Beginning Balance

Mark and Jesse have discussed the advantages of being cash focused since the beginning of the show -- such as episode #3: Your Cash Is Your Strategy -- and part of being cash focused is not being focused on debt, or using debt to fund business operations. Most followers of YNAB can agree with this outlook, however credit cards fall into a grey and sticky area.   Jesse contends that credit cards actually pose a number of problems, even for people who use them "responsibly," that is, pay them off regularly and never carry a balance or pay interest. His main problem is the fact that banks push them so hard -- there must be an incentive to have people transact with credit cards rather than with debit cards or cash. Of course, banks and payment processors make money with every swipe, about 3% of the transaction value in fact. As credit cards have become ubiquitous, this transaction cost has been baked into the price of goods, too.   Jesse also cites some research that revealed spending with credit essentially provides you with a dopamine hit similar to what you get just buying things. Credit is an appeal to the lizard brain, the idea that you are getting something without giving something. Of course you are giving something, just not yet. It's the "not yet" part that short circuits our brain. And this psychology often leads us to simply spend more than we would otherwise when we use credit cards.   So, can you stop using credit cards in your own business and personal life? Mark and Jesse are going to give it a try in 2023, and see what happens...     Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

The beginning of the year brings for every business owner a familiar feeling... worry and fear about taxes. Even for those putting in an honest, good faith effort, it's not always clear that you've done things 100% correct. There's also the lingering worry that somehow, the IRS is going to show up in dark sunglasses one day and start tearing through your records.   Jesse's strategy for managing this is simple. Do your best with your taxes, then stop worrying. The only absolutely wrong move is not to file your taxes (which tax lawyer Casey Murdock stated in episodes 16 and 17). In the instances in which Mark and Jesse have been involved in IRS situations, the agents have been helpful and open to finding a quick resolution -- they are human after all.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

There's a lot of doom and gloom in the media these days, more than usual, that is! Inflation, recession, war... there seem to be many reasons to be negative about business outlooks in the coming year. But what are you going to do about it? Is it even helpful to think about this stuff too much?   Jesse relates a recent experience talking to a reporter about business conditions, generational finance issues, and predicting the future, which kicks off a discussion with Mark about the futility of ruminating on the negative.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the idea of "moats" in business, that is, the things which both give your business a competitive edge and also make it difficult to replicate. Too many budding entrepreneurs become enamored with building apps and software tools for their business, thinking that the app is the thing that makes them unique.   Software is very rarely a moat, however, or even unique. It's usually just a tool for aiding the real business, and focusing too much on the tools without executing the business plan is a recipe for failure. Mark and Jesse discuss the moats in their own businesses, and analyze some of the mistakes they've seen other entrepreneurs and business owners make.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse answer a listener's questions about whether Jesse knew that he was onto an idea that would positively impact so many people when he started YNAB. They also discuss what new projects -- in business and in life -- they have on the horizon for the coming years.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse ponder the question: what makes (and keeps) employees happy? While Jesse doesn't like the term "happy," there are definitely some strategies to keeping employee morale high and making jobs more fulfilling. Jesse references Dan Pink's book "Drive" and his concept of AMP -- autonomy, mastery, and purpose. If a job can offer these things to an employee, chances are they are going to find fulfillment and satisfaction in their work.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the idea that all businesses really transact in information. Whether the business sells goods or services, no matter the field or industry, ultimately there is information behind all products -- how to make the product, how to market and sell it, how to support it, etc. With that revelation, the concept of standardization becomes very important. Standardizing processes and protocols lowers the cost of information transaction, and increases the profitability of the business.   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   YNAB https://www.youneedabudget.com

Mark and Jesse discuss the importance of preserving institutional knowledge when employees inevitably leave and new ones join, and how that can (and should!) be baked into the normal functions of the business. As Jesse puts it, nothing in business is ever "one and done." Every process requires regular updating lest it fall prey to the law of entropy and important business knowledge gets lost.    Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse discuss a new term that is making the rounds on social media, and recently got the Wall Street Journal treatment as well. "Quiet quitting" is the so-called trend of dissatisfied and disillusioned workers exerting bare minimum effort and working as little as possible to keep their jobs, without actually quitting. The employer side to this has been dubbed "quiet firing," that is, keeping an employee but giving him less work, fewer hours, and generally making the work experience worse in hopes that he will quit of his own volition.   Mark and Jesse discuss whether this is a "thing" or just a spin on the victim mentality, which is unforunately all too common among employees and employers alike. Jesse references Jocko's Extreme Ownership, and why it's equally important for team members to "lead upward" as it is for managers to "lead downward."   Wall Street Journal article: https://www.wsj.com/articles/quiet-quitting-firing-productivity-paranoia-11664390490   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com

Mark and Jesse set their sights on Rule Four as they contemplate the first principles, or the foundational ideas, behind YNAB's Four Rules. Rule Four has evolved over the years from pay today's bills with last month's money to, simply, "age your money." But the age of money, while a useful statistic, can be confusing.   When you spend money on things that you've budgeted and saved diligently for, your age of money goes down. You are punished for doing the very thing that budgeting is for, in a sense. So while an increasing age of money is a good thing, it's not the point of budgeting. In fact, if you're age of money only increased, then you have missed the entire point of budgeting, which is to spend money on the things you value!   As Jesse puts it, age of money represents increasing options. But at some point increasing your options more and more (by accumulating more and more cash) becomes never making a decision. So, Jesse instead posits that the age of money is a separation between desire for something and fulfillment of that thing. By separating the desire from the spending, you become aware of your options and are thus better equipped to make good decisions. Age your money... age your desire!   Mark Butler, Virtual CFO https://markbutler.com https://letsdothebooks.com   You Need a Budget https://www.youneedabudget.com