YNAB Podcast Episode 64: My Financial Life

Hello YNABers. My name is Jesse Mecham and this is podcast number 64 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 don’t really want to talk about budgeting, but maybe more the fruit of budgeting, so to speak. I want to talk about how I run my financial house; and I’m no expert – this is just what I do, right or wrong, optimal or sub-optimal. Anyway, so take from it what you will and disregard the rest.

Let’s start with something extremely basic and something that I’m lacking. Well, not totally lacking, but my father’s an attorney, he wrote me up a will a couple of years ago; and he’s an attorney in Arizona, so for two years now, I think, or three, I have not taken it to a Utah-based attorney to have it adapted to kind of the Utah legalese. So, I need to do that. I have reached out to my Facebook friends for referrals for a Utah-based attorney that’s done lots of wills and is not just your cousin. So, if you know anyone, write me at [email protected],* and I’d love to have them help me out with adapting this will to Utah. So, we do that.

*No need to email Jesse about this. He’s found an attorney and completed his will. 

Life insurance is pretty straightforward. I bought some term life insurance – 20 year term – probably when I was 23, and it’s a bargain, it’s a steal. So, yes, we do that. Let me figure out exactly what that is worth as far as income goes… I bought it before, when I wasn’t making as much money as I am now – thankfully. But yes, our policy is 12.5 times my income. So hopefully it keeps becoming a smaller and smaller multiple as I can earn more money; but [?? 0:02:26] Julie would be fairly set and we have YNAB as a going concern. And when they told me that phrase “going concern” in school, I always thought it sounded bad; but a going concern is good. I don’t know why, but you’re not concerned for it, so they call it a going concern when everything’s fine. So yes, that’s YNAB. And YNAB has some inherent or intrinsic value in it, so if I were to be removed from this earth – hopefully in a long, long time – but at any rate, I wouldn’t want Julie to run YNAB. She wouldn’t want to either. So we’ve worked out where that can be kind of handled. So that basically equates to more life insurance. So yes, that’s that as far as the life insurance goes.

Cars, car insurance – nothing with car insurance. We do high deductible stuff – we use our emergency fund to insure ourselves and then do high deductible, so we end up saving money. Speaking of cars, we own three now. Trying to sell a sweet Chrysler Town and Country limited edition from 2000. I haven’t listed it yet, but we’re trying to sell that. Just bought a new Honda Odyssey – we got a smoking deal on it if we financed it. If we hadn’t financed it it would have been a good deal but not a smoking deal; so I basically saved $2,500 more by financing it. I have the cash flow – we saved up for it for about six years, and I just sent them a check for 88% of the loan value, and we’ll pay off the rest over the next three months. It ended up costing us about $80 in interest, but we saved over $2,000 by doing that deal with them – they got some kind of kick back, so I talked about that already. Anyway, that’s the car situation.

The Civic that I have needs replacing. It’s a 2002, it’s got 158,000 miles on it. I’m hoping to replace it in five years, and we’re paying car payments to ourselves for that. We also have started paying car payments for our next van or other family vehicle; just started this month, actually. So I kind of reevaluated what we would need – we hope to drive that van for ten years and figure it out if we wanted to spend… Who knows what cars will cost in ten years, but if we wanted to spend $40,000 on a really, really nice car, it ends up being $333 a month – and I think that’s about what we’re doing. So, that’s our car money. That’s a pretty normal car payment. The trick is to drive the car for a long time and not trade up in five years.

What’s really freaky is we did not give them a dime when we bought that car. This is a little tangent – we didn’t give them a dime when we bought that car, and that was freaky. They didn’t ask for a down-payment; they just said, “Okay, sign, sign, sign.” And then the monthly payment on that beast was $650, and that’s ONE car. And I asked the guy, “Do people really come in here and sign up for $650 a month?” He says, “Yes, all the time.” Couldn’t believe it. So can you imagine having a $650 single car payment then another car payment of $400, then a mortgage? Now you’re like $2,400 into obligations, and that’s just for shelter and driving around. Crazy. Crazy, crazy stuff. That’s our car situation.

Kids’ education – I used to contribute to a Utah 529 plan. It gives us a little bit of a State tax break; it’s actually a pretty good program, the Utah one is, all things considered. Invested in some kind of a… you know, it grows more conservative as they approach 18 years old. But a year and a half ago we pulled them out of… well, pulled Porter out of public school and put them in a private school, and so I stopped contributing to the 529 to help fund the private school. And we like that school. We liked the public school actually, quite a bit; but we like the private school even more. And my whole plan is you go to this private school, I pay for that, and you get scholarships – that’s my thought. And we just feel good about it, so we’re going to stick to it until those feelings change. So, that’s kind of the kids’ education.

