WCI #167: You Need a Budget

This is the White Coat Investor podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011. Here's your host, Dr. Jim Dali. This is White Coat Investor podcast number 167. You need a budget. We're recording this. Let's see, it's now July 7th. This is going to be running on July 16th. So welcome back. It's always nice to have a short interval in between the time we record and the time you'll start listening to this. It helps us be a little bit more current. I think some of you have noticed in the past when we got a little further away, a little more space between our recording date and the date it runs. You can especially notice that in times of rapid social, medical or economic change, but we're trying to record a little bit closer to the time these go live. Did you know that the White Coat Investor not only has a podcast and a blog, but but several books that will help you on your way to financial independence? These books cover topics such as asset protection and minimizing your taxes to keep more of your hard earned money. They discuss plans for insurance, housing spending, student loan elimination, investing and estate planning. You can learn how to become a millionaire within five to 10 years of leaving residency and how to invest in a sensible, low cost and effective manner with or without the assistance of a financial advisor. There's even a book geared directly toward medical and dental students so you can start optimizing your finances or early in your professional journey. Find the book that is right for you at the WCI store, at shop.whitecoatinvestor.com or on Amazon. You can do this and the White Coat Investor can help. All right, thanks for what you do. I don't know about you guys, but we feel like the pandemic has finally arrived here in Utah. And I think a lot of people are seeing the data as the pandemic spreads from our coastal cities to our southern and western cities like us here in Utah. But it's interesting. We're now, you know, regularly running codes on COVID patients and seeing our units fill up. We're not quite having to have extra ICUs opened up, but we're certainly seeing it now, whereas we were not for a number of weeks or even months at the beginning of this. So those of you on the front lines out there, I'm with you and thanks for what you do. It's not easy. Our quote of the day today is from William Feather and it's a very appropriate one for the discussion we're going to be having. He said a budget tells us what we can't afford, but doesn't keep us from buying it. A couple things I want you to know about before we get into our interview today. If you haven't seen it yet, we have a new recommended page. This is our what I call the retirement plan page. And if you go there under our recommended tab@whitecoatinvestor.com you will find people that provide retirement plans for small businesses. If you need a 401k, if you need a defined benefit plan, et cetera, for your practice, for your partnership, whatever, these are the folks I trust that can put those plans together for you at a fair price. In fact, we are working through putting together a white coat investor plan as we'll have employees here shortly. And so we got to change from individual 401 to a real 401. And these are the folks we work with to try to sort this out and to get this in place for us. So I have no qualms whatsoever recommending them to you. Other things you'll find on that page are self directed individual 401 and self directed IRA providers. So if you're interested in getting into private real estate investing using retirement accounts, you need one of these accounts. You're not going to be able to do that at Vanguard or Fidelity or Charles Schwab or whatever. Also some recommended HSA providers there. If you need a health savings account and you're able to use one aside from the one your employer offers, that's a place you can go to find those as well. The other thing I want you to know about is that we are putting plans in place for WCICON 21. This is going to be the first week of March next year. Now, obviously we don't know which direction this pandemic is going to go. It's possible we may have to push this a year, but we got to start planning now or it's not going to happen for sure. So at this point I'm putting out a call for conference speakers. If you would like to speak at the conference, here's how you apply. You go to whitecoatinvestor.com facultyapp faculty app app. You can basically apply to speak at the conference. There's going to be three tracks as far as the breakout sessions go. This time there's going to be a wellness track and then there's going to be a track aimed at the basics and then a track that covers advanced topics. So you'll have to choose which one of those you're applying under when you apply. But you can submit multiple applications to speak and put those in there. But if you're going to apply for the wellness track, your talk has to qualify for continuing medical education and dental continuing education. So keep that in mind as you put in your objectives and your summary of the talk. Very important. Without that, you're not going to be selected to speak in that track, I can tell you right now. But otherwise, I'd love to see new speakers. We've had some great speakers in the past. I'd love to see them reapply. And hopefully the decision of who to speak at the conference is going to be even harder than it was last time, which was no small feat. All right, we're going to have a great interview today. Let me get our guest on the line and introduce them. All right, our special guest today is Jesse Mecham, entrepreneur of great fame here in Utah. You may or may not recognize the name, but I bet you recognize the company. You need a budget, which is one of the greatest budgeting app companies in the world. So I'm excited to have Jesse here on the podcast. Welcome to the podcast.

Thank you. Thanks for having me. I appreciate it.

So, Jesse, we went to the same college and we actually live and work near each other. You were a few years behind me in school. But let's start with just kind of introducing you to the listeners. Let's talk a little bit about you and your story. Can you kind of start at the beginning, taking us through your upbringing and especially how that shaped your views on money today?

