067 BudgetMania I – YNAB vs. Mint vs. EveryDollar

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Topics and your questions answered on the show

  • Budget review: You Need a Budget (YNAB) vs. EveryDollar vs. Mint.
  • Emily wonders if the debt snowball or debt avalanche is better
  • How to annoy someone you are dating.
  • Matt (Warrington, PA) wants advice to give to 18-year olds
  • Tim asks should you roll an IRA into a 401k
  • Winning takes a lot of losing.

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BudgetMania I – YNAB vs. Mint vs. EveryDollar

[0:00:12.0] ST: Tribute to the nature boy Rick Flare, you’ll hear why coming up. Broadcasting from one Dallas Tower, it’s the Scott Alan Turner show, ready to help you get out of debt, save more money and retire early and become a financial rockstar. In the studio with me is producer who loves a good action movie.

On the show today, Budget Mania One. I’ll be answering your questions about money, business and life. If you have a question you like answered on the show, visit Goaskscott.com. Last time on the show, how much should you tip? Where, and why.

As a man, when I purchase something that needs assembly, I open the box, open all the boxes in that box, then the packages, unwrap everything, lay it out neatly on the floor in little piles and start putting it together. If I get stuck then I will look at the instructions unless there is something like 500 pieces then I will start with the instructions but you got 50 pieces, no, I should be able to figure that out.

I’ve been writing software since college, I have an IT degree, I build Ecommerce websites, user interfaces, know a dozen programming languages, designed encoded database that handles millions of transactions a day. I’m a pretty bright guy I like to think when it comes to software. When I use a new program, I should be able to figure it out quickly and easily without having to watch a tutorial or read a manual if the software’s well designed.

Today, we’re looking at budgeting software, comparing EveryDollar, Mint and You Need a Budget which is called YNAB for short. YNAB released their web based software in January of 2016. It’s called NYNAB. New, You Need a Budget or YNAB 5, depending on where you look. The issue with the old software they had, it was a onetime $60 charge, you couldn’t auto import the transactions, everything was manual.

Some people like that because they want to manually track where their stuff is going. Auto import is a huge big time saver for me, it’s what I look for as a top feature in budgeting software. It’s a deal breaker if the budgeting tool can’t do that, at least for me. Some people like pen and paper, that’s good, I appreciate that. But I don’t want to spend two and here hours a month manually typing in “Walmart, kid’s clothes, $53.13, February 2nd,” it’s mind numbing, it’s a waste of my time. I value my time a lot.

So the new YNAB, the web based version, it’s got an auto import feature. I thought, “This is great, this is the time where I can try this out, maybe switch to something new. I have been looking forward to this for a long time.” YNAB has four million users prior to this new version. People like the old version a lot. It’s been around for a while, it has a lot of good feedback on it.

It took me 20 minutes to create my first budget, categories and limits, I copied what I had from every dollar which is what I have been using for a while now. Then, it took me four days to figure out how to get the auto import to work. It’s because I had to spend an hour trying to do it myself then I contacted support, took three days to get a response, spent another two or three hours on the forums messing around, trying to figure out what to do with my credit card payment.

In Mint, which I also used to use, you transfer it to the credit card from the checking. In YNAB, it does this odd thing with the budget. I’m not going to go get into it because I don’t understand it, it didn’t make sense to me. The last thing on YNAB, there are no reports. Right now it’s half the price of EveryDollar and that’s nice. EveryDollar also doesn’t have any reporting features. I can’t figure the stuff out.

I’ve written software forever. I should be able to do this. I wanted to like this software, I wanted to switch to it, it’s half as much as the EveryDollar plus and it did take them half as long to build it, I know they’re going to turn out new features with YNAB much faster than EveryEollar. EveryDollar said, “No new features,” since it was released. Like reports, I need some reports.

Budgeting software has to have reports at least in my opinion. Then you can look at stuff and see where it’s going. How much did I spend last year on eating out or car repairs? Because then I can plan my next year’s budget based on that. YNAB, I don’t even know what questions to ask. I can’t understand it.

