Episode 221: Gaining Total Control of Your Money with Jesse Mecham

Oh. So let's talk about the rewind bars. And I'm not trying to promote the rewind bars, per se, but here's what I found with these bars. Like, I think, actually I do think they're delicious. But my challenge is, well, I'm just naturally a skinny guy because I think it's a high metabolism. I can eat like 15 of these a day. And I think no matter how healthy you're eating, when I say you, I mean the proverbial you. How healthy people are eating, it's regardless of what you eat, based upon the quantity you eat. If you eat 17,000 rewind bars, it ain't gonna serve you well.

No, no. Well, I think moderation is the key for anything. Any excessiveness is not gonna serve you well.

That's why I think Jared, Remember that guy Jared?

Yeah, for Subway. Yeah, yeah, yeah.

Like, I don't think there's a judgment the quality of Subway's food just.

No, no. And I would be curious to see the long term effects of eating Subway.

What happened to him? Didn't he go to jail for something like.

Yeah, something weird did happen.

I think he was a deviant of some sort.

Like creepy, Creepy sexual deviant, I think.

A sexual deviant.

I think so too. I actually forgot about that. Glad you brought that up on the show. On that note, welcome everybody, to the Profit first podcast.

This is the episode you've been waiting for. Finally, we're gonna get you a budget. Go. Yeah, that's right. I did all the grunts. I know. I've told you a million times, Chelsea, that when I. People nowadays come up to me and go. And they go, you're a fan of the show? They're like, yeah, kinda. Other people, they'll get surprised. They haven't heard the show. And like, why is that person grunting in your face?

Awkward.

And like, why aren't you grunting in my face? Who am I? I'm Mike Michalowicz. I am the author of Profit First. I'm the host of the show called the Profit first podcast. Coincidentally, also, I've written a book called Clockwork. It's all about business efficiency. If you want your business to run on automatic, you want to run like clockwork, read the book. I've also written the Pumpkin Plan, some other books, all designed for small business owners to achieve entrepreneurial ecstasy, I guess is the word. And I'm joined in studio by my co host, Kelsey Ayres.

Hello, everybody.

I didn't finish your name. You come in. It's spelled A Y, E, R, s, s, s. 15s's. Yeah, 15x's. And you, my friends, you are listening to the Private first podcast. This is a show where we explore every single element of profitability and foundationally. If you don't have a budget, you can throw profit out the window. So today we're bringing in the master himself. Jesse Mecham will be joining us this afternoon, or depends what time you're listening. This morning.

This evening.

Yeah. This awkwardly late night, 12 midnight, where you can't sleep and you're just listening to podcasts. Jesse Mecham is joining us to talk about establishing a budget. He is the guy who founded ynab. You need a budget. You've heard of that before? You've heard that a million times. All right, but before we do that, I do want to tell you where you can find us on the interwebs. So where is it? Cal State.

You can find us on itunes. Stitcher, Tunein Radio, Google Play, probably. Or any podcast or anywhere.

And I want people to know, like, you just. You don't read that from a script. You just were staring in the air saying that. Isn't there some other podcast we're on? I don't know.

Castbox.

Castbox.

That's what I use. Or I used to use. Podcast addict.

Yeah. Email us. Tell us what podcatcher you're listening in.

On and what makes it better than other ones, because I'm always curious.

And here's. Here's the promise. We're gonna make you the first person that emails. Kelseykemicalitz.com we're sending you a box of Rewind on us.

Rewind.

Rewind. So it's part of the music. So horrible. A box of Rewind the bar. You can. The next time you listen this episode, you can be enjoying the. The snack bars, the. The power bars, the super bars, he calls them, that we're eating. Okay, I got a quick icebreaker before we kick into our show.

Okay.

Who was your childhood actor or actress, I guess, for you as an actor. But who knows? Crush.

I feel like we've done this before.

Seriously?

Yeah.

Oh, Barry. The same answer. Or maybe it changes. I don't know.

I feel like it's a hard one for me. I. The one that comes to mind is honestly Steve Buscemi, because I just loved him in Fargo, even though it's so creepy. Yeah, but he was like the good bad guy. Like, something very endearing about him.

Who's that? Australian woman married to Tom Cruise?

Yeah, that's what you said. Last time, Nicole Kidman.

Oh, okay, so it's still true.

Yeah.

I'm being a rewind boy. Yeah. Stretch it a little.

Can you stop? I can hear your lips smacking.

I'm a lip smacker when I eat. Only on radio or broadcast.

Yeah, you have to emphasize it.

I do, I do. I just realized that no one can see us, so you have to play up all the tonality.

You're welcome, listener.

Hey, do you have any community shout outs?

I do. This one comes from Jackie Johnson. She says she's a real estate agent working and living in South Africa, and she has a commission only business. She identifies with many of the solutions that you talk about making decisions based on what the bank balance is and then what when the terrorist that's in, sell, sell, sell. Another of my coaches, Tom Ferry, calls it commission breath.

Jackie, thank you for sharing that. And it's so common. I have a friend, Barry Molt. You know Barry, right? He hasn't come. We've had him on the show. We gotta get him out here. The guy is such high energy. But Barry wrote a book. It's not called the Double Helix, but he brings up the concept and what a double helix is, is like that. I think it's like DNA or something where the kind of wraps like two S's wrapping around each other. And what he says is businesses are in this constant double helix. One thing is rising while the other things declining. And the two things that are opposing each other are the deliverables of our promises. The service or the product and selling. And he goes, in a small business, when we're delivering, we put so much effort in taking care of the customer and getting it out to them that we don't have enough resources or times to sell. So our sales start dipping. Then as that project approaches completion because we haven't been selling, there's a panic. It's like, oh, my God. And that's where the helix flips. Then we go into oh my God, to sell, sell, sell. And we start selling as aggressively as we can. But now we're not focusing on the delivery. So now no income's coming in until we sell someone. And we keep flip flopping back and forth. He has a solution to it. I'm not gonna say what it is because we. We still have time. And I don't want to give away his book, but read Barry Moltz's books. I'm trying to buy you time, Mike. Moving quickly. So buy Barry Moltz's books. And guess who just walked in. Very Slowly. It's the Hawaiian Lumberjack. Say hello.

