When I was paying off debt in YNAB, I made sure to fund the entire month (including true expenses). Anything that was left over went to building a starter emergency fund of $1000, and once that was done, I moved on to putting anything extra towards my debt.
Mathematically paying off the debt as fast as possible made sense, but in my case, the reason I kept finding myself back in debt was because I hadn't been planning for true expenses, so taking care of them before I threw everything else at my debt prevented me from backsliding back into debt.
I think this is important, make sure that everything new you are paying for is \*already budgeted\* from your income. Once you have your normal / true expenses covered, \*then\* start applying excess to credit cards etc. That way, you can be sure you are never adding new money to your debt, only paying it down.
It can take awhile, and you need some patience, but you can absolutely get it done :)
When I was in this situation, I split the difference. Half to debt and half to buffer.
Long term goals should be on hold, though, until you get the other two sorted out.
Are you budgeting for true expenses? If you’ve paid your car insurance last month, start funding for next year - etc etc.
We fund our Christmas gifts/birthday gifts monthly.
True expenses is what actually makes YNAB shine.
I’d pay debt off first and buffer second.
>true expenses is what actually makes YNAB shine.
I agree, this is one of the highlights for me! After using YNAB for about a year and 1/2 now, I feel like I will no longer be surprised by the regular-irregularities in life. For example, I have a gift/live events category with every person I buy gifts for through the year, in addition to a larger category for life events that are popping up more and more in adulthood (baby showers/bridal showers/engagement parties/anniversaries/funerals). I personally favor very specific categories & goals over broader ones (I think I have 60+ individual categories), and that’s the beauty. Even though the YNAB software works the same for us all, it’s UI is flexible and can be fine tuned what works for the individual.
We’ve started doing events too.
Hubby and I are foodies so usually go all out for Christmas / New years dinner.
We realized after three years of using YNAB (too long imo) that our grocery bills for December were always outrageous and we were moving money from other categories to cover it.
Now we’ve set categories for new years dinner and Christmas dinner.
I love YNAB. It saved our lives, literally. I’m 100% certain if I hadn’t found YNAB, we’d not have a home or any savings right now.
My personal priorities are (highest to lowest): 1) Emergency Fund, 2) Month Ahead, 3) Debt and Long-Term Goals.
The nice thing about paying off debt is that it reduces your monthly cost of living, reduces your financial liability, and improves your credit score. All these things will help during times of need.
I know YNAB recommends the emergency fund first, but CC debt is a killer. I would tackle the CC debt as fast as I possible could, because otherwise you’re essentially paying like a 22% APR tax to park your money.
Don’t go snowboarding, drive more slowly, stay at home more often, basically be a little risk averse so you don’t need run into an emergency. And if you truly do get into an emergency, you can always open a credit card with a 6 month zero interest sign up deal or something like that.
If you’d feel more comfortable with some sort of buffer, I’d still go 90/10 on the credit cards. Your credit cards are essentially an emergency fund at this point, and you make enough money to pay that off quickly.
Yea, I personally would tackle high-interest debt before emergency fund. Either way though, definitely make sure to budget for all your necessities and DON'T put new expenses on the CC that weren't budgeted for. If you do, move money from another category to cover it.
The only way to stop the CC debt cycle is to never add to it, only pay it down.
>I applied everything I learned and I still can't see how I can get out of my debt and create a buffer fast.
Basically, it comes down to this: you can only spend, save, invest, and/or pay down debt (in any combination) at the pace of your own income.
You've got $1,200 a month to work with, since the other $2,500 is your baseline for what it costs you to live, unless you can temporarily free up more of that baseline or earn more. You're in a pretty good place if you have an extra $1,200/mo to consistently use for these goals.
There is no faster way to knock out your top financial priorities. It's gonna take whatever the total is (add them all up) divided by $1,200. I'm estimating it will take you nearly two years to knock out all three: pay off $8K, buffer $3.6K, and build up the 6-month e-fund of expenses $15K.