Now, part of what brought me to this review and this episode in this context is taxes. I itemize my deductions, maybe you do too. I have a home office deduction, maybe you’re in one of those camps where you do that. In the past when I used Mint, it would just tell me in a few minutes.

“Here’s what you donate at charities, here’s all your utility bills, here’s your total internet for the year, here’s your AC service, here’s your water. Here’s your service, your repairs.”

And I can use all of those in my home office deduction, really simple. “Here’s your property taxes, here’s your car registration stuff, here are the totals.” Click, click, click, done. “Here’s your business expenses that you used the wrong credit card for.” Click, click, click. On and on. I could have my taxes done in 30 minutes, using Mint with its nice reporting features.

EveryDollar can’t tell me that because it has no reports, YNAB can’t tell me that, the new one, because it’s got no reports and since I switched from Mint to EveryDollar mid-2015, Mint can’t do it for me either because it’s not up to date. All those time I have saved by moving to every dollar which is great for monthly budgeting, it’s really quick. I have lost because now I’ve got to spend hours and hours and hours figuring all this tax stuff out for the year. Cry me a river right?

So what is the best budgeting software out there for you? If it’s cost, it’s Mint. Easy, hands down, it beats the free version of EveryDollar because it has superior reporting, you want to know how much you spend at Target last year? Easy to find out. How much you spend on electricity? 30 seconds to run a report. What percent of your income went to housing, no problem, nice little pie chart. How much overtime did I work? Easy. If you tracked it apart from normal salary.

Mint’s got all this nice little features and it’s free. If you have a simple financial solution, single standard deduction, Mint or the EveryDollar basic is for you. EveryDollar plus, $99 a year. If you like easy budgeting and don’t care about reports, you can budget in about a quarter of the time compared to what you spend in Mint. 10 to 15 minutes a week. Mint, it’s a lot more manual, it’s a lot more clicking. It’s more typing, it’s five times more clicking around to get stuff done.

What about YNAB? I wanted to like it, I couldn’t figure the freaking thing out. I don’t know, if you’ve got four to five hours to figure it out, maybe its good product, if you want to go watch tutorials and how to do stuff, I just want it to work. Maybe you can figure it out on your own, maybe you’re smarter than I am. I will tell you EveryDollar claims you can have a budget setup in 10 minutes and it’s true. I tested that out when I first started using it, it is that easy.

YNAB, it will take you about 20 minutes and then you have to figure out what to do with it and how it’s supposed to work. There’s some other options out there, I haven’t spent a lot of time looking into because I don’t have infinite time to look at every little piece of budgeting software. Personal capital is one, a lot of people talk about that, I didn’t find it to be a budgeting tool.

It tracks your net worth from all your accounts; mortgages, loans, 401(k)’s, investment accounts, credit cards, bank accounts, that’s nice. You can get a whole holistic view of where all your money is. I didn’t’ find it to be budgeting helpful. Simple, it’s the actual name of the company, Simple, that’s an online bank, they have no fees and they have budgeting software, part of their service. Problem I have with that is, you can’t link it to all your other external accounts.

I think it’s a neat idea, I’ll be talking about it again in the future but from what I’m trying to do, I didn’t find it very useful. Google Spreadsheets. Free, want to build your own budget. Pen and paper, you can do that too, you have a notebook and a pen. Many people do that, they like it, writing down stuff. There’s a bunch of apps out there, I don’t know how many dozens of apps there are you can put on your smartphone.

So there is no best that I can point you to. I can say some are better than others in certain aspects and features depending on your personal situation. That’s why it is personal finance because it’s personal. You are unique, what you use to budget should fit your needs and lifestyle. Who is the winner of budget mania one? Randy Macho Man Savage. Now, on to your questions.

Emily asks:

[0:08:45.7] E: “I’ve heard of the debt snowball method where the smallest balance is paid off first regardless of the interest rate. I also heard of another snowball method that looks at all the different debts and attacks each debt based on the highest interest rate first. Do you promote one or the other or have you found other options that are successful as well?”

