YNAB Podcast Episode 67: Spending Tens of Thousands of Dollars is So Easy

Hello YNABers. My name is Jesse Mecham and this is podcast number 67 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.

Speaking of getting out of debt, I got into debt when I bought a new car. And I’ve told you about that, but I want to just talk about one specific instance with the car purchase that has just had me genuinely freaked out; and that is the fact that I put no money down on the car and walked… not walked, drove out with this new vehicle that cost tens of thousands of dollars, and all I had to do was sign something. So I’m sitting there in the office with the business manager, and we’re there talking CrossFit because I noticed he was wearing a CrossFit shirt, and I said, “Do you wear the shirt or do you actually do the work-outs?” and he said, “No, no, I do the work-outs.” So we were talking about that after he pitched me on a very long warranty, which I didn’t take. But I’m going through, I’m signing the papers he’s showing me… because the game plan was – and still is, and it’s 95% already done – pay off the car in four months. The cash is sitting there in our checking account waiting. I already sent 95% of the loan and double checked, and everything is good to go there, so I sent a check to the credit union that financed the loan. So that’s rolling and we owe $5,000 on the van still, which we’ll pay off over the next three months.

As we were discussing these details, he’s showing me there’s no pre-payment penalty, which was important to the plan; here’s the interest rate – I don’t recall what it was, I didn’t care; there’s no down-payment. I can’t remember anything else specifically. In Utah you don’t have that law where you can change your mind after a few days, so you sign, you sign. Well, that’s what he said. I guess I take him for his word. But I know in some other states you can actually have kind of like a buyer’s remorse thing kick in, but not with Utah apparently. So, I’m going through this paperwork, I sign in lots of different places, and then we just go back out to the lobby area and wait. And they clean up the car – clean off all the snow and everything that was on it – and detail it and everything, and then hand us the keys and we drive home. And I didn’t give them a penny. And that’s what is so scary.

So, I want you guys… We’re going to start focusing a little more on debt here and talking about what we can do to combat the debt. I was talking with an insurance agent that offices in the building where I am, and he says the same thing. The Baby Boomer generation were kind of the first generation to really embrace the whole credit card thing, and I think we’re seeing the effects of it – the savings rate is low, credit card debt just keeps climbing despite all this apparent public awareness and everything; we just still seem to be living beyond our means. And you would have thought that the recession would kind of jog everyone into a little bit of a reality check, but it doesn’t look like it has. Credit card debt just keeps climbing. People keep spending more of their… as a percentage of income, more and more on cars than they ever have before. People are living in homes that are bigger than they were just 30 years ago. Square feet per person in a house, I think, has tripled. So families are getting smaller, but also homes are getting much, much bigger. And so we’re really just spending and spending and spending, and I just want you YNABers out there to make sure that you are spending on things you really care about. At the end of the day, I’m really happy we’re driving around in a new van; I like the fact that it doesn’t make strange noises for a while; and that it’s nice inside and clean for a while until we go on our first road trip; and that we can count on it for long trips where our old van, it was getting to a point where you were kind of questioning it. I’m glad we have it. It’s still just does its job of getting us from point A to point B; just does so with a little quieter ride, it’s a little smoother.

So, be aware of situations where money is leaving your hands and you are not voluntarily saying, “Yes, take it. Here it is and this is my decision.” Subscriptions do this; any time you have to sign and don’t actually hand money over. I mean, this, I didn’t even have to swipe my credit card, for crying out loud! I just signed some papers. Just be aware of things like that that want to get your money without you really giving it much of a thought. I can tell you all about optimization of online checkouts, because we try and sell online, obviously. And I know that the harder it is for someone to purchase – I mean, more forms to fill out and more questions to answer – the fewer people will purchase. So we have people do as little as possible, give them as little time as possible to think about their purchase before pulling the trigger. That is exactly what EVERY marketer wants to do, and it’s exactly what you want to combat.

So, enter your transactions on your phone, stay aware, check your category balances. And until next time, follow YNAB’s four rules and you will win financially. You have not budgeted like this.