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Author: neveragain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308722  
Subject: Got debt? Date: 4/4/2014 7:07 AM
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In college, I managed to get myself into credit card debt mostly because I did not know how to manage money. I crawled my way out of it only to find myself back in debt several years later. I crawled out of that as well. Had an emergency fund, investments, until I decided to start my own business in the middle of a recession. Thankfully I kept my well paying day job but owe about a third of what I take home. It's awful.

It's been this way for three years. But after many missteps, I'm determined to make this debt paydown happen. Am also trying to come to grips with how I get here in the first place.

In any case,

I owe 23500 at 15.24 to Amex.
4000 to chase at 15.24.
12000 at 14.24 to chase
6000 Bank of America 11.24
4000 Bank of America 9.9
3500 Capone at 9.9
15200 Lending club at 10.99
2500 citi at 0% until march 2015.

Min payments are 2% of balance except lend club which is $523/month. I have 33 months left on a 36 month loan.
The citi card is also new. Disappointed I didn't get a higher credit line to transfer more but my cc utilization is high. I believe it is 60%.

Chase offered me the slate card for 0% interest for 15 months with a limit of 3k. Can also get a prosper loan for 10k at 10.99%.
Plan to go w slate, not sure if prosper will give much of a bang for my buck given how similar the interest rates are.

Thoughts? Advice? Suggestions?
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Author: tconi Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308124 of 308722
Subject: Re: Got debt? Date: 4/4/2014 10:41 AM
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Welcome.

You came to the right place.

I'll let others handle the details.

peace & snowball calculators
t

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Author: jeffbrig Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308128 of 308722
Subject: Re: Got debt? Date: 4/4/2014 11:01 AM
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You left out a line:

Total - $70,700

Yeah, it's a big number. But many of us here have paid off this much or more.

First question is do you have positive cash flow each month? Are you able to keep up with all your immediate bills (mortgage/rent, insurance, and debt service), or are you still backsliding? It's difficult to bail out the boat if it's still taking on water. First you need to plug the leak.

Transferring money around for better interest rates can reduce the total interest paid. While 0% teaser rates are great, they do expire, and unless you have a firm plan to get those paid off, you may end up with the balance shifted to an even higher APR. Also, with a high utilization on your cards, your credit score may suffer. Opening new lines of credit also has a negative impact on your score. Ideally, as you pay cards down to zero, they may send you additional balance transfer offers that you can take advantage of without opening new accounts. I did this a few times while paying off my cc debt several years ago.

What you really need to do is sit down and make an honest budget of your income and expenses. Figure out how much you can commit to debt paydown each month. With that number, you can set up a plan of attack. It's generally cheapest to pay off the highest rate debt first, although there is some satisfaction that comes from knocking out a smaller debt out first.

I would not necessarily go for the Prosper loan at 11%. At best, you'd be transferring $10k of 15.24% debt, for a savings of less than $425 ($10k * 4.25% difference) the first year. You would also have to consider the payment schedule, and it's impact on your cash flow. While a credit card may only require a minimum payment of 2% of the balance each month, and fixed loan with a short term and require a larger payment.

My first priority, if I were you, would probably be to attack the $4k at 15.25%. It's your highest rate, and a relatively low balance compared to other high rate options. In parallel, I'd consider options for transferring the $23.5k balance to a lower interest rate, but I'd be reluctant to open more accounts.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308129 of 308722
Subject: Re: Got debt? Date: 4/4/2014 11:20 AM
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You didn't list a mortgage. Are you renting? Car loans?

Have you checked your credit report recently? Do you know your credit score?

Minimum payments are around 2K a month. Approximately, $750 in interest.

Do you belong to a credit union? Your rates are high enough that you could check on a debt consolidation loan.

The normal process is to pay additional funds to the account with the highest interest rate, which would be the chase accounts. The other consideration is any account that is very close to the limit. Is the monthly interest pushing at account over limit or very close to the limit?