[0:09:09.7] ST: Now what we’re talking about is the debt snowball method, which says you lay out all your debts and you pay the one with the lowest balance first. If you’ve got a $300 debt and a thousand dollar debt, you pay the $300 debt first. It doesn’t matter what the interest rates are. Compare that to the debt avalanche method which you lay out all your debts and you pay the one with the highest interest rate first. If the $300 debt has a 0% interest rate and the thousand dollar debt has an 18% interest rate, you pay the thousand dollar debt first.

Now, let’s look at this using a little analogy here. Years ago when I worked in college and in high school. I would bring my lunch to work every day during the summer and as part of my lunch, I would pack two Ding Dongs. Ding Dong’s, they’re so delicious. I had them every day, five days a week for lunch. Sometimes devil dogs, you just varied.

But let’s say I got home for dinner that night and I eat my dinner and I had 5 Twinkies after dinner. Let’s say I started putting on some weight, I needed to make some changes. The debt snowball method would say, don’t eat the Ding Dongs for lunch. Cut those out of your diet first then once you get in the groove, you’re feeling good, you can take it, then you work on cutting the Twinkies out of your diet, okay? Not worrying about which one has more calories. Five Twinkies does okay?

Now with the debt avalanche method, that would say no, you cut out the five Twinkies first because they have way more calories that the two Ding Dongs you’re having for lunch. Then when you get in the groove, maybe after a few weeks you’ve cut out the Twinkies then you come back and you eliminate the two ding dongs from your lunch. Those are the difference between the two using food.

We know that if I want to lose weight the fastest, I need to cut out the five Twinkies first, not the two ding dings but the argument is, if I eliminate the two Ding Dongs first, that’s going to give me a psychological boost, it’s going to give me motivation, it’s going to give me this great feeling that I did the Ding Dongs, I’m feeling good, I’m losing a little bit of weight, I can definitely attack the Twinkies next because I’ve had this minor success with the Ding Dongs.

That’s the debate between the debt snowball and the debt avalanche. There are studies, reports, accounts that people doing the debt snowball method, they have a greater success rate because they get this little wins along the way and it’s like a snowball moving down the mountain. Starts out small, gets bigger and bigger till it gets down to the bottom and it’s really big.

The avalanche just starts out big, wipes out the big debts first or big interest rates first then it heads down the mountain. There’s an app out there, it’s called Ready for Zero. You can use that app to plug in your debts and interest rates. It works by helping you pay off your big interest rate debts first and it gives you little alerts, little helpful messages along the way to keep you encouraged.

They’re calling it the best of both worlds, it’s giving you the little wins, the encouragement to keep you moving forward but it’s paying down your big debts first so that’s also an option. In the end, it’s what’s going to work best for you. What is going to work best for you? Because the best one is the one you’re more likely to follow. We’re all unique, we all have different motivation in drivers.

You may find going and paying off high interest loans is super rewarding because you see yourself saving money more quicker. That’s the bigger driver to paying off debts faster. Or you might find the debt snowball method better because it gives you this little quick wins right off the bat. Each person is unique again, pick the one that works best for you. Thanks Emily for the question. If you got a question unanswered on the show, visit goaskscott.com to get in touch with me.

[BREAK]

[0:13:23.8] ST: Back in Episode 59, I was talking about the life changing magic of tidying up, cleaning up your house. One of the things in that episode we talked about was getting rid of all your mementos. I did just that. I went through my office where I had stacks and stacks of birthday cards from ever ago, even stuff that I’d kept prior to getting married. I whittled that down, I’d say probably 10 or 20 cards total out of 500 and all the notes that my dad has written me over the years.

One of the things I kept was noted that Katie had written to me prior to us getting married and I went through those, some were a little lengthy and I want to share one of those things I found there because I was like, “This is what I was saying?” This was pre-marriage and says, she was writing to me and says, “You don’t tease me about my crazy business ideas and you encourage me to start saving for retirement, boo.” Those are her words, just says, “boo.”

Apparently, even before getting married I was annoying my wife to save for retirement which I guess that was a good thing, it got us on the same page and it helped us out. If you are dating someone, and you want to annoy them, ask them to save for retirement and encourage them to do so, it’s not a bad thing to find out what their financial philosophy is to make sure that it matches yours.

