618 | You Learned How to Save. Now Learn How to Spend | Jesse Mecham

ChooseFI | Financial Independence Podcast

Jesse Mecham, the founder of YNAB, joins Brad to discuss the psychological transition from accumulating wealth to spending it with intention

Key takeaways

Jesse Mecham's book, 'Never Worry About Money Again', centers on the fundamental question: 'What is this money for?'
The '50 cent donut' story highlights how extreme frugality can become suffocating when money lacks a defined purpose.

Main topics

The purpose of money
Transitioning from saving to spending

Notable quotes

Every dollar you save is simply money you're planning to spend later.

Conclusion

The episode offers a profound mindset shift for savers, teaching them

Transcript preview

Speaker 1 (0:00) Hello and welcome to Chooseify. Today on the show, I'm joined by Jesse Mecham, the founder of YNAB and the author of the new book, Never Worry About Money Again. Jesse starts with a premise that might make longtime Chooseify listeners a little bit uncomfortable. Saving money isn't inherently virtuous. It isn't. Because ultimately, every dollar you save is simply money you're planning to spend later, which raises a much more interesting question, what's it for? For those of us who have spent years learning to save and invest, that question gets surprisingly difficult. At some point, you have to make the transition from accumulating money to actually using it to build the life you wanted in the first place. Jesse argues that spending well is a skill and one that many great savers have never actually learned. We talk about the 50 cent donut that helped Jesse realize he had taken frugality too far, why financial independence exists on a continuum, what enough really means. and how something as simple as a car repair can reveal whether money is controlling your life or if it's serving it. And ultimately, we come back to the question at the heart of Jesse's book, and maybe one worth asking about every dollar you have. What is this money for? I think you're really going to enjoy this episode. And with that, welcome to Choose FI. Speaker 1 (1:17) Before we get started, I keep this podcast entirely ad-free for two reasons. First, this is a FI podcast and I don't want to promote products that I don't want you to buy in the first place. And second, I really like the clean listening experience of a show where you don't have to fast-forward ads. To keep it ad-free, all I ask of you as a listener is the next time you open a Travel Rewards credit card, go to choosefi.com slash cards. And with that, on to the show. Speaker 1 (1:46) Jesse, welcome back to Choose FI. It's good to see you. Speaker 2 (1:49) It's good to see you, Brad. I'm glad to be here. Thanks for having me back after a couple, six, seven years. I cannot Speaker 1 (1:55) believe it's almost been seven years. Yeah, a little bit's happened since that time. That was right on the eve of the pandemic, actually. It was. Little did we know. Yeah, yeah, goodness. All right, well, you just put out a book. Yes. I'm really excited about this one. Never worry about money again by answering one question. So I think the obvious, obvious logical starting spot is what the heck is this one question? Speaker 2 (2:18) Yeah. The one Speaker 1 (2:18) question is what's it for? What's this money for? Speaker 2 (2:22) This money that we work so terribly hard for, give up so much of our time, effort, energy, blood, sweat, tears, network, family, you know, all of it. And then you get this thing called money. We fail miserably at really being certain on what our money's for. I'm actually glad to be here because This audience is like, my money's for investing. You know, so much of it, my money's for investing. And that's the easy answer. The harder answer comes later, but we'll dive into that. But people give so much of their effort to earn this thing that they then don't know truly at its core what it's for. That is the tragedy that we're trying to avert. Speaker 1 (2:59) Oh, totally. I mean, let's dive into that right now because I don't think that's a sufficient answer at all. Neither do you, obviously. It's for investing. In my opinion, it's for buying your freedom. Yeah. It's the JL Collins answer, which is, what are you doing saving money? I'm not doing it to save for some nebulous retirement or something that I can't quantify. I'm literally buying my freedom with every single one of those dollars. And I think on the front side, that's pretty fantastic. And I think on the backside of the skill of spending, that's a much harder thing still. Speaker 2 (3:32) Yeah, the book comes out pretty hard. I say that most people are bad at