Step Away From the Financial Edge

Written by Lindsey Burgess  |  on


We have Four Rules. I hope this is a review for you. What we used to call “Learn to Live on Last Month’s Income” we’re now calling “Age Your Money.”

It is a different name but we really haven’t changed much of anything.

We sat down and asked ourselves, “What do we really want people to achieve? What is the core principle behind this rule?” And the principle is simple: we want you to stop living paycheck to paycheck. We want you to be living far, far away from the financial edge.

Now, paycheck to paycheck looks different for everyone. If you’re sharing finances, you might have a partner who gets paid weekly, or once a month, or every other week, or twice a month, or one who pockets tips—it can be structured a hundred different ways. If you are a freelancer, or you’re in sales—who knows. My point is the whole idea of paycheck to paycheck is problematic because everyone’s situation is different.

The idea that we want to be the focus—the idea we want you to embrace—is what it would look like and feel like to back away from the financial edge.

What if you could budget an entire month ahead?

What if you could sit down and say, “I want my money to do all these things this month. I want to cover all of my true expenses. I want to be able to roll with the punches. I want to have a little bit extra. I want to be able to budget the entire month before that month even starts.”

The only way to do that is to be dealing with money that you earned before yesterday. The older the better.

The concept of old money is just that you look and say, “Hey, I just spent that dollar. How old was that dollar I just spent? How long ago did I earn that specific dollar?”

It works like a grain silo. The first money in, is the first money out. So you pour your money into that silo and then you get the money out of the bottom. And then, as you pour more money in, you’re still getting money out of the bottom. The first money in is always the first money out. As you fill up that silo and you decrease the rate of spending, you’ll be spending money that is older and older and older.

When you spend less money than you used to, your money will get older. But it will also be getting older because you’re saving for your true expenses. That’s all fine, but we want you to take it one step further. We want you deliberately placing money into the next month.

When you are all done budgeting for the month, and you have 2,000 or 200 or 20 or two dollars left, those dollars should go to the next month. Ask yourself, “What should this money right here do for me next month?”

Maybe it will start chipping away at the rent bill, the groceries, gas, your Netflix subscription—I don’t know. Whatever you want.

The point is, you look ahead and you say, “What should this money do for me in the next month?” And then when you earn new money and you sit down again and ask, “What should this money do for me in the next month?”

Sometimes you’ll realize, “Oh, I need the money now! I need it this month! This thing happened!”

No worries. Rule Three: Roll With the Punches is your best friend. You adapt. Sometimes you have to do that. Sometimes we all have to do that.

But when you’ve addressed your current priorities and there’s money left over—and fight for this wherever you can—start funding the next month. And when that month is completely done and then you start with the next.

So I’m standing there at March 1st, let’s say, and March is all budgeted out and I haven’t earned a penny yet in March, that feeling is phenomenal. But the only way to get there is to be spending money that is older than you are used to spending.

Instead of spending money that’s a day old/two days old/three days old, you’re paid on Friday and then Monday you’ve run out of money, you’re spending money that’s three days old, you’re spending money that’s at least 30 days old—and that feeling right there, you can’t beat it. We made it a rule because we don’t want you to miss it.

It might not happen overnight but think about aging your money.

Start putting money further ahead into the future so that the money you’re spending is a little older than you’re used to. Try and keep that age of money that’s staring at you from the top right corner of the software. Try to get to 30 days and then hold it above 30 days.

You do that by knowing and anticipating your true expenses, planning for them, and embracing them.

And you will slip and your Age of Money will drop. And that’s OK. As you become more thoughtful and have more insight about your true expenses, you’ll see it go up again.

But the idea that you can fund a whole month ahead, that is a thing of beauty. I want you all to experience this feeling.

Just think about, “How old is that dollar I just spent?” We do the calculation for you. We take the average of the last ten outflows; we take the average age of each outflow and we look at the last ten, so it’s not quite so volatile. But we’ll work on some other things to kind of visually represent this and I think we’ll get to a cool place where you’ll know, “Okay, I’m predicting well with Rule Two, I’m looking ahead, and I’m also funding the future well, where I’m spending money that’s older than what I’ve done in the past.” And you’ll love it.

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Adapted from Podcast #212: Rule Four Reloaded, the one in which Jesse waxes poetic about the power of stepping away from the financial edge.

Your Next Step

Budgeting is not restrictive. You won’t be spending less, you’ll be spending right. So what do you have to lose? Except all that debt and stress?