Now, on to your questions. Matt from Warrington Pennsylvania wants advice to give to 18 year olds. This is my second time recording this, I lost the first one, maybe the cat won’t show up in the background this time, the company cat. He writes:

[0:15:06.9] M: “I am a high school librarian, I have a 403(b) account until recently I was unaware of the fees I paid on a recurring basis. After listening to podcast like yours and reading about personal finance, I now feel a little less clueless about the drain these hidden fees, have on my long term potential earnings. I wish I had been more informed 25 years ago.

One of my new passions is to educate students about the importance of understanding personal finance. I have three things I’d like to know; one, books you’d recommend to an 18 year old, two, advice you’d give to an 18 year old, and three your opinion on paying for college with student loans.”

[0:15:40.8] ST: First, that is a great undertaking Matt. I’m so glad that you found a new passion for sharing your knowledge with those that are younger because they need to hear this stuff. Regarding your 403(b), I’m with you, I think we all wish we knew then what we know now in some capacity in our lives. The important thing is, now you know. Hopefully you can be the spearhead of change for your plan.

First question: books I’d recommend to an 18 year old. The Millionaire Next Door which I recommend to everybody, it’s just a great insight into how the average person builds wealth. How they live a frugal life, how they buy used things, don’t live in this mansions and drive Bentleys, wear all this fancy clothes. We think they do when we see celebrities on TV.

The second one is a classic one, it’s called Rich Dad, Poor Dad. This book is available on any public library. This is a great book because the guy just tells a lot of really good stories that are memorable. He has his dad that he compares with who is a poor money manager, who this fictional rich dad who does kind of everything right; how to run a business, how to invest, how to work with employees, how to build relationships and networks.

How do you spend your money wisely and invest it wisely? It’s an excellent, excellent book. I don’t always agree with some of his investing advice because he talks about being highly leveraged so taking on a lot of debt to do things from that particular aspect of it, I don’t necessarily agree with but the message that he has is really excellent.

The advice I’d give to an 18 year old? This is sort of new and I’ve learned about this recently after hearing a number of different studies and what people are doing and where they are in their life. Is that to just take some time off after you graduate high school. Don’t run off to college, called the gap year.

It doesn’t mean you have to take off a year to six months, a few months before you figure out what you want to do. Everyone’s always saying, “College, college, you’re going to earn more, you’re going to have that degree.” Well that can be true but statistically, most people are either going to go to college and change their major, the number is 80%, change their major in the first couple of years.

They go there, they don’t know what they want to major in so they don’t even know if it’s the right school to begin with or if you’re an adult, you might have a midlife change in your 30’s or 40’s you decide, “I don’t really like what I’m doing, this is not the field I wanted. This is not my passion when I was 12 years old,” or whatever. So they’ve wasted half their work life in some degree that they’re not really interested in.

That gap year. That time off gives a person time to reflect on and see what is important to them, what do they want to do in their life? Finishing off high school and running off and doing something else. Now if you know 100% if you want to be a doctor, you want to go help people to do that, sure, go to medical school. If you’re not so sure, take a break. Take a break.

Number two, don’t get into credit card debt. Younger people, 18 year olds, college students, you do need to get a credit card to build a credit history and have a good credit score. It is important no matter what anyone else says. You need a good credit score to get the best loan rates on your mortgage or to get a car loan if you go that route and get a car loan, which I don’t recommend.

But if you’re going to do it, get the best insurance rates as well. It even comes into play in some job application processes. You don’t go into debt to do it, you don’t’ treat it like you can use it all the time, just spend $10 bucks on it a month, get it paid off, pay it off every month, that will build the credit history.

Finally, don’t buy a new car, just drive the one you have until the wheels fall off. I have this latte factor calculator. Now, on the website, you can plug in what a new car will cost you over time and it is an eye opener. $400 a month in a car loan can cost you $73,000 after 10 years if you decide to invest that money instead. That’s an expensive ride. That’s an expensive ride.

Finally, my opinion on paying for college with student loans. This one’s tough for me because it’s case of “don’t do what I did, do what I say”. Or do what I think I like my kids to do in 16 years which is a long time away. Some people say college loans are good debt, others say it’s bad debt. What it is, it’s debt.

