You Need a Budget – Podcast #167 – The White Coat Investor – Investing & Personal Finance for Doctors

Intro:
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 Dahle.
Dr. Jim Dahle:

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 of record and the time you’ll start listening to this. It helps us be a little bit more current.
Dr. Jim Dahle:
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.
Dr. Jim Dahle:
Our sponsor today is Contract Diagnostics. They’re a long-time advertiser with us here at WCI. I love this company as they’ve helped thousands of white coat investors get a fair shake when it comes to reviewing and understanding their employment contracts. It’s all they do there.

Dr. Jim Dahle:
All contracts are reviewed by an in-house attorney and presented in a simplified way back to you. They’re easy online signup, custom documentation, proprietary compensation data as well as weekend and evening hours that make it easy for your schedule.
Dr. Jim Dahle:
All packages are flat price. So, you know what? You will pay upfront. Residents and fellows can even make interest free payments over time. So, look them up. contract diagnostics.com or call (888) 574-5526. They’re reviewing many 2022 contracts already. If you don’t need to review, they can just provide compensation data for your current position. Again, contractdiagnostics.com.

Dr. Jim Dahle:
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. 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.

Dr. Jim Dahle:
But it’s interesting. We’re now regularly running codes on Covid patients and seeing our units fill up. We’re not quite having to have extra ICU 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.
Dr. Jim Dahle:
Our quote of the day today is from William Feather and it’s 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”.
Dr. Jim Dahle:
A couple of 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 what I call the retirement plan page. And if you go there under our recommended tab at whitecoatinvestor.com, you will find people that provide retirement plans for small businesses. If you need a 401(k), if you need a defined benefit plan, etc. for your practice, for your partnership, whatever, these are the folks I trust that can put those plans together for at a fair price.
Dr. Jim Dahle:
In fact, we are working through putting together a White Coat Investor plan as we’ll have employees here shortly. And so, we’ve got to change from individual 401(k) to a real 401(k). And these are the folks we work with to try to sort this out and to get this in place for us. I have no problems whatsoever recommending them to you.
Dr. Jim Dahle:
Other things you’ll find on that page are self-directed individual 401(k) 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 able to do that at Vanguard or Fidelity or Charles Schwab or whatever.

Dr. Jim Dahle:
Also, some recommended HSA providers are 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.

Dr. Jim Dahle:
The other thing I want you to know about is that we are putting plans in place for WCI con 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. A-P-P. And you can basically apply to speak at the conference.
Dr. Jim Dahle:
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.
Dr. Jim Dahle:
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.
Dr. Jim Dahle:
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.
Dr. Jim Dahle:
All right, we’re going to have a great interview today. Let me get our guests on the line and introduce him.

Dr. Jim Dahle:
All right. Our special guest today is Jesse Mecham, an 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.
Jesse Mecham:
Thank you. Thanks for having me. I appreciate it.

Dr. Jim Dahle:
Jesse and I went to the same college and we actually live and work near each other. You’re 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?

Jesse Mecham:
Yeah, if you want to go back pretty early on the money side, I remember when I was 14, 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.
Jesse Mecham:
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 saw that I liked that one and he gave me “The Millionaire Next Door”. And I remember learning like, okay, for Ford 150, 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 is going to like it.
Jesse Mecham:
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’ve got to spend a lot of money”. And so, I made in whatever word processing situation we had at home, this would have been like 1995 or 1996. I put like a column for date description and then amount. And I would hand write. I spent this here. I spent this at Taco Bell. I spent this here. 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.
Jesse Mecham:
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. 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.
Jesse Mecham:
So that’s kind of the early stages. As far as starting YNAB app 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 my new wife and I have been using for a year. Maybe they would buy it and we could 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 and become a CPA and become a partner and live the life”. And none of that happened except YNAB stuck around.

Dr. Jim Dahle:
Tell me about that. You’re in college at this point. What year in college were you?