money and your listeners are probably like, yeah, they are. You know, they'll look around and be like, yeah, I know I'm not. like everybody else, and we get that. Most people are bad at money and specifically, at its core, the money problem stems from being bad at spending. People know the advice. They know that they should save, although I take issue with that advice on its own. But yeah, they're bad at spending it. They spend it on things they don't really care about. They spend it when they shouldn't have, or they spend it and feel bad when they don't need to feel bad about it, when they can spend it and feel great. So it's just the one thing money is meant to do. at the end of the day, is to be spent. And we're really bad at doing the one thing money is meant to do. Speaker 1 (4:14) Yeah. Speaker 2 (4:14) Why do you think that is? Oh man, it's kind of like if you were to go to someone and say, hey, how do you want to use your time? And they're like, man, tomorrow I'm going to get up. I'm going to do this, this, this, and this. But we're kind of wired to, I don't know, be lazy, I think, and conserve and preserve and find homeostasis. And when you're doing the work of figuring out what you really want to spend your precious money on, you're swimming against a tide that pushes you, right? I mean, it is not, you can't do this kind of laissez-faire, like this takes concerted effort. And so in that way, being effortful is not easy. It's effortful. Yeah, by Speaker 1 (4:57) its very Speaker 2 (4:57) definition, it is effortful. It's a little circular there, but we'll take it, you know? No, it's true. Yeah, Speaker 1 (5:02) it's true. And yeah, I mean, I think the human brain is wired to look for the path of least resistance. So something that is effortful. This is something I tell my daughters all the time. It's like, nothing good in life comes. from the easy path. Speaker 2 (5:14) Yeah. It's Speaker 1 (5:15) almost invariable, right? That like you have to have a little bit of effort. You have to have a little bit of hardship, a little bit, even hormesis, right? It's like that little thing that might be a little difficult, but it's really darn good for you. It makes a big difference. Todd, our YNAB Speaker 2 (5:30) CEO, he says, we want to take the harder path that compounds. And that's, we talk about that a lot. Speaker 1 (5:35) I love that. So let's talk about your path in terms of spending. Because I know in the book you talked about the 50 cent donut that you had an issue with. You know, you're kind of shaking your head sheepishly. Listen, man, we've all been there in some way. It might not be the 50 cent donut, but it's something. It's something identical, especially for a lot of people listening to this podcast are savers. Yeah. It's a continuum and we're just, we're all working on ourselves. I think that's part of the fun of being human is, all right, we know some stuff today, but. man, if we ever stop learning, if we ever stop trying to get better, I find that hard to imagine as a life well lived. So talk me through this 50 cent donut thing and then we'll talk about where you are today. Speaker 2 (6:20) Julie and I married young. I mean, we were, let's see, I just turned 22 and had three years of school left, was going to get a master's degree in accounting, ended up doing that. I always took to the personal finance topics. I read The Millionaire Next Door when I was 14 and enjoyed it. You know, like that's a little odd. I read The Richest Man in Babylon. I remember Rich Dad, Poor Dad and kind of being like, okay, I can see which way you want to go with this. I just remember taking to the topic. And so when Julie and I first married, we sat down and being newlyweds, you don't have all this baggage of like how you do money because you're so poor and you have no history. So we were just like, we're going to nail this. We're going to save for a car. We didn't own one. We're going to save up for a computer. I needed one for school. You know, we're going to just eke by and we're going to just check all these boxes. All the stuff that these books have been saying, you do this, this, this. Avoid debt. Absolutely. We built this plan for our money that when I was walking past that little display case of old fashioned donuts, if you microwave them for 10 seconds, they are perfect, you know? And I wanted one. I was on the way to class and I was 22. Like I could eat eight donuts. Didn't even matter, you know? I'm sitting there and I'm like, that's 50 cents. There was no sales tax. I think because you're buying it on campus and there was some exemption. So we're talking about 50 cents flat. And I have this existential weight that was