I had student loans, probably would not have gone to school without them, at least not the school that I picked. Times are much different now though because student loans, the rising rates of tuition has caused those loans to be much, much larger for kids coming out of school. And again, 80% of students are going to change majors.

You combine that with an average of $30,000 in student loans, people are graduating, they can’t find a job, then you have 70, 80, $100,000 in student loans. It’s going to take decades to pay them off in that situation. Lawyers and Chiropractors, $200,000 plus in student loans.

Now, if you want to be a lawyer, it’s not realistic that you’re just going to save up $250,000 in cash and go pay for a law degree. It’s not realistic. Maybe one out of a thousand people could do that. If you think about that, you get out of high school, you have no education, maybe save $30,000 a year on the high end if you’re a hard worker to pay for school. You’d have to work eight and a half years to save up for that law degree. In that case, it’s a terrible idea. You would not do that, you would take out the loans and go to law school.

Here’s a great website which sheds some light on making a wiser choice, it is collegescorecard.ed.gov. Just Google College Scorecard. It will allow you to compare a degree, the cost of the school that you want to attend and your earning potential coming out of that school. It’s a great website to check information on.

Matt, I’m going to pick on you since you’re a librarian, I use this website and I picked the most expensive university you could attend to get a library degree. It was New York University, it would cost you $38,000 a year, we’re just going to call it 40. So for your four year degree, it would cost you $160,000.

And the average salary to come out of that school after 10 years, not from 10 years when they graduated. But from 10 years from the day they started school, just shy of $60 grand. So you figure after some taxes, some bills, maybe you’ve got 10 grand a year to pay back your student loans, it would take you 16 years to pay them back, not even including interest.

It’s not worth going to school there if you want to be a librarian in my opinion. You look at North Eastern state in Oklahoma city, one of the less expensive schools, seven grand a year, you come out of there after 10 years making $35 grand. You’ve got $28 grand in loans, $35 in salary, still not great but if you put 10% towards your loans, you can have them paid back in nine or 10 years. Not 16.

You’re making less but you’re not paying them back for as long. So I’d take a good look at that website, make sure you don’t’ start out upside down on your loans versus your salary potential. Another idea, a lot of people suggest going to community college for the first two years, that makes sense to me, you get those core classes done for the cheap.

But from a different perspective, I had a great time in college, Katie did as well. If the opportunity is there to not go to a community college, if you can afford to go full years for a four year school, I’ll push my kids down that route just to have the experience because it’s just fun and you learn a lot. Make different connections.

It’s worth it if you don’t go broke to do it. Maybe you can save 30 grand by going to a community college down the street for a couple of years, that’s a lot of money, that’s something to consider. Thank you for your desire to educate the younger generation Matt, please let me know how I could help you further with that.

[BREAK]

Back in 30 seconds, you’re listening to Scott Alan Turner.

[0:23:53.8] ST: Hey nation, Scott Alan Turner here. Now for those of you that are my long time listeners, you know I’m not one of those guys in the radio who promotes every product that shows up on their desk. You’re never going to hear me trying to get you to buy wine from Texas or recommending you buy air conditioning service from some company in a city I’ve never lived in. No, I have a name to uphold to you, my valued and awesome listeners.

But if I were, if I were to recommend something to you, I would tell you about public bread. If you need to make a sandwich, bread pudding, stuffing for a turkey, bread crumbs for your parmesan chicken. What else do you use bread for? Toast. Feeding the ducks, you can’t go wrong with public bread. Twice the yeast and half the sugar of normal bread, you can taste the difference.

Public bread is made by the brotherhood of Millers and the brotherhood uses only the finest flour, true roman bread for true romans. Available in the bread section of select grocery stores. Tell them, Scott Alan Turner sent you.

[CONTINUED]

[0:24:54.3] ST: You’re listening to the Scott Alan Turner Show, if you have a question, visit me on the web at goaskscott.com. Tim asks:

[0:25:02.3] T: “I have $7,500 in IRA that I no longer contribute to. Should I roll it into my current employer’s 401(k) plan or do something else?”