Jesse Mecham:
Yeah, I was, let’s see, it would’ve been 2004. 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 add two years left in school. I finished up in 2006 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 like two and zero, little kids.
Jesse Mecham:
And the whole time I’m working as an accountant and learning the ropes there and try to do my best there. But they’re having to 80 hours a week which is normal. It’s not like that’s crazy. Like that’s kind of standard fare as you’re a staff accountant. But between 04:00 AM and 5:00 AM I would work on YNAB.
Jesse Mecham:
And I got it to a point, we got rid of the spreadsheet. We built stand alone. At the time it was 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 app than I was as an accountant. And I was working about five hours a week on YNAB and 80 on the accounting thing.
Jesse Mecham:
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 yeah, we jumped ship 10 months into my illustrious accounting career and just started working on YNAB.

Dr. Jim Dahle:
YNAB for those who haven’t made the connection is “You Need a Budget”. So how big is it now? How many people do you have working for you?

Jesse Mecham:
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.

Dr. Jim Dahle:
122 people. That’s pretty awesome. How’s that feel to know you’re putting food on the table for 122 families?

Jesse Mecham:
I think, I wouldn’t even say it’s that. They work so hard. They’re doing all the work. I used to kind of jokingly be like, “Yeah, we have X number. We have 50 people, but I really wish it were only 5”. And I used to say that, and then I’d be lying if I said, I didn’t just love where we’re at. And I love our team. We’re adding new team members. There are probably 30 team members that I’ve never met in person. We’re an all remote company.
Jesse Mecham:
And so that’s different and new, and my role has changed and evolved to where I’m kind of more leader in last, like in the trenches. And that’s a little odd for me, 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.

Dr. Jim Dahle:
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 Fin Con in 2013. You bought me dinner. So, thank you for dinner.
Jesse Mecham:
You are very welcome.
Dr. Jim Dahle:
It was a really interesting dinner because it’s a couple of financial bloggers, right? Including perhaps the cheapest one in the blogosphere with Mr. Money Mustache. And somebody who is literally an expert of budgeting, having this very nice dinner, 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 pretty wild dinner just to realize that the personality you see on his page is exactly who he is in real life. That is him.
Jesse Mecham:
Yeah. There’s no fake in it. That’s what I love about Pete is he’s the real deal. Like you just get the real thing every time. Sometimes people will associate budgeting with not ever having a nice dinner out. And so, you have to kind of fix that for people. It’s just about being intentional about caring, about knowing what you care about and then putting your money behind those things. So, I’ve had that happen before people like, “Oh, this is kind of nice for a budgeting CEO”. And I said, “I only like the fine things in life”.
Dr. Jim Dahle:
That’s why I budget. That’s exactly right.
Jesse Mecham:
Exactly. Exactly.

Dr. Jim Dahle:
Now you’re an accountant by training, not necessarily a tech wizard. How did you bridge that gap?

Jesse Mecham:
A lot of the DIY stuff. 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, what I did early on was just kind of roll my own, do my own thing. I launched with a spreadsheet. Anyone can build a spreadsheet. It doesn’t take any kind of programming skills.
Jesse Mecham:
But 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 our CTO and he’s the technical wizard. I mean, he a genius, truly a genius. And so, he’ll always dumb it down for me enough to explain how things are going and why this or that.
Jesse Mecham:
And then we have designers that just can approach problems from such new and fresh ways where 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.
Dr. Jim Dahle:
Yeah. You find yourself pinching yourself, thinking back to running this thing off a dining room table and realizing where it’s gone to.

Jesse Mecham:
Yeah. That’s crazy. There’s always something to do. Everything’s iterative, so you’ll examine someone’s trajectory and you’ll say, “Wow, look at them here”, but they don’t see the daily mundane grind of the whole thing. So, the whole thing it’s been a 16 year. I won’t say slog, but just heads down effort. Focused, 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.

Dr. Jim Dahle:
Yeah. 16 years to become an overnight success, right?
Jesse Mecham:
Exactly, yeah.
Dr. Jim Dahle:
So, 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?

Jesse Mecham:
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, rinse that, dry it out. Like, we’ll use it again. So, there’s a bit of me and maybe I grew up like with my parents, just like we don’t waste. So, there’s that where I see money as a representation of your effort. That’s it. You’re just swapping currency.
Jesse Mecham:
So, if time is currency, if effort is currency, you see these people just pour their hearts and souls into their work, their career, medical training. Like you see people that just pour into like, “Okay, 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?”
Jesse Mecham:
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. Oh, I’m not a money person. You’re like, “What? What do you mean money person?” Like, you’re just a person. Like the needs to align effort with things.
Jesse Mecham:
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 figuratively out the window really bad. That bothers me.