Hello.

How's it going?

Good. How you doing?

Splendid.

I want everyone to know you are wearing your Hawaiian shirt today.

I am.

We haven't had you on a shoot.

The button undone and chest hair coming out.

Yeah. You're a throthy chest hair guy.

That's what Hawaiian lumberjacks are for.

That's right. That's right. Mike has. You haven't been on an episode in a long time.

I know, it's been too long.

So let me just refresh our listeners memory. Mike Scalise is known better known worldwide as the Hawaiian Lumberjack. I dare even say you just got yourself a logo called.

Yes.

Yeah, I did. I love that you got a logo without intent behind it. I'm like, oh, you started a podcast? No, I'm like, are you starting a newsletter? No. I'm like, what's the logo for it? Like, I'm the Hawaiian Lumberjack.

Just your brand.

Exactly.

Yeah. It's your brand. But you're not doing anything with it yet.

Not yet, no. Next step is vanity license plates. Hlj.

Oh, are you really?

Yes.

All right, so you're just building the brand up with no content behind it. That is novel.

Well, that's to come. That's to come.

Yeah. But you're.

It has to come organically. Right? You can't force it.

I think there's a lesson to be learned here. Like most brands, Kim Kardashian, so forth, do something behind the scenes. A TV show, a reality show. Your approach is you're building a magnificent big brand first with nothing behind it. And that's the magic.

I guess so, yeah.

You could advocate that you're not nothing.

No, I'm not saying you're not. I'm just saying, like, you're first building the brand and then when they discover you, then you're going to reveal something at some future point, perhaps something big. Okay.

Yes.

Good.

Look out.

I like your approach. All right, Mr. Hawaii Lumberjack, you always come in here with a tip, so I assume you've walked in with a tip.

Well, not necessarily tipped, but a fact. An interesting one that I thought many of you might not know. So without further ado, I just wanted to share that the term itself, lumberjack, is an antiquated one.

Oh, is it offensive?

I don't think so. I think it's more badass than offensive. So. But the term lumberjack I found is for. Well, I actually do. Being a lumberjack myself is used for the old, old world view of A lumberjack, where you're using an axe to smack down a tree, you know, but the modern. What we would think of as of a lumberjacker. The guys who use chainsaws.

Yeah.

They're actually called loggers.

Okay, so don't get it right. And so what do you just.

Don't get it wrong. Don't get it wrong. Don't get it wrong.

Don't get it right.

So in response to. Is it offensive? Let me clarify. If you call a lumberjacker a logger. Yeah, that is offensive.

Because they're carrying an ax and he's like, dude, I don't.

Yeah, I don't.

I don't go through that modern chainsaw nonsense. But what if you call a logger a lumberjack? They're probably like, oh, that's pretty cool. Thanks for the old school.

Yeah, yeah. You're basically putting them up on a pedestal.

Okay, there you go, listeners. Michael the Hawaiian Lumberjack Scalise, thank you so much for that insight today.

Absolutely. That's what I'm here for.

All right. And you listeners, you heard it here first. Don't get it right. Do not get it right. Okay. All right. I also want to thank our corporate partners. Make the show a reality. Right. Networks nextiva and Receipt Bank. We'll talk about them in just a minute. But now, the moment we've all been waiting for. Kelsey.

Yes.

Is the introduction of our guest, Jesse Mecham. So let me explain who we're talking to today. Jesse Mecham is the founder of ynab. That's you need a budget. He teaches individuals, families, and business owners four rules of thinking about their money in a whole new way. While broke and newly married. As a newly married college student, Jesse launched his original software as a spreadsheet for himself. And guess what? It made money. Now I told it out to the world. Now you don't know. This is a little hidden fact about Jesse. He and I met in the midst of the winter. So I mean, it's maybe four or five months ago now in New York City. He was traveling and visiting New York City, and just recently, he moved to New York City for three months.

That was while you were there.

Oh, I thought I triggered. I thought I was the impetus for that. He moved to the car. The buildup was not nearly as good as I thought for his family of eight. They moved to New York for three months while I was there to visit me. That's it. Jesse, welcome to the show.

Welcome.

Thanks for having me.

So I totally messed it up. I Thought I was the impetus behind your move to New York. How was that visit?

It was awesome. We miss it terribly.

Oh, how do you move a family, especially a family of your size, there's eight of you to a new city and, and, and live that way. I mean, and where do you live?

In Utah normally. Where do you live?

Yeah, we normally live out here. You know, it's fine. But I wanted to give my kids a bit of an experience, you know, so I've been to New York one other time and I just remember walking down the street, I remember why I was there, but we were, I was walking down the street and just thinking, this is awesome. This, this place is crazy. And then my next thought was, my kids have to see this place know, so I tend to kind of overdo things. So I didn't, I wasn't really satisfied with, hey, let's go visit. It was kind of like, let's go get the real experience, you know, pretend to be locals for three months. So I don't know if we did a good job pretending, but we were there for three months and it was, it was fantastic. It's really intense living there that way with all these little kids, you know.

How did you.

How old are your delivery? And we were, you know, we were set after that.

How old are your kids?

Oldest one's 14, youngest is 2.

Wow.

So a 2 year old coming to New York, I mean, I can't even comprehend, I assume when you, you know, five years from now, you don't talk to your two year old and say, hey, how did you think New York was? So, yeah, so. So you're not tourists, meaning you're not just hopping on the, that red bus that drives you around every day. You're actually raising your family in New York. How did.

Yeah, we kind of, we homeschooled them. Ish. You know, we just kind of like. I kind of just said, man, they're learning a lot. They definitely learned a lot of new words, like on the subway.

Oh, yes. Oh, yeah.