If you want comments on your budget, you could post your budget.

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Author: neveragain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308130 of 308722
Subject: Re: Got debt? Date: 4/4/2014 12:15 PM
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Yes I have a mortgage, car loan, and student loans - all at less than 4%. My priority now is to tackle this albatross first. Prosper sent me an email offering a $100 amazon gift card in exchange for applying and being approved for a loan. They told me my score is 712 based on data from experian. Not sure if this a true fico score. Have checked my reports - all r correct, but didnt feel like paying for the score, so didnt.

Am eligible for a credit union thru work but don't think at this point that I am eligible for a significantly lower rate. Paid down a handful of cards to lower utilization rate to get the citi card. Current utilization rates are as follows:

Amex: owe 23,500.limit 35,900
Chase: owe 12000, limit 17000
Chase: owe 4000, limit 7400
Bofamerica: owe 5908, limit 7200
Bofamerica: owe 4000,limit 9300
Capone:owe 3600, limit 6000
Lens club is an installment loan

Planning to pay acc to interest rate, starting w chase then Amex next

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Author: neveragain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308131 of 308722
Subject: Re: Got debt? Date: 4/4/2014 12:35 PM
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Thanks to a pay increase and elimination of nonessential expenses, I've plugged the leak. Am aiming to pay an additional 2500 to 3500 per month on the debt.

U said prosper would only save me $425. What do u mean? Over the life of the loan or every month. How do I calculate the difference every month? I'm approved for the prosper loan but they need additional documents for verification, if I decide to take them up on the offer. Even if the savings is not significant wont transferring my debt from revolving to installment help my score and decrease utilization that I could qualify for more balance transfer options?

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Author: Retrograde Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308132 of 308722
Subject: Re: Got debt? Date: 4/4/2014 12:59 PM
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I owe 23500 at 15.24 to Amex.
4000 to chase at 15.24.
12000 at 14.24 to chase
...


The first thing I would do is call the 3 companies with the highest interest rate and ask them to lower their rates. This has sometimes worked for me and would certainly help you a bit.

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Author: jeffbrig Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308133 of 308722
Subject: Re: Got debt? Date: 4/4/2014 4:06 PM
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U said prosper would only save me $425. What do u mean? Over the life of the loan or every month. How do I calculate the difference every month?

The $425 is actually a simplification. The interest rate savings amounts to 4.25% between the two loans. So, on an annual basis, you'd save 4.25% of whatever the balance happens to be. Of course, the balance isn't constant, it's going down every month as you make payments. So my quick back of the napkin was the initial $10k balance * 4.25% = $425. You'd save that the first year (actually a little bit less, as the average balance throughout the year is less than $10k). It's probably better to think of it as a monthly interest of around .35%. That's 4.25% / 12. So, it would be around $35 the first month, then slightly less in subsequent months.

I can't calculate the actual savings, because I don't know the term of the loan or the theoretical monthly payment.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308135 of 308722
Subject: Re: Got debt? Date: 4/5/2014 2:10 AM
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Thankfully I kept my well paying day job but owe about a third of what I take home.

So, when you say 'I owe about a third of what I take home' do you mean that your take home income is $212k/year (3 x $70.7k)? Or do you mean that your minimum payments of $1,633 (2% x $55.5k for cards + $523 for Lending Club) are 1/3 of your monthly take home? Trying to pay off $70.7k in debt on a $200k+ annual income may be able to employ different strategies than if your income is $80k or so.

Just to be clear - what you 'owe' is $70,700. The minimum cash flow you need to service that debt is $1,663/month. If you get caught up in thinking that the cash flow need is what you 'owe', rather than understanding that you actually 'owe' $70,700 - your thinking is based on a 'monthly payment' basis, which is probably part of why you have gotten yourself in debt trouble 3 times now.