[0:25:13.6] ST: If you have an IRA, about 70% of companies are going to allow you to transfer it into your 401(k). Don’t cash it out otherwise you’re going to pay taxes on it. The answer is, with most things money related, it depends. You can access your money penalty free at a younger age if you retire early but the funds in your 401(k) have greater protection against legal judgments if you get sued.

The big one though is what do you have access to in your 401(k). If the investment options suck, they have high fees, well there’s no way I’m transferring the money in. Most 401(k)’s have high fees. If you work for a very big company or maybe you just got lucky with a smaller company and they picked provider that has low cost index funds that you can get in to, yeah, then you might consider rolling it in.

But the choice is in your 401(k), they’re going to be very tiny compared to an IRA that you control yourself. You also have to consider early withdrawals, typically can’t take money out of an IRA penalty free until age 59 and a half but you can take withdrawals from a 401(k) once you’re 55 and have left your employer. So if you’re planning an early exit, move the money to a 401(k) so you can get to it earlier.

Another thing you might want to consider is converting your Traditional IRA to a Roth because the Roth grows tax free, that’s the best thing going. While you can convert a traditional IRA to a Roth, you may not want to because you’ve got to pay the taxes on the conversion. When you convert from the Traditional to Roth, you pay income taxes on the contributions.

The taxable amount that gets converted, it’s added to your income taxes and that may impact your taxes that you’re going to pay this year. Also going to impact your tax rate. If it pushes you into a higher level, you’re going to be paying more taxes on that. So whether you do that or not, that’s a question you want to ask a tax preparer. They can recommend you over some of it, all of it or none of it. You can convert $100, thousand dollars, whatever dollars you want per year.

Again, one of the issues you’re going to run in to doing that, you might get bumped up into a higher tax bracket. There’s also online calculators you can play around with saying what are the implications of converting from a traditional IRA to a Roth IRA? And it shows you whether you’re going to end up with more or perhaps less money in retirement. So try those out and see what kind of results you get. Thanks Tim for the question.

[BREAK]

[0:27:57.8] ST: When I occasionally think back over my life, I think of many things that I’ve lost. I’ve lost a lot of money, I’ve lost a lot of time, lost my health at times, lost my sanity on occasion, lost a lot of arguments, lost friends, lost business deals. If you sometimes wonder what it takes to win at life, the answer is easy. Usually it’s a lot of losing. Embrace it, it’s how you get to be where you’ll be.

Those are the words but one moment, a couple of minutes. Sometimes it’s hard to nudge a friend in the right direction without coming across as a know-it-all or implying, “Hey, you might have an issue.” You might be looking for an opportunity to share the rock star gospel with your mother, sister, son, coworker, cute checkout girl at Starbucks perhaps but you find it awkward to say, “Hey, listen to this episode on budgeting. It’s so exciting.”

Well, have I got an opportunity for you. This is either going to go down as one of the greatest moments in oratory history or be a complete train wreck. Either way, it’s already recorded and scheduled for the release so I am doomed. This is the show you’ll finally be able to share with everyone you know if you haven’t done so already. In the e-mail, text, Facebook, putting a sign in your front yard, tattoo on your arm if you’re crazy.

You’ll be able to say, “Dude, this is so funny, you have to check it out.” Or, “Girlfriend, this made me laugh, you have to listen.” That’s as high as my voice will go. It’s definitely not as funny as that meme of the lion that can jump 36 feet in the air. That things still has me crying every time I see it, it’s so funny. Go Google “lions 36 feet”. There are some swearing involved in the picture but you’ll cry.

Anyway, next time, the episode that you’ll be able to share. That’s it for this episode, I’m your host Scott Alan Turner, Rock star Katie is my producer. All the links mentioned in the show are available in the show notes on Scottalanturner.com except for the 36 foot lion. If you have a question you would like answered by me, visit goaskscott.com. Thanks for listening.

[0:30:18.1] ANNOUNCER: Okay nation, for your free copy of the guide, “How to save $1,000 in one week”, simply subscribe to the podcast right now on iTunes and text the word saving to the number 33444 to prove that you did it. Subscribe now to get out of debt. Save more money and retire early. See you next time.

[END]

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