Beginning Balance

Mark shares a difficult personal situation he and his family have been dealing with, that has signficant financial ramifications. Recently Mark's wife was diagnosed with cancer, and she has undergone chemo treatments and a litany of medical tests. As the medical bills continue to pile up, Mark finds himself having to float tens of thousands of dollars in costs while he waits to be reimbursed by their health sharing plan.   While this can be a very scary proposition, he has found peace and security in the YNAB process. Most importantly, Mark says, YNAB tells him the truth about his financial situation, neither catastrophizing nor softening the ramifications of unexpected large medical bills, and that clarity has been critically important to making good decisions and maintaining sanity.     Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

It's happening! Mark's son is taking the step toward business ownership. His plan is to leave his job at the auto shop behind, and start a mobile oil change business. Mark and Jesse discuss some of the challenges of pricing his service, establishing a recurring revenue model, and marketing to the most influential groups he has access to.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Jesse shares a recent situation that would have sent shivers through most owners. Following a revision in the tax code regarding software R&D costs, YNAB discovered it would be facing down a huge tax bill, over triple what they anticipated for the year. While this might bankrupt some companies, Jesse and the executive team were able to take the news calmly, and use the company's cash reserves to easily handle the tax bill.   It's a triumph of cash over the unexpected, and a YNAB success story!   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

What if all your spending... was actually borrowing? Ok, well not ALL your spending, but those situations in which you pull money from one category of your budget and apply it to another. Jesse gives the example of going to a special dinner at an exclusive restaurant. Reservations are very difficult to get, and you finally get one when someone else cancels -- but it's tonight. And you don't have the cash available in your restaurant category! So you move money from another budget category to cover the expense, because this is your only chance to go to dinner. We all run into these situations from time to time. Maybe it's not a fancy restaurant, but situations arise where you have to spend money now or forego an opportunity forever.   YNAB does a good job of making you aware of the tradeoffs. When you move money from, say, car repairs, to cover the restaurant expense, you must acknowledge that your car repair category is now underfunded, and that you'll have to replace that money later. Essentially, you're saying that "future you" will figure it out and generate the cash needed to replenish that fund. Jesse takes this a step further. Really, even though you "had the money" because it was in your budget, you still borrowed from future you -- because you created a liability which future you must take care of.   You didn't actually take on debt per se -- you didn't charge a credit card or take out a loan -- but you did borrow the money, from yourself. In that sense, everything is borrowing. Mark and Jesse explore the implications of this line of thinking, and how YNAB could better illustrate this concept.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse answer a question from Beginning Balance listener Allison (thanks for listening Allison!). Allison asks: what do you do when you get paid? How much should you set aside for taxes and retirement savings?   It's a great question, and many business owners struggle with this. Mark and Jesse explain the concept of "profit first" and why the business should pay you first, then take care of bills and expenses. As it turns out, using YNAB makes this process easy to implement in your business, but profit first does require some patience and discipline. Starting with a small percentage of profit (Jesse offers a few ways to calculate a good profit percentage to distribute) and slowly increasing that amount over time keeps you from overreaching and distributing too much money, which you might have to contribute back to the business in the event of unforeseen expenses. A slow and steady approach also gives you time to dial in your budget, and plan for future expenses as well as build up reserves for unforeseen expenses.    Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com  

On the previous, Mark shared a recent experience about letting an employee go. Not long after, another team member left for a great opportunity at another company. On a small team like Mark's, the loss of two employees back to back poses a big problem, as the workload gets spread to the remaining employees (a BIG increase) and some institutional knowledge is lost. Even with great systems and documentation, there's always some amount of institutional knowledge lost when an employee leaves, not to mention it takes time for their replacement to get up to speed.   This experience of picking up the slack, including both high and low skill work, got Mark thinking -- the curse of a small team is that skilled labor can leave for better opportunities, in which case the remaining skilled labor ends up doing a blend of low and high skill work. Ultimately, the business ends up paying skilled wages for work which is not entirely skilled, cutting into margins.   With this new revelation, Mark describes his plan for moving all low skill tasks in his business to lower skilled, lower wage employees, and why it's critical that businesses strive for this efficiency.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

It's not a fun part of the job, but sometimes you have to let employees go. Mark discusses a recent experience, and why, in retrospect, he should have acted much sooner. Jesse shares his thoughts on when, and why, you should let go of team members, when it's clear they aren't a good fit with the organization.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse consider the wave of AI technology that is rapidly being deployed in a number of industries. Whether it's the dreamlike collage-art of Midjourney or ChatGPT's pedantic essays based on conversational prompts, AI seems to be on everyone's lips these days. What remains to be seen is how quickly -- and broadly -- it will impact businesses. Mark and Jesse both agree, though, that now is the time to consider how it might impact your business and how you could make use of it.   Jesse offers a simple exercise to get started -- write down (without Googling!) every way you can think of that AI could replace or perform some aspect of your business. Write each idea down on a sticky note, and as you amass a lot of sticky notes start to organize them, arrange them into categories, and see what patterns appear. At the very least, this exercise can help you start to understand better what your business is, where and how AI can help or hurt your processes.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Jesse and Mark return to their credit card debate from episode #69 (recorded last year in 2022) and discuss how business is going with using a credit card. Jesse went cold turkey and stopped all use of credit cards, while Mark kept a card for just a couple recurring transactions, but greatly reduced his usage.   The consensus? Even though YNAB attempts to treat credit card spending the same as cash, because you have to set aside cash to cover the credit balance, it's NOT the same as cash. Even if you diligently set aside cash to cover your credit card expenses, until you actually pay off the card... well, the card isn't paid off! There's mental overhead in having to set aside cash for purchases as they occur, while also remembering to pay off the card. And while it may seem small, Mark and Jesse were surprised at the impact it had on their thinking and emotions around money.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse share their New Year's resolutions for 2023, and why their goals and plans are getting simpler as time goes by. One common goal for 2023? Mark and Jesse are recommitting to YNAB, and ditching the credit card.   Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com