This article is sponsored by YNAB, a budgeting app that seeks to help you stop living paycheck to paycheck and gain total control of your money.
How’s your financial situation?
Oh hey there, it’s your favorite question here to ruin your day. Or maybe not. Recently, we have all been worried about our finances, the safety of our careers, and, you know, the future of the economy as a whole.
So, when is the best time to really think about your long-term finances? We’d argue that it’s right now. We recently spoke with Jesse Mecham, founder of You Need a Budget, about how budgeting shouldn’t be about shame and restriction. Instead, taking control of your finances should bring joy—and a couple of rules.
Let’s dive into it, shall we?
Table of Contents
Redefining the Budget + What Your Budget "Says" About You
A budget, according to Mecham, is the opposite of restriction. Instead, your budget is a detailed list of what you want. So, at a high level, a budget is an allotment of money you’re intending to spend on certain things—it’s a “priority map” of where you see your money going, both short-term and long-term.
Mecham explains, “When people are saving for retirement or doing something super responsible, you're really just acknowledging that you're going to spend money later and that you would like to spend money later on.”
Love Saving Money? Here are 40+ Ideas to Save Money Each Month Starting Today
4 Rules to Follow for Financial Control
These four rules are the cornerstone of You Need A Budget, what they believe in, and how they make budgets work for anyone. FYI, the average person who starts a YNAB account has $300 or less in their checking account.
What we love about these rules is that they aren’t shame-based, stringent, or ignorant of real-life. In fact, these rules can be used to prioritize a leak in your roof as well as your need to have a night out with “the girls.”
Your money is your money. You get to decide how to spend it, where to spend it, and (a recurring theme in these rules) when to spend it. Here are the four rules for budgeting success.
Rule 1: Give Dollars a Job
This rule is king—and it feeds into all the other rules. The other rules are functions of this rule. Simply put, this rule is to assign the money that you do have (right now) a job. An important distinction here is that this is for the money you have today, right now, and in this particular minute. With this exercise, you have to “forget” that you might be getting paid Friday or that you have a large check coming in the mail at some point in the future. This is about giving a job to the money you have in your possession.
What does the money in your checking account need to do today?
Mecham explains, “And so if it's $300 or $3,000, the exercise remains the same, whether you're making $200,000 or $20,000. You just feel in control because maybe for the first time you are deciding what is important to you and you are making sure that that money is doing that thing that is important to you.”
This exercise allows you to line up your priorities—and give jobs to the dollars you have right now. Some “jobs” for money can be:
- Housing
- Car
- Childcare
- Hobbies
Rule 2: Consider Future You (While Keeping Current You Happy, Too)
This step is where you bring all of your priorities to the forefront—ahead of time. For example, if you prioritize a budget of $5,000 for an upcoming vacation, you might break it down over a period of five months—and save $1,000 per month for that particular expense. It's saving for a specific purpose, rather than having a catchall savings account you pull from.
This rule is an important one. It’s where you consider “future you” in relation to “present you.” This allows you to seriously consider whether your sushi night out can work with your long-term Hawaiian vacation. Spoiler alert: it can, as long as you're setting your budget up in advance.
Rule 3: Roll With the Punches (Change Your Plans As Needed)
Ahh, the punches! You know these expenses. These are the unexpected expenses that historically blow your budget to smithereens and undo any progress you’ve made. This is when your car tire blows out, when you fracture your arm on a Sunday night and have to head right into urgent care, or when your whole roof caves in. Fun!
Mecham’s advice on these big punches is to untie your budget from your emotions (and expectations). He explains, “People make their budgets so rigid and their emotions are all tied into it. And if you're so fixed on [a certain budget] and you mess up for one day, then the idea is, ‘Well then, the whole budget is blown.’”
The advice here is two-fold. It’s to create categories that might protect you from future financial punches—like an “automobile” fund or a “house repair” fund. The second prong is as follows: when these “ouchy” punches happen, pull from money from “squishy” categories—like your “entertainment” fund.
We try to steer clear of diet analogies, but this really applies here—especially in the long-term. If you had been working so hard on a healthy, all-green diet and you have one cookie, it doesn’t mean you’re weak or that you’ve ruined anything. It just means you had a cookie. The same can be applied to money. If there's a bump in the road on your way to saving money or creating a budget, don't let it completely derail you.
While a big unexpected expense can feel like a step backward, it’s crucial to ditch that thinking for real success. That’s one of the principles that we love about You Need A Budget. There’s no shame in your budgeting game—as it should be.
Rule 4: “Don’t Spend Babies”—Only Spend 30-Day-Old Money
I think we’re all familiar with the pay-day spree. It’s where you take that quick photo of your paper check, log it into your bank app, and go absolutely ham with your brand-new money.
The advice here is to let your money age, to get away from your paycheck-to-paycheck cycle, and to build a "silo" of money.
Try creating a 30-day window for your money to live in. This means that, by August, you’re spending money that you earned in June—instead of constantly relying on your next paycheck or windfall.
This, Mecham explains, is key to relieving those finance-induced sleepless nights that we have all endured.
3 Budgeting Rules to Ignore
There's tons of advice around budgeting—and a big problem is that most of it isn't applicable to everyone and much of it doesn't allow for any missteps or deviations from the plan.
We asked Jesse Mecham to share some of his least favorite misconceptions—or outright lies—about building and maintaining finances.
Being Too Hard on Yourself—The Perfectionist Mindset
The perfect budget does not exist. You’re thinking about your month—and your budget is an output of your constant thinking. Let go of this notion or else you will “fail” every time you set out to achieve the “perfect” budget.
Both Partners in a Relationship Should be Equally Excited About Budgeting
While you and your partner should be on the same page for the overall goals, the way you’re going to go about it can (and probably will) be different.
Don’t expect your partner to be as excited about building a budget. Just like you might vacuum the living room differently or pair your socks differently, your methods and excitement levels are going to be different. Figure out a way to work together toward a common goal without lording your method over theirs.
Annual Budgets Work Really Well
There are huge fluctuations month-to-month. Nobody lives in the average and extremes are a huge part of budgets—and why they end up “not working out.”