just like, you can't have that. You can't afford it. Money's already gone. It's already taken. And it felt like. the very plan that Julie and I had crafted was encroaching on us. I come home that night. I didn't buy the donut. Come home and I'm telling Julie. And Julie grew up in a much poorer situation, single mom, school teacher. So she was used to something I wasn't used to. I grew up middle class, maybe upper middle class. My parents were so frugal. They pushed us down to middle class, I think. So that was how I grew up. Never worried about food in the fridge. Julie, a little different story. So when I come back to her and I'm like, I can't do this. You got the feeling from her that she could have done this for five, 10 years. Like this is what we do. She had done it already in college, eeked by on nothing. But I was like, I feel suffocated. So we just kind of retooled the plan. And the weird thing, Brad, we took out minuscule amounts of money. We were like, okay, both of us will get five bucks a month that we can do whatever we want with. And I was like, oh, that's 10 donuts. Okay. Now we're talking. And then it was like, we're going to do some gym money. Like we're going to be able to go to the gym. That was something we prioritized and a date once a week, but like little Caesars pizza type date, you know, but still we were like claiming some of the money. And it was this weird realization where I was like, I should be good at money. I majored in accounting. I've read the books and I felt bad at it because I wasn't clear on what my money was for, for me. And I had just let every book, every piece of advice kind of be mine. or pretend to be mine. It was a bit of a crisis for me. And so it was the beginning of my learning around what money's for specifically for me. And then being able to say, wait a minute, this is, this is important. Like this is kind of the end all be all for people. Speaker 1 (9:31) Yeah, it is important because it affects every single day of our lives. Yeah. Yeah. Speaker 2 (9:37) I Speaker 1 (9:37) think it's easy to say like, oh, this is a money scarcity thing, yada, yada, yada. Sometimes we get, and I'm sure there's some aspect of that, but like you said, this is a learning. This is a learning thing, right? So it's a lifelong evolution. Talk me through the last 20, 25 years. Were there inflection points for you? Speaker 2 (9:56) Yeah. One was we had built this little spreadsheet for the two of us, and then we get pregnant and we're going to have our first baby. We got pregnant on purpose. It was all part of the plan. part of the plan was that Julie would be able to step out of the workforce. She was making 12 bucks an hour as a social worker for the state of Utah. And I was still just looking at school. I think, I think I was making 14 as like a audit, like an internal audit intern at this company. We were getting by and people like 14 bucks an hour. You're like, yeah, but our rent was three 50. Like we were eking by, wow. People are like, oh, three 50 rent. Wouldn't that be something, you know? Although it, the, the basement had mold in it. There was, there were problems, but you know, you took what you could get. So. we're doing that. And then our first is coming along. And that's when I was looking at our situation being like, we still can't get through this. We'd been saving some money trying to be able to write out tuition payments. I had a small scholarship that was helpful and we weren't going to be able to make it through my master's degree without borrowing money. And I was mad again, because I'm like, we're doing everything right. I don't want to borrow money. That was where the idea came for YNAB in the sense that I thought maybe other people will want this spreadsheet that I've built. So we literally start selling a spreadsheet. This is back before phones. People got to go back in time a little. This is before phones. Early 2000s? Yeah. It was literally 2004. You're like, okay, this would work. Other people were selling spreadsheets for various things. I put it on there for $10. Nobody buys it. Then my friend tells me it's too cheap. No one buys cheap things. I put a one in front of it. I sell it for $19.95 instead of $9.95. I started getting a few sales. AdWords was $0.05 a click. I'm able to... went to Julian was like $63 is what we have as like seed money. And we can use it to buy visitors off of this new thing called AdWords. And she was like, okay, that 63 bucks was half of our grocery money. So it wasn't nothing to us. Right. So, so we get that going and it was just enough to realize like, oh, people kind of like the spreadsheet, you know, very few people, but in February of 05.