Database Name: dbwzecoixet92g you-need-a-budget – A Dad’s Path

Episode #49 – Is Money Spent Faster When you Have Kids?


Money seems to go a lot faster when you have kids. With all the stresses that can come from parenting, you don’t want money to be another one of those challenges. Today we speak with Jesse Mecham, the author and entrepreneur behind the wildly popular You Need A Budget book and website. Some highlights of our podcast include:

  • How to budget together but still keep your financial independence

  • Why you should plan for “unexpected” expenses

  • How to manage changes to your spending when you have a child

  • Why you need to buy the necessary baby items and ignore the rest

  • At what age and how do you involve your kids in budgeting


Listen on Apple Podcasts, Spotify, Google Podcasts, Amazon Music, Stitcher, or your favorite podcast platform. Like this episode? You can check out more of our Dad Podcasts.


Will, A Dad’s Path: Hello, and welcome to another episode with Dad’s Path podcast. I’m Will Bronstein today’s guest Jesse Mecham founded You Need A Budget in 2004 to give him and his wife Julie, a way to watch their money. His book, You Need A Budget, literally gives you a blueprint to set up and manage your finances and they built that into an app that we’re going to talk about during the podcast. If you don’t have a budget, it can sound daunting to make one. If you do you know how hard it can be to manage, so you need a budget to manage both those needs. I’m excited to have Jesse on and talk money a little bit and family in general. Welcome, Jesse.

Jesse Mecham, You Need a Budget: Thanks for having me, Will. I appreciate it.

Will: Awesome. Thank you. A lot of my listeners either have a young child at home about to have their first child and haven’t even thought about budgeting and what that means. When you’re going to become a new parent or you are a new parent in an ideal world, when do you start saving and budgeting? When do you start thinking about that and how does that even work?

Jesse: Yes. In an ideal world, everyone would probably answer, sooner than you did, would be the standard answer, but anytime we experience an event in life and a kid being inbound is certainly one of them, we start to want to get a reality check and budgeting is just a bad word used for the idea to reconcile what you want with what reality is. A kid on the way is one of the ultimate reality checks. It does tend to push people where they think, “Okay, wait, I better make sure all my ducks are in a row, got to make sure things are lined up.” They’ll start to think along the lines of the money. It’s very common for us to see a lot of people hit the site and say, “Yes, we’re about to have a baby,” or things like that, that move them to say, maybe there’s a better way than what I’ve been doing.

Will: That makes a lot of sense because you go from– If you have a partner, you have a wife, you need to make some money or maybe one of you does and you spend it and it works. Then you throw in this third-party, that baby, and there are things that you hadn’t “budgeted for” which I know isn’t the right word, but whereas in the nicest word, but childcare, food, other baby things that have to be paid for. Suddenly it’s not as simple as you two scrimping by each month it’s saying, “Hey, we’ve got someone to care for, and we’ve got longer term thoughts as well, probably, in terms of savings and those types of goals.”

Jesse: When you’re budgeting, you’re really just taking your money and deciding what you want it to do. When you’re doing that with a partner, you now have two people that are saying, well, here’s our money provided that they’re sharing it somewhat in some manner or another the different flavors are almost infinite in how people share. When you introduce a child, there’s a lot of emotion, obviously attached to that. Not only do you have your own priorities, but now you have your priorities as it relates to this child. Then your partner has their priorities and their priorities as it relates to the child. Then you also have the future version of your partner that also has some priorities and the future version of you. You really want to bring all of the parties together.

One of the things we teach is to really think about the future version of you. As you’re having these conversations around money and what you want it to do, you’re thinking about that child now, 18, 19 years old and that’s just a new party at the table to discuss things, what you really want, but the conversations start happening. That’s key, no matter how people think about budgeting or like, oh, this is going to be complicated or complex. It really is just about conversation. Lots and lots of conversation.

Will: Yes. That makes a lot of sense. Especially with a family, with a new child, it’s not just you budgeting because you’re budgeting, it’s you and your partner hopefully budgeting together. What are some ways you found to get buy-in from your partner? Who thinks it’s hard, who thinks I don’t have time to deal with budgeting, we’ve got too many things going on, that sort of thing?

Jesse: Yes. It’s interesting because when people say they don’t have time for it, what usually happens is they’re not thinking of what the process is. They’re not thinking of it accurately and so they’re spending a lot of their time and energy to try and earn money. Then once that time and energy is converted into a dollar, they’re then saying, I don’t have time for this money. What they’re really saying is I don’t have time to allocate that resource that I created with my time. It’s a little bit almost circular, but what I want to do is just get people to squeeze in a little bit more effort where we’re saying, man, you spent so much time and money and now you’re going to be purchasing daycare for someone to watch your child while you’re working. You’re expanding all of these resources to convert some of that energy into time.