Yeah, I mean, if you want to go back pretty early on the money side. I remember when I was 14, you know, I grew up middle class and my dad, he was an attorney, and he was listening to this guy on the radio who was pretty out there named Dave Ramsey, who had just kind of gotten started. And he's like, he's got this book. You should read it. And so I remember reading, I think it was Financial Peace University as like a 14 year old kid. And just like, oh, yeah, this makes sense, this makes sense. And then he gave me, you know, he saw that I liked that when he gave me the millionaire next door. And I remember learning like, okay, Ford F150, you know, that makes sense, like that kind of a thing. And he gave me the richest man in Babylon. And so he would just kind of like spoon feed me these books and I took to it. I always liked the topic, but only as much as a high school kid's going to like it. But I remember distinctly at one point I was making money and I was going out with friends and doing all that stuff you do part time money or whatever. And I remember thinking, man, I'm kind of spending a lot of money. And so I made in whatever word processing situation we had at home, this would have been like 95 or 6. I just made. I put like a column for date description and then amount and I would write, you know, handwrite. I spent this here. I spent this at Taco Bell, you know, I spent this year and I remember a few months in that I started spending less and less money because I didn't want to write down that I had spent the money. And, you know, it was all discretionary. So you have to take that for a grain of salt. Like this is a kid with just only discretionary money, you know. But it had a lasting impact on me, that experience of just recognizing, oh, the more aware I am, the more my money kind of tends to stay with me longer. And I think that's never gone away, that lesson. So that's kind of the early stages as far as starting Ynab, that just started because my wife and I were broke student newlyweds and I needed to make some extra money and I thought maybe people would buy this spreadsheet that know my new wife and I have been using for a year. Maybe they would buy it and we could like have it pay rent if it could just pay rent. So that was my grand vision for Ynab at the time was let's just make rent, you know, and become a CPA and become a partner and, you know, live the life. And none of that happened except, except Ynab stuck around.

So tell me about that. You're, you're in college at this point. What year in college were you?

Yeah, I was, let's see, it would have been 04. So I think I was going to kick off my senior year and I had a five year master's degree program. So I would have had, I think, two years. Yeah, I would've had two years left in school. I finished up in, oh, six with a master's degree in accounting, got my CPA license, went off and worked for a big accounting firm in Dallas, Texas. And we had two little kids at the time. Little kids, you know, like two and zero little kids. And the whole time I'm working as an accountant and learning the ropes there and trying to do my best There, but they're having me work 80 hours a week and which is normal. It's not like that's crazy. Like that's kind of standard fare as you're, you know, you're a staff accountant. But I would, between 4 and 5am I would work on YNAB and I got it to a point. We got rid of the spreadsheet we built standalone at the time you, you know, desktop software. There was no concept of apps or anything or even phones that could do that. But we had built some separate software and I was actually making more money from YNAB than I was as an accountant. And I was working about five hours a week on YNAB and 80 on the accounting thing. So to be honest, I'm so risk averse. It still took me a while to convince myself I could support myself with something of my own. But I finally convinced myself and Julie was on board with it. So we jumped ship. Ten months into my illustrious accounting career and just started working on ynab.

Ynab, for those who haven't made the connection is you need a budget.

Yeah.

So how big is it now? How many people do you have working for you?

You know, I just posted in Slack, I just posted a message to everyone and it said there were 122 people that this message will go to.

122 people. That's pretty awesome. How's that feel to know you're putting food on the table for 122 families?

You know, I think, I wouldn't even say it's that like they work so hard, like they're doing all the work. You know, I used to kind of jokingly be like, yeah, we have X number, you know, we have 50 people, but I really wish it were only five. And I used to say that and then I, I'd be lying if I said I didn't just love, love where we're at and I love our team. We're adding new team members. There are, There are probably 30 team members that I've never met in person. You know, we're an all remote company, so that's different and new and my role has changed and evolved to where I'm kind of more leader and less like in the trenches. And that's a little odd for me. But, but man, I just love the team. They just care about people actually making changes to their money, like actual behavior change. It's fun to watch it kind of all unfold.

Awesome. Now you may or may not remember and we talked about this just before we Started recording, but we met before. We shared a dinner together with Mr. Money Mustache at Fincon in 2013. You bought me dinner. So thank you for dinner.

You are very welcome.

It was a really interesting dinner because it's a couple of financial bloggers, right? Including perhaps the cheapest one in the blogosphere, right. With Mr. Money Mustache and somebody who is literally an expert at budgeting having this very nice dinner. You know, it was quite a memorable experience for me because it was also when I met Pete, when I met Mr. Money Mustache. And so it was a pretty wild dinner just to realize that the personality you see on his page is exactly who he is in real life. You know, that is him.

Yeah. There's no faking it. That's what I love about Pete is he's the real deal. Like, you just get the real thing every time. It's. You know, sometimes people will associate, like, budgeting with not ever having a nice dinner out. And so you have to kind of fix that for people. Like, it's just about being intentional, you know, about caring about knowing what you care about and then putting your money behind those things. So I've had that happen before. People are like, oh, this is kind of nice for, you know, a budgeting CEO. And I said, I only like to find things in life.

That's why I budget.

That's exactly right. Exactly, Exactly.

Now you're an accountant by training, not necessarily a tech wizard. How did you bridge that gap?

You know, a lot of the DIY stuff, you know, you just learn by doing. And I would say learn by doing a lot more than learn by reading about doing. And so I think I have a bias toward action, and I think that's the best teacher. And so a lot of it, you know, what I did early on was just kind of roll my own, do my own thing. I mean, I launched with a spreadsheet. Anyone can build a spreadshee. He doesn't take any kind of programming skills. But you also, as you do, you also learn quickly what your limits are and what your natural strengths are. So it was pretty easy for me to bring on Taylor, who built the original software. And he's now, you know, he's our cto, and he's the. He's the technical wizard. I mean, he a genius, you know, truly a genius. And so he. He'll always dumb it down for me enough to explain, you know, how things are going and why this or that. And then we have designers that just can approach problems from. From such new and fresh ways where I, you know, I get tunnel vision. And they're so good at, like, coming up with an idea, working on it for an hour, and then just scrapping it and being like, no, no, let's try this. Where I just get so beholden to this idea. It's impressive just how professional they are and the level of craft people bring. So you hire out for where you have lots of gaps, and you just make sure that you make it a great place to work, and then great work comes out of it. Yeah.

