The YNAB Podcast

Invest In Preparedness, Not Prediction

Dec 18, 2023

09:34

Snipd AI

The podcast discusses the importance of investing in preparedness rather than trying to predict the future. By saving money for future expenses, we can be ready for unexpected events. The speaker shares personal experiences to highlight the benefits of being prepared and avoiding debt. The value of having cash on hand, reducing spending, and living within one's means is emphasized. Being flexible and prepared allows for more options and less stress in the long run.

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Quick takeaways

Invest in preparedness, not prediction, by embracing future expenses and saving up cash.

Being prepared by having cash on hand and carrying less debt provides more options for unforeseen circumstances.

Deep dives

Invest in Preparedness, Not Prediction

The podcast emphasizes the importance of investing in preparedness rather than trying to predict the future. The speaker refers to the quote from a favorite book, 'Invest in preparedness, not prediction.' They highlight that predicting large catastrophic events or amazing gifts is futile. Instead, being prepared by having cash on hand and carrying less debt provides more options for unforeseen circumstances. The podcast suggests spending purposefully and reducing spending footprint while increasing income, all aimed at accumulating more cash. The main takeaway is to live within your means and invest in preparedness.

Introduction

3min

Investing in Preparedness Instead of Prediction

2min

Investing in Preparedness through Cash and Financial Strategies

2min

Investing in Preparedness: The Flexibility Beyond Predictions

2min

Jesse ran across a quote from one of his favorite authors, Nassim Taleb. In his book Antifragile, Taleb advises "invest in preparedness, not prediction," which also neatly describes the goal of YNAB. We cannot predict the future with any certainty, so it's folly to behave as if we can with our spending habits. What we can do, however, is prepare for the future by embracing our future expenses, and even though we don't know exactly when (or how much) those future expenses will occur, we can save up a pile of cash to handle them.

Jesse gives the example of an old car. As his early 2000's Toyota Camry aged, he started dutifully socking away $150/mo to cover inevitable repairs as well as a replacement vehicle. Years later, he had enough for a replacement, but the car was still humming along. So in this case he did not successfully predict the future. He could have held off on saving that money and directed it toward something else. At the end of the day, however, by preparing for the day he needed a new car, Jesse had a pile of cash in his bank account. When that day didn't come, he still had lots of options, because he had the cash. If he hadn't prepared, and the car died earlier than expected... then he likely would have ended up having to borrow money for the car.

This gets back to the idea of being "antifragile." Owing money is a state of fragility, because someone else has a claim on your future cash flows until you pay off the debt. It prevents you from using your cash to prepare for the future.

Got a question for Jesse? Send him an email:

askjesse@ynab.com

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