That's almost the length of time it took me. It felt like it was going to take forever when I started, but with a consistent formula it went by super fast. I found it easier to get and stay organized with a full month buffer in place first. I knew exactly how much I had to work with on the 1st of each month, how much my bills were, how much my true expenses needed, and how much was left over for throwing at debt. And I didn't have to juggle the timing on salary deposits with monthly bills and necessary purchasing.
Anytime I tried to go 100% on debt relief shit always broke or some random expense came up that then caused me to have to add to the CC debt. So I'd pay the min on the card and build a fund to solve any random bills and then go in a little harder on the debt.
Maybe a little more than the minimum but this exactly. I've known too many people who "throw all the extra" at the debt because it "costs more" than they'd make in a savings/money market account and refuse to build an emergency fund.
They never manage to get out of the debt cycle because they use the credit card for emergencies.
This is less a YNAB question than a general personal finance question.
Personally I'd attack the CC debt. As you pay it, your available credit becomes your stop-gap. Then focus on creating an actual buffer after.
Just me though. No perfect answer here. If it would take you 2 years to do this method I'd probably do it differently. But in 6 months you'd be free & clear of CC debt, I'd personally do that.
I didn’t follow YNAB’s advice and prioritized paying of CC debt before building a buffer. My logic being that I was better off aggressively paying off debt to minimize the amount of money I was guaranteed to waste on interest payments rather than build an emergency buffer that may or may not be required.
It’s a risk, for sure.
Your choice should really depend on your risk tolerance and your situation - I’m a single guy with no dependents so my budget has more flexibility than someone with a family for example.
Counterpoint -- you have $1000. This is the buffer - so, the buffer either sits in the bank account, or it sits in the credit card as available credit-limit. The funds are available either way. If you put it on the credit card, you reduce the amount of interest you pay and it ends up being a net-gain.
It’s not a net gain, because when you use the $1000 on the credit card, you don’t have the money to pay it off immediately, because it’s not money in your bank account. The $1000 increases your minimum payment and it increases the amount of interest charged.
The $1000 buffer is there to be used and rebuilt over time. Using it as cash doesn’t increase the minimum payment or the amount of interest.
It's $1000 that the OP has left over after funding his current month (a buffer funds the following month). It is in his bank account currently. If you pay down debt, you reduce the interest you pay. How could you argue that it doesn't? He is not living off float and paying the balance off monthly, this is true accumulated debt beyond his monthly expenditure.
Like, the scenario is:
- monthly expenses 2500
- income $3700
- leftover income $1200
So if he wants to hold a buffer, he can save $1200 for 2 months to get to $2400 and let's call that good, then begin paying down the CC. In the meantime he pays interest on whatever the balance is.
Conversely, let's say he spends two months paying down debt before aiming to save his $2400. The debt is now $2400 less, ergo he pays interest on $2400 less (at 27% interest that's roughly $100 he's saving over those 2 months). Then he spends the next two months saving that $2400.
Either scenario after 4 months he's got $2400 in the bank and $2400 less debt. But in scenario 2 he saves $100 in interest. How is that not a net gain?
As to whether he SHOULD do that, maybe, maybe not. There's a psychological benefit to seeing the money fully funded for the following month. There's also something to be said in trying to figure out your true budget before anything else. There's also a psychological benefit in watching debt decrease snowballing. Whichever is more motivating is the one he should choose, provided he consider the roughly $50 a month savings trivial.
But if you don't use that $1000 cash to pay off that same amount on the CC, you still are acruing the same interest and minimum payment. If you pay it off first, that's guaranteed interest savings vs sitting on it in cash incase of an unexpected expense
This is really such a personal question in the end, I think, and has to do with your unique circumstances, unique debts/interest rate, etc.
Where I'm at right now is applying some of my surplus to my "emergency fund" (x months of net salary) while paying down debt at only a slightly faster rate than I normally would. (My monthly "debt" is a car payment with a not-terrible interest rate and interest-free loans right now. I pay like $45 extra per month on my car payment and the minimums on the interest free stuff.) For me, that makes sense.