You find yourself pinching yourself, thinking back to running this thing off. Off a dining room table and.

Yeah.

And realizing where it's gone to.

Yeah. It's crazy. You know, there's always something to do. You know, everything's iterative. So you. You'll examine someone's trajectory and you'll say, wow, like, look at them here. But they don't see, like, the daily, mundane grind of the whole thing. So the whole thing is. It's a 16 year. You know, it's been a 16 year. I won't say slog, but just heads down, effort, focus, trying to stay in our lane as far as recognizing what we do well. Try not to just go after every new shiny thing, picking our battles and trying to figure out the job that we're really being hired by our customers to do for them. And you just stay in there and find your groove and don't get distracted. And it works after 16 years.

16 years to become an overnight success, right?

Exactly. Yeah.

So, you know, budgeting is not something that very many people are passionate about. But in order to become a successful entrepreneur, you really do need to have at least some passion about your subject, about your company, about what it does. Why do you feel so passionately about budgeting?

That's a. That's a killer question. I don't like waste. I don't like wasting a quart Ziploc bag, like, if it's kind of clean still, I'm like, we're. Rinse that. You know, dry it out. Like, we'll use it again. So, like, there's a bit of me, and maybe I grew up, like, with my parents, just, like, we don't waste. So there's. There's that where I just. I see money as a representation of your effort. That's it. You're just swapping currency. So if time is currency, if effort is currency, you see, these people just pour their hearts and souls into their work, their career, you know, medical training. Like, you see people that just pour into, like, okay, I'm going to. I'M going to do 12 more years of school and live a life that very few can pull off. And then that's converted, all of that effort, like almost superhuman effort, is converted into a dollar. And people are like, yeah, whatever. And you're like, what happened here between this conversion of one currency to another? Where you're like, you would never waste a moment of your time, but now when your time has been converted to a dollar, you're just like, I don't even care. I'm not a money person. You're like, what, what do you mean, money person? Like, you're just a person, you know, like that needs to align effort with things. So I think it inherently goes back to like this optimizer in me. This. I want things to be used well. And I see people being really careful with their time and then throwing their money, you know, figuratively out the window. And it bothers me really bad.

I assume you have a chief financial officer, your company. Is that a hard job working with you?

Well, okay, I'll take your assumption a little bit further. I am still the chief financial officer. I still do the books. And that probably would be a hard job because, yeah, I'm just, I'm always kind of like, well, wait, how much was that? How much would that cost? And you know, I tell the team, like, I've hired a bunch of budgeters, you know, they, a lot of them have, they were formerly and still are users of ynab, and then they fall in love with what they've seen in their own life. They want to share that with other people. And then they're great hires. So we have all these people that are naturally budgeters. And I tell them, you know, when you spend company money, it's not like you're taking a Christmas present from Faye, you know, my four year old little girl. But I don't mind that you think that for a moment, you know, so like there's a little bit of, hey, recognize, like, you know, the money needs to be used appropriately and you can take that too far where you're, you're really pinching a penny and dollars are falling out of your pocket in some other way. But I do appreciate the sentiment of the team. They treat my money, the business money, probably more carefully than they treat their own. And that says a lot to just their level of care. But yeah, it'd be hard to be a cfo.

Now, I have a pretty unique audience. Most of my listeners are high income professionals, vast majority doctors, physicians, dentists, et cetera, if they don't already have a high income, they soon will, you know, 1500-002000-00300,000, 400,000, $800,000, whatever it might be. Do you think they have a greater or a lesser need to budget than a typical American?

Greater, yeah, because the potential for positive impact is so much higher. So, you know, you have someone that's making, let's say, 50, and you think, oh, man, if we optimize this, that person could maybe live on 40, right? And they can make progress. And they can. They'll make progress. I would encourage them to try and make more money, but they can definitely make progress. Under 50, you get someone making, let's say, 500. The kind of progress we're talking about them making would be so much more. It's just a bigger lever, and that lever can be used for far greater things. So I could have a pretty good impact with a small company of 20 people. But now when you talk about, you know, a team of 122, there's just greater impact there. And so when you're talking about a. A flow rate that is that fast, you can divert more to achieving greater things. And that's where the win becomes disproportionately more valuable for the higher earners. So it's the opposite of what people think, like, oh, I don't need to watch what I spend. Well, maybe you don't need to watch what you spend very carefully, but you should certainly be extremely intentional about where you point that fire hose, because it can be powerful if you let it.

Awesome explanation. And the fun part about it is something like, you need a budget is the same price for a higher earner versus a lower. It doesn't. The price doesn't go up with a higher income.

We should look into that and be like, just pop up, be like, hey, we think you could swing this, so we're gonna, we're gonna bump it up. No, it's true. I mean, I, I liken it to someone that has this fire hose with all this water pressure. You know, you shoot that in the air, it does nothing. You know, you might feel it come down a little bit, but it's just everywhere. But, man, you point that in the right direction, you gotta be careful almost how effective it can be, you know, so that's. Those high earners, they have such an opportunity to really just whatever it is they want to do, they can do it big.