I’m not doing big contributions, though, for college. I may change that in the future, but for right now the focus is on that schooling, giving them a good foundation and then going from there. Of course, I really hope Porter gets a Philmore scholarship. Just kidding – sort of!

Health insurance – we do high deductible plans there for the same reason. I found we almost always… And we have little kids too; we have five – I had to count them. I don’t do health insurance through YNAB, through the company; I don’t like employers making that decision for employees. I think having employees closer to their healthcare decisions helps a lot. So I don’t do that and I won’t as long as I’m allowed to not.

Let’s see. Other things health-related – we don’t do an HSA because Utah doesn’t allow you to do an HSA and have coverage for having children. When we stop having children we would do an HSA, and my plan would be to never touch the HSA funds until I’m in retirement. That is the best tax break you get – tax deductible and tax-free growth. It’s just awesome. So it’s the best thing for taxes, period. We can’t do it yet because we aren’t sure about the kid situation; so when we are, we’ll do that and then we will not pull those funds out. I would hope to be able to fund them out of pocket and keep that HSA growing as kind of a healthcare/retirement nest egg.

Speaking of retirement, I do 401K through YNAB, and YNAB puts in 3% – that’s immediately for everyone – and then I put in another 7% of that. I also put in another 5% of gross to my Betterment account. You guys know I do Betterment to do my other investing – it’s brainless, which I like. I also just started investing… started… I bought a rental property that I feel like I got for a good deal, and we’ll see how that goes. I’m not managing it; I made sure to bill in a property manager in my calculations. So, I’m trying that; so real estate a little bit. Also, our home is much bigger than we would need once we retired, so the plan would be probably to downsize once we retired and get a little bit of cash there. Not banking on that one, though – just might be kind of nice. And honestly, it would be nice to not care for a house that big or care for the yard and stuff like that. But I do like the gardening, so maybe it will just turn into a big garden and I would just garden full-time and camp full-time, raise Nigerian dwarf goats, you know, and chickens. I have a pastoral tendency that I think needs to be fulfilled in the next 20 years.

Also as far as retirement goes, YNAB is part of my retirement. So I don’t know exactly how that would all play out; who would even pretend to know if we were eventually sold or if I just kind of stepped away and let someone else fill in or whatever it is. I won’t even pretend to guess. Right now we have so much low-hanging fruit and so many prospects, the idea of selling to someone just gives me the heebie-jeebies. But YNAB is my retirement; you know, part of my retirement plan.

That is basically it. I think I covered most of the financial issues. I’m just kind of plugging along, but hopefully you gathered something from that – I don’t know. I don’t do anything crazy risky, I don’t invest in single stocks. I have in the past and actually made money, but that’s totally lucky. Yes, high deductible on insurance, life insurance is covered. We have some life insurance on jewelry – I actually don’t think that’s necessary. I think we should probably get rid of it. But it’s so cheap it’s kind of hard to get rid of; it’s like $90 a year – it’s some insanely tiny premium. So, got to get the will done. Again, I’m no expert – this is just our thing. And yes, maybe you guys got something out of that.

So, I don’t have big beliefs here, like hard-set things. You guys know I use a credit card for the business, I use a credit card personally; I let the budget dictate my spending decisions and it’s worked out well for us so far. So I don’t have kind of dogmatic beliefs in regard to a lot of this stuff, but I wanted to share what I’m doing, and a year from now maybe some of that will have changed. One thing that I noticed that I changed in the last four months was the retirement. I just noticed that we weren’t contributing enough to retirement. We were doing the 401K thing, but as a percentage of our pay check it wasn’t high enough. That’s where I started looking into it and looked at Betterment and liked that investing option. We have some Roth IRAs that we’ve built up over the past, and some traditional IRAs when we weren’t allowed to do the Roths, and things like that. So those are all invested in Target, like Vanguard Target Retirement Funds. I wish those were a little more like small cap value-based instead of being what they are, but they are good enough.

So, that’s that. Basically it. Hopefully that spurs you on to ask yourself some questions at the New Year and see if there’s not something you can tweak, something you can look at and maybe optimize a little bit. And just keep on living your life, recognizing that financial stuff tends to creep in every part of our life, but it’s nice when you can start to kind of set things on auto-pilot, get into a rhythm and then not have to be constantly thinking about it. That’s the real way to manage your money, I think.

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