Dr. Jim Dahle:
I assume you have a chief financial officer of your company. Is that a hard job working with you?

Jesse Mecham:
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 always kind of like, “Well, wait, how much was that? How much would that cost?” And I tell the team, I’ve hired a bunch of budgeters. A lot of them 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.
Jesse Mecham:
So, we have all these people that are naturally budgeters. And I tell them, when you spend company money, it’s not like you’re taking a Christmas present from Fay, my four-year-old little girl. But I don’t mind that you think that for a moment. Like there’s a little bit of, “Hey, recognize, the money needs to be used appropriately”. And you can take that too far where you’re really pinching a penny and dollars are falling out of your pocket and some other way.
Jesse Mecham:
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, right?

Dr. Jim Dahle:
Now, I have a pretty unique audience. Most of my listeners are high-income professionals. The vast majority are doctors, physicians, dentists, etc. If they don’t already have a high income, they soon will. $150,000, $200,000, $300,000, $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?

Jesse Mecham:
Greater. Yeah. Because the potential for positive impact is so much higher. So, you have someone that’s making, let’s say $50,000 and you think, “Oh man, if we optimize this, that person could maybe live on $40,000. 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 $50,000.
Jesse Mecham:
You get someone making, let’s say $500,000. 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 a team of 122, there’s just greater impact there.
Jesse Mecham:
When you’re talking about a flow rate, that is that fast, you can divert more to achieving greater things. And that’s where the wind 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 firehose, because it can be powerful if you want it.

Dr. Jim Dahle:
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 earner. The price doesn’t go up with the higher income.

Jesse Mecham:
We should look into that and be like, just pop up and be like, “Hey, we think you could swing this. So, we’re going to do it. We’re going to bump it up”. No, it’s true. I mean, I like it when someone that has this fire hose with all this water pressure. You shoot that in the air. It does nothing. You might feel it come down a little bit, but it’s just everywhere. But man, you point that in the right direction, you got to be careful almost how effective it can be. So, those higher earners, they have such an opportunity to really just whatever it is they want to do, they can do it big.

Dr. Jim Dahle:
Now let’s talk a little bit about your budgeting philosophy that’s built into the software really. There are four rules to us. Can you tell us what the four rules are and why they matter?

Jesse Mecham:
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.
Jesse Mecham:
And we introduced this idea of tradeoffs through classic zero-based budgeting, where you’re always making tradeoffs. And the one thing we’re trying to fix across all of society is this idea that you can do something and not be doing a tradeoff where you always are.
Jesse Mecham:
So, if the doctor, I’ll use the stereotypical doctor from like the “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 tradeoff being made. And is the doctor aware of the tradeoff? If she is, great. But if she’s not, we have a problem.
Jesse Mecham:
So, all we’re trying to do with rule one is just surface that every time you do one thing, 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 tradeoffs. That there, that’s the magic. That’s all it is. It’s surfacing that decision for people so that they make the right one.
Jesse Mecham:
And the same thing you could say, “Well, I want to do this thing. 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”. While you were making that tradeoff. 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”.
Jesse Mecham:
Rule two 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. 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.
Jesse Mecham:
So, then when you’re presented with, I use sushi as my extravagant example. Don’t read into that. But if somebody says, “Hey, let’s go get sushi”. And you’re looking at your restaurant category and you’re like, “Okay, I’ve got $25 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 $9,000 in there. Of course, I can go do sushi”.
Jesse Mecham:
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 tradeoff that’s actually happened. Sushi or Christmas for the children. 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, actually, I’ll do it a little different”. But they’re still making a tradeoff.
Jesse Mecham:
What we’re basically allowing with rule two, we’re allowing your future you to walk back 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?”
Jesse Mecham:
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 on with just these simple tradeoffs, they make the right decision. I never see it otherwise. So that’s that second rule.
Jesse Mecham:
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 work in ER, right?
Dr. Jim Dahle:
That’s right.
Jesse Mecham:
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, 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.