Once it becomes a dollar, let’s just keep that energy going a little further and be really intentional about what we want that dollar to do. At the end of the day, we’re still just being really intentional about what we want our life to be. A budget is just a way of lining up what you want with all of your energy, really. That’s one way you can get by and there are some sneakier tactical ways we can get into, but one is just helping your partner understand, well, this is just our effort represented in the form of a dollar. Let’s make sure our effort is still going the direction we want.

Will: I like that a lot. It’s stressful.

Jesse: It is.

Will: There’s going to be a lot of money going out the door that you weren’t expecting or you didn’t know was going to happen. That almost creates some buy-in saying, hey, I need that from my peace of mind because I’m stressed about money and then I think you can also– I like using a carrot as well, just being really, even with all these challenges, having a new child, like we need to have fun for ourselves. We need to invest in our future selves. Like you were saying, Jesse, I like that a lot. Whether that’s a big trip, whether it’s literally investing in education for yourself or self care.

There’s so many things that could mean, but I think the most important thing is just focusing on it and saying, “Hey, it is important to focus on myself too in the future and that’s part of what I’m investing for because just like with fatherhood, you get so caught up and be stronger and so thin because you have so much to do with your kids and being pulled in 100 different directions. It’s easy to lose sight of taking care of yourself.

Jesse: Yes, absolutely.

Will: That’s the same thing with the budget. You could budget nonstop and then, oh gosh, I don’t have money for new clothes for myself or new, whatever it is I need or things I want.

Jesse: Yes. The process of budgeting is just making sure that this resource you have, this money, is lined up in doing what you want and budgeting. Isn’t a thing, it’s not a budget. You are budgeting. You are allocating your finite resources, two things that you want your money to do and that never ends. We’re going to be doing that our whole life, where you wake up in the morning, you say, what do I want to do today? You’re just waking up and saying, “Well, what do I want my money to do today?” That kind of a thing. It’s important we recognize that budgeting is not about spending less, cutting back, frugality, deprivation. It’s just a plan. That’s all it is. It’s totally agnostic as to what you do with the money. It’s just, do you have a plan? Are you being intentional?

Are you being thoughtful? Are you sharing that plan with your partner? That kind of a thing. When a baby enters the mix, this child, then the plan naturally needs to change, but it’s still just your plan. If you have a big vacation that you want to do, then you do that. Our money is meant to be spent. It’s meant to be enjoyed. It’s not meant to be hoarded. You don’t get any extra prizes when you end up with an extra bit at the end, it’s meant to do whatever you want it to do. I think too often people think of budgeting as some faux prison. It’s really not. Quite the opposite.

People that really start to work the process they find that they are finally for the first time ever spending money without feeling guilty about spending money. You’re talking about someone that was feeling guilty when they were buying bananas to the grocery store. It’s like, oh, well, gosh, these aren’t on sale. Should I really– it’s like, do you want bananas? Yes, then let’s just move along. So often we just carry so much baggage with almost every purchase because we haven’t acknowledged upfront what we actually want our money to do. A budget just lets you start to spend guilt-free, including spending on that child when you’re buying really expensive onesies or whatever it is, whatever floats your boat.

Will: Right. Bouncers and pacifiers and all the amazing kids toys.

Jesse: I should say. People say like, “Oh, these babies are so expensive.” They really aren’t. So much of it is just marketing that preys on you as a parent. You have to be really cognizant of like, okay, I’m in an emotionally vulnerable state right now. Apparently, everything on the shelf looks like this absolute need and it’s not. Just be wary of that.

Will: Yes. That’s a really good point and very good to know. I do want to ask a specific budget question just because I know you’ve worked with a ton of families, ton of people. A lot of dads who listen are either stay at home dads or their partner, their wife, has turned into a stay-at-home mom and a big change there is one income, the drop in income, but you’re balancing that with childcare and also being able to spend more time with your child, et cetera, et cetera, but one question that always comes up is discretionary income. How do you manage or deal with discretionary income or the less fancy word is an allowance for your spouse, for your partner, or vice versa for them, for you. If they’re the primary breadwinner, how do you have that conversation? What does that look like when you’ve seen it work?

Jesse: Yes, I would never use the word allowance with my wife. The root of it to me sounds off like I allow you this. It’s like, ah, no way.

Will: No, 100%.

