Archive for May, 2013

YNAB Update

Alas, things don’t always go as planned with budgeting.  I expected to be able to have $500 put aside in June, but due to May budget overruns, I’m now expecting to only have about $200 to start my Buffer with next month.  Part of the issue is with the month itself.  My wife grocery shops on Wednesdays, and this month there are 5 Wednesdays, verses the 4 from last month, which is what I based this months budget on.  Another issue was a CostCo trip for items that we don’t buy every month.  Then, there are always little unexpected expenses that seem to have a way of cropping up.

But it’s all okay.  I’m “rolling with the punches” and learning as I go.  I’ve increased my grocery budget for June, with the hopes that an overage can carry into July, the next month with 5 Wednesdays.

On the brighter side, I decided to re-arrange some of my upcoming payments.  I had a bill that would cost $150 more if I waited until the end of July to pay, but if I could pay it before the end of May, I’d save $150.  I had planned to save up a little this month, then the bulk of it over the next two months.  But then, I had a thought.  My new Chase card has 0% interest until next July, so I put this bill on that card.  I’ve rolled most of the money that I had saved for this bill in May into my electric bill, as they have essentially moved my bill up from the beginning of the month to the end of the month.  (So, I paid an electric bill early in May, and I’m paying my next electric bill before the end of May).  Next month, I’m moving most of the money I would have saved for this debt to complete paying off a loan at 6.25% interest, and likewise in July I’m finishing paying off our Van loan.  Debt snowball in progress!  That will leave me with two debts (aside from my mortgage).  A debt consolidation loan at 6.5% and my 0% Chase Slate card.  I’ll be piling money into the 6.5% loan until it’s completely paid for in January.  Then, I should have just enough time to pay down the Chase card before the 0% expires in July 2014.

I am also in the process of re-financing my home mortgage.  My current loan only has a little less than 7 years remaining at 5.99%.  I’ve applied for a 10 year loan at 2.75%.  After running the numbers, even if I just pay out the new loan over 10 years paying just the minimum payment, I’ll still save $3000 vs. my current loan (paid over less than 7 years).  That pretty much makes it a no-brainer, even if I wanted to keep paying the same payment, as I’d pay it off in probably 5 years, perhaps faster.

In addition, I’ve taken the month of May to rearrange some income.  The majority of my income comes in the form of one big check at the end of the month.  About a week before that, I get another small check making up about 9% of my monthly total.  Prior to May, I had added the small check as income for the current month, and the big check as income for the next month, but in May I decided that both of those checks should be income for June instead.  So, I budgeted with about 9% less income in May than April.  In June, my income level will be back up to the full amount, giving me about 9% more money to budget than was available in May  Since I’m still catching up from overbudgeting, I won’t see much of a bump in available funding until July, assuming my June budget can be adhered to.

I imagine that other unforeseen things will hit and cause me some more minor bumps, but I think things will smooth out in a few months.

YNAB lets me see a path to the end to the debt.  I just have to make it there!

May 18, 2013 at 10:50 pm Leave a comment

YNAB after a full month

YNAB is liberating.  I’ve just gotten through my first full calendar month of YNAB.  Things weren’t quite the way I want them to be during this month, but I can see things getting better.

During my first partial month (the last week and a half of March), I was learning to use YNAB, and I had already spent about two-thirds of my monthly income before I started using it.

When you have any sort of long-term debt, be it a personal loan, a credit card running a balance, etc, YNAB puts that into a category called Pre-YNAB Debt.  This allows you to easily track how much long-term debt you have.  Each credit card or loan you add becomes a sub-category of this Pre-YNAB Debt category.  The sub-categories you create here carry over from month-to-month, allowing you to see your debt all together in one spot.  This makes it easy to do the classic “debt ladder”, where you pay the minimums on all your debts except one, where you pile as much in as you can.

More typically, a category is intended to fund some spending during that month, or savings toward a goal.  For this reason, unspent amounts left over in other categories roll over to the following month.  So, if I had $150 budgeted for Restaurants during May, and we only used $50, I’d start June with $100 in the Restaurant category.

Whenever a category goes over-budget, though, it doesn’t work the same way.  For example, say instead of only using $50 for Restaurants in May, say we went wild and spent $250.  That would mean we overspent.  That doesn’t roll to the following month in the Restaurant category, but is taken “off the top” of the amount of money that can be budgeted for June.  This means you pay for any overages immediately from your next income.