Min payments are 2% of balance except lend club which is $523/month. I have 33 months left on a 36 month loan.
The citi card is also new. Disappointed I didn't get a higher credit line to transfer more but my cc utilization is high. I believe it is 60%.

Chase offered me the slate card for 0% interest for 15 months with a limit of 3k. Can also get a prosper loan for 10k at 10.99%.
Plan to go w slate, not sure if prosper will give much of a bang for my buck given how similar the interest rates are.


In your position, where you are just starting your paydown, aren't really sure how much you actually can commit to paying down debt each month, and already having committed to a large cash flow requirement of $523 for the Lending Club loan, I'm not so sure I would worry as much about the rate differential (or lack thereof) as I would about the cash flow. At 2% per month, the minimum payment on the $10,000 would be $200. Assuming a 36 month term on the Prosper loan, that minimum payment would be $327. You will have committed yourself to paying $850 on your Prosper & Lending Club loans, while still having to pay $910 in minimum payments on the remaining card balances, for a total of $1760/month - $127 more per month than you are currently paying.

Before taking on another large fixed rate loan, I would instead suggest that you make sure that you are able to commit the '$2500 - $3500 additional per month' that you say in a later post that you intend to pay. If you can actually pay an additional $2,500/month (for a total of $4,163 toward your debts each month), you will have the Chase card knocked off in less than 2 months. Because of the small difference in rates between the AMEX and the other Chase card (15.24% vs. 14.24%) I would then think about going after the other Chase card first, and knock it off in another 5 or 6 months, before starting on the AMEX. This would provide you a little breathing room on the minimum payments, in addition to providing you two cards that would be open for balance transfers.

At that point, if you still can't find someplace to transfer the Amex balance to at a low rate, I might suggest thinking about a Prosper loan in addition to the Lending Club loan.

AJ

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Author: alstroemeria Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308136 of 308722
Subject: Re: Got debt? Date: 4/5/2014 9:13 AM
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Thanks to a pay increase and elimination of nonessential expenses

Congratulations, and kudos!

aiming to pay an additional 2500 to 3500 per month on the debt

Is that in addition to your minimums, or what?

If you would post your income and expense details (remember, we have no idea who you are), we can help you nail down this number and help you ensure that it's being used as efficiently as possible in your debt pay-down.

I might tentatively add that home ownership and cars that require car loans fall under many peoples' definition of nonessential expenses. What percentage of your income is snarfed up by your house PITI (principal, interest, taxes, insurance)? Is your car loan close to being paid off? Might it make sense to sell the car and buy an older used, but reliable, model to get rid of a debt or two, or are you underwater on the loan (owe more than the car is worth)? Except the day we drive it off the lot brand new, we're all driving used cars. Houses also cost more than PITI. So far this year, we've spent nearly $1,000 each on termite bond and mold mitigation in HVAC ducts. I often wonder if I'd be better off renting, and I don't even have a mortgage.

Good luck--and keep posting, and listening.

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Author: neveragain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308137 of 308722
Subject: Re: Got debt? Date: 4/5/2014 12:09 PM
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aj485

Reading your comments makes me realize part of my problem is how fluid I am with the numbers. Too fluid. 2011 into 2012 I accrued the debt. Mid 2012 I began to appreciate that I had a problem and made a plan to pay off the debt in 2013. 2013 was a bad year financially for me and I made little progress in debt reduction. Mostly because I had less income, more expenses, and the interest. In 2014, I have been concentrating mostly on interest reduction as my income increased, and expenses plateaued and in some cases decreased.

But in addition to reducing interest, I should also be focusing on honing down my budget. The problem is that many of my expenses are so variable - child care, gas, utilities, etc. I do use Mint and will use the 12 month averages to arrive at an actual number and will post them shortly.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308138 of 308722
Subject: Re: Got debt? Date: 4/5/2014 2:03 PM
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Reading your comments makes me realize part of my problem is how fluid I am with the numbers. Too fluid.