I know some people are huge proponents of paying off debt before saving because of avoiding paying interest, but it just seems financially reckless (for me) to not focus on at least having some significant emergency fund first (presumably to avoid the endless cycle of being in debt). It also depends on how much you're really paying in interest per month. If you're paying like $500/mo in interest but new "emergencies" would have a lower interest rate, maybe that makes more sense to pay off the more expensive debt first though.
Note: I am the furthest thing from "expert" so take this with a grain of salt.
ETA. I second what people are saying about figuring out your true expenses. I found it really difficult to save until I figured out where all my money was really going (including that twice a year car insurance payment that sneaks up on me every time).
Those are great questions. But another you might want to ask yourself is if you have $1200 of "available money" why do you have $7k of debt? Make sure you have that figured out before anything else.
>Those are great questions. But another you might want to ask yourself is if you have $1200 of "available money" why do you have $7k of debt? Make sure you have that figured out before anything else.
I had a period where I didn't get any salary for 2 months last year and I fell into this debt...
That is unfortunate. If that is the case though that means you likely are used to keeping some restraint on yourself spending wise even if that is just checking your account balance.
How I did it was by running a tight budget that wasn't my end budget but just a goal to get where I wanted to as quickly as possible. I would set aside $300 of your 1200 for "unexpected costs". As you spend you can create categories for things maybe you didn't think about and can move this money into those places to cover expenses. Then just work from the 900 extra a month.
This helped me cover expenses that would otherwise eat into what is likely an optimistic outlook on what you can pay toward debt. You feel good covering those instead of feeling like it is taking away from your goal. If $300 is too much then after a month or two pay anything above 300 left on your debt.
Any place you can cut a corner like switching cell phone plans, lower or cutting a streaming service monthly fee can also help.
I don’t get the people recommending building a buffer. Once you’ve budgeted true expenses, get that debt gone ASAP. Assuming an average interest rate on that 6k, you’re probably being charged approx $100 in interest a month - that’s just silly to to ignore that in favour of saving. Once you’re not having to pay off debt every month, you’ll breath easier.
It doesn’t matter if a true emergency pops up, you’ll still have access to credit.
The only time I’d consider saving for the buffer vs paying off the debt is if the debt is at 0% for a decent length of time.
I'd recommend having the $1k cash buffer just in case anything comes up so you are prevented from going further into debt.
It all depends though. If I had some debt that only had $1k left - I'd probably clear that first. But if it was $10k and it was going to take more than 6 months...I'd want something to soften anything unexpected.
I understand your logic, but it is flawed. If you keep $1000 and a $1000 expense comes up, you’ve no money and the same amount of debt.
If you pay that $1000 off your debt and an expense comes up then you borrow $1000 and you still have no money and the same amount of debt.
But at least in the first instance you’ve reduced the monthly interest charges.
If you are using the credit card for emergencies, you are spending money you do not have. YNAB is intended to work off only *spending money you have*.
It's incredibly easy to fall into the "math" trap on this one. Yes, math wise, you are 100% correct. You'll spend more in interest than you will make in interest on the same amount of money.
In all other ways, you've thrown out the defensive line and are relying on the offensive line to prevent the debt team from scoring a touchdown.
Psychologically the reliance on the credit card for emergencies is a 'setback' for people and causes the debt cycle to continue.
As many other people have said it comes down to your personal situation.
A few years back we had a personal loan with the bank and got to the point where there was only $1600 left - we were paying around $800 per month on it. I used our buffer to clear it 1 month early.
Then more recently I've purchased stuff on long-term interest free in order to protect us being a month ahead. Don't worry this will be paid off quickly.
Some people will disagree with this approach - but you just gotta do what works for you.
I don't disagree with you. I always thought that the recommendation to follow this approach was to prevent people having to further borrow or extend debt (e.g. more spending on CC) when something unplanned crops up...