Anyhow, during the month of April, I had to alter the way I handle my credit cards.  Previously I had gotten into the bad habit of charging on my card and then paying that off when it came due with money from my next month’s paycheck.  So, I paid off a portion of that bill, then decided I was going to carry the balance and pay it off over time.  I got a Chase Slate card, currently the only credit card that I’m aware of that will allow 0% balance transfers with no transfer fee (only within 60 days of getting the card, unfortunately).  I’ve transferred the balance of two cards to this one, and now have 0% for 15 months to pay it off.  I divided my Chase balance by 15, giving me the amount I’d need to pay Chase to completely eradicate that debt before the 0% ended.  I then chose to use the debt ladder approach, and since this debt is my lowest rate, I’m only paying the minimum against it per month, and the remainder will go against the smallest of my Prosper loans.  At the rate I’m going, that loan will be paid within 4 months, at which time I’ll put that full amount toward my second prosper loan.  With a couple months before the Chase 0% offer ends, my second Prosper loan should be done, and I should be putting over $800 a month against the Chase debt, meaning I may have to pay some interest against it, but it won’t amount to much.

For my April budget, I over-budgeted by almost $700.  With YNAB, that’s not a huge issue, as that money is taken off the top for the next month.  At it stands right now, for my May budget, I’m over by about $500.  That’s not as bad as it sounds, though, because I’ve started budgeting for some long term items, such as $100 each for Home Insurance and Property Tax, putting $25 aside for Birthdays and Christmas, a little under $50 for car maintenance, another $50 for vacation, over $200 for another home project, and $300 savings toward a fee for my children’s school.  Oh, and I’m making a $300 car payment this month (I had the option of skipping last month, and with my finance changes, I took advantage of it).  If I didn’t do all these things, instead of being over by $500, I’d be under by about 700.

Projecting into June, I expect to be on budget, with the same budget items covered again, and a few hundred dollars of my Buffer being funded, along with a little money into my Emergency Fund.  That will be an additional $500 above April’s level.

Finally, I’ve also projected into July.  Again, I expect to be on budget, and since I’m not expecting to be over-budget in June, I should have almost $500 more to put against my Buffer.

What’s a Buffer, you might ask?  That’s a budget category that I’m trying to fund over time (hopefully by the end of the year) to equate to a month of salary.  By maintaining a Buffer equal to a month’s salary, you are effectively spending last month’s income each month, not the current month’s income.  This will give me some peace of mind…  I won’t need to worry about scheduling payments of bills to ensure that my check has come in prior to paying, etc.  It will also give me some flexibility.  My current job pays me at the end of each month for the work that I will do the following month.  If I were to switch jobs, depending on when the new job pays, I might have to go a few weeks or so without any income.  With my Buffer, I will have the flexibility to switch jobs without having to worry about being able to make my normal monthly commitments on time.

Once the Buffer is fully funded, then I’ll have several hundreds of dollars a month, perhaps $1000 or more, to put toward projects, investments, or to double-down on getting rid of my debt.

One thing I’m planning to do is to fund some categories like Medical with a few hundred dollars, and just keep it at that level each month.  For example, if my target number is $250, once I get it to that amount, I’ll stop funding Medical.  Then, if I spend something out of the Medical category, the next month I’ll “even it up” to $250 again.  With several kids, medical bills are an almost certainty.  Maybe not every month, but they happen often enough that having money reserved for that is probably a very good idea.  Other categories, like Clothing will probably be treated the same.  That way, if we need something, we’ll have money reserved for that purpose, just sitting there in the bank.

By this time next year, I fully expect to be within a few months of being debt-free (except my mortgage).  Not having those debt payments will free up another $800+ a month.

Oh, one more thing to mention…  This program has really changed how I think about my credit cards.  I still do the majority of my spending on my credit cards, but I am now much less likely to just buy something, because I have a tight focus on my finances.  My money is accounted for, and I know it.  I don’t worry about putting too much on my credit card so that I can’t afford to pay for it when the bill arrives, because I know that the money will be in my bank account, waiting to pay whatever I spend, because I’m spending money that I’ve budgeted.  It doesn’t matter if it comes out of my account immediately (like a check) or delayed for a few weeks (credit card).  The only advantage a credit card does give you is during the first few months, you are likely to go over budget, and you can float on that credit card a little.

If you’ve got any sort of issue with finances, try YNAB.  If you are like me and feel like you know what you are doing, but just can’t seem to save money, try YNAB. There is a free trial (just over a month), so you can even try it out and see how it works for you.

If you try it for a few weeks, you’ll almost certainly see the benefit.  Don’t let the price tag dissuade you.  It’ll be the best $60 you ever spent!

Oh, any I’m not profiting one bit by posting this article.  I don’t know anyone from the YNAB team, and get no financial reward out of it.  I’m also not an affiliate or anything like that.  I’m just so very excited by how this tool has positively affected my financial life that I want everyone else out there that’s struggling to know about it.

May 4, 2013 at 11:48 pm 2 comments


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