That's a good realization. One of the other ways the 'fluidity' was exhibited was in how 'round' the debt numbers were. It can help to keep a spreadsheet of what the exact numbers are - it can make it feel more real if you are looking at the figure of $70,718.32 at the bottom of a column of numbers, instead of just mentally adding up the numbers to get to 'about $70,700'. And sometimes it can give you a nice surprise - if you have been rounding your numbers, the 'about $70,700' that you have in debt may actually be $70,438.29 - so a bit lower than you thought. (Of course, the surprise can go the other way, too, depending on generous your rounding was.)

In 2014, I have been concentrating mostly on interest reduction as my income increased, and expenses plateaued and in some cases decreased.

But in addition to reducing interest, I should also be focusing on honing down my budget. The problem is that many of my expenses are so variable - child care, gas, utilities, etc. I do use Mint and will use the 12 month averages to arrive at an actual number and will post them shortly.


Yes - there are 2 keys to paying off debt - managing the debt to ensure that you are paying the least you can in interest and ensuring that you are keeping the rest of your expenses as low as possible, so that you can apply more toward debt reduction.

One thing that can help to decrease expenses is to write down (or entering it into your phone, etc.) every penny that is spent when you spend it. Using Mint to gather transactions on a regular basis is useful, but doesn't seem to have as much impact in realizing how much as being spent, at least to me, as tracking purchases as you make them. Your personality may be different, and Mint may provide enough impact for you - but if you find yourself tending to overspend, you might want to try tracking expenses as they occur.

AJ

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Author: ishtarastarte Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308139 of 308722
Subject: Re: Got debt? Date: 4/5/2014 4:09 PM
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But in addition to reducing interest, I should also be focusing on honing down my budget. The problem is that many of my expenses are so variable - child care, gas, utilities, etc. I do use Mint and will use the 12 month averages to arrive at an actual number and will post them shortly.


12 month averages can help, somewhat, but on another set of forums, we're fond of saying, "There's no such thing as a 'normal' month."

Every month is different. There will always be some expenses that vary (sometimes wildly). There will always be an emergency or an expense you forgot or a school fundraiser or a blown tire.

A 12 month average is a good starting place, but it's just a starting place. It doesn't help to know that you need $112.34 each month to pay your 6 month insurance bill if it's due next month and you haven't already been setting that aside. It doesn't help that much to know that last year you averaged $34.16 for car repairs if you need $625 right now to fix something.

And now it's time for my usual pitch for You Need A Budget.

Mint can tell you what you've spent and where. It's good for that.

YNAB helps you figure out what to spend before you do.

It's a pricey bit of software (currently $60) but there are discounts available (anyone who owns it can give you a link for a 10% discount) and there's a free 34 day trial. And once or twice a year they run sales (I also think it's currently free for college students).

It's possible to use the YNAB method without the software. It's essentially an envelope budgeting system where you plan what to do with the money you have, not what you think you're going to get.

Ishtar

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Author: neveragain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308140 of 308722
Subject: Re: Got debt? Date: 4/5/2014 4:50 PM
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Called amex and chase.
Amex states that my card is actually a charge card. There are some pay in full items and some pay as you go. 15.24 is the lowest APR they offer.
Chase will not lower my rate. Interestingly, since they have seen how aggressive I have been in paying down the card, they will offer me a balance transfer rate of 0% up to my max limit which is 7200. I think I will take it if the board think it's reasonable. I don't have to open a new card just take advantage of my credit limit, and throw the money at Amex.

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Author: Retrograde Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308149 of 308722
Subject: Re: Got debt? Date: 4/5/2014 10:39 PM
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they will offer me a balance transfer rate of 0% up to my max limit which is 7200.

The questions that usually come to mind with respect to balance transfers are: what is the fee for the transfer (it's usually a % of the amount transferred), how long will the 0% introductory rate last, what will the rate be on that balance when it ends, and if you send in a payment will it be applied to the existing balance at 15% or to the 0% balance?