Jesse Mecham:
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”. We’d be bloodletting still. We are always taking new information and changing our approach. And we have to do the same with our plan, with our money.
Jesse Mecham:
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 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 once it’s decided upon it, it can’t be changed. It’s horrible in medical care and it’d be horrible in financial budgeting as well.
Jesse Mecham:
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.
Dr. Jim Dahle:
I wish that were true.
Jesse Mecham:
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 is lower. You make better decisions. It’s a better environment overall.

Dr. Jim Dahle:
I found this useful in my budget that I actually spend last month’s income.
Jesse Mecham:
Yeah.
Dr. Jim Dahle:
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.

Jesse Mecham:
Absolutely.
Dr. Jim Dahle:
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.
Jesse Mecham:
Well, the problem with probably a lot of listeners are on variable incomes, 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”.
Jesse Mecham:
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. That 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 will be like, “Oh, well, on Friday I’m paid”. It’s like, no, stop. Just that money.
Jesse Mecham:
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 tradeoffs. And that’s what we need to happen. We have to have the tradeoffs start to surface. So only ever budget money you have.
Jesse Mecham:
Anyone that’s listening now, look at your checking account balance and 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 to do?” It removes all of that ambiguity around like, “Oh, I think I’ll do this. I have this procedure lined up. Okay. This or that. I get paid”. And it’s like, “No, just spend the money you made last month”.

Dr. Jim Dahle:
So, to recap, the four rules are “Give 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”.

Jesse Mecham:
There you go. Yeah. Perfect.
Dr. Jim Dahle:
Genius. Genius.
Jesse Mecham:
Genius and so patently obvious at the same time.

Dr. Jim Dahle:
So obvious it’s hard to patent, right?

Jesse Mecham:
Yeah. There you go.

Dr. Jim Dahle:
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? 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?

Jesse Mecham:
Did you ever see that movie with Tom Cruise where they could predict the future?

Dr. Jim Dahle:
Oh, I love that movie – Minority Report. Yes. With the precogs. Yes.

Jesse Mecham:
The precogs. And they were weird. It was weird. There was something weird. But that movie was pre kind of dystopian cool. And you’d get put in prison for something that 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 rest of the time is what happened? Why was this person dead?
Jesse Mecham:
Mint is the CSI situation. Mint is like, you look and you’re like, “Okay, honey, we have a dead body here”, which is your finances for the month. Like what happened? And you’ll look back. You’d be like, “Oh, we overspent on this. Oh, we did that. Oh, we did this”. And you can come up with an explanation, especially like armchair quarterbacking with retrospective glasses on. Like, everyone can do that. You and I can explain all kinds of things just looking back with that hindsight.
Jesse Mecham:
We, at YNAB, we’re trying to do the minority report thing. We’re trying to prevent the corpse from appearing. 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 I hate the word “should” because it sounded like you have some obligation to spend more or less at a restaurant or whatever. But “what do we want to spend at restaurants?”
Jesse Mecham:
One is looking in the rear-view mirror kind of examining how that all happened. And the another one is looking forward and mapping where you want to go.

Jesse Mecham:
Mint is excellent at gathering that data and having you look back. There’s another side of it too, if you’re using Mint. And it’s a great product. It does the job it’s supposed to do. I’ve given 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.
Jesse Mecham:
But at YNAB, we don’t touch data at all. The only way we make money is when you pay us $84 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 are trying to do.

Dr. Jim Dahle:
It’s almost like fee only advisor in the financial advisory space.

Jesse Mecham:
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.

Dr. Jim Dahle:
Another question people ask is, you read a Dave Ramsey book when you were a teenager. Dave Ramsey, he’s got a budget program, an app. He calls it Every Dollar. Why is You Need a Budget better than that?
Jesse Mecham:
I think we have a better product. I think we have a better design wise, I could go really into details, but I haven’t spent a lot of time in Every Dollar. When they launched a couple of 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.
Jesse Mecham:
But we are obsessive really 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.
Jesse Mecham:
To be fair, I think Dave Ramsey’s, his business is so massive. While I get to focus on this tiny little area, this one thing, we make money one way. He’s got so much going on. I think product superiority comes a lot from just rabid focus on one thing, from the very top. But everyone’s got to kind of run trials. Maybe you might like something about it more so it’s really up to each individual. So, I don’t mind bagging on into it because they’re so huge. But everyone’s got to try these out and see. There’s room in the market for several players.

