Beginning Balance

In today's episode, Mark and Jesse discuss money as a concept, why it exists, and how trade (using money) has created tremendous value for humans throughout history. On the YNAB Podcast, Jesse has spoken about money being far more than a tool, however, and really an extension of one's self -- one's energies and desires. Mark and Jesse then attempt to connect the dots to our modern monetary system, where debt and inflation loom large. What exactly is it about money is essential to human flourishing? Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark kicks off today's episode with a handful of words, hoping to weave them into a broader discussion: vision, goal, strategy, plan, and tactics. Mark and Jesse discuss how many small business owners look for tactics first, various tasks focused on operations: posting on social media, starting a YouTube channel, building an email list. These may or may not be worthwhile activities -- you really need a strategy to understand the big picture of where the business is going (or needs to go), and then select the activities that will get you there. But even then, strategy is hollow, Mark argues, unless there's a why behind what you do. Unless the company has a clearly defined core identity, it will struggle to adopt a good strategy. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

In today's episdoe, Mark and Jesse discuss the importance of developing good systems, not just in business but in life! Mark shares a recent experience in which his wife left for a few days on a retreat, leaving Mark to handle her usual duties. Mark was faced with a lack of systems in day to day tasks, and enough friction to sit her down after the retreat and have a talk about family systems. Kate agreed, and, within a few weeks, became a systems expert, looking for every avenue she could find to create better processes. Good systems aren't just for increasing business profit, they're for improving quality of life, relationships, and family harmony too! The Goal by Eliyahu Goldratt and Jeff Cox https://www.amazon.com/Goal-Process-Ongoing-Improvement-dp-0884271951/dp/0884271951/ref=dp_ob_title_bk Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark and Jesse ponder the question -- what do you do when growth slows and the business plateaus? Mark recalls a story about a successful businessperson who failed at several ventures before striking gold, and notes that the "gold" business was never hard. It grew a lot early on, and continued to grow steadily from there. He juxtaposes this result with some of his clients who spend hundreds or even thousands of hours working on a business, yet never really take off. There were signs of sucess early on in the good business, and likewise there were not signs of success in the failed ventures. Looking for signs of success is a good indicator of whether a business has legs or not. If you don't see any, it's a good indicator that your time is spent elsewhere! Antifragile by Nassim Taleb https://www.amazon.com/Antifragile-Things-That-Disorder-Incerto-ebook/dp/B0083DJWGO/ref=sr_1_1?crid=JMRX5RI5RNZ8&dib=eyJ2IjoiMSJ9.C3e4IagEiQHRzgC0W8S0KkU1s2tYPbhDWivIreUIOtwe2xEXBRSw7sYgY8vGAZxpOF13z-5F3MCQJ00OZnI2iuM5RFHBnnqqX5yeUs348hp-T297HGOx2e0-cQ-XPjqTBF2D8WYJx5Kt0LCnHhsFfmbdwGDgxb3pwniTQYHi71ahb0q4CkhWvUHmByV0dJqUkoIHy2PEFt18GVXgLjePclPH4zK4uOKDXX14x9cdoAc.MlGqTaeOx35qrIkulkswcuGJuF4GOAXfSoFOGSpA4z8&dib_tag=se&keywords=antifragile+by+nassim+taleb&qid=1710465424&sprefix=antifragile%2Caps%2C102&sr=8-1 Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

People have been hemming and hawing over the value proposition of college for years now, and in 2024, the value that a bachelor's degree offers is more questionable than ever. Mark and Jesse, both with teenagers staring down the barrel of college (or not) in the next few years, share their thoughts on the subject. As Jesse argues, the purpose of education is "to learn how to do something, when you don't know how to do something." As Mark points out, the resources for self-education are more prolific than they've ever been, meanwhile critical thinking in school appears to be as low as ever. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