Jesse: We have all of our money together. All of it is spoken for already. Then we carve out money that is just for me and money that is just for her. We call it our fun money. Well, you can call whatever you want to his and hers or whatever, but the idea is all of the money is spoken for both parties, it’s together, money and then you extract a little bit of money and you just agree on the amount. When we were first married, it was literally $5 a month each was just enough for us to be like, “Oh, I have a little bit of money on my own.”

That wouldn’t do anything today, but back then it seemed to give us just enough breathing room to be able to feel like, “Oh, I’ve got a little bit of autonomy, a little bit of my own money,” but I would never say, “Oh, I give Julie an allowance.” Julie is a stay at home. She has been since our first was born, but it’s our money, and then we always carve off a little bit that’s Jesse’s, a little bit that’s Julie’s versus saying, this is my money because I earned it. It’s like, well, the earning was completely facilitated by the fact that you have all of this stuff done for you. You’re a partnership top to bottom.

You view it as 100% partnership. In that way, a lot of the tit for tat little quid pro quo things that people do, it’s just no, no, you really can get rid of that and view it as a full-fledged partnership, but like you mentioned, carving out a little bit of money up front for each of you just to be able to do whatever you want with, I’m not accountable to the family with this. I can do whatever I want. It’s just nice to have that bit of breathing room.

Will: That makes a lot of sense. Like you said, a budget solves a lot of those challenges, of here’s my money, here’s your money, well, no, here’s the money. This is for our family. This is how we’re in a partnership together.

Jesse: I mean to say, even if you’re like saying, we have two checking accounts, they’re separate, people have all kinds of physical structures and how it all sits. When you’re budgeting, when you’re using the software, it doesn’t really matter where the money is physically. You’re just allocating that money to jobs that it needs to do and really think of it less as his, hers, or theirs or whatever, and think okay, this needs to pay the rent, this needs to do this. They don’t care about any of those traditional or nontraditional roles. It’s just your plan. I think people bring a little bit too much baggage to that. Oftentimes because it’s been modeled poorly for them when they were growing up. Make sure that you view it. This is the household, this is the whole money. Then carve out a bit for each other.

Will: I like that a lot. When you talk about the household, we start talking about kids, and as our kids get older, how do you involve kids with budgeting? At what age, what does that look like in your estimation?

Jesse: At the earliest, they start to hear you use the word, they start to hear you say like, “Oh, that’s not in the plan. That’s not in our budget or hey, let’s buy this. There’s plenty of room in the budget.” You make it a positive as well. They’ll hear you talking with your spouse about that. It’s like, “Oh, this isn’t a bad thing.” They’ll hear you talk about money with your spouse. You’re not yelling at each other. You’re just talking. That’s actually a really good modeling. At eight years old is when I actually set my kids up with their own budget.

That to me, they’re old enough. They can start to do the work on their own. That’s where we give them money, an allowance. I would happily call it an allowance with a kid. We give them their allowance and I got this from Ron Lieber, a New York Times columnist. He said, “You give them the allowance, not so you are teaching them that money comes from work, but you’re giving them allowance so that they can begin to practice using money and it’s just practice.” I really like that because the kids need to do chores around the house because they’re part of the household.

I don’t like tying everything with like, oh, I’ll pay you. Oh, I’ll pay you. Some stuff you just do because you live here. The money that we give them as an allowance that is purely for them to start to practice looking ahead, saving up for things, feeling what it’s like to waste money on something. We try and give them a lot of freedom there. Show them what giving looks like. We’re teaching them that the budget is their way of viewing here’s what my money should do. My favorite thing to see is when my daughter who’s 14 will say, “Oh, I don’t have any money to go shopping for clothes.” Her bank account is full of money, but her clothing category is empty. That little bit that she demonstrated, I thought, “We’re doing all right with this one.” One for seven, not too bad.

Will: I’m sure you’re batting higher than that but that’s a great example. That’s a really good example. Some of those topics I think can be learned by modeling like you said, you get the negative in terms of maybe we were brought up with not the optimal budgeting or ways of dealing with money. We can change that, like anything, same thing with fatherhood. We had things that maybe our dads did we didn’t like and we don’t need to follow those. We can chart our own path. That’s part of the fun of all this.

I think you brought up, wants verse needs. That’s a really important kid topic. One that’s interesting to talk about is why we don’t spend all our money. Why we can’t buy this? What savings looks like? That’s another topic that comes up a lot that I was asked to ask you by one of my dads, which is when you’re saving, this is a more specific question, how do you balance a emergency fund versus savings to give you that peace of mind? I know there’s not a set formula, but how did you and your family? How do you look at? How do you advise other families to look at that?