They learned a lot about just how to get around the city. We had our two oldest boys, you know, they, they could go to like some church activities we had there. It was like two stops down, you know, same subway line, but they thought they were, you know, kings. The fact that they could hop on the subway for two stops and then hop off and, and I love that, I love that they, you know, they felt independent in that way. And, and then our two year old, I don't know if she won't remember anything. Maybe she'll have like this weird draw to large Cities when she's 17. She'd be like, dad, where does this come from? I don't know.

I want to go to the, uh.

That'S where it came from. So.

So let's talk about Ynab and the inception of it.

Yeah.

You yourself were broke, right? And you, you did this for yourself?

Yeah, absolutely. I mean, we, I, I married young, so Julie and I, we got married when we were 21, 22, and we were, you know, I was still in school, I was studying to be an accountant, and I just picked that major because the job placement was like 99 and a half percent. And I think that's because no one wants to be an accountant. That's maybe what I figured out, but at least for me. So we were doing that and I just realized, man, once we're married, we're going to be broke. Like, we just won't have a lot of money. I still had three years of school left. And Julie, she had majored in social work. So she had a job lined up, but I think her full time job with a degree working for the state of Utah in the mental illness field, it was something like 1112 bucks an hour. So things were super tight. And I just built a little spreadsheet for us and that was that. And then we got pregnant fairly quickly and had our first one on the way. And that was where I realized, okay, if I want Julie to stay home, because she, she more than anything, she's like, I want to be home. I want to be home when this, when this baby's born. I want to just be, you know, full time mom. And so I wanted that too. And I realized with Julie stopping her work, even at that, you know, fairly mediocre pay, that was a, that was the main, you know, the main source of income for us. So I was crunching numbers, trying to figure out how we could get by on savings if I could work more hours at my job and still get school wrapped up. But I had, you know, two years left. So the whole idea, this big vision behind, oh, I should start selling this spreadsheet was because I needed to make 350 bucks a month for rent. That was my big gap, you know, to cover. So I, I wish I could say I had this, you know, I was on a mission to get the world on a budget, but I really was on a mission to make rent and then get through school, you know.

So what year was this, by the way?

This was 2004. So it was 14, 14 years ago.

And so you start selling a spreadsheet, at least in today's terms. I can't even imagine that. I can't imagine saying, oh, someone emailing me, hey, pay $300. I got this spreadsheet that will help you budget. I'm like, what? I'll just get an online app.

Yeah.

So, yeah, yeah, there was no. There was no. Like, you had Quicken, you had Microsoft money. You probably had some other small players in, like, the personal financial management space. And my. I did. I did market research to the extent that I looked up whether anyone else was selling spreadsheets for any reason. And I'm thinking, well, okay, there are a few people doing it. So I did it. I put it out there for 10 bucks, and I thought, I just got to sell 30, 35 of these a month, you know, one a day, and I'll be able to make it. And no one bought it for two weeks. You know, I'm getting traffic. AdWords was five cents a pop, you know, back in the day. And so I was getting traffic there. Nobody was buying. And a buddy said, nobody's going to pay 10 bucks for anything. It makes it cheap. So he said, double it. So I doubled it to 20 and sold my first copy that day, which is a. You know, it's a testament. I always think about that when I think about pricing. You know, a lot of times, the entrepreneur, the creator is the one that devalues the product more than anyone else. It's. It's crazy that way. So, yeah, it got a little bit of traction that way, and. And I just started, you know, iterating on it from there.

Well, I think there's an important insight here. You have an idea, it solves your problem. You realize other people may have this problem. You sell the first one and you approached friends. It sounds like. How did you get beyond the friend stage? Because they may be doing you a favor. Hey, listen, it's 20 bucks. Just. Let's help them out. Let's help out a friend here.

Yeah, well, my friends. No, my friends, they weren't buying it. They were just telling me, oh, yeah, that's great, you know, but they weren't paying me money.

Real true friends.

I'm not gonna buy that.

That's great.

It's an amazing idea, Jesse.

But quite frankly, I'm so good. This is so good. I'm sure people will love it. And they turn around classic. So, yeah, I just, I learned how to, you know, throw a website up and I, you know, I. I was Gonna say, I learned how to market it, but I didn't. At that point, I knew nothing, but I put it out there. And so I was just getting people online. You know, I threw a PayPal button up on there. That was back when you just, you know, drop a big old block of code on your site and money would start coming in if people would pay you. So that's what I did. And, you know, you worry about things like, oh, people will steal this, and what about that? And then you find out, a lot of the details you worry about, they don't matter at all. You got to figure out if people are even going to pay you something before you worry about, you know, whether you should get a trademark or something or whether you should have a logo. No offense to the lumberjack guy, that kind of thing.

No offense taken on his behalf. So it's funny, I heard someone once say, entrepreneurs worry about their intellectual property, their ideas being stolen. He goes, the real problem is convincing people that you have a good intellectual property, a good idea. Oh, yeah, let's give people the juxtaposition. Where is YNAB today in comparison to that first startup?

Yeah, so we. So I quickly realized that there was, you know, limitations in the perceived value of the spreadsheet and in absolute value. So about a year and a half after selling the spreadsheet, I met up with the guy online who was a developer, who's now my CTO and business partner. And we made an agreement where he could build a separate standalone piece of software. It wasn't called an app back then. It was just software that you download onto your desktop. So we built some desktop software and we launched it end of 06. And right about that time, I was doing my kind of the CPA thing, got my CPA license. Still thinking YNAB is just a little side thing, make some side money, but not a career. But over years, I've been convinced otherwise. And now we've got apps and we've got an API people can build on and connect with us and everything. So we've got iPhone, apps, Android, and then our web app, and we're far more sophisticated than we were back in the spreadsheet. Although I do feel nostalgic sometimes when I think about those simpler times. But. And I think we're at about 70 employees. 70 employees.

And I assume the user base is thousands, tens of thousands. I mean, it's a substantial.

