Why We Approach Financial Planning and Budgeting Differently

Picture of Jesse Mecham, founder and CEO of YNAB.
Jesse Mecham, founder of online budgeting tool “You Need a Budget.”

Disclaimer: Neither the author, nor Providers & Families Wealth Management, LLC or its employees, are affiliated with, compensated, or endorsed by You Need A Budget (“YNAB.”) This is not an endorsement of YNAB and should not be read as such.

On his company’s website, Jesse Mecham (founder and CEO of online budgeting tool “You Need a Budget,” or YNAB for short) explains in his like-titled book how budgeting and financial planning are different:

If it is impossible to perfectly predict your expenses, a budget needs to be nimble and adaptable, right? Except most budgeting systems are decidedly “set it and forget it.” You make a budget at the beginning of the month, set it in stone, valiantly try to bend the fates and laws of the universe to make the month turn out exactly like the numbers you guessed, er, projected. Oh, and then beat yourself up and feel guilty when it doesn’t.

In retirement planning, “forecasting” is very useful. We forecast what we will spend, how much things will cost, and how much more expensive they’ll get over time. We even forecast how are investments will perform, even though there’s no guarantees.

Related: Yes, You Can Keep a Budget

When it comes to budgeting, forecasting is much different. If we forecast what we’ll have, we’ll forecast how we can spend it, and often make the mistake of spending it now. This is why YNAB’s approach to budgeting is so unique: you only focus on what’s in your bank account today, and you split it up into bitesize pieces designed to accomplish its own tasks.

Budgeting is a fluid, active process that requires dilligence and awareness.

Most budgets are backward. You start by projecting or guessing what your income will be, then plan how to spend that money. The farther out you go with this exercise, though, the less accurate your guesses–about your income or your expenses–are going to be. (Go ahead, I dare you to try and perfectly predict your expenses even for a week). The result? You are always in the dark, guessing, and waiting for the other shoe to drop.

With YNAB, you only budget money you have right now. It’s an allocation system, rather than a forecasting system. Therefore, you are on solid ground, fully aware of what you have and where you are going.

What about that big bill next month? Slow down, we aren’t there yet. With YNAB’S approach, we focus on what are current money is doing. And if it our current money isn’t helping us achieve our objectives, then we need to rework it.

Check out YNAB for yourself here.

About the Author

Scot Whiskeyman is Founder and Partner of Providers & Families Wealth Management, LLC., and is a CERTIFIED FINANCIAL PLANNERTM . His primary focus is on retirement planning for established professionals and estate planning for seniors. He can be reached by e-mail at scot@providersandfamilies.com.

A.I. will Now Fight Your Overdraft Fees for You

DISCLAIMER: Neither the author, nor Providers & Families Wealth Management, LLC or its employees, are affiliated with, compensated, or endorsed by Cushion. This is not an endorsement of Cushion.ai and should not be read as such.

As a frugal consumer (and one that just hates paying overdraft fees), a new service caught my attention this weekend. Scrolling through my Facebook newsfeed, I was served an ad that said something to the effect of: “Wow! In less than 24 hours I had $427 in overdraft fees returned to me, thanks to Cushion.” Sound click-baity? It did to me, but I clicked (or tapped, rather) nevertheless. I want to talk about my experience, but first, let’s talk about A.I.

Boy, has it ever come a long way.

Back when I was in high school (about 15 years ago), I used AOL instant messenger to talk to classmates and friends online. There was no Facebook, and there was no Facebook messenger. No one owned a smart phone, because they didn’t exist. People communicated online either through e-mail or “AIM”.

One day, a group of individuals at AOL decided to try something radical: create a profile (in 2000’s vernacular, the term was “screen name”) for Artificial Intelligence. Enter SmarterChild, one of the very first artificial intelligence chat bots.

Simple in its design, SmarterChild was created to have basic conversations, learn from conversations it had with users, and adapt. It was rudimentary at best, but it was innovative and ahead of its time.

A screenshot of an AOL instant messenger conversation with SmarterChild.

Fast forward 13 years to 2017. Ever the networker, I connected with the owner of a successful Harrisburg-based technology business (not related to A.I.) while attending an event at a local healthcare institution. I followed up with him about meeting for coffee, to which he agreed, and looped in his assistant Sophie, to schedule it. We got a day on the calendar, only for him to be involved in a fender-bender and have to reschedule.

“So sorry, Scot! David’s been in a car accident and needs to reschedule,” she said.