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

Jesse Mecham:
Okay. Here’s one. We talked about these high-income earners that are possibly listening and let’s just think through what the value of your 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. But I get some other intangible benefit from it and possibly superior nutrition. And someone might get that from building their own spreadsheets.

Jesse Mecham:
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 stick with the spreadsheet. But if you’re kind of saying like, “Oh, I hate having to tinker with this”. Or, “Man, my partner won’t ever give my spreadsheet the time of day because your spreadsheets are horrible but you don’t think so, but everyone else knows it, but won’t tell you”.
Jesse Mecham:
So, there are some things that you may consider that you might just say, “I’m going to outsource this bit of management, I will let some pros handle it”. But again, if you’re hitting goals and it’s working, don’t change anything,

Dr. Jim Dahle:
Some advocates, particularly in the financial blogosphere talk about being anti budget. And they say, “Well, just pull all your savings off at the beginning and spend the rest”. What’s your response to that approach?

Jesse Mecham:
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, that jobs that are more granular, it provides information for you to make better decisions.
Jesse Mecham:
Some people may just say, if my budget is just saving this, giving this and spending the rest and they have enough cushion that 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 $18,000 in my checking account, it’s fine”.
Jesse Mecham:
But other people need to be setting aside money intentionally for car repairs because they’re making those tradeoffs. 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, which is quite a place to be, they just don’t have to worry about it.

Jesse Mecham:
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 tradeoffs that they’re required to make. So, I have a very, grobe high-level budget at this point. It works, we’re hitting our goals. So I’m probably more in that camp and people would expect. I don’t have a toothpaste category.

Dr. Jim Dahle:
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.
Jesse Mecham:
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 $20 at Walmart on groceries”. And she’ll say, “Okay. Yeah, I put it in”. So, she’ll record the transaction for you. Or you can say, “How much is in groceries?” and she’ll tell you to. Caution though, your kids can ask, “How much is in Christmas?” Your friends can ask, “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 got to be careful with that. But it’s cool. Pretty cool tech. It’s early stages with voice UI, but I’m hopeful that it’ll get better and better.

Dr. Jim Dahle:
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?

Jesse Mecham:
I think people approach budgeting incorrectly. So, I don’t know if it’s the app so much as there’s the mental model. They think that budgeting means dieting and it doesn’t. It just means planning. And they think budgeting 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 guilt less. They think that when you budget, you’re forecasting, you’re always saying, “Here’s what I will spend. Here’s what I will earn”. And it’s not that. It’s about allocating current dollars that you have on hand.
Jesse Mecham:
Yeah. 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 brow beater, 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 finances situation, because they think it means that they can’t ever spend. And that’s just not correct.
Jesse Mecham:
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 is going to do. It’s never, ever use it to wag your finger. 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 where the magic’s really happening.

Dr. Jim Dahle:
So many great quotes in there – “Budgeting is not dieting. It’s planning.” That’s awesome. “It’s not spending less, it’s spending guilt less.” 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?

Jesse Mecham:
I touched on it a little bit. I think 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”, we’re so afraid of just doing.
Jesse Mecham:
And it’s like, “Well, I got to know the best way to do this.” Like I’m a horrible woodworker, but I’ve learned the most when I actually start cutting wood, gluing things together, trying to unglue them, fixing mistakes. Then 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.

Jesse Mecham:
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?” It was just, “I need $350 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.
Jesse Mecham:
So, my advice to any entrepreneur is read less and do more. You will learn lessons that will stick with you far longer. Here we are on a podcast. Like you can podcast yourself to death. There is a podcast for like the niche of the niche of the niche group of people now. And we got to 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 going to create something now.” 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.

Dr. Jim Dahle:
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, 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?

Jesse Mecham:
It did seem a little silly. I actually had to go, I talked with an advisor through my church. 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 consultants and so lots of young families and things.
Jesse Mecham:
And he didn’t know me from anyone, but he being the religious leader that he was, I knew that he had to take my appointment. 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 really brilliant business guy. He was a part time kind of unpaid clergy.

Jesse Mecham:
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 here’s this young guy with his 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.

