YNAB Podcast 001 – Stop Living Paycheck to Paycheck

YNAB Podcast 001 – Stop Living Paycheck to Paycheck

Hello YNABers! My name is Jesse
Mecham and this is the inaugural podcast before it you need a budget
where we keep four rules to help you stop living paycheck to paycheck get out
of debt and save more money welcome to our very first podcast out of four it’s
doing a lot more in the weeks months and years to come this podcast will go out
every Monday and hope you can find some time to listen to it on your way to work
on your way from work while you’re working out or maybe while you’re
budgeting I hope to provide some motivation some inspiration some things
to think about different ways of looking at your money many of you know exactly
what we’re about and maybe there are some of you listening that don’t know a
thing about us the website is you need a budget calm people call it YNAB for
short we have four rules first rule is to basically give every dollar a job
second rule save for a rainy day the third rule is to roll with the punches
and the fourth rule is to stop living paycheck to paycheck and some of you are
probably saying that’s not a rule that’s a mandate and it kind of sounds like
that and it’s certainly not very creative but it does work and I want to
talk about rule one today excuse me rule 4 today being our first podcast we’ll
talk about the fourth rule there’s a stat that’s been floating around for a
long time seventy percent of people live paycheck to paycheck and I actually
heard recently that it’s 80 percent so I don’t know if that has something to do
with the economy this great recession that we’re in but 70 percent or 80
percent whatever it is it’s the majority of people and there’s a portion of that
stat that is rarely mentioned but extremely important and that is that 70
percent of people live paycheck to paycheck regardless of their income so
you think about that you think where you are living on the
edge so to speak you have very little to your name unless a paycheck just lands
in your account and you are just waiting with bated breath to be able to pay some
bill and then you just tell yourself and incorrectly so you say well if I just
had a little more money if I could just get that raise if I could just get that
new job where I’ll make an extra 10% if I could just find an extra two hundred
dollars a month that would do the trick but if we know that 70% of people are
living paycheck to paycheck regardless of their income then your idea that
earning more will help you break the paycheck-to-paycheck cycle is incorrect
because there are people just like you but earning more that are still in that
vicious cycle so what does higher income mean it doesn’t mean you’re not living
paycheck to paycheck apparently it means you mostly have higher debt as a
proportion to income maybe it’s still the same but people with high incomes
tend to just carry around more credit card debt distance from the financial
edge though you’re still just as close so what we’re talking about here isn’t
about making more money it’s a behavior change it’s a real shift in how you
think about your money where you basically make it unacceptable to live
right on that client financial edge a new guy just met and in Brian Ford he’s
the author of a book called eight pillars I just met him this week and we
had a good chat and he teaches a principle that I thought was just a
fantastic way of saying this where he says $1000 is the new zero and what he’s
basically saying that is if you’re checking account or I should say like
this I’m probably butchering this so if Brian ever hears this you might want to
have take words with me or something but basically if $1,000 is the new zero what
we’re saying is if your checking account dips below zero that’s the equivalent of
or sorry I am just totally butchering this if your checking account dips below
$1,000 then it should feel as if it’s at zero because I know there are a lot of
you out there that operate or have operated in the past before you
implemented you need to budgets rules where if you had a few dollars to your
name you were stressed and then when that checking account hit zero were
close to it or even overdrafted that was when the real panic set in what Brian
teaches and what I totally agree with is that you could have that panic reaction
at a much higher watermark where your checking account balance dips below a
thousand and you start freaking out and I know there are a lot of Y neighbors
out there that operate with this rule in place where you live on last month’s
income and you’re no longer living paycheck to paycheck and I know that
you’re thinking back to that time where you did operate with thirty two dollars
and ten cents in your checking account and you can’t believe you ever lived
that way and I know there are some of you that haven’t yet broken this cycle
and are maybe tinkering around a little bit and I
encourage you to give it a shot could you do such a thing
could you make your could you mentally just say $1,000 means zero and get to
where that panic attacks sets in then I think you could it’s just a way of
breaking a little paradigm and changing the way you think about how you should
be operating so when I first launched you need a budget back in September of
2004 there weren’t any rules it was mine and my wife’s own budgeting system we
were doing it on this rinky-dink spreadsheet and I came up with the rules