Jesse: We have four rules that everyone should follow. Whether or not they use our software, they should follow the rules. The first rule is to give every dollar a job. We’ve hit on that a few different spots, but every dollar that you have in your possession needs to be assigned something that it will do either now or in the future. Rule two is to embrace your true expenses. That’s a little bit of it’s about looking ahead to larger, less frequent expenses, and breaking those up into monthly amount.

You would look at that vacation you’d mentioned earlier and you’d say, “We’re going to spend $6,000 on vacation. It’s going to be six months from now. We need to set aside $1,000 each month for this vacation.” I did easy math on purpose, but the idea is you’re looking ahead. That’s that future version of you that’s vacation, Jesse. That’s like, “Hey, throw me a bone here. I want to have a good vacation?” The third rule is to roll with the punches. That means you’re adjusting as you go, new information comes up, vacation was canceled or whatever, you’re going to move and adjust.

Our fourth rule is to age your money. Meaning you want money to sit in the system for a little bit. If you earn the dollar today, you wouldn’t want a dollar you earn today to be spent tomorrow. It’s too fast. You want to be able to say, “Hey, this dollar I spent today, I earned it 60, 70 days ago.” We call it aging your money, the software just calculates what the age of your money is based on a little formula we do. The idea of the emergency fund, to answer that dad’s question.

A lot of what people call emergencies aren’t actually emergencies like your car tires wearing out, that’s not actually an emergency, that’s just car tires doing their thing. Just yesterday, we had a little pinhole leak in our water heater. It was shooting against the wall and soaking this drywall. I don’t know how long it had been going on, but that’s just– is it an emergency? Yes, but things happen. We find that YNABers, people that are using our method, they start looking ahead and thinking about things car tires and repairs and home maintenance and what they want to do with the garden next year.

They start allocating money to these specific jobs and then they find that they don’t have emergencies anymore. A lot of time, what we’ve done is we’ve taken this big emergency fund, call it three to six months expenses is standard advice and people will build up that fund and then an emergency will happen and they’ll take from it and they’ll feel bad about it. They are, Oh, man, my emergency fund, it’s getting hit.” Then something else happens they take from it. “Ah, dang, it’s getting hit again.” What we’ve found is you look ahead and try and anticipate larger, less frequent expenses and be really specific with your savings.

You’ll find one that is very satisfying. Doesn’t make you happy, but it’s satisfying when you have a house repairs category that is flush and your house needs repairs so that you’re like, “Hey, look at me, I’m a little clairvoyant versus just every bad thing happening to you one after the other, after the other. We have people regularly report they don’t really keep much of an emergency fund because their emergencies have all just become large expenses they anticipate in the future.

Now, I still personally keep just six weeks of cash that’s in the budget and the line item is literally emergency, but others don’t, others like, “I never end up touching that anyway.” I would encourage this listener to look ahead and try and anticipate those emergencies. Look back if you want, scroll through your bank account and find large amounts and be like, “Oh, was that an emergency? Should I prepare for that again?” That thing. You’ll find that there are very few bonafide actual like, oh man, this just came out of nowhere.

Will: I’m sure you’re right and you brought up a really good point though, about the emotional aspect there, because when something breaks in your house or that “emergency” or your tires run out, not an emergency and it happens, it will happen to every house, it’ll happen to every tire. It’s just that we didn’t plan for it, but by planning for it, you’re right, you’ll feel clairvoyant and you won’t feel that negative emotion nearly as strongly as, oh my gosh, where’s this $500 going to come from? I’ve allocated that because I knew it was going to hit in the next six months or a year or whatever it is.

Jesse: It’s very satisfying to have a car mechanic say, “Oh man, I’m so sorry, but this is going to be $980.” They’re racing for the reaction because they’re used to dealing with people that can’t handle it. It’s very satisfying to say, “Okay. Is that all we need to do or is there something else we could do?” Make it a little cheaper while you’re in there, get a little preventative maintenance as well. You’d be surprised how good that feels just to be ready for fairly normal wear and tear of just life in general.

Will: It’s thinking ahead, because there are surprises, but not as many as I think we expect when those bills come along. Can you talk for a little bit, I’d love to hear more about both the book, You Need a budget and then the app where I know there’s more focus. If you don’t mind where the book came from, how we can use it and start from there?

Jesse: Yes. The book actually came late. Originally my wife and I were going to get married and we were young and in school and I built a spreadsheet that I thought, “Oh, we’ll use this once we’re married.” I showed it to her right after we were married and we were in the honeymoon phase and she was like, “Cool, this is great.” We were dirt poor and we followed this little spreadsheet and I got the idea about a year into it when our first baby was on the way, I wanted to earn a little bit of extra money and I thought maybe people will buy our spreadsheet. We found it pretty useful. We wanted Julie to be able to stay home and just focus full time on being a mom.

