Home). Don’t worry about creating a hard drive partition (just click through to install) and choose to “Format the partition using the NTFS file system (Quick) option. To use function keys inside Windows (F8 particularly), you’ll need to hold down the Function (fn) key, and then press F8.

.

And I’ve got Windows obviously running now:

16. Start Internet Explorer from within your new installation, and download YNAB Pro.

17. Install the YNAB Pro setup file and you should be all set (you will likely need to download and install .Net 2.0. The installer will detect and do it for you).

18. And voila. I’m running YNAB Pro on my Intel Mac, Mac OS X 10.5.5.

Anyway…

I received a newsletter from him yesterday: “Breaking News on the Government Bailout Plan”

It had steps each of us should take in regards to the plan. Before we get into it it, let me back up for just a second.

I’m no political scientist, economist, academic…but I’m becoming increasingly worried about the US debt load. I’m not nearly as smart as all of the people in all the rooms in Washington, but despite a lot of respected people telling me that we absolutely must get the $700B bailout plain through…it just doesn’t sit right with me. That $700B is all borrowed. We’re talking about more debt. A lot more.

A lot of families finally face their breaking point because their required obligations consume so much of their available funds. The US Government’s budget, for the most part, is not discretionary. It’s tied up in debt and other welfare obligations. We’re losing our “wiggle room”. We scream and holler about earmarks, and McCain says he’ll, “make them famous” when he vetoes the earmark spending…but that’s such a small amount compared to our much larger obligations!

Obama’s quick to point out just that. Yet at the same time he also seems very much in the direction of more overall spending, not less.

Either way, both of these guys, at least from what they’re saying right now, are not very budget-oriented.

Oh, how I wish they would all operate following Rule Two.

They’re not. And they haven’t for years. And the spending has simply skyrocketed — some of it perhaps justified — but then, as I type that I think about how you can justify pretty much anything these days.

My number one concern is the spending. Remember the family that finally can’t meet all of their required obligations? They declare bankruptcy. We don’t want to have to do that. What will happen when our creditors decide they don’t want to give us any more credit?

Why couldn’t we start allocating some funds toward paying down our national debt? I miss Ron Paul. Not that I was ever some huge supporter of Ron Paul, but his record in the house shows that he never once voted for a budget that included a deficit. That guy understands zero-based budgeting!

So there’s my brain dump on why I’ve just had this sick feeling regarding the $700B bailout plan. One side of me hears the doomsday (media) folk telling me the sky will truly fall, and my beautiful country will be destroyed, and that we absolutely must pass the bailout. It didn’t pass, so the parties started blaming each other. And I’m sure if it did pass and then didn’t work, they’d blame each other again.

The media leveraged the biggest point drop in the history of the DJIA to really toy with my emotions. Actually, I wish I would have had $3k in my brokerage account to drop in the market Monday evening, just like Flexo did (Well played Flexo! I hope you picked it up at the bottom and already pocketed profits. Annualize that return for me…it’s gotta be big).

To be honest though, the drop we saw Monday didn’t even rank as one of the top ten worst drops (percentage-wise, which is obviously a smarter benchmark) in history. But MAN! Everyone was talking about it! We were all in a frenzy. What did the market do the next day?

Now, the markets open in two minutes on the east coast, and who knows what will happen today, but did you notice the difference in media coverage on the big recovery the next day? I’m not saying the stock market has been some gleaming beacon of ROI in the past several years, but that swing down and then quite a ways back up is notable.

Why did the markets do that? They panicked, and then got about their senses, and realized they’d overreacted perhaps just a little bit.

But during that panic, we were all thinking the sky would fall and we’re thinking Oh my gosh, we have to act now or the country will crumble! and in that frame of mind, we’re supposed to decide how to fix things?

On the micro level, that’s why I tell people to have their Buffer (one month’s expenses) in place. That gives you some breathing room and prevents a panic attack when you’re right in the thick of some horrible event. In government, we like to think we have no breathing room (and in actuality, because elections are so close, the timing of all of this is great — politicians are forced to make a hard, hard decision with election right around the corner!).

But back to this spending…it’s just got to stop. We’re literally mortgaging away our capital one bite at a time. Warren Buffet said it best in his Annual Report in March of 2005:

As time passes, and as claims against us grow, we own less and less of what we produce. In effect, the rest of the world enjoys an ever-growing royalty on American output. Here, we are like a family that consistently overspends its income. As time passes, the family finds that it is working more and more for the “finance company” and less for itself.

I didn’t realize this post would be so long — it was supposed to just be about Dave Ramsey’s common sense approach to the bailout, and here I’m going on some tirade. Sorry. I only wanted to make clear what was rubbing me wrong about the bailout idea from the get-go.