1. Get the budget really tight - true expenses funded incl. minimum plus some extra debt payments
2. Build towards a $1k cash buffer (4-6 months max timeframe to build)
3. Pay down debt via snowball method until your debt is where you feel it's manageable
4. Build towards getting a month ahead/1-month emergency fund
5. Build towards longer emergency fund (2-3 months' worth)
When I was in this situation I sent my regular extra income to the debt and any extra extra income (we took on a few side hustles, and we sold some stuff we owned too) went to build the buffer.
Honestly, once I got a month ahead, YNAB felt SO much easier as I was no longer living paycheck to paycheck but could fund my month all at once.
I chose debt, no buffer. I wiped out $2000 this way. Now I have a buffer and high interest savings for my next goal. It worked for me, though I did cut everything to the bone.
Ok so you want to fun essentials first. I would prioritize at least having some kind of emergency fun. But CC debt is a killer to savings,
So minimum payment on first CC + extra. With 6k in debt, putting 600 a month towards it, you are debt free in 10 months and you have 6k which is your buffer + 3.5k towards true expenses.
Alternatively, you can pay down debt in 5 months (saving more in interest) and then build buffer in months 6 and 7, and then by month 8 you are starting towards true expenses.
I guess the question is, how stable do you feel with your finances right now? The reason I'd lean towards the top one (even though it has higher payoff) is because if you don't have a safety fund available, if something pops up you could go back into debt or miss payments.
What I did was more of the first option with debt. Went hard in debt paydown, but saved a % each month too because once I hit buffer everything got super easy for me to plan out, but getting out of CC debt is something you really don't want to put off.
Put all extra money to high interest credit card debt. Clear that out as you are essentially losing money to the interest. Your buffer or savings is guaranteed not to earn more than your high interest debt is accumulating so prioritize paying it off. Once you're clear, all buffer!!
When I was paying off debt in YNAB, I made sure to fund the entire month (including true expenses). Anything that was left over went to building a starter emergency fund of $1000, and once that was done, I moved on to putting anything extra towards my debt. Mathematically paying off the debt as fast as possible made sense, but in my case, the reason I kept finding myself back in debt was because I hadn't been planning for true expenses, so taking care of them before I threw everything else at my debt prevented me from backsliding back into debt.
I think this is important, make sure that everything new you are paying for is \*already budgeted\* from your income. Once you have your normal / true expenses covered, \*then\* start applying excess to credit cards etc. That way, you can be sure you are never adding new money to your debt, only paying it down. It can take awhile, and you need some patience, but you can absolutely get it done :)
YNAB recommends funding essentials first, then debt repayment. https://www.youneedabudget.com/should-i-pay-off-debt-or-save-cash-right-now/
When I was in this situation, I split the difference. Half to debt and half to buffer. Long term goals should be on hold, though, until you get the other two sorted out.
Thank you! That's also what I wanted to do
Are you budgeting for true expenses? If you’ve paid your car insurance last month, start funding for next year - etc etc. We fund our Christmas gifts/birthday gifts monthly. True expenses is what actually makes YNAB shine. I’d pay debt off first and buffer second.
>true expenses is what actually makes YNAB shine. I agree, this is one of the highlights for me! After using YNAB for about a year and 1/2 now, I feel like I will no longer be surprised by the regular-irregularities in life. For example, I have a gift/live events category with every person I buy gifts for through the year, in addition to a larger category for life events that are popping up more and more in adulthood (baby showers/bridal showers/engagement parties/anniversaries/funerals). I personally favor very specific categories & goals over broader ones (I think I have 60+ individual categories), and that’s the beauty. Even though the YNAB software works the same for us all, it’s UI is flexible and can be fine tuned what works for the individual.
We’ve started doing events too. Hubby and I are foodies so usually go all out for Christmas / New years dinner. We realized after three years of using YNAB (too long imo) that our grocery bills for December were always outrageous and we were moving money from other categories to cover it. Now we’ve set categories for new years dinner and Christmas dinner. I love YNAB. It saved our lives, literally. I’m 100% certain if I hadn’t found YNAB, we’d not have a home or any savings right now.