All of these can affect whether you will save money on the deal and how much. That last one can mean that the interest keeps cranking up on the 15% balance even if you are making extra payments (not sure if this may have been outlawed due to credit reform or not).

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308163 of 308722
Subject: Re: Got debt? Date: 4/6/2014 2:30 PM
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Interestingly, since they have seen how aggressive I have been in paying down the card, they will offer me a balance transfer rate of 0% up to my max limit which is 7200. I think I will take it if the board think it's reasonable.

Okay, I'm confused. You said you had 2 Chase cards:

Balance     Limit     Rate
$ 4,000 $ 7,400 15.24%
$12,000 $17,000 14.24%

I'm assuming that the BT they are offering you is on the card with the 15.24% rate, and your limit is really $7,200, not $7,400? Or is your limit $7,400, but there will be a $200 fee, so you can only borrow up to $7,200?

There are some issues here: - they will charge you a fee, and, since you still have a balance on the card - after you have balances at two different rates on the same card, your minimum payments will only go toward the lower rate balance - so you will have effectively paid Chase additional money in the form of a fee in order to not be able to make payments on anything other than the 0% balance when only making minimum payments.

If you really can throw $2500/month at this card, then, depending on what the fee is and how much you can really transfer, it might actually save you money, but we would have to know additional details to be able to determine that, like:

- When will the 0% rate end?
- How long do you have to take advantage of this offer; i.e. do you have to make the transfer this month, or can you wait until you get the $4000 balance paid down/off?
- What is the fee that they will charge you for the balance transfer?
- How much can you actually transfer?
- How much can you TRULY COMMIT to paying toward your snowball, over and above your minimum payments?
- What are the specific terms of how your minimum payment will be calculated after you make the BT?

Without knowing this detail, I will say that it might be a good deal if you keep the Chase card as your snowball target until you have paid off the balance that they are charging you the 15.24% rate on, and only then switch over to making AMEX your snowball target. The trick will be - in the month that you can pay the high rate balance off, you will need to pay just enough of your snowball to pay off that balance plus the interest that will have accrued on that balance, while paying as little as possible on the 0% rate balance.

The reason you don't want to pay all but, say, $1 off on the high rate balance plus interest is that there is can a minimum amount of interest that will be charged to you, if they charge you any interest at all. So if you underpay the balance plus the interest owed by just $1, they might charge you $1 in interest each month until you manage to pay enough over the minimum payment to pay everything off. Of course, if you pay too much off, you will have a lower balance on the promotional 0% rate.

If this offer will still be available to you in a couple of months, the best thing that you could do would be to use that time to pay off the balance you have now completely (including interest that you accrue during the month you are paying off), and then, when your balance is at $0 (or you have a small credit balance) - transfer about $7k (depending on what the fee will be) from the AMEX card to the (now empty) Chase card, and only then make the AMEX card the snowball target.

AJ

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Author: neveragain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308169 of 308722
Subject: Re: Got debt? Date: 4/6/2014 7:05 PM
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Yes, two chase cards. The one at 15.24% just extended me the offer up t my credit line of 7400. The offer expires 5/31/14. The rate is 2%.
I agree I will pay off that credit card first, 4k, and then transfer the whole 7k credit line t Amex. The 0% ends 6/2015.

I can commit 2k plus additional money made from moonlighting. This month I have an additional 2275, coming my way.

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Author: neveragain One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308210 of 308722
Subject: Re: Got debt? Date: 4/11/2014 1:32 PM
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12 month averages can help, somewhat, but on another set of forums, we're fond of saying, "There's no such thing as a 'normal' month."

Every month is different. There will always be some expenses that vary (sometimes wildly). There will always be an emergency or an expense you forgot or a school fundraiser or a blown tire.

A 12 month average is a good starting place, but it's just a starting place. It doesn't help to know that you need $112.34 each month to pay your 6 month insurance bill if it's due next month and you haven't already been setting that aside. It doesn't help that much to know that last year you averaged $34.16 for car repairs if you need $625 right now to fix something.