“I’m so sorry to hear that! Please tell David I understand, and give him my best!” I responded.

“Absolutely,” Sophie said. “Will do!”

After more than a year (yes, a year – apparently David is very in demand) I managed to get an appointment on the calendar with him. My successful attempt was the result of me e-mailing not him, but his assistant. I was very impressed – I e-mailed her at 6:30 at night, and received a response fewer than 20 minutes later with his availability.

When coffee finally happened, I was sure to compliment Sophie. People that are hardworking, courteous, and professional are rare, at best. “Your assistant is awesome,” I told David. “She’s so polite and she responds very quickly.”

His response? “She’s A.I.”

I was flabbergasted. The last time I had communicated with A.I. was with my friend SmarterChild in high school. Had A.I. really advanced so far that I couldn’t even recognize I was talking to it?

Turns out that this A.I. that David used was part of a pilot program by a startup out of Silicon Valley. David managed to snag their services for free. For someone like myself, use of A.I. would cost about $400 per month, he estimated.

Fast forward to this past weekend, when I would experience the wonders of Artificial Intelligence first hand once again. After clicking on the Facebook advertisement for Cushion, I was taken to a website, where I was prompted to enter my e-mail address to get started. Next was a list of financial institutions with a question: which of them do I use? I selected several of them (note – there was no option for “other.”)

What happened next surprised me a little. Expecting to be taken to an app I needed to download, I instead received a message from Cushion’s Artificial Intelligence via Facebook Messenger, where I was prompted to select a financial institution. If you’ve ever used Intuit’s Mint, or Fidelity’s eMoney, Cushion uses similar encryption techniques to securely log on to your financial institution’s website and download your account data – the difference, of course, being that Cushion combs through your transaction history and finds not just fees, but interest charges – and will actually negotiate with your bank to get them refunded to you!

Sound too good to be true? I thought so, so I did a little digging. In setting out to understand how Cushion works, my primary questions were a) how exactly does this artificial intelligence “negotiate” with financial institutions, and b) how did it make any money doing so on your behalf? The answer to the first questions is extremely straight forward: large financial institutions have e-mail, SMS, and online messaging services that allow you to chat with a customer service representative. Cushion connects with them, with your permission, on your behalf, and negotiates with them for you. A.I. had me fooled once – it can surely fool an unwitting customer service representative at a bank.

To make money, Cushion charges a hefty 25% of any overdraft fees or interest charges it manages to get credited to your account. I’m not sure of the exact mechanism the company utilizes to get paid, but I can tell you that because of my banking history, I knew this had to be an extremely profitable venture. Some research proved just how right I was: the most profitable banks in the United States collected $11.16 billion in non-sufficient funds (NSF) revenue in 2015, according to Pew research. Just imagine: if Cushion could capture just 5% market share, it would net nearly $140 million in revenue.

Is it worth a shot? That depends. Are you the type of person who pays a lot in interest charges, but manages to pay down your credit card balance to zero every 3-6 months? If you’re carrying a balance right now, you’ll have to first reduce your balance to less than 10% of your total credit, or Cushion will deliver you some bad news – financial institutions won’t negotiate with you unless you do. The other way you can save money is if you happen to pay a good deal in overdraft fees. If you don’t have time, or have exhausted all options talking to a branch manager, then what do you have to lose? 75% of the fees you already paid is better than 0% of them.

Bottom line: Cushion is simple, user-friendly, and easy to use. The downside is that because it’s so new, it only works with a handful of financial institutions (actually four, as of this writing). Still, it’s amazing to see how far A.I. has come over the past 15 years, and it’s incredible to see the innovative solutions it’s providing to consumers. Who knows where it will take us next.

You can check out cushion yourself here.

About the Author

Scot Whiskeyman is Founder and Partner of Providers & Families Wealth Management, LLC., and is a CERTIFIED FINANCIAL PLANNERTM . His primary focus is on retirement planning for established professionals and estate planning for seniors. He can be reached by e-mail at scot@providersandfamilies.com.


A New Year’s Toast


In the spirit of New Year’s Eve, I’d like to make a toast. If you’re reading this, join me in raising your glass, coffee mug, water bottle, or whatever.

It seems like just yesterday 2018 was beginning. Scary how the years seem to zip by faster and faster as we get older, isn’t it? But that’s not what this toast is about.

This New Year’s Eve, I’d like to make a toast in your honor. I may not know you, but I believe you have the power to be great – so here goes.