Oh, yeah, yeah. I think we're probably, at least the way the media perceives us, we're probably, you know, you got mint at like this, the behemoth, you know, the Goliath. And then I think we're probably a very distant second place.

So let's talk about the four rules. When I was reading your intro, I mentioned that there's four rules of thinking and about money in a whole new way. Can you layer what those are and help us get a budget?

Yeah. Yeah. So I'll maybe go through them super quick, and if you want to dive in, then we can, we can dive in where you want. First rule is, we say give every dollar a job, meaning you proactively decide what your money will do before anything, any money leaves. And the big kicker with this, the big difference is you only do this with money you actually have on hand. I know that for a business owner like myself and these listeners, a lot of times it's the forecasting. We're going to forecast, what will we sell, what will we sell? And that's great for planning and annual plans and visioning and things like that, but when it comes to budgeting, you only budget the money you have on hand, and it makes a world of difference. So rule one is give every one of those dollars only the ones on hand, give them a job. Number two, we call it embrace your true expenses. And it's essential that, you know, I can list a ton of these for business owners, but you've got your quarterly taxes. And I know, as you know, in profit first, this is a big deal. So if you think about the profit first mentality or you think about just these large, less frequent expenses that end up knocking business owners back and really throwing them off, and if you can just break those up into monthly amounts, and you just treat your taxes, you treat your, you know, life insurance premium, you treat an annual retreat for your company, you, you treat the bonuses, all of those things, you treat them like their monthly bills, and you just set aside for them, you stick them, you know, right in. You know, we use, we use software that just allocates in different categories. And so you, you see all these different balances climbing over time. And then when you need to pay that bill, large as it is, all that money's there. And we want it to be really normal and really boring when a big bill hits to where it feels just like every other day.

Yeah.

And so rule two, does that really. Rule three is a funny rule because we basically say the rule is you can change your budget whenever you need to or want to. And I sometimes think that's so silly that you have to tell someone to Change their own plan. But people really feel guilty when they say, you know, I'm going to. Okay, for eating out or travel, I'm going to kind of cinch the purse a little bit. And we're going to say, I'll only spend 500 bucks. And then they spend 560. And they say, oh, budgeting doesn't work. It's like, well, no, you spent 560. That's all you found out. You spent a little more. You know, so as it's like a coach making halftime adjustments during a game, you know, they make, they do the best of planning. They've done all this tape analysis. And then when it comes to the actual game and what's really happening, you adjust your plan. So part of budgeting is just making sure that you're rolling with it. And that's what that rule is. You just roll with the punches. Our fourth rule is a bit of a twist, but it's called aging your money. And if you just think about it this way, you want to ask yourself, especially in the business sense, okay, here's a check I just collected. How long will it take before I have to use some of that check? Or another way here I'm spending some money doing payroll. So you're cutting payroll. And then you ask, how many, how long ago did I earn the money that I just used for payroll? And if it was yesterday, you're a stressed out individual. If it was 30, 45, 60 days ago, you're doing fine. And so we talk about aging your money. The idea that there's this time elapses from when the money is collected to when it's used. And if that number is greater, you're in a much better position.

Gotcha.

So those are the four rules, kind of in four minutes.

Okay, I love it. So let's do the deep dive, as you were suggesting. You said give every dollar a job. So give me some example. I think I understand that, but give me some examples of giving a dollar job when it comes to a budget.

I mean, from a business sense, if I just thought about my own, you know, my own business, I would say, okay, we, we have software we use, we've got payroll, we, we have rent, you know, for office space, we've got computer equipment to buy or replace. So as you're going through, you're just, you're looking at your pile of money and you're just saying, what does this money need to do before new money will come in? And sometimes the pile is so small you just say, oh, it Needs to pay the electrical bill, and we're good. That's all I've got. You know, other times the pile is a little bigger and you start to give it more strategic oomph. But a lot of times the answer is pretty clear. For most business owners, unless they're. They just don't know what to do with all the money that's just dropping out of the sky onto them. For most, it's a pretty simple question. I'll say, hey, here's the checking account balance you have. Right now, it's 5,000, 10,000, 50,000. Doesn't matter. What does that money need to do before new money will come in? And they'll know right away because, you know, every business has pretty standard line items and things, but then you always have those little bits that are kind of unique to the business, but that business owner knows, oh, it's got to go here, it's got to go here. They've been doing it in their head, and you know that, Mike. I mean, they've been doing this the whole time in their head, just pretty poorly for the most part.

Yeah, because it's.

So you want them to be very exactly like you want it. You want to say, like, planning your day. No one at the end of the day looks back and writes down everything they did and says, oh, yep, that made me feel really good about my day. You write down what you're going to do before the day starts, and suddenly it feels productive and great. Your money is the same exact way. You just got to write it down, put a plan in place beforehand and say, this money will go here. That's why I love your approach with paying the owner, because we're. We're essentially saying, owner gets paid. That is a priority, you know, and then everything else will fill in after. Right. So it's that idea, but to a more granular level. I mean, you've hit the biggest, most important piece. And I want to be able to take it even further and say, okay, what about. What about these smaller things? Can we be more strategic here? Can we keep costs low by being very aware of what exactly is going on and that our money is lined up with what our real strategic priorities are?

Jesse, do you assign some form of prioritization to these. These pre allotments? And what I mean is Maybe this month 5000 is in the bank account, but maybe next month is 2000. Do I then say the electric bill is the priority over employee payroll or vice versa?

