In a Nutshell:
By following four simple yet powerful rules, you can take control of your finances and transform from being controlled by money to becoming its master.
In 2004, Jesse and Julie Mecham were a young couple in their twenties struggling to make ends meet. Living in a modest 300-square-foot basement of an old house, Jesse was pursuing a master’s degree in accounting while Julie worked on her bachelor’s degree in social work. To add to their challenges, they were expecting their first child.
The couple felt financially stretched, but Jesse, a self-proclaimed “numbers nerd,” decided to create a spreadsheet to track their daily expenses for the year. By diligently sticking to their budget, they discovered an unexpected benefit: financial stability. They could pay their bills, save a little, and even afford monthly date nights.
This success inspired Jesse to share his method with others. What began as a simple spreadsheet evolved into a popular budgeting software called You Need a Budget (YNAB), now one of the most highly-regarded personal finance tools available.
In his book You Need a Budget, Jesse Mecham outlines the same budgeting philosophy that helped him and thousands of others overcome financial stress. Let’s dive into the four core rules of the YNAB method.
Rule One: Give Every Dollar a Job
The foundation of a strong budget is assigning every dollar a purpose. Mecham encourages readers to ask: “What do I want my money to do for me?”
Start by listing all your financial obligations—essentials like housing, utilities, transportation, and health care. Once these needs are covered, prioritize your remaining funds based on what brings you joy or adds value to your life, whether it’s travel, new clothes, or saving for a big purchase.
Mecham emphasizes that budgeting is about aligning your spending with your personal priorities. When you create a “to-do list” for your money, you gain a new perspective and take proactive control over your finances.
Rule Two: Embrace Your True Expenses
Many budgets fail because they overlook irregular expenses. Mecham introduces the concept of “true expenses,” which include:
- Predictable irregular expenses: Insurance premiums, holiday gifts, or fluctuating utility bills.
- Unpredictable but inevitable costs: Car repairs, medical emergencies, or home maintenance.
By setting money aside for these expenses in advance, you protect your budget from surprises. Saving for long-term priorities may feel like a sacrifice at first, but Mecham reframes it as “spending money ahead to the future.” This mindset ensures you’re financially prepared for life’s curveballs.
Rule Three: Roll with the Punches
Even the best budget can be disrupted by life’s unpredictability. Mecham urges readers to remain flexible and adjust their plans as circumstances change.
Budgeting is not about perfection. It’s about progress. If unexpected expenses arise, reprioritize your spending. For example, if your garage door breaks unexpectedly, fixing it becomes your immediate priority—even if it wasn’t on your budget yesterday.
Mecham shares his own story of repeatedly underestimating grocery expenses until he and his wife adjusted their budget to reflect reality. Flexibility is key to avoiding frustration and maintaining momentum.
Rule Four: Age Your Money
The ultimate goal of the YNAB method is to “age” your money—extend the time between earning and spending it. This means building a cash buffer that allows you to cover future expenses with income you earned weeks (or even months) ago.
Mecham explains that the “age” of your money reflects financial stability. For instance, spending money earned yesterday means your money is one day old. Spending money earned last month means your money is 30 days old.
While living off “old money” might seem out of reach for those living paycheck to paycheck, Mecham assures readers that consistent application of the four rules will help them build a financial cushion over time.
Final Thoughts
You Need a Budget is a straightforward yet impactful book. Mecham doesn’t overwhelm readers with every facet of personal finance; instead, he focuses on the practical steps to create a budget that works in real life.
The book includes chapters on budgeting as a couple, managing debt, teaching kids about money, and overcoming setbacks. It’s filled with real-world examples and anecdotes, making the principles relatable and actionable.
With years of experience and feedback from YNAB users, Mecham has distilled a system that’s both simple and effective. Whether you’re new to budgeting or looking for a fresh approach, You Need a Budget offers invaluable insights. Highly recommended for anyone ready to take control of their finances.