We usually talk about stress as something you need to reduce, or recover from. But there are different types of stress -- good stressors and bad stressors -- and sometimes stress drives us to accomplish things and innovate when we otherwise wouldn't. To that end, Mark and Jesse discuss Morgan Housel's book Same As Ever: A Guide to What Never Changes, in which Housel outlines the way stressors and risk taking drives us to grow achieve new things. Mark also shares a recent story about how the stress of a bookkeeping sprint at work provided the spark for him to write new software to automate a key process in his business, and save a lot of time as a result. Other books mentioned in this episode: Endurance by Alfred Lansing The Psychology of Money by Morgan Housel Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Jesse defends the New Years resolution, and offers up of his own resolutions for the year, namely being kind. Mark resolves to try really hard, and be a better friend. Harvard study on men's happiness (started in 1938!): https://www.health.harvard.edu/blog/the-secret-to-happiness-heres-some-advice-from-the-longest-running-study-on-happiness-2017100512543 Musical interlude courtesy of Kevin MacLeod: "Investigations" Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 4.0 License http://creativecommons.org/licenses/by/4.0/ Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark shares a trend he has become aware of in his business: his highest revenue clients are also his least time-consuming clients, and thus his most profitable clients. On balance, the clients who pay the least under his sliding scale fee structure end up taking the most time to process. This discussion begs the question -- when do you fire a client? Jesse hashes out some ideas for a new fee structure so that Mark can retain higher-touch clients while incentivizing them to comply with the best practices that make them easier to process. They discuss the importance of focusing on the client's emotional state and how changing their behaviors to comply with Mark's system (such as opening accounts at banks that are easy to query for data, and minimizing the total number of accounts) can bring them value by reducing stress and increasing insight into the trajectory of the business. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark shares a recent conversation with a client fixated on "diversifying" her business, which to her meant expanding her coaching services from 1-on-1 to group coaching. Diversification is one of those concepts that sounds wise (of course you should diversify!) and is a bedrock concept of investing. However, as Jesse points out, what most people think of as diversifying is really just expanding -- expanding product and service offerings, introducing new price points. The expansion still serves the same market. True diversification is decoupled entirely from the product or service, like using excess earnings to buy Treasury bills. The value of T-bills is independent from the performance of the business. There is nothing wrong with expansion! It's natural as busineses grow and accumulate more institutional knowledge to seek out new opportunities to leverage that knowledge. But it's not diversification. That prompts Mark and Jesse to ask the question, why? Why do you want to diversify? What's the thought behind the thought? The answer can reveal the true nature of the problem -- maybe the business owner is worried about some risk exposure in the business and is trying to sidestep solving that problem (or perceiving the problem to be bigger than it really is), or perhaps the owner is simply bored and looking for a new problem to solve. Whatever the answer, before you take steps to diversify your business, understand the why behind the motivation so you don't end up merely distracting yourself from the core business. Acquired Podcast on Costco: https://www.acquired.fm/episodes/costco Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Jesse shares a conversation he had with the YNAB executive team about spending (and giving) with joy, and Mark relates how many business owners struggle with this problem. Mark also shares a recent talk with a client agonizing over an upcoming vacation, which he believes will require him to make poor financial decisions. As Mark has coached him through the process of planning for the vacation and saving cash beforehand, he has been able to navigate through his all or nothing feelings -- the idea that you either enjoy life or be financially responsible (at the expense of enjoyment). There is a middle way! Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark and Jesse actually read the book (almost)! After completing most of the book recommended by a listener, 10x Is Easier Than 2x: How World-Class Entrepreneurs Achieve More by Doing Less by Dan Sullivan and Benjamin Hardy, Mark and Jesse share their thoughts on organizing your business and your life to harness your "unique ability." Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