Now let's talk a little bit about your budgeting philosophy that's built into the software. Really, there's Four rules to us. Can you tell us what the four rules are and why they matter?

Yeah, the first rule is really the only rule. Every other rule is just a function of that first rule. But the first rule is to give every dollar a job. And all we're saying here is figure out what you want, what you care about and make sure your money is doing that. But you also, if you want it to go to A, it can't maybe also go to B. And we introduce this idea of trade offs through classic zero based budgeting where you're always making trade offs. And the one thing we're trying to fix across all of society is, is this idea that you can do something and not be doing a trade off where you always are. So if the doctor, I'll use the stereotypical doctor from like millionaire next Door or whatever. If the doctor wants to buy a boat, the doctor can buy a boat and that might be great. But there is a trade off being made. And is the doctor aware of the trade off? If she is, great, but if she's not, we have a problem. So all we're trying to do with rule one is just surface that every time you do one thing you, you're not doing another. It's cool to do the one thing, it's great, it might be right, but be aware of those trade offs. So that, that there is, that's the magic. That's all it is, is surfacing that decision for people so that they make the right one. And the same thing you could say, well I want to do this thing like I want to, I want to go on a trip. And you say, well did you know that because you went on that trip you won't have money for your transmission that's going to blow in two months. Would you have still gone on that trip? And people will say, oh no, I wouldn't have. Well you, you were making that trade off. So all we're trying to do is just get them to give every dollar a job and make sure they're very aware of if you do one, you can't do another. Rule 2 ties into that because we're talking about giving a job to larger, less frequent expenses, a trip you want to take, student loans you need to pay off, actually that hits monthly. So that wouldn't even necessarily apply. Property taxes that are due to Christmas seems to surprise people, even though as far as I can tell it, it's always pretty consistent as far as when it arrives. But you know, so then when you're presented with the I Use sushi as my extravagant example. You know, don't read into that. But if someone, you know, somebody say, hey, let's go get sushi, and you're looking at your restaurant category and you're like, okay, I've got 25 bucks in there, I'll just spend from something else. Or worse, you look at your checking account balance and you're like, oh, I've got nine grand in there, of course I can go do sushi. Well, what you really should have been evaluating is should I go to sushi or should I make sure my Christmas fund is being funded? That's the trade off that's actually happened. Sushi or Christmas for the children. You know, and when people are presented with those decisions, they may still elect to be like, yeah, I'll go out with the buddies, I'll catch up on Christmas next month, easy, no problem. Or they may say, oh, I'm going to actually, I'll do it a little different. But they're still making a trade off. We're basically allowing, with rule two, we're allowing the future you to walk back, you know, and be like, hey, hey, hey, before you make that decision, just let me give you an FYI about what I'm facing here. In six months, would you still make that same decision? And it turns out you don't need a fancy education, you don't need to be good at math, you don't need any of that. When you present anyone with just these simple trade offs, they make the right decision. I never see it otherwise. So that's that second rule. The third rule is kind of funny that we have to make it a rule. But you set up the plan and then you're allowed to change the plan if you need to. And you said you worked, you work er, right?

That's right.

Okay, so this is a classic example. You get a patient that comes in, you're already starting to process information, you're getting the download right, and then based on any new information that pops up, you change your plan. Can you imagine how bad care would be? And here, you know, we're recording this during this time of crazy medical situations. And we've noticed how they're starting to change their approach to treating COVID patients based on what we learned earlier. Imagine a doctor that was just like, no, no, no, I had a plan going in. I don't care about anything new we've learned. This is what, you know, we'd be still, we'd be bloodletting still. You know, like we are always taking new Information and changing our approach. And we have to do the same with our plan, with our money. You know, so if you have this plan and you've put your heart and soul into it and you think it's great, and then you find out you're going to be hosting, you know, your family for two weeks unexpectedly, you need to change, move money into groceries or whatever. But we can't be beholden to this idea that, like, once it's decided upon, it can't be changed. It's horrible in medical care and it'd be horrible in budgeting as well. The final rule really quickly is just we want to get everyone away from the paycheck to paycheck cycle. We want you to start spending money that you earned at least 30 days ago. Just get away from that edge. And with your audience, you probably aren't dealing with that too much.

I wish that were true.

Yeah. But although they could probably walk away easier from the edge than others might be able to with just a few behavior tweaks. But yeah, you want to get to where your money you earned, that check was cut to you 45, 60 days ago. Just get away from the edge. You sleep better, your stress level's lower, you make better decisions. It's a better environment overall.

You know, I found this useful in my budget that I actually spend last month's income. Yeah, spend, save, whatever. And so that way I don't have to worry about what's coming in this month. That's not what I'm spending. Just being 30 days before just makes the process much easier because it's already set. You already know what you made.

Absolutely.

And so now you can work on the spending side. It's so obvious when you write it down. But I don't think most people think about that. Spend last month's income, not this month's income.