Right, right. Yeah, we. I usually will teach people to order their categories. Because we're doing this all on a software interface where you just. It's like almost like a spreadsheet still. You're dropping dollars in. And so I'll usually have people order it kind of in order of importance where you're saying, these are topmost must happen, you know, and then you can get down to more little squishier priorities. You say, if we have it, it'll be nice. If not, we can get by. I think it's really useful for people to see the money run out only after the most important things have been taken care of and then, you know, see what else is left and what can cut. It's amazing when people realize that they're taking care of the big stuff, that those little things that they thought were so important actually aren't even really, you know, moving the needle. And it's also interesting when you'll have a business owner say, well, we really want to sell this or do this or go to conferences here. Like, we're going to go to conferences and we're going to start pushing our, you know, this great new product we have. You say you're going to go to conferences like, where. Where in your budget have you allocated for conferences where, you know, if you show me what your money has been doing, I will show you where your strategy lives. And a lot of the time people say, oh, wait, that's not actually our strategy. And you say, well, your money needs to start behaving then and falling up.

Just a quick antidote for you that I'd like you to analyze for me and tell me if you've seen this in people's budgets, both in their business, but also their personal lives.

Yeah.

Today I was with somebody whose business is struggling, and he's invested over over a million dollars of his own wealth. He's now depleted all his wealth in getting this business off the ground. And we're talking about the marketing phase of the business. Clearly, that's where the weak spot is. Not enough potential prospects know about this product. And so he said, the only way to market is. And he outlined this expensive marketing strategy similar to Facebook ads, but not Facebook ads. Exactly. And a salesperson, so forth. I then asked him, I said, you know, you started this business from scratch before you had your wealth. You were starting the business kind of like Jesse, your story with the spreadsheet. And I said, how did you market it? Then he's like, oh, I had an email address because I went to a prestigious school. I emailed out from that address, which I still maintain and told people that I'm running a trial effectively and that we would like to them to be part of this analysis. And he goes, people flock to us to be part of this trial. And that's how they discovered our offering. And. And then many of them actually became customers. So my thought was, why don't we do that again? Because that sounds like it costs nothing. Have you found, Jesse, that maybe in your own personal story, but also the people you've. You've helped with ynab, that as the income increases into their business or their personal lives, that their expenditure rate seems to climb almost uncannily at the same rate?

Oh, yeah, it bothers me most personally, you know, like, for me, where I. I think about, okay, I'm working on, like, new project, and suddenly this project has to be perfect. You know, suddenly it has to just be. Everything has to be dialed in. We have to throw all these resources at it. Where I think, man, 10 years ago, I would have just, you know, in a week I would have put something out there. And now this is supposed to take six months and 10 times the amount of money. And so the resources can be a curse sometimes. Where I don't know if we are afraid of, oh, man, now that we've done something kind of the market's validated, that was pretty good, that we're then kind of afraid of putting something out there that's maybe not quite as good. Perhaps that's part of it. But the idea that expenses rise to meet whatever resources are available is absolutely, absolutely true. And personally, no question at all. And in business, I can't see how that would be any different. What, what's interesting is, I mean, when I first started, started ynab, I fly. I, like, I blanketed our apartment complex with flyers that I printed, you know, for probably $3.

Yeah.

And it did not work. And I put like stickers on the back of my car saying, you know, use your budget dot com. That didn't work either. And. But like, these were. I couldn't say, well, I'm going to hire a salesperson, right? Because I couldn't. So with budgeting, a lot of the times there's a principle I try and teach business owners, and it's this idea of scarcity. And we're all so afraid of, I mean, the root word of scarcity, it sounds like scare. So maybe that's why. But we're so afraid of not having money, not having resources. But in reality, that situation that I was in back in 2004, and then maybe your friends in now where the resources are gone. That to me is when the entrepreneur can shine. And when you're budgeting, what you're doing is you're creating, you're manufacturing scarcity because you're saying, this belongs here and this belongs here and if I put some here, I have to take it from over there. And so you're manufacturing this idea of like finite resources. And I think finite resources are the entrepreneur's biggest blessing because you start to use your brain. And I don't mean that in a derogatory way, but you start to get creative, you know, and you just say, okay, what else can we do? Because I guarantee if a gun was held to your head and someone said figure this out, you would figure it out. So that you make, you make it a non negotiable where you just say, I'm not going to spend more than X on this or I'm going to do this for free. You know, and there's a, there's a really great, great book. I think it's called the Beauty of Constraints maybe. I think that's probably.

Sure.

And the idea that when you, when you constrain yourself, creativity can be unleashed. And money, if we use money to actually constrain ourselves, we say, I'm not going to spend more than this. We budget. Suddenly we can get very creative and get killer, killer ROI when we come up with those solutions that really work.

Yeah, the old necessity is the mother of invention.

Yeah, absolutely.

You said in the second tip, embrace true expenses. Which also means that there's untrue expenses. Right?

Yeah.

What does this mean?

Well, the idea is, you know, if I were to say, like, hey Mike, list your monthly expenses for me. Like say personally, you say, oh, cell phone, maybe cable, rent or mortgage, groceries, you know, you list all those things. And I wouldn't have said, I kind of say list monthly expenses to kind of make your, your brain think, oh, monthly, monthly bills, you know, monthly cadence. But a lot of the stuff, a lot of our outflows that we experience are not monthly. We just think of them that way. So when someone gets their W2 in the mail and they see how much money they made last year and they have this moment and I know a lot of listeners have had this where it's like, where did that money go? Like, what the, Like I'm making an adult income, where, where is it all? And that they'll go through this math and they'll say, well, my expenses are X and my income, you know, I'm My expenses are four grand and my income's five grand. What the heck's going on? And then you start saying, well, did you go on vacation? Like, oh, yeah, well, we always go, you know, here in the summer. Okay. Did you have, did you celebrate, you know, Christmas or holidays or anything? Did you give gifts to people? Yeah. You go to weddings sometimes? Yeah, a little bit. You know, did this happen? What about this? And you just start listing non monthly events and pretty soon you found that extra grand that they were wondering, you know, where it went each month. And a lot of our expenses just don't hit monthly. And so we want to. The true expenses is the idea that you capture all outflows and, and then you just make them all into monthly bills so that it feels nice. Nice and even. There was a really dumb article in the New York Times a while ago where they said, hey, we found that when people budget annually, they're more accurate than if they budget monthly. Like there was this big revelation, I think. Well, yeah, of course they're going to be more accurate. You're. You're taking the, excuse me, the average of a year, right? And then of course you're good. But the problem is people have these peaks and valleys personally and in business, where at the Valley. That's where they get into trouble. That's where they have to borrow on an expensive line of credit. It's not on this. No one lives in the average. We dip and then we take a hit and then we rise and then we dip again and we don't capitalize on the rise again. And so it's just this cycle where at the end of a year that was supposedly very average, this person's in the whole 12 grand, you know. So anyway, stupid article, but otherwise great.