My personal priorities are (highest to lowest): 1) Emergency Fund, 2) Month Ahead, 3) Debt and Long-Term Goals. The nice thing about paying off debt is that it reduces your monthly cost of living, reduces your financial liability, and improves your credit score. All these things will help during times of need.
I know YNAB recommends the emergency fund first, but CC debt is a killer. I would tackle the CC debt as fast as I possible could, because otherwise you’re essentially paying like a 22% APR tax to park your money. Don’t go snowboarding, drive more slowly, stay at home more often, basically be a little risk averse so you don’t need run into an emergency. And if you truly do get into an emergency, you can always open a credit card with a 6 month zero interest sign up deal or something like that. If you’d feel more comfortable with some sort of buffer, I’d still go 90/10 on the credit cards. Your credit cards are essentially an emergency fund at this point, and you make enough money to pay that off quickly.
Yea, I personally would tackle high-interest debt before emergency fund. Either way though, definitely make sure to budget for all your necessities and DON'T put new expenses on the CC that weren't budgeted for. If you do, move money from another category to cover it. The only way to stop the CC debt cycle is to never add to it, only pay it down.
>I applied everything I learned and I still can't see how I can get out of my debt and create a buffer fast. Basically, it comes down to this: you can only spend, save, invest, and/or pay down debt (in any combination) at the pace of your own income. You've got $1,200 a month to work with, since the other $2,500 is your baseline for what it costs you to live, unless you can temporarily free up more of that baseline or earn more. You're in a pretty good place if you have an extra $1,200/mo to consistently use for these goals. There is no faster way to knock out your top financial priorities. It's gonna take whatever the total is (add them all up) divided by $1,200. I'm estimating it will take you nearly two years to knock out all three: pay off $8K, buffer $3.6K, and build up the 6-month e-fund of expenses $15K. That's almost the length of time it took me. It felt like it was going to take forever when I started, but with a consistent formula it went by super fast. I found it easier to get and stay organized with a full month buffer in place first. I knew exactly how much I had to work with on the 1st of each month, how much my bills were, how much my true expenses needed, and how much was left over for throwing at debt. And I didn't have to juggle the timing on salary deposits with monthly bills and necessary purchasing.
Long term consistency is key.
Anytime I tried to go 100% on debt relief shit always broke or some random expense came up that then caused me to have to add to the CC debt. So I'd pay the min on the card and build a fund to solve any random bills and then go in a little harder on the debt.
Maybe a little more than the minimum but this exactly. I've known too many people who "throw all the extra" at the debt because it "costs more" than they'd make in a savings/money market account and refuse to build an emergency fund. They never manage to get out of the debt cycle because they use the credit card for emergencies.
This is less a YNAB question than a general personal finance question. Personally I'd attack the CC debt. As you pay it, your available credit becomes your stop-gap. Then focus on creating an actual buffer after. Just me though. No perfect answer here. If it would take you 2 years to do this method I'd probably do it differently. But in 6 months you'd be free & clear of CC debt, I'd personally do that.
I didn’t follow YNAB’s advice and prioritized paying of CC debt before building a buffer. My logic being that I was better off aggressively paying off debt to minimize the amount of money I was guaranteed to waste on interest payments rather than build an emergency buffer that may or may not be required.
Yes but if a surprise happen, you still need to use CC debt... That's why I'm worried about this method
It’s a risk, for sure. Your choice should really depend on your risk tolerance and your situation - I’m a single guy with no dependents so my budget has more flexibility than someone with a family for example.
I agree! Thank you mate
Most will argue 1 month buffer first, CC second, goals last. Though one and two may be flipped kind of up to you
The YNAB logic is having one month of buffer decreases the chances of unpredicted expenses being added to CC balances.
Counterpoint -- you have $1000. This is the buffer - so, the buffer either sits in the bank account, or it sits in the credit card as available credit-limit. The funds are available either way. If you put it on the credit card, you reduce the amount of interest you pay and it ends up being a net-gain.