Well, and the problem with, you know, probably a lot of, a lot of listeners are on variable incomes, you know, depending on what kind of work they had. You can't budget an income. You don't know where the number is. What happens is people will have a high month and they'll be like, man, I'm rich. And then they'll have a low month and they're like, ah, shoot. Well, all we want to do is just get to where if you're on a highly volatile income, you just need to have more padding, period, because there's some volatility there. And then always just budget money that you actually have in your hand. You know, it's actually in the checking account, whether it's $30 or $30,000, we start people at the same spot. What does that money and that money only need to do again? And they'll be like, oh, well, on Friday I'm paid. It's like, no, stop. Just this money. We have to introduce the idea, foreign as it sounds, that we run out of money. We have to. So if you're always saying, well, I will earn this, you're never letting yourself run out of it. And when you don't run out, then you aren't forced to start doing those trade offs. And that's what we need to happen. We have to have the trade off start to surface. So only ever budget money you have. Anyone that's listening now, look at your checking account balance. Be like, there it is. What does that money need to do when new money comes in, Whether it's tomorrow or in three days or in three months? Same process again. What does this money need to do? It removes all of that ambiguity around, like, oh, I think I'll do this. Oh, I have this procedure lined up, okay, this or that, you know, I get paid and it's like, nah, just spend money you made last month.

So to recap, the four rules are give every every dollar a job to do. Break up your larger, less frequent expenses into manageable monthly bills. Change the budget if you need to, and only spend money that's at least 30 days old.

There you go. Yeah, perfect.

Genius, genius, genius.

And so patently obvious at the same time.

So obvious it's hard to patent, probably.

Yeah, there you go.

All right, well, let's move into some of the hard questions, right? Because this is what goes into people's heads. Why is you need a budget better than mint. You know, a lot of people talk about, well, I got mint, why wouldn't I just use that? What's the advantage of you need a budget over that?

Do you remember that? Did you ever see that movie with Tom Cruise where they could predict the future?

Oh, I love that movie. Minority Report. Yes. With the Precogs.

Yes, the Precogs. They were weird. It was a weird. There was something weird. But that movie was pretty kind of dystopian cool. And you know, you'd get put in prison for something you were going to do or whatever. And then you also have like classic CSI crime stuff where at the beginning of every episode, it's like we have a body. And then the whole, you know, whole rest of the time is, how did the body? What happened? Why? Why was this person dead? Mint is the CSI situation. Mint is like, you look and you're like, okay, you know, honey, we have a dead body here, which is your finances for the month. Like, what happened? And you'll look back and you're like, oh, we overspent on this. Oh, we did that. Oh, we did this. You know, and you can come up with an explanation, especially like armchair quarterbacking with retrospective glasses on. Like, everyone can do that. Like, you and I can explain all kinds of things. You know, just looking back with that hindsight, we at ynab, we're trying to do the Minority report thing. We're trying to prevent the corpse from appearing, right? We're trying to prevent the death. And so all we're saying is, well, let's just look ahead and plan what our money will do. So instead of saying, oh, we shouldn't have spent this much on restaurants, all we're doing is saying, what should we. Or better yet, I hate. I hate the word should, because it sounds like, like you have some obligation to spend more or less at a restaurant or whatever. But what do we want to spend at restaurants? One is looking in the rearview mirror, kind of examining how that all happened, and another one is looking forward and mapping where you want to go. Mint is excellent at gathering that data and having you look back. You know, there's another side of it, too. If you're using Mint and it's a great. It's a great product. Like, it does the job it's supposed to do of giving you kind of an all in one dashboard. But you are also the product for Mint, and you just have to be kind of eyes wide open with that. Like, you're the product with Facebook, with Mint, with a lot of companies that have monetized data in that way. And it's a business model that works. And I think consumers are learning and going in more eyes wide open than they used to in that regard. But at ynab, we don't touch data at all. The only way we make money is when you pay us 84 bucks a year. So in that way, I like that you and I can have this arm's length transaction where you know how I make money, and I know that you like what I'm giving you without any kind of sneaky like, hey, I hope you care about your finances. But also try this credit card. I mean, it's misaligned for what we're trying to do.

It's almost like a fee. Only advisor in the financial advisory space.

Yeah, exactly. It's cleaner. It's like, this is how you make money. So now I feel like you have my best interests at heart.

So another question people ask is, why is. I mean, you read a Dave Ramsey book when you were a teenager. Dave Ramsey's got a budget program, an app. He calls it Every Dollar. Why is you need a budget better than that?

I think we have a better product. Like, I think we have a better, I mean, design wise, I could go really into details, but I haven't spent a lot of time in every. When they launched a couple years ago, I checked it out and everything and it was pretty, pretty cool. Far better than what they had offered before. As far as promoting cash and things like that. I think that ship sailed, but I haven't looked at it recently, so I can't speak to specifics or anything like that. But we are obsessively focused on that product experience and I think we nail it from a workflow perspective from you don't want things tedious, you want them to add value. So there are times where we want awareness, but we don't want tedium. And we have a lot in the works that I think will just keep edging us away. Just product quality, to be fair. Like, I think Dave Ramsey's, his business is so massive. So while I get to focus on this tiny little area, this one thing we do, we make money one way. You know, he's got so much going on. I think product superiority comes a lot from just rabid focus on one thing, you know, from the very top. But everyone's got to kind of run trials and I mean, you got to, maybe you might like something about it more. So it's really up to each individual, you know, So I don't, I don't mind bagging on, you know, on intuit because they're so huge. But everyone's got to try, try these out and see there's room in the market for, for several players.