Here’s to your potential. To the greatness and success that lies just around the corner from you. To your wealth, our prosperity, and generosity. To your success.

Here’s to all of the love you have to give, and all of the love you were born to receive. To new beginnings, and to the great places they’ll lead.

I’m not saying it will all be easy. In fact, the average person may cower away when challenges arise. But not you. You’re anything but average. So here’s to your bravery in the face of the impossible, and your ability to overcome it.

You are brave – braver than you knew in 2018. In 2019, you’ll worry less, because you know there’s plenty of time, and plenty of love to give and to get. And you know that you’re edge greatness. Any challenge life might decide to throw in your way is only temporary, and yours to overcome.

Because in 2019, you’ll be fearless. Whatever you’re faced with – financially, professionally, or personally, you’ll think to yourself “I’ve got this.” And you’ll be right.

Here’s to fearlessness.

About the Author

Scot Whiskeyman is Founder and Partner of Providers & Families Wealth Management, LLC., and is a CERTIFIED FINANCIAL PLANNERTM . His primary focus is on retirement planning for established professionals and estate planning for seniors. He can be reached by e-mail at scot@providersandfamilies.com.

Looking for a Simple Way to Reward Employees?

Getting from point A to point B should be simple
Putting a retirement plan into place for your employees should be Simple. [image credit: eglobalis.com]
Ever wonder how some of your peers offer expensive benefits packages to their employees and manage to stay afloat? Have you thought about putting a retirement plan into place to reward your employees, but gotten stuck navigating complicated filing requirements and trying to make sense of confusing language like ERISA, Third Party Administrator, and Form 5500?

The IRS recognizes that it can be both costly and time consuming to set up a 401(k) plan if you’re a small business. Complicated rules such as avoiding being “top-heavy,” choosing between profit-sharing options versus matching options, and high startup costs can be seemingly insurmountable hurdles to putting a retirement plan into place.

For those businesses looking to avoid the complicated, the IRS has a solution – the (appropriately named) Simple IRA. Simple stands for Savings Incentive Match Plan for Employees. It is intended to be an easy, cost-effective way for employers with fewer than 100 employees to reward them and provide access to a retirement plan for their future security.

Unlike the traditional 401(k), a Simple IRA has no annual filing requirements. This might not sound like a big deal, until you see what the form 5500 looks like. Not a lot of fun to have to think about every year. And potentially even less fun to pay someone (a third party administrator) to do.

In addition, most Simple IRAs can be set up with no start up fees to the employer. It’s not uncommon for a mutual fund company to to charge a flat fee in addition to what the third party administrator charges for its services for a 401(k). If an employer intended to offer a match, that’s two gatekeepers she has to pay just to offer her employees free money. Not so with a Simple IRA.


For all their simplicity, there are some trade-offs employers should consider carefully before establishing a Simple IRA.

When establishing Simple IRA plans, employers have the choice to either offer every employee 2% of his pay, or a 3% match if he puts in 3%. For example, if Joe employee makes $50,000 per year, the employer has the option to a) put in $1,000 (2% of Joe’s pay) on top of Joe’s salary, or b) match up to $1500 if Joe puts in $1500 of his own money. Either way, the employer is on the hook to make contributions, and can only reduce the match twice in a 5 year period.

Additionally,  all employees are always 100% vested. That means that the match the employer makes is the employee’s to keep forever, even if they leave the next day. This is quite a contrast to vesting schedules in 401(k) plans, which are designed to give employees incentive to stay – or risk losing some of their 401(k) matching. The even bigger pitfall here is if an employee leaves mid-year and the employer is offering a flat 2% non-elective contribution, because the employer is required to make good on that contribution.

While higher than IRAs, Simple IRA contribution limits are lower than those of 401(k) plans – $13,000 for 2019, compared to $19,000 for 401(k) plans. If there are quite a few employees over the age 50, then you’ll want to consider whether the lower catch-up contribution limit would be detrimental to those getting started saving late.

It’s important to weigh the costs and benefits to any type of retirement plan you’re considering – Simple IRA, 401(k) or otherwise.

The Bottom Line

We’ve only scratched the surface of the ins and outs and of Simple IRAs, their pros and cons, and how they compare to 401(k) plans. If you’re an employer, it’s important to weigh your options carefully before implementing a retirement plan. Not sure where to get started? Check out “Help with choosing a retirement plan” on the IRS’s website, or contact us today to get answers so you can decide what type of plan is best for you.