Jesse Mecham:
And I basically sat down with him and said, “I have this little side gig” and he’s like, “Go on. What side gig do you have?” This is back when marijuana was much less legal than it is now. So, he might’ve been thinking, “Okay, is it this kind of a deal?” And then, 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? What’s the deal?”

Jesse Mecham:
But I basically just started talking to him about this software and his face just totally more 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 because I was like, “I’m making double what I make in my accounting job. I’m making on this side gig and I work 80 hours of the accounting job”. So, this was the quick math.
Jesse Mecham:
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.” He says, “How old are your kids?” I said, “They’re two and zero.” 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.”
Jesse Mecham:
And then to him is like, you have no debt, meaning you’re living within your means. Which means it is essentially risk-free. These little kids, you can do anything you want with them. They’re super resilient. All they care about is that you play with them. So, there’s no tie 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.
Jesse Mecham:
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, go get another accounting job. Always. Well, functionally always.
Jesse Mecham:
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 that living gap where we have these means, suddenly you could jump at an opportunity.
Jesse Mecham:
If you have someone living, I don’t care whether they’re making a million dollars or a hundred thousand dollars or whatever, if you have someone living right on the edge where they have no means, 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, 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.
Jesse Mecham:
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.
Jesse Mecham:
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 go for it.
Jesse Mecham:
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.

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

Jesse Mecham:
I feel like I’ve blathered on pretty, pretty solidly. Okay. Here’s one out of left field, right? In my master’s degree education, we had a class on fraud. And I’m going to 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.
Jesse Mecham:
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 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 and because you mentioned dentists, which triggered me, dentists are the most stolen from group across all small businesses. It’s a fact. It is not hyperbole. And I imagine other professionals in similar situations experienced, close to the same thing.
Jesse Mecham:
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 ARC – Authorization, Recording and Custody.
Jesse Mecham:
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 then another person records how much you spent. If you have one person that does two of those, you have a potential, not necessarily a given, but a potential for fraud.
Jesse Mecham:
So, this is not at all about budgeting, but when you’d say that, that class was both highly entertaining, highly fascinating, and very scary for a lot of professionals 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.
Jesse Mecham:
And then what happens is you have your heartbroken 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 is that wasn’t what I would have probably said in any other podcasts. But in this instance, it is very relevant. So, it’s just ARC – Authorization, Recording, Custody. If you make sure that someone’s doing each one of those individually, you’re golden.

Dr. Jim Dahle:
Awesome. Thank you for sharing that. 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 learn CFO of You Need a Budget.
Dr. Jim Dahle:
If you need some help with your budget, if you need to get control of your spending, you can get his help at, youneedabudget.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 it 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.
Jesse Mecham:
Thank you for having me.
Dr. Jim Dahle:
Well, that was awesome. I really enjoyed that interview. Not only from the budgeting perspective, but also just from the entrepreneurial perspective. I think is really fascinating to interview entrepreneurs and see what their story is.

Dr. Jim Dahle:
I hope that’s helpful to you to talk about basics like budgeting. I’m surprised how many doctors I run into that are living hand to mouth that basically are spending that monthly 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. 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 earned.
Dr. Jim Dahle:
So, whatever it takes, whether you want to do it using a spreadsheet or 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.
Dr. Jim Dahle:
In a lot of ways, a budget is training wheels. 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. As Jesse mentioned, we’d do or should have a lot more fluff in there. There’s a lot more gap between what we’re earning and 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.
Dr. Jim Dahle:
I had to laugh when he was talking about washing Ziploc bags because I tease Cindy all the time. Cindy is 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. 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.
Dr. Jim Dahle:
This podcast was brought to you by Contract Diagnostics. This is a company that specializes in contract reviews. Specialization is something we can all appreciate here. So again, when you have contract needs, give them a call. They’re a long-term sponsor and have helped many thousands of your white coat investor colleagues to help you understand your contract and make sure it lines up with your interests. contractdiagnostics.com or give him a call at (888) 574-5526. Be sure if you need help with retirement plans, HSAs or self-directed IRAs or 401(k)s that you check out our recommended page under retirement plans.
Dr. Jim Dahle:
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 and 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.
Disclaimer:
My dad, your host, Dr. Dahle, is a practicing emergency physician, blogger, author, and podcaster. He’s 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.