Ishtar,

Probably a silly question, but just wanted clarification. So if you allocate $50/month for car repairs but don't use it that month, what do you do with that $50. Does it sit in your checking account or do you set it aside in a savings account? And do you have subcategories in your savings account? Or does house maintenance, car maintenance, annual insurance premiums, vacation fund, etc. all get thrown together in one account? And what happens if you have a surplus? Does it roll-over into the next year, go into more permanent savings, or what?

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Author: ishtarastarte Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308212 of 308722
Subject: Re: Got debt? Date: 4/11/2014 3:09 PM
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Ishtar,

Probably a silly question, but just wanted clarification. So if you allocate $50/month for car repairs but don't use it that month, what do you do with that $50. Does it sit in your checking account or do you set it aside in a savings account? And do you have subcategories in your savings account? Or does house maintenance, car maintenance, annual insurance premiums, vacation fund, etc. all get thrown together in one account? And what happens if you have a surplus? Does it roll-over into the next year, go into more permanent savings, or what?



First of all, you have to realize, I make less money than your nanny - I really wasn't kidding about that, with VA disability payments, a contract job and side business. So my needs and your needs are very different. I don't have a lot that rolls over (although the contract gig is getting better and I'm starting to).

That said, YNAB doesn't care what bucket (account) your money is in. It's actually more difficult to use YNAB if you have a zillion savings accounts and sub-accounts (trying to match category balances and account balances have driven a few people crazy - most people end up streamlining accounts after using YNAB for awhile). The bulk stays in my checking.

But I don't spend based on my checking balance, I spend based on my category balance in the YNAB budget.

So, there's $2,200 in my checking account right now, but only $173.72 available for groceries, $105.05 for gas, and so on.

One of my "savings" categories is travel, and I have $50.99 so far. My emergency fund is (FINALLY) growing. When I hit $x that I haven't had to "Whack a Mole" with in a couple of months, I'll likely move that to savings.

"Whack a Mole" in YNAB (so-named by our very own Patzer) is when you have to reallocate funds.

For example, let's say I spend $185 on groceries. That means I've spent more than I planned to in that category. I'll probably have to take that money from one of my other categories, likely travel, since it's the lowest priority, to cover it.

I WANT a lot of those categories to roll over. I want to to build a decent emergency fund. I want to save money to travel. I want to be able to buy hobby materials. I want to be able to give gifts when events pop up. So, yes, if I allocate funds and don't use them, they sit there and roll over month to month, hopefully building until I need them - or they are available to reallocate to higher need items when I have a low income month.

Ishtar

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308214 of 308722
Subject: Re: Got debt? Date: 4/11/2014 3:40 PM
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but only $173.72 available for groceries...

For example, let's say I spend $185 on groceries. That means I've spent more than I planned to in that category. I'll probably have to take that money from one of my other categories, likely travel, since it's the lowest priority, to cover it.
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Let's say grocery spending ends up being 160.00, would you leave the extra 13.72 in groceries? If you did then it added in the next month's budgeted amount, I might tend to over spend since I see the money is there and forget part of it was from the previous month. Does that make sense?

jean

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Author: 2gifts Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308215 of 308722
Subject: Re: Got debt? Date: 4/11/2014 3:47 PM
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Let's say grocery spending ends up being 160.00, would you leave the extra 13.72 in groceries? If you did then it added in the next month's budgeted amount, I might tend to over spend since I see the money is there and forget part of it was from the previous month. Does that make sense?

I don't use YNAB, but to me, I'd leave the leftover money in the grocery bucket even if that means that I spend it next month because I might find a big sale and stock up on something, and that is the sort of savings that lets me keep my grocery spending low.