Now when you got started, you just made your own spreadsheet. Why should somebody use your app instead of just making their own spreadsheet?

Well, we. Okay, here's one. We talked about these high income earners that are possibly listening and like, let's just, you know, let's just think through like what the value of an hour is worth and just ask yourself if you want to spend 40 hours building the spreadsheet and then maintaining it. And if you do. And it's the same way, I like growing my own food even though it's not economical. Right. But I get some other intangible benefit from it and possibly superior nutrition. And someone might get that from building their own spreadsheet. So if that kind of like scratches an itch for you, go for it. And especially if you've already built one and it's working for you and you're hitting your goals and you're in this state where you're like, man, I can't believe how well I'm doing financially, then by all means, like stick with the spreadsheet. But if you're kind of saying like, I hate having to tinker with this or man, my partner won't ever give my spreadsheet the time of day because your spreadsheet's horrible, you know, but you, you don't think so, but everyone else knows it but won't tell you. So there are some things that you may consider, you know, that you might just say, you know, I'm going to outsource this bit of management. What, what? Some pros handle it. But again, if you're hitting goals and it's working, you know, don't, don't change anything.

Some advocates, particularly in the financial blogosphere, talk about being anti budget, you know, and they say, well, just pull all your savings off at the beginning and spend the rest. What's your response to that approach?

Yeah, that's just a really simple budget. That's all it is. They're just basically saying, I'm comfortable with really grove categorization. They might have a high enough income where they can get away with that. As incomes get lower, you have to be more careful and as you get categorization or jobs that are more granular, it provides information for you to make better decisions. Some people may just say, if my budget is just saving this, giving this and spending the rest and they have enough cushion, they can totally do that. It's not anti budget. It's just a very simple budget. And it really only works with people that have lots of cushion because then when a car repair comes, they're just like, oh, that's unfortunate, but I'm sitting here with 18 grand in my checking account. It's fine, you know, but other people need to be setting aside money intentionally for car repairs because they, they're making those trade offs and they have to recognize that they are trading off to not be able to make the car repair. If they spend over here someone that's more flush, you know, which is quite a place to be, they just don't have to worry about it. You see the anti budget, those overly simplified budgets with high income individuals, but when it gets down to the lower income, it's not disingenuous, but it's not good advice to not have them start to be more thoughtful about incoming larger expenses and the trade offs that they're required to make. So I have a very grove high level budget at this point. It works. We're hitting our goals. So I'm probably more in that camp than people would expect. You know, I don't have a toothpaste category.

Very nice, very nice. Now I was looking at the site in preparation for this interview and I see that you need a budget is now on Alexa. I'm curious if it yells at you when you overspend.

Yes, she doesn't have a yelling option yet. Like that would be cool if you just like could toggle a switch as a developer. But yeah, you can ask her like, hey Alexa, I just spent, you know, 20 bucks at Walmart on groceries. And she'll say, okay, yeah, I put that in. And so she'll record the transaction for you. Or you can say how much is in groceries? And she'll tell you too. You know, caution though. Like your kids can ask how much is in Christmas. Your friends can ask like, how much is in Jesse's woodworking budget and find out things you may not want them to find out. So she'll blather on to anyone that asks. So you just gotta be careful there. But it's pretty cool, pretty cool tech. I mean, it's early stages with voice ui, but I'm hopeful that it'll get better and better.

You know, some people might say the budgeting is just common sense, but yet so many people don't seem to be able to figure it out without some kind of help from an app like yours. Why do you think that is?

I think people approach budgeting incorrectly. So I don't know if it's the app so much as just the mental model. They think that budgeting means dieting and it doesn't. It just means planning. And they think budgeting, you know, means restriction. Like I should spend less. If I'm budgeting, I should inherently spend less. And it doesn't mean that. It means you should spend guiltless. They think that when you budget your forecasting, you're always saying, here's what I will spend, here's what, here's what I will earn. And it's not that it's about allocating current dollars that you have on hand. Yeah, they, if they're in a shared financial situation, some will think that budgeting is kind of like they kind of weaponize the budget against the other person and use it as a little bit of a browbeater, which is very unfortunate and not at all advised. On the flip side, you have people that won't ever accept that they should budget, and they're in a shared financial finances situation because they think it means that they can't ever spend, and that's just not correct. So if you're sharing finances, it's still only about just, what do you guys have in common and what's your plan? And make sure you're on the same page financially. But all a budget is, is a common language between two people about what the money's going to do. It's not, you know, never, ever use it to wag your finger. It's just. It's not going to be effective at all. But budgeting, really, for the most part, it's just done incorrectly. Our app is excellent, but the way we teach people to think about how they should manage their money, that's. That's where the magic's really happening.

So many great quotes in there. Budgeting is not dieting, it's planning. That's awesome. It's not spending less, it's spending guiltless. So there's a lot of truth, a lot of pearls you're dropping on us there. I appreciate that. So you've been a very successful entrepreneur. What advice do you have for the entrepreneurs in my audience?

