You Need a Budget: The Proven System for Breaking the Paycheck to Paycheck Cycle, Getting Out of Debt, and Living the Life You Want

by Jesse Mecham

When You Don’t Know Where You Stand, You Don’t Know What You’re Capable Of

Even being a single paycheck ahead relieves so much stress and worry from day-to-day life.”

Once his paycheck-to-paycheck stress was gone, he had the brain space to figure out the small changes he could make that would lead to huge results.

Rule One makes you more aware of what your money is doing and helps you to stop spending on things that aren’t important to you. This gets you on the fast track to spending less than you earn.

Rule Two has a huge influence on the age of your money because it gets you saving for longer-term expenses. Since that money doesn’t get spent right away, it sits there and grows old. Rule Two also helps you see that some future obligations are more important than current “wants.” Setting money aside for next month’s rent instead of eating out for lunch at work this week is deferring the use of your money. Those tiny decisions help keep your money in-hand, where it can sit and age. And Rule Three keeps you adjusting and adapting, which will keep you budgeting over the long haul. Your money won’t get a chance to age if you don’t stay in the game for a while. Rule Three also keeps you accountable to the ultimate bottom line—which keeps you from

going backward.

The sprint is a short period of time during which you go to extreme measures to accumulate extra cash. Once you’ve brought in enough to fund a month of expenses, you’ll officially be out of the paycheck-to-paycheck cycle.

RULE FOUR: AGE YOUR MONEY Living off “old” money can feel like a pipe dream if you’re living paycheck to paycheck. Remember, this isn’t a luxury reserved for the rich. Some things you can try: • Set a goal to save what you spend in a typical month. When you hit your goal, budget out the new month with that money. Now your next paycheck can go to the following month. Your money is officially thirty days old. • Embrace the sprint. Go on a no-spending spree for as long as you can. Also hustle to bring in extra cash in creative (and legal) ways. Anything you save or earn

goes straight to your savings for the new month. • Budget windfalls to next month. We all have them at some point. If your money isn’t as old as you’d like, use a windfall to get ahead by budgeting it to a future month. The stress relief will feel so much better than the temporary happiness any new purchase can bring. Remember, anyone can do this—it just takes a smart blend of goal setting, tenacity, and patience. It’s totally worth it.

CHAPTER 6: Budgeting as a Couple

Surprise—you (both) need a (shared) budget.

help. On a very basic level, it’s much easier to talk about your money when it’s through the lens of a budget. Now it’s not about your debt or my debt, my spending or your spending. It’s about how it all works within the budget. The budget is like a neutral third party that keeps the conversation grounded in reality.

Rule Zero is the process of deciding what’s most important to you. This is fundamental to budgeting. You can’t get far into Rule One without having a good idea about what you value.

You can use your first budget date to explore Rule Zero in three ways: what’s most important to you as an individual, what’s important to your partner, and what you value together as a couple.

Yours. Mine. Ours. You can’t get far in a budgeting relationship without realizing that these three sets of priorities exist—and without talking openly about them.

I recommend boiling your priorities down to a small number of things—around one for each of you, and two that you share. You probably have more priorities than this but make an effort to zero in on your one selfish, personal priority. Then give each other more leeway to spend on that one thing. So maybe the baby cushion and Fiji trip turn into shared priorities, while the coworking space is yours. Meanwhile, the coding classes are your partner’s.

You’re guaranteed to learn new things about each other once you start to embrace yours, mine, and ours priorities. You may also be surprised to discover how liberating it is to know that your personal goals—from the responsible to the quirky—have a firm place in your shared life plan.

Let the Four Rules guide your sessions. If you’re just starting out, set your priorities (after your Rule Zero date) and then roll on Rule One. Assign dollars to jobs together so you’re both aware of your monthly targets. You may be guessing at certain spending categories, like fuel or groceries, in your first couple of months. That’s fine! You’ll get a realistic view of your spending the longer you budget together.

You’ll naturally veer into Rule Two as you set priorities and assign dollars to jobs. Set long-term savings goals together and be honest with one another. If your partner is feeling fierce about paying off the car loan but you’re more concerned about saving for a much-needed trip, talk it through.

Rule Three will make a showing at your monthly budget dates, but its true place is in the day-to-day. It’s the “Gah, we blew through our grocery budget and it’s only the seventeenth!” conversation. The “I know we said we wouldn’t spend on clothes this month but I’m having dinner with the CEO and my best pants don’t fit” conversation.

Rule Four is a great tool for measuring how well you’re doing overall. You can get a quick pulse check on your money’s age just by observing how you talk about upcoming paychecks.

The same goes when you’re budgeting with a partner, only we encourage couples to up the ante by having a no-questions-asked “personal fun money” stash for each of you. We still want you to have those joy-inducing categories—eating out, shopping, whatever. But “personal fun money” is a little different. In this case, neither of you has to answer to the other about what you did with your loot. If you decide to fold yours into origami cranes and fly them off a cliff, that’s your choice.

Most of our reasons for wanting to quit budgeting stem from one core problem: perfection. When we feel we’re failing, it’s often because we’re pushing too hard for a perfect budget.

It’s self-inflicted to boot, which is actually a good thing (although it doesn’t sound like it). Once you’re aware of the behaviors that kill your chances of success, you can do something to counter them.

Not leaving yourself breathing room. Also known as the doughnut incident. This is one of the most common behaviors that make people want to quit.

Setting unrealistic spending targets. This is very common when you start budgeting, especially because you lack the data you need to set realistic spending goals. If you’ve never tracked your grocery spending, how can you know whether that $300 target is anywhere near your reality?

Assuming rapid change. Perhaps you’ve realized you spend $800 a month on groceries. Good! You’re now working with real numbers. But trouble brews if you swear you’ll only spend $300 starting today. It’s a great goal but you can’t expect to change your behavior overnight—especially by such a huge degree.

Demanding too much of yourself. I’ve made the comparison between budgeting and diet/exercise before. There’s a way in which the similarities can’t be ignored. In both scenarios, you will burn out if you demand too much of yourself (this is really true in all areas of life).

The OCD factor. Bet you didn’t think there were so many ways to go crazy over your budget. . . . When the budgeting OCD kicks in, you just can’t let the penny go.

Complexity. A person with one credit card and one bank account will undoubtedly have an easier time budgeting than someone with several of each.

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