As soon as I received this newsletter and read the plan, I sent it along to JLP to see what he had to say (I trust JLP’s opinion on these things and like that he doesn’t beat around the bush). He said (and I quote), “I LIKE it!”

Here’s the skinny, straight from Dave Ramsey’s newsletter:

1. Read the Common Sense Fix
2. Copy the text and
3. Send it to your representatives and senators.

Someone please chime in here if you see a problem with this approach. I liked it. I’ll readily admit that our financial regulation system needs some serious updating, but I don’t think the time to do it is now when we’re all in panic mode. I don’t want to talk about parties or who’s to blame (as if this could all be pinned on one particular person or thing, I could name a dozen just off the top of my head).

I recognize this is probably my most political post I’ve ever written, but it honestly doesn’t feel very political at all. It’s about budgeting, right? I mean we’re talking about our money here and we want to make sure it’s doing the job we want it to do, right?

I do hope beyond hope that we can break away from the days of spending without regard to the future obligations we’ll owe — and I’m talking about it on both the individual and government level, including everyone in between. I do hope it doesn’t take another depression to teach us that lesson.

I wholeheartedly believe in the American Dream.

Lesson One: Don’t be greedy

The banks became very greedy. They rode the housing boom all the way up, and all the way (are we all the way yet?) back down — and then some. They started lending money to people that couldn’t afford the loan. The banks just wanted a piece of the action.

The same thing can happen with us. We see “everyone else” around us doing something (freshening up the landscaping, buying a new big screen TV, driving around in a new car, investing in real estate, etc.) and we automatically thing we should be doing it as well regardless of our gut instinct, or our personal situation, goals…

It’s so HARD in the moment to be able to withstand the pressure though! Operating with a written budget helps mitigate that pressure by presenting you with a much needed reality check when unrealistic things start looking a bit too enticing. Trust your budget and your monthly budget meeting, where your true values and goals present themselves.

Lesson Two: Keep some cash on hand

Dave Ramsey said it best (though he was writing specifically about small businesses surviving):

When you have no cash, you freakin’ go broke. You must keep some cash on hand, no matter what kind of business you have. Give yourself some wiggle room where you can take a hit and still be standing.

In your personal finances this is key! Your one-month buffer is your first step, where you’re given both a psychological boost and a real cushion. Once your buffer is saved, begin attacking your debt so you can free up those required minimum payments and increase your monthly cash flow. With the debt gone, start socking away some money for your life’s emergencies.

Having some cushion will enable you to be in the right state of mind when disaster strikes — you’ll then be able to make the right decision, instead of one based on panic and sheep instincts.

Nothing.

I disconnected the adapter and the green light was still glowing (?).

I didn’t buy Apple’s AppleCare or whatever you call it.

Anyway, so I took it into an Apple store and they ran a diagnostic. The motherboard failed. It’ll cost $850 + labor to have a new motherboard installed. I brought in an external hard drive and they said they backed up the entire hard drive. In the meantime, I bought a new Dell laptop for $700.

Our budget file, it’s called Mecham’s Budget.ynab, is on that external hard drive — I’m hoping. We were running Windows on the Mac with Parallels and I’m hoping against hope that they got everything off the hard drive and not just the Mac OS docs. Tonight I’ll plug in the hard drive and see exactly what we have left.

If they didn’t…if we lost our budget…that’d be said. I think we have data in there from 2005.

So we didn’t budget for September because of this whole computer issue. As a result, we’ve declared a moratorium on spending. Well, not really. But darn close. Things will be fine. Over the past five years the budget has trained us to not spend money unnecessarily (for the most part), so I’m not completely freaked out by the fact that we’re operating without a map, rudder, compass…PLAN.

Right now in our checking account there’s this pile of money. I’m staring at it and I’m wondering what it’s all supposed to do. I know we had some money set aside for furniture — a couple hundred dollars I think… I know we’ve been putting $25 per month in the furniture fund…I think $100 in the car repairs fund… but I have no idea on exact numbers. Tithing? Eh..we pay it monthly, but I really leaned on the budget to tell me what the exact amount was supposed to be. Did we already handle August? I can’t remember.

What is the point of that pile of money in the checking account? I feel lost.

If the budget is lost forever, then we’ll just have to do what everyone does when they first start. Take that pile of money and start deciding what it should be doing. We’ll just have to develop a fresh PLAN.

What about all of that historical data? It didn’t really serve much of a purpose except for the geek inside of me to be able to see what we had spent on groceries in July of 2006. The important stuff hasn’t happened yet. The important part of budgeting is what you will do, not what you have done.

If you’re in a forest, and a disaster strikes, but you’ve been budgeting, did the disaster really happen?