Great publication, good recovery. Well, that plays into your third tip, is change the budget whenever you want. Which actually sounds very counterintuitive. Oh, this isn't working for me. Here's my new budget. Yeah, how does that work?

Like if someone were to stick to a dieting plan, it's the same way. Like, I don't know, those bars you guys are mentioning, the rewind bars, do they have a lot of protein in them? Like, okay, I gotta look them up because I eat the G2G bars. I love those. But I'm always on the lookout for like a good bar because people will say, oh, this bar is delicious. And I eat it. I'm like, that's chalk. You just ate chalk.

I know, I know.

These are good.

I'm so skeptical when they say, here's a protein bar and it actually tastes good, I'm like, whatever, man.

Yeah, yeah, this may be the one.

Anyway, I forgot what I was talking about now.

Budgets, the dynamics. You were talking about how people change their diets.

Yeah. Like if you accidentally overeat, you accidentally eat a piece of chocolate cake on a Tuesday night because you're emotionally spent. Right. The worst thing to do would say, oh, eating healthy is an incorrect principle, because clearly I can't. And that's what people do with budgeting. They say, oh, I'm going to spend only. Well, first they ratchet way down to an unrealistic level. So that's a separate problem. But they're spending 500 bucks a month eating out, and they say, I'm going to spend 200. It's like, come on, man. No, why don't you say you're going to spend 600 and see how that feels and then ratchet back down from there? But they give themselves very unrealistic expectations, as if they're suddenly just these frugalistas. And then at the same time, when they don't hit that unrealistic expectation, they say, oh, this doesn't work. And so I just. When, when life happens and suddenly your in laws are coming and you didn't realize it and they have, you know, they have like a brood with them and you're going to have a lot more food you're going to have to buy. Like, that's just life. Or, or I mean, heaven forbid someone passes away and you got to fly somewhere to a funeral. Were you supposed to have this clairvoyance that allowed you to say, oh, I'll need to get that ticket? I mean, that'd be a creepy skill to have that, you know, So I, I think you're, you just, you just roll with it. Like, life comes at us, all we have to do is just adapt to it. You're not changing your budget. You're not giving up. You're just adapting to new information. All you're doing is say, hey, my information now is better than it was yesterday. So I'll make a better decision at this point. You know?

And the last thing you mentioned, age your money. What a novel concept. So what I heard was money that comes in the door and goes out the door quickly is weaker money than money that comes in door and stays with you longer. There's, there's value in the ability to retain money. Did I hear that correct?

Absolutely. Yeah, absolutely. So if you're, if you're spending Money that you earned yesterday, you're spending that today. That money was a day old. You know, it only begins to age once it lands in your possession. So you think about like a good wine or something like that, you know, it ages over time. And, and that's what we want your money to do. Now you can take it too far and say, oh, it's going to be a year old. No, that doesn't really help. But when you get to this point, like 30 to 60 days is this sweet spot where for most business owners, they're out of a cycle. There are some, there are some businesses where they're cycling at a larger time frame. But for most, there's kind of a monthly cadence. So if you can go to like a 60 day cycle time with your money where you're saying, this client that just paid me, I won't need their money for 60 days, that is so empowering because at the same time, a client can come along and say, do you want this job? And it's a crappy job. And you know that client's lame. You know, they email you constantly, call you all the time and nitpick you to death, don't let you do your job. And they, they are like the worst client. We all know there are those. So that person comes along and says, hey, I've got a job for you. And if you had a bill due tomorrow that you couldn't pay, you would be inclined to take on this, this lousy client. And instead you can say, you know what, I'm pretty booked. Or you just give them. This is crass. My buddy has what he calls the fu price where he says, hey, if they're willing to pay that price, I'm willing to do the work, you know, so, right, you can price them out where they're like, oh, I'll go elsewhere. And that's also a really, you know, really solid approach. But when you have a 60 day window of that time where you don't need your money, you have all these options. And that's the beauty of it. You have time to think. You aren't emotionally reacting to one little event that's just making you panic. So the, the objective is just to get to that point where you're, we call it being buffered, where you've got that buffer, you know, and it just buffers you from just the fluxes of, again, of life, you know, that happen. So I love that principle. It kind of came out, came about in Ynab organically. I didn't, I didn't start with that saying, hey, Julie, you know, you and I, we should do this. But as I realized how things were working out and how the budget was working, I thought, oh, man, it'd be nice if we had a little bit of a buffer, because then it kind of evens out these ebbs and flows in the budget. And it did. And. And I've been on it ever since. And, you know, we've got tens of thousands of people doing it as well. It just helps you sleep better at the end of the day, you know, think clear. So it's. It's well worth. It takes a while to get there. It's not somewhere you can say, oh, yeah, I've got it, you know, snap my fingers. But usually about four or five months, people personally can. Can build up a buffer that lets them not need their money for at least 30 days, you know, just cool.

There's no question that everyone listening needs a budget. The question I do have for you, Jesse, is how do they get started, though? What's the day one for them?

So I don't know how much you want me to, like, show my approach or just in general, I want to.

Know what you think. Your insight or your approach, maybe. Why now? That's fine.