as I struggled to explain to people why the system works so well so just to
recap one more time rule one give every dollar a job rule to save for a rainy
day Rule three roll with
punches and Rule four stop living paycheck-to-paycheck
and a lot of the old-timers know this but rule 4 stop living
paycheck-to-paycheck used to be rule one and I originally set it up that way for
a few reasons first reason and maybe I should be ashamed to admit this but I
didn’t think it through very much I just thought well I kind of stumbled on these
four rules as I was working through my explanation of the system in preparation
for selling it I thought okay I’ve got these four rules I didn’t really think
too much of the order and when I did think about it just for a moment I
thought well if we think about it from the flow of money since Rule four deals
with your income and a timing of your income or when you use that income you
think about it that way then I thought well with the flow of money income being
first and then you budget it so if incomes first then this could be rule
one and you budget it rule to and you say four things rule three and you deal
with overspending and kind of post-mortem with rule 4 that was the old
way and I have to admit when I first set out to sell the software and try and get
people to implement this method which doesn’t require the software the
software hits it out of the park as as far as ease of use when you want to
implement this for rule method well when I set out to sell it I was pretty darn
sure that we wouldn’t sell a thing and I didn’t have anything to lose though I
was trying to make rent so I thought we wouldn’t sell because I was telling
people to stop living paycheck to paycheck I wanted them to work toward
that and use the software to get to that point but I was still telling them that
eventually I wanted them there where they spend in January what they already
earned in December and frankly I just thought people wouldn’t buy it they
would they would land on the site and they would see oh this guy’s teaching
these four rules and then I’d get to that rule where I say stop living
paycheck to paycheck and you’ve got this person that sits there and kind of leans
back in their chair and says yeah and you know in fairytale land I can do that
and in my wildest dream and so I thought I would really turn
people off and they just basically write off the whole system and say well this
isn’t for me because it’s obviously too hard I was completely wrong giving
people this rule telling people to get their act together in a nice way and
break the paycheck-to-paycheck cycle it’s what put you need a budget on the
map we ask people to do hard things because we know that doing that hard
thing will have a huge impact in their life and then they’ll tell their friends
about it it ends up being completely worth it so you’re maybe thinking well
this is nice I can’t do this I am so on the edge Jesse this is just unbelievably
hard for me I am waiting with bated breath for that
direct deposit so I can you know pay my bills that have been maybe a little bit
overdue even but I can just tell you that this is completely worth it it is
completely worth it to be able to say what I earned in March I spend in April
what I earned in April I spend in May and later podcasts we’ll get into some
of the finer points of rule for the big whys behind it how you can handle
variable income with ease how it completely cuts down on your money
management time commitment because you no longer having the time bills to pay
checks how you sleep better you have less stress you make better decisions
when a potential crisis comes along you will be happier so consider this and
think about that rule for stop living paycheck to paycheck I wanted to start
with that one because I wanted you to know if you’re a newcomer to the you
need a budget method that we are asking you to do something hard and I can
promise you that when you do something hard it can make a big difference now
remember you work toward this rule you use the software to get to this point
following rule four is not a prerequisite
the software it’s an end cold my name is Jessie Miko
this is the you need a budget podcast thanks for listening and I look forward
to talking with you guys next week

8 thoughts on “YNAB Podcast 001 – Stop Living Paycheck to Paycheck

  1. I think YNAB is a very, very good program but its kinda unfriendly for someone thats not living in the US. I would hope that you make it available in more languages in the future. 

  2. I can't thank you enough for YNAB.  Financially 2013 was a landmark year for us as we started the year out at $0 because we were living paycheck to paycheck and finished the year with a full buffer and not a single over draft the entire year.  I tell anyone who will listen to check it out.

  3. This is so true, not bragging or anything but I am a software developer and my wife is a nurse and we gross 140,000/yr. We live paycheck to paycheck. So bad that we often have to overdraw our accounts the night before we get paid. So we are doing the opposite of the program we are spending next months money this month. Just bought the software yesterday, hoping to make a change.

  4. one thing I realized is that regardless of how much I make unless I have a written budget I will live paycheck to paycheck.

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