She stepped out of the workforce and I jumped in and tried to sell this little spreadsheet. In the selling of it, I realized that it was enforcing some really distinct rules that we hadn’t even seen. In the selling of it, I started to codify those four rules that I outlined and realized, oh, it’s really not the spreadsheet at all. It’s the way we’re thinking about the money that’s really starting to move the needle for us, and so one thing led to another.

I met a guy that said, “Hey, I can take your spreadsheet, make it into software,” and so we did that, that was so long ago, 2005,’6. Then phones came on the scene and we thought it would be really handy to have this on your phone, and so we threw that on there. Now you can ask Alexa how much is in your grocery budget and she’ll tell you, but your neighbors can ask too so you got to kind of be careful.

[laughter].

Jesse: It’s just been one thing that’s led to another and the software has gotten better and better. In 2016, I thought, I really need to get this just really down on paper. I’ve been thinking about this for 10,12 years, I want to kind of get it all on paper, and so that’s when the book came out, but we’ve always just taught those four rules and taught people they’re thinking about their money wrong, and we just need to get them to think about it a little differently.

It’s not about forecasting and pretending you’re going to earn money, it’s about just dealing with the here and now, giving every dollar a job, and actually starting to introduce real trade-offs in your thinking, where you know you have a finite amount of money and it’s time that you start to kind of say like, “Well, if I do this, I can’t do that.” The method that we teach is the power, and so whether or not people use our software, I’ve always been very okay with someone saying, “Well, I’ll build a spreadsheet, that’s exactly what I did, it works very well, but the thinking is key, that’s the magic of it. We run workshops and all kinds of things online, teaching people completely for free. Here’s how you should think about things, and it hasn’t gotten boring yet. I keep just enjoying every day.

Will: Well, you’re serving a really important need, you’re serving a community and you do have a ton of great content for free on youneedabudget.com and I think once my listeners start digging there you guys will also see that there’s a book, that there’s the app, and again there’s a lot of tools you can use, but the most important is choosing one and it could be a spreadsheet, it could be, but being active, I think and just not letting the budget happen to you, but you, being active in creating the budget, creating how you want to make your money work.

Jesse: Absolutely. One nod to the third rule that I went kind of quickly through, but the third rule that roll with the punches, that really is the key to sticking to it, because you have to recognize that we want a budget that’s flexible, it bends, but it doesn’t break, and too many people go in and say, “Okay, honey, we’re going to be budgeters,” and they’re like, “Normally we spend $1,200 on groceries, we’re going to spend $900. I mean, they just go full scorched earth mentality, and of course, they fail, and then they blame how the budgets run, this doesn’t work for us. The budget has to be realistic and flexible.

Just like if you and I would be like, “Hey, we’ll bring our families to the beach and then we get up to go and it’s pouring rain, we wouldn’t be like, “Ah, beach vacations, they don’t work.” We would just be like, “Oh, what should we do differently today?” It’s just about adjusting your plan. You’re a lot more like a coach making halftime adjustments. You had a good plan, but you’re also seeing how your opponent plays, and people too often think that budgeting is just like this set-in-stone thing and then, of course, when it breaks, they’re just like, “Oh, whatever, that doesn’t work.” That third rule is really– that is the sticking power rule, it’s just like, “Oh, changing my budget is budgeting.” That’s a new thought for people to have.

Will: Absolutely, that’s a simple one, but it’s as simple or complicated as you make it, it sounds like a budget, it’s again, this whole shining star in the sky, I’ll never have a budget, but that’s not the right way to look at it at all. It can be inspiring and freeing once you know what your money is doing, and “Hey, I know kids are expensive, but at least I know it, at least I know where the money’s going. This has been perfect, Jesse. I really appreciate you joining us again. On youneedabudget.com, you get a lot of great information. Any closing thoughts for us here, Jesse?

Jesse: I just appreciate you having me on. Being a dad is the greatest thing in life, all it’s pales in comparison, so I’m just happy I get to chat with dads and money, it’s a pernicious thing if it’s done poorly, really the negatives all just seep in. On the flip side, the positives, when money is just dialed in and we can almost get it boring, then you really do get to focus on other far more fulfilling things, so just get the money right, get it dialed in, and then, raise the kids and change the world.

Will: I like that a lot. Money is a tool, it’s a means to an end, so use it as such, that’s great. Well, thanks, Jesse, appreciate you joining us and we’ll talk to you soon.

Jesse: Thank you, Will!

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