Yeah. Well, I tell them to go take one of our classes. They're free. We run 50 classes a week, you know, and go in, don't worry about the software or anything. Go in and get the principles that the teacher is teaching and how they're talking about money that's only on hand, how they're allocating it to their priorities, how they're. You're seeing it roll from month to month, and you're seeing these balances build. So 12 months later, I have a Christmas fund that, you know, in December, it's, I'm ready for Christmas or. Or we have a vacation fund and we're ready to pay cash for this vacation. So just take one of those classes. They're like 25 minutes long. They're super, super concise. There's no. There's no cruft or anything like that. It's just. Is it live, dialed in? You know, it's dialed in, so it's well worth. Well worth your time to pop in. And it works based upon any schedule because we run. We might run 10 a day.

I mean, are they. Are they live?

They're live. Yeah. I can take questions, everything. It's. It's. It's one like. And I'd say I'm proud of it. I'm proud of my team, you know, Erin, who's lead of education that she's put together because she has this, well, old machine that just teaches these principles. So yeah, go there, take one of the classes and see if it jives, you know, with kind of their thinking and then give the software a spin. It's, you know, we do a 34 day trial so people can see how it works from one month to the next because there's, there's some light bulb moments that we like to see happen there. So yeah, get started there. And if you don't want to do the software at all, my book's pretty good, you know, so you could read.

The book and it's very good.

It's extremely popular actually. I'm really proud of the book. It's, it's a fun read. I don't go at all into the software, but I really try and dive deep into the principles and teach people how to think about it differently, which I think is so, so cool, critical.

And your book is so digestible. It's, it's not, I don't want people that, hearing this show going, oh my God. But it's, it's a budget and all these spreadsheets. It is so digestible. It's. And it's based on these four rules.

Yeah.

Where can people, what website should they go to to sign up for that class and learn more about you?

So you need a budget.com or if you're in a hurry you can just type ynab.com. we got that one too. So. And then from there I think it's learn and you can go through the method and, and then jump onto one of the classes. Awesome. But yeah, that's, I'd love to have people check it out, especially business owners because I'll be honest, like just in closing, like the business owners already have stressful business situations so much of the time. And so if you can get your personal side pretty, pretty solid, you know, pretty steady. It really relieves a lot of business pressure and I think that leads to better decisions, better strategy, better execution in the long run.

Awesome. Awesome. Jesse, thank you so much for joining us today.

Thanks for having me. I totally enjoyed it.

Thanks, Jesse.

Cool. And then everyone make sure you pick up his book. So also you need a budget. And we'll have in the show notes the links to you needabudget.com I gotta tell you, if there's anything that works in simpatico with profit, first it's you need a budget. It is an extraordinary system. So Much so that if you haven't experienced profit first yet, I say skip profit first. Go to you need a budget before you do private first. And then come back, explore what we have going on. I'm that much of an advocate of what Jesse's doing. All right, Kelsey, punch me. Yeah. I told you I got tons of stuff going on here. I got another icebreaker, but it's a super quick one I want to ask. I told you those two things to write down. I got to share.

Yes.

Plus, we got to share what we learned from Jesse. We'll do that first. And we got listener mail. And I want to thank our corporate partners. So here's our corporate partners receipt. Bank scan in those receipts you have in your phone. It syncs up with your accounting system. 1, 2, 3. You know me. All right. Second one is Nextiva voice over IP phone system. We've used them for the life of our business, and I've used it for six years prior to this business even being founded. They are that good, that extraordinary. And last but certainly not least is right Networks. Get that legacy application you have on the web or maybe just use ynab, which is web enabled. You don't have to worry about it.

But I'll tell you, if you're someone.

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Oh.

I love the idea of aging your money.

Damn.

It took mine. I will say, when I was preparing to buy my house, like when I was approaching my closing, I had like these, you know, just panics. And I had a super hard time sleeping at night because I was envisioning all the things that could happen when you take on a financial burden as a.

When you bought your house, you were sleeping. Yeah.

And one of the things that brought me such great relief was this concept. Jesse's concept of making sure you have enough money in the bank. Like you shouldn't spend any money that's older than. Or I mean, newer than 30 days, right?

Yes.

And so that I felt, like, set me up for just ease. Like, I just feel like there was this burden that was lifted off of my shoulders. Like, if I have a cushion in the bank at all times, I'm okay. If I lose my job, I'm okay. Like, if, you know, I get ill, I'm okay. There's that, you know, understanding that comes from building your money to a point that you have a cushion, you have a, you know, And I just think in general, having clarity and that's the simpatico that you speak of with profit first is like understanding what money you're spending right now. And that's the great thing about the app is, like, you see exactly how much you're spending. Rather than be like, I think I spent like, $100 on food a month, because that's what I was doing. And then I looked at it, I.

Was like, oh, those rewind bars are damn good. Clearly. But.

But it's like you always say it's like operating from your bank account because you have a realistic view of what you're actually spending.

Yeah.

Where it's getting spent. And then you can build from there, and then you can tweak from there. You can't until you have that knowledge.

Yeah. I love that he talked about actual money only, you know, budget with actual money. Not projected money. Actual money. I also love the aging of money. I like the analogy used, like, it's like wine. It can be too young. Right. You don't open a brand new bottle of wine. You want to age, but it also can go sour if it sits too long. So there's this balancing period. Those were extraordinary insights. I use his strategies, too, in my personal life. And we the same thing. We have a. An account for health. There's money reserved for health. There's money reserved for vacation. All these different things. And what happens is, because money's being allocated to those purposes, the remainder is to do our daily expenses. So we live within a confine of our daily expenses. We don't live extravagantly. We just had a health need. And my wife's like, I don't know, maybe we should, you know, sometimes you, like, delay the health. Oh, maybe I can wait until the insurance period flips. I'm like, no, we got the money. It's, like, reserved for this circumstance. And that's. Thank you to Jesse's strategy with Ynab.

Yeah.