I prefer flat budgeting over each month, which I think is how YNAB works but I'm not sure, where I set aside the same amount every month for a particular expense, but may not use it every month, so the money rolls over. For instance, if my car insurance is $1200 for the year, but it's due twice a year, then I need to be putting aside $100 each month, but that money just sits there until the bill comes due.

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Author: ishtarastarte Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308216 of 308722
Subject: Re: Got debt? Date: 4/11/2014 3:57 PM
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Let's say grocery spending ends up being 160.00, would you leave the extra 13.72 in groceries? If you did then it added in the next month's budgeted amount, I might tend to over spend since I see the money is there and forget part of it was from the previous month. Does that make sense?

Yes, your concern makes sense, but that's the beauty of YNAB - it's flexibility.

YNAB is not a "set it and forget it" budgeting thing. It's not "I'm going to budget the same amount every month in every category."

There are choices.

At the end of the month, I could sweep that $13.72 into a savings category.

I could let it roll over and budget less next month (so, budget only $160, bringing the total in the category back to $173.72).

I could let it roll over and build a bit of a cushion in that category to be used in Nov/Dec when I buy extra stuff.

I could do sort of a combination and allow say, up to a $50 cushion in the category and sweep anything over that into a savings category.

It's essentially an "envelope" budgeting system.

I have this stack of cash. I have these envelopes with "groceries" "gas" "snacks" "clothing" written on them.

If I need more in one, I have to make a choice about which other envelope to take it from. Likewise, if there's extra in one, I can figure out another, better place for it to be.

Ishtar

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308217 of 308722
Subject: Re: Got debt? Date: 4/11/2014 5:09 PM
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Yes, your concern makes sense, but that's the beauty of YNAB - it's flexibility.
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Thanks.

I wasn't as concerned about how YNAB handled it as how I would forget it was an overage from the month before and think I was being thriftier than I really was.

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Author: ishtarastarte Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308219 of 308722
Subject: Re: Got debt? Date: 4/11/2014 6:03 PM
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how I would forget it was an overage from the month before and think I was being thriftier than I really was.

Ah, I see.

I can tell that in YNAB.

Ishtar

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Author: yeilBagheera Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308229 of 308722
Subject: Re: Got debt? Date: 4/17/2014 9:35 PM
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about spending categories

When I was watching pennies carefully, I set up direct deposit of the paycheck to a savings account (at the Credit Union). That's the money I used for large, infrequent bills = insurance,property tax = and for travel.
The remainder of the paycheck went to the checking account (at a bank) for everyday expenses.
I could get to the saved money when I needed it, but it was an errand to go get it, which encouraged me to live from the checking account.
And it helped when we thought about travel, because the account was a total separate from what we lived on.

If you find yourself spending less than you allocated, some folks recommend taking a bit of the savings as a reward.

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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 308231 of 308722
Subject: Re: Got debt? Date: 4/19/2014 4:59 PM
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There are choices.

At the end of the month, I could sweep that $13.72 into a savings category.

I could let it roll over and budget less next month (so, budget only $160, bringing the total in the category back to $173.72).

I could let it roll over and build a bit of a cushion in that category to be used in Nov/Dec when I buy extra stuff.

I could do sort of a combination and allow say, up to a $50 cushion in the category and sweep anything over that into a savings category.


This is what I like about YNAB which I often use. Whether I roll over an amount to the next month just depends. For example, dining out I roll over. I enjoy dining out and so if I have a lesser spending month I want to be able to spend more next month. But I don't want to go over my annual total.

On some other categories, spending is more variable so I roll it over. An example is groceries. I might spend $100 more this month than last month just depend on what is on sale or what I run out of, whether we have company, etc.

On other categories, though, if the amount is less than usual I don't really roll it over. I just take that unused money and allocate it somewhere else. An example of this might be the electric bill. I already budget electric bill according to time of year (instead of just dividing the annual total by 12). So if March I used a little less electricity than expected I don't add to April (if I consistently use less than expected then I just redo that entire budget category so that it is closer to what I am actually spending).

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