You know, I touched on it a little bit. I think in this. In this day and age, this is probably more relevant than it would have been 20 years ago. But when you want to start something now, you almost have to Google how to start something, or how should I feel about wanting to start something? Or do other people want to start something like me? Like, all these weird validations that we search for, or then we also are searching for, like, the best way to. We're so afraid of just doing. And where it's like, well, I got to know the best way to do this. You know, like, I. I'm a horrible woodworker, but I've learned the most when I actually start cutting wood, gluing things together, trying to unglue them, you know, fixing mistakes than I do watching how to do those things. And we have so much information at our disposal that it actually can really move us into this state of just constant information gathering instead of doing. And I am genuinely grateful that I started this business at a time where my first thought wasn't, wait, what's the best way to sell a spreadsheet? What's the best way to. It was just, I need 350 bucks a month for rent. I'm going to build a website, I'm going to start. I made so many mistakes and none of those mistakes mattered, except they just taught me things. So my advice to any entrepreneur is read less and do more. You will learn lessons that will stick with you far longer. I mean, here we are on a podcast like you can podcast yourself to death. You know, like there is a podcast for like the niche of the niche of the niche group of people now. And we gotta be careful that we are not just sitting there consuming, but that at some point you pull the curtains and you're like, I'm gonna create something now. You know, it feels risky, it is risky, but that's where all the learning and reward happens. So that's my advice to the entrepreneur. Bias toward action.

In a lot of ways, you were in a similar situation to a physician that's thinking about some sort of side gig or starting a business or some sort of entrepreneurial hustle. And you had to step away from a very solid, reputable, you know, safe, high paying career and step out into your entrepreneurial pursuit. How did you make that decision? You mentioned it was 10 months in. Was it simply that you needed more time to do it or was it that you were making so much more money with the business that it just seems silly to be going to work as an accountant at that point?

It did seem a little silly. I actually had to go. I talked with an advisor through my church. You know, he was like what you'd call the pastor of our church. And I went to him and we had just moved in. I didn't know the area at all and he didn't know me. And he was just used to like, we actually were an area with lots of med students, lots of like consultants and so lots of young families and things. And he didn't know me from anyone, but he, you know, being the, you know, the religious leader that he was, I knew that he had to take my appointment, right? I knew he was a very successful businessman. So I was like, well, this is perfect. He has to take my appointment. And he's a really brilliant business guy. You know, he was, you know, part time, kind of unpaid clergy. So I set up an appointment with him and only in hindsight do I realize he thought I was going to unload some like heavy problems I had. Or, you know, here's this young guy with this young wife, two little kids. What has he done that's Horribly wrong that he needs to help me fix and counsel me out of and things. And I basically sat down with him and said, I have this little side gig. And. And he's like, go on. You know, like, what side gig do you have? You know, this is back when, you know, marijuana was much less legal than it is now. So he might have been. He might have been thinking, okay, is it this kind of a deal? And then my next line was, and it's making pretty good money. And so I'm sure he's just like, oh, no, you know, what's the deal? But I basically just started talking to him about this software and his face just totally morphed from like, somber counselor of moral things to like, business consultants. So happy that things were actually going well for me. And he asked a few really interesting questions that I've always found instructive. He said, do you have any debt? And you know, because I was like, I'm making double what I make at my accounting job. I'm making on this side gig, and I work 80 hours at the accounting job. So this was the quick math. And he's like, do you have any debt? I said, no, I'm renting an apartment. He said, do you have any kids? And I said, yeah. And he says, how old are your kids? I said, They're 2 and 0. So he's like, okay. And then he said, would your wife be on board if you were to do this? And I said, yeah. And then to him it's like, you have no debt, meaning you're living within your means, which means it's essentially risk free, right? These little kids, you can do anything you want with them. They're super resilient. They have. All they care about is that you play with them, right? So there's no TUs in there, there's no risk from the kids, and I've got a wife that's on board. And so he knew that I was on the same page in that regard, which was important. And once those three things were checked for him, he was like, well, you'd be an idiot not to. He didn't say it exactly like that. It was just like, man, go do it. You have nothing to lose. And it took someone else telling me that for me to realize how hyper conservative I was being. I could always fall back and go get another accounting job.

Always.

Well, you know, functionally always. But this was an opportunity where I had no risk. And because we were living within our means, we were living off of my accounting salary while earning double My accounting salary on this side gig. So we're functionally living on, call it 33% of our income. And because we had built up this, that living gap, you know, where we have these means, suddenly you could, you could jump at an opportunity. If you have someone living, I don't care whether they're making a million dollars or, or $100,000 or whatever. You have someone living right on the edge where they have no means, right? I mean, they're consuming every bit of it. They have opportunities that they don't even recognize because they can't even entertain them. It's the same reason that you and I, we don't. Well, perhaps I don't get a letter or a phone call from someone saying, hey, we're looking for investors. Minimum buying is $80 million. Would you be interested? I never get those calls ever. But there are people that get those phone calls. Why? Because they have $80 million. I do get phone calls around much smaller investment opportunities, and 20 years ago, I wouldn't have gotten those phone calls. So these opportunities that we have are only ever available if we're living on less than we earn. And as poor and trite as that sounds, it is the only way things work. And I am so glad that back at that time, we were living well within our means so we could recognize the opportunity. I could get a little kick in the pants to actually do it, and we could, we could go for it. But everyone has to recognize, even if you don't know what you want to do yet, until you're living well within your means, you won't even see the opportunities that are there. You have to create that situation first.

Well, we better wrap up here soon. But you've got the ear of 30,000 listeners here. Mostly high income professionals, majority physicians and dentists. What have we not covered today that you think they need to know?