A listener requested Mark and Jesse comment on the book 10x Is Easier Than 2x: How World-Class Entrepreneurs Achieve More by Doing Less by Dan Sullivan and Benjamin Hardy -- and they happily oblige! Except... they haven't read the book. Yet. Nevertheless the title is thought provoking, and they debate the merits of growing a business slowly vs growing quickly, as well as the difference between doing it as a startup vs a mature business. Jesse shares his experience 10x'ing YNAB over the years, and how the challenges of the business scaled with his own vision and expectations for the company. 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 a snippet of a long conversation about the nature of opportunity cost in budgeting. They broadly divide people into two different personality types: the accumulators who diligently follow the rules of budgeting and amass cash, and the spenders who focus purely on what that cash can buy them -- experiences, memories, mementos, etc. Both camps face a hard challenge in budgeting. The accumulators may have a lot of cash, but at what cost to their relationships? What opportunities did they miss or forego to continue accumulating wealth? On the other hand, the spenders face a very concrete cost, that is, the money that they spent to acquire the things they wanted. Perhaps they lack financial stability, or safety, as a result of their spending. Either way, the hard work in budgeting really boils down to understanding what cost you bear in your spending decisions. The above examples are the extremes of a spectrum, but wherever you fall on the line, there is a cost to your current behavior, and understanding that cost -- and aligning that cost with your values and priorities in life -- is the key skill to a fruitful financial life. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark explains his unique system for managing his day to day tasks after years of struggling with ADHD. For Mark, it's all about managing his energy and honoring his mindset in the current moment. If the "dirt pile" calls (his affectionate name for an ongoing earthmoving project in his backyard), then that's what he does, whether or not it's the "best" or most important use of his time in the moment. Over the years, Mark has learned that allowing himself space to indulge in physical tasks often has the benefit of settling his mind and, therefore, putting him in a good headspace to tackle bigger, more stressful business challenges. For Mark, productvitiy follows his headspace. Jesse, on the other hand, has a very different style for getting things done. Jesse is a man of systems, and he's also a man with a long to-do list. He mentions how in the past he has been called out for letting tasks slip or needing reminders to follow up on things. So for Jesse the priority is making sure that tasks don't live in his head, but are organized in a good system. He likes David Allen's Getting Things Done (GTD) productivity system, which asks a person to first organize and sort through their list of tasks before tackling them. With a good categorization of tasks in place, it becomes easier to execute tasks at the time and place when you can do them, rather than relying on your mind's own reminder system which often reminds you when you can't do anything about the task! Jesse adds a weekly review to his process, to make sure he's working on things that matter -- in business and personal life -- and not avoiding challenging tasks by filing his day with low-level admin work. The takeaway? People can get things done with very different approaches. One key to figuring out what will work for you is to recognize and honor who you are. As Mark's mentor says, you can't will yourself to be the kind of person who systematically categorizes and organizes tasks if that's who you are by nature. Once you accept that, then you can find the system that works for you. 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 listener question about how to run more effective meetings, particularly for introvert-heavy groups. Jesse talks about the importance of ice breakers (although you don't have to call them that) and standardized meeting structures across the company. Mark and Jesse also discuss some new books on their reading list, including a book about the keys to longevity. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark poses a question -- how much knowledge about money does someone need? As in, how much time and energy should one devote toward investing, planning for future needs and problems, and other future considerations? Jesse offers some examples of how people often seek assurances, guarantees that their future income (and circumstances) will be safe. The reality, however, is that if you are in business, or even if you are an employee in a business, you are taking risk, and that risk cannot be mitigated to zero. One takeaway from this conversation is that when you live within your means and create financial cushion in your life, you leave yourself open to take advantage of future opportunities. And as Jesse points out, the personal bleeds into the business. Business IS personal. So the same thing holds true for both the business' balance sheet and the business owner's balance sheet. When there is ample cash on hand and the owners live well within their means, the business can take more risks and take advantage of opportunities that would have been closed otherwise. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark provides an update on his son Charlie and his budding mechanic career, and voices some concerns about his continuing to work at the auto shop. Charlie made some good money replacing brakes on a family friend's vehicle, and is considering making the jump to a mobile auto service business (as Mark and Jesse first discussed in Episode 79). Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark and Jesse discuss the process of setting compensation, salaries, bonuses, and communicating those effectively to the team. Compensation is a touchy subject. Businesses want to incentivize employees to perform at a high level and reduce turnover by compensating them well. Employees need to feel like they have space to grow their skills and capabilities in the organization, and be compensated accordingly. And many business owners want their employees to be happy and feel fairly compensated, out of care for the people they have grown close to and relied upon to build their business. Therein lies a minefield, however! Jesse argues that compensation, including salary, benefits, and bonus, carries a lot of information and expectations. Business owners should set compensation based on market rates for a given role, discounted to what the business can afford (both what the business can afford to pay and what amount of turnover the business is willing to accept if they pay significantly under market). Business owners should NEVER compensate out of a sense of charity, generosity or to "share the wealth," epsecially with unplanned bonuses. While these things can seem great in the moment, they can cause serious confusion for employees. Why did I get this? How do I get it again? Should I expect this every year? If I don't get it next year, does that mean I'm performing poorly, or the business is doing poorly? There are many pitfalls to basing compensation on something other than the cold hard facts of market rates and clear job descriptions. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

...probably comes from doing more of what you're already doing, not a new venture or even a new product. But Mark and Jesse have talked about digging trenches already. Today they ask the question, is it enough for a business owner to put their head down and just dig more trenches? When do you look around, observe broad trends in your industry, and react to those? It's a balancing act, with risks on both sides of the question. Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com

Mark and Jesse dissect the culture of striving that pervades American society, in businesses and consumers alike. There seems to be a tacit assumption that all business should be about more -- growing more, making more money, etc -- and you don't have to look far to see the same mentality in consumer culture. In fact, it's the heart of the economy! The desire for more is endless, a hole which can never be filled. So, how do you figure out what is enough? Mark and Jesse have encountered peers struggling with this question, and have noted that limitations can be freeing. If you simply tell yourself that what you have is what you will have forever, you create boundaries and limitations which actually spur creativity and help you figure out what you really want (not just want other people say you should want). Mark uses the house as an example on the consumer side. What if you said to yourself, this house that you are currently in is it -- this is the house you will own and live in until you die. With no possibility for moving in the future, or building something else, you're free to think about what you don't like about your current house, and what you would change. Maybe there are some things that you dream about having in a future house, like a pool, that you discover you are fine without. Or maybe you can't live without one and must find a way to put one in! It's a useful creative exercise to get closer to answering the question -- how much is enough? Mark Butler, Virtual CFO The Money School: https://moneyschool.works https://markbutler.com https://letsdothebooks.com YNAB https://www.youneedabudget.com