So we want to know what you learned Too post in the comments and stuff like that. But we still have a few minutes left. I got a nice. An icebreaker. I wanted to ask this one and since we did kind of a repeat one, I thought I should give us a fresh one. Kelsey, what is the weird family, strangest family tradition that your family has. You go first. So, because I had time to think about this, we, when we go to Long Beach Island, New Jersey, it's our favorite beach. It's a. It's a wonderful place. I've been going there ever since I've been born. So for 46 years we went there this year again, every time we crossed the bridge. My family started this. My wife and my children, we play Volcano by Jimmy Buffett, you know, and so every time, right when you get to this bridge that brings you onto the island, we crank it up and it's weird, strange family tradition, but it's caught on. My son, my oldest son, his girlfriend Cora, she's like, oh, we just cranked Volcano. And so my son was driving across the bridge. They drove separately. And she's like, he cranked Volcano. He saw, he actually stopped at the causeway, pulled over, turned on Volcano and we drove over. He's like, I can't cross this bridge without playing Volcano. Oh, the tradition is there.

See, I love that.

Yeah. What's your strange one?

I really don't think I have a strange one. I can't think of anything. I'll say we.

You all make weird voices at the same time. Everyone, that's just me, everyone sits at the table and starts humming and singing.

No, my mom does that too, though.

Oh, does she?

Yeah. I didn't realize that until I was living with them again. And my mom would be like, I.

Really like Toby, your dad.

Oh, thanks. He really liked you too.

I mean, we. What, we Talked for about 30 seconds. Yeah, but you can just, I don't know, just a really nice guy.

Yeah, he's a super good guy. Like, just genuine hearted, but super honest. Like, I trust him emphatically because he doesn't. He doesn't placate you ever. Like he, he says what he thinks, even when he thinks he shouldn't be saying it. You know what I mean?

He seems like a great dad. Yeah, I kind of want him to be my dad now. You can really, what do you adopt me?

Yeah.

I wonder what's the oldest everyone's ever been, They've been adopted. He's 46. Is kind of cool. As long as he's older than me.

Yeah. 18 is the oldest. I mean, actually, I'll say 17. Yeah.

I should apply for an adoption by your dad and see what happens. Yeah, I told you.

That's create the application.

The grices adopted me, Scott and Elise, and they're younger than me. That was peculiar.

So is this like a weird kind of polygamy of parents?

Yes. I'm the first parent polygamist ever and will probably only be. I have, I think, like 25 adopted parents. Parents that have adopted me. I'm the son of so many people.

Yeah.

Yeah.

It's amazing.

What are the two other things I had there? Because I know our listener audience is.

Like, tell me about your first car.

My first car was a Nissan 300 ZX, which is unimportant. The thing was, it was one of the first digital sound effects. When you lift the door open, it's like door ajar. Yeah. And then you could program it with your name, but the. It was a female voice. Dora Jar. But the name that you program, Michael. Well, it wouldn't say in a female voice because it was a computer. So it would say Dora Jar. Michael. Right. You'd say it had like 15 different things, like, you know, setting, favorite station for Michael. Very funny. What was the other thing we had on that list?

Tell them about your hotel.

Yeah, so I said, what's it called? Pod.

Pod? Yeah.

It's literally a pod. Oh, you put me in a hotel with the smallest room I've been in. You see this podcast room we're in?

That's minimalism, Mike. Embrace it.

It's all minimalism. This room is what, a 10 by 10, maybe 10 by 12 size room? This would be considered a luxury suite in the pods. It was half the size of this room. You. You literally could not get out of the bed. And if you wanted to sit on the floor, there's not enough room to sit. The narrow space. I got out of the bed and my nose hit. I have a big nose, but my nose hit the wall. You go into the. In the bathroom to thin out the walls. It's all glass. Fogged glass, but fog glass. So you really want to go there by yourself. A pod.

Okay, this is what I'm going to look for moving forward. I'm just going to look for the most bizarre hotel rooms.

That'd be funny. But you saved us a lot of money, so I like that. Yes. Profit first. Anything else you got for me? Listener mail.

Okay, so this one comes from pattern baldness.

McKenna Gouldy.

She says she does not pronounce a Gouldy.

Maybe.

Oh, it's awfully gooby outside. Like, come on.

What does that even mean? That doesn't make sense.

It's awful instead of cold. It's gold. But I had to add the Wii, you know, it's like awfully gold outside.

Yeah, but her name is Gouldy.

But the way you pronounce is like, gooood. All right, keep going. You're killing me.

Anywho.

Anyhow, do I have to read this? Yeah. All right. McKenna says, I am curious as to which accounts, if any, should be personal and which accounts should be set up under the corporation. Also, should owner distribution or the profit first account or tax account be personal checking accounts Mechanic Gouldy, I suggest that you do all these question. That's funny. It was a Gould question. That doesn't make sense. I think these all should be business accounts because when you start moving to a personal account, you start to cloud the line between distinguishing your business and your personal life. And that's the problem of business owners and businesses. They're like conjoined twins. They're sharing resources way too much. So we need to separate it out. Definitely talk with a professional accountant or bookkeeper to help navigate that. My suggestion is all business accounts. The reasons people are hesitant, it's like, but I get charged for business accounts. Find a bank that doesn't charge you. It's that simple. All right, Kels.

Okay, everybody, please leave us ratings and your comments on profitfirstpodcast.com or any whatever podcast you're listening to.

Yeah, and you know, one more, one more thing you can do is check out Profit first first professionals dot com. That's our organization of certified accountants of bookkeepers and coaches throughout the globe. I think cumulatively 300 ish folks in different niche specializations. So I don't care if you have a CrossFit gym, you have a spa, you make software, you're the creator of nutrition bars. We have someone that specializes in your industry and knows how to make it profitable using the Profit first methodology. All you need to do is just go to profit first.com profitfirstprofessionals.com click on find one, fill out the little form there, and we will hook you up.

And don't forget to email me. The first person who emails me gets a box of Rewind rewind bars on us.

And Ryan Lee doesn't even know we're doing it. No, that's the cool part. So email Kelseykemcalowitz.com claim your rewind bars. All right, let's get out of here.

Bye, everybody.

Sa.