I feel like I've blathered on pretty, pretty solidly. Okay, here's, here's like one out of left field, right? In my master's degree, you know, education, we had a class on fraud. And I'm gonna, I'm go completely different direction what anyone might have anticipated. But in my fraud class, we learned all about how you perpetrate fraud in business and how you prevent it. And one thing that really stuck out to me, and this is probably why I'm still the CFO of my business, one thing that really stuck out to me was how common fraud is in very, you know, pretty small businesses. So I would give just not caution like you have to be super cynical or very wary. But you need to make sure in every business, because you mentioned dentists, which trigger me. Dentists are the most stolen from group across all small businesses. It's a fact, it's not hyperbole. And I imagine other professionals in similar situations experience close to the same thing. Here's a little tip. You have to make sure when you're talking about your assets and essentially cash, things like cash, gift cards, spending access, credit cards, things like that, you need to make sure that you have separated the authorization of spending from the recording of that spending in your books and from the actual possession of that resource. It's called the Ark authorization, recording and custody. You know, if you have a pile of gold, one person is allowed to spend the gold. One person actually has access to the vault of gold, and another person records how much is spent. If you have one person that does two of those, you have a potential, not. Not necessarily a given, but. But a potential for fraud. So this is not at all about budgeting, but when you say that I, I'm so that class was both highly entertaining, highly fascinating and very scary for a lot of professionals that with the best of intentions they delegate many responsibilities. And you can put a person and this sounds like I don't believe in humanity when I really do, but you can put a person in such a situation where they have incentive and opportunity to slowly start to let things slide from a financial controls basis and it spirals wickedly out of control. And then what happens is you have your heart broken because you trusted that person, you fire them. They might get kind of blackballed in some form or another, but it basically doesn't serve anyone well at all. So that surprised me because that wasn't what I would have probably said in any other podcast, but in this instance it is very relevant. So it's just Ark authorization, recording, custody. If you make sure that someone's doing each one of those individually, you're golden.

Awesome. Thank you for sharing that.

You bet.

And thank you so much for coming on the White Coat Investor podcast. This has been an interview with Jesse Mecham. He is the founder and CEO and as we learned, CFO of you need a budget. If you need some. Some help with your budget. If you need to get control of your spending, you can get his help@you needabudget.com for just $84 a year, you can get your hands on this pretty sweet app software. It's even on Alexa and it will teach you how to generate. That means that allows you to have choices in your life. Thank you so much, Jesse, for being on the podcast. I appreciate all that you've done.

Thank you for having me.

Well, that was awesome. I really enjoyed that interview, not only from the budgeting perspective, but also just from the entrepreneurial perspective. I think it's really fascinating to interview entrepreneurs and see what their story is. I hope that's helpful to you to talk about basics like budgeting. I mean, I'm surprised how many doctors I run into that are living hand to mouth that basically are spending that month's paycheck. And yes, they've got a few tens of thousands of dollars in a retirement account and they've got some home equity and maybe they've got a boat or something. You know, they've got some wealth, but they're really not building it very quickly. And the main reason is they're just spending everything they earn. So whatever it takes, whether you want to do it using a spreadsheet or, you know, using paper and pencil and envelopes with cash in them or a budgeting app, like, you need a budget. Figure it out, Figure it out and live on a budget. In a lot of ways, a budget is training wheels. You know, once you live on it for a while, you train yourself to spend less, and then you find that you don't actually need the budget. And I think that's a common situation for financially successful doctors. You know, as Jesse mentioned, we do or should have a lot more fluff in there. There's a lot more gap between what we're earning, what we actually absolutely have to spend each month. And so find that sort that out. Until you solve that, it doesn't really matter how you're investing your money. If there's no money to invest, you're not going to be successful. You know, I had to laugh when he was talking about washing Ziploc bags because I tease Cindy all the time. Cindy's my podcast assistant. So as soon as he said that, she rose up over the computer monitor to give me the evil eye because I give her a hard time about it. You know, I always use this as an example of rewashing and reusing Ziploc bags and drying out paper towels and reusing them and those sorts of things. I don't know that you have to be quite that careful, particularly on a physician income, but the mindset of waste not, want not I think is pretty useful. Did you know that the White Coat Investor not only has a podcast and a blog, but several books that will help you on your way to financial independence. These books cover topics such as asset protection and minimizing your taxes to keep more of your hard earned money. They discuss plans for insurance, housing spending, student loan elimination, investing and estate planning. You can learn how to become a millionaire within five to 10 years of leaving residency and how to invest in a sensible, low cost and effective manner with or without the assistance of a financial advisor. There's even a book geared directly toward medical and dental students so you can start optimizing your finances early in your professional journey. Find the book that is right for you at the WCI store, at shop.whitecoatinvestor.com or on Amazon. You can do this and the White Coat Investor can help. Be sure if you need help with retirement plans, HSAs or self directed IRAs or 401ks that you check out our recommended page under Retirement Plans. Thank you. For those of you who have left us a five star review and told your friends about the podcast, truly this grows more and more from your word of mouth than anything else. Keep your head up, your shoulders back. You've got this and we can help. Stay safe out there. I'll see you next time on the White Coat Investor podcast.

My dad, your host, Dr. Dalla, is a practicing emergency physician, blogger, author and podcaster. He is not a licensed accountant, attorney or financial advisor.

So this podcast is for your entertainment.

And information only and should not be considered official personalized financial advice.