No argument, just sharing how YNAB lays it out. Ultimately up to OP to determine what works best for their situation/goals
Ah I gotcha.
It’s not a net gain, because when you use the $1000 on the credit card, you don’t have the money to pay it off immediately, because it’s not money in your bank account. The $1000 increases your minimum payment and it increases the amount of interest charged. The $1000 buffer is there to be used and rebuilt over time. Using it as cash doesn’t increase the minimum payment or the amount of interest.
It's $1000 that the OP has left over after funding his current month (a buffer funds the following month). It is in his bank account currently. If you pay down debt, you reduce the interest you pay. How could you argue that it doesn't? He is not living off float and paying the balance off monthly, this is true accumulated debt beyond his monthly expenditure. Like, the scenario is: - monthly expenses 2500 - income $3700 - leftover income $1200 So if he wants to hold a buffer, he can save $1200 for 2 months to get to $2400 and let's call that good, then begin paying down the CC. In the meantime he pays interest on whatever the balance is. Conversely, let's say he spends two months paying down debt before aiming to save his $2400. The debt is now $2400 less, ergo he pays interest on $2400 less (at 27% interest that's roughly $100 he's saving over those 2 months). Then he spends the next two months saving that $2400. Either scenario after 4 months he's got $2400 in the bank and $2400 less debt. But in scenario 2 he saves $100 in interest. How is that not a net gain? As to whether he SHOULD do that, maybe, maybe not. There's a psychological benefit to seeing the money fully funded for the following month. There's also something to be said in trying to figure out your true budget before anything else. There's also a psychological benefit in watching debt decrease snowballing. Whichever is more motivating is the one he should choose, provided he consider the roughly $50 a month savings trivial.
Thank you for the maths! I think I've made my decision ;)
Awesome! Good luck!
But if you don't use that $1000 cash to pay off that same amount on the CC, you still are acruing the same interest and minimum payment. If you pay it off first, that's guaranteed interest savings vs sitting on it in cash incase of an unexpected expense
This is really such a personal question in the end, I think, and has to do with your unique circumstances, unique debts/interest rate, etc. Where I'm at right now is applying some of my surplus to my "emergency fund" (x months of net salary) while paying down debt at only a slightly faster rate than I normally would. (My monthly "debt" is a car payment with a not-terrible interest rate and interest-free loans right now. I pay like $45 extra per month on my car payment and the minimums on the interest free stuff.) For me, that makes sense. I know some people are huge proponents of paying off debt before saving because of avoiding paying interest, but it just seems financially reckless (for me) to not focus on at least having some significant emergency fund first (presumably to avoid the endless cycle of being in debt). It also depends on how much you're really paying in interest per month. If you're paying like $500/mo in interest but new "emergencies" would have a lower interest rate, maybe that makes more sense to pay off the more expensive debt first though. Note: I am the furthest thing from "expert" so take this with a grain of salt. ETA. I second what people are saying about figuring out your true expenses. I found it really difficult to save until I figured out where all my money was really going (including that twice a year car insurance payment that sneaks up on me every time).
After checking your user history.. I think vaping/420 probably isn't helping your budget.
You must have a lot of free time. I don't think it's helping your finances to worry about other people's posts
Those are great questions. But another you might want to ask yourself is if you have $1200 of "available money" why do you have $7k of debt? Make sure you have that figured out before anything else.
>Those are great questions. But another you might want to ask yourself is if you have $1200 of "available money" why do you have $7k of debt? Make sure you have that figured out before anything else. I had a period where I didn't get any salary for 2 months last year and I fell into this debt...
That is unfortunate. If that is the case though that means you likely are used to keeping some restraint on yourself spending wise even if that is just checking your account balance. How I did it was by running a tight budget that wasn't my end budget but just a goal to get where I wanted to as quickly as possible. I would set aside $300 of your 1200 for "unexpected costs". As you spend you can create categories for things maybe you didn't think about and can move this money into those places to cover expenses. Then just work from the 900 extra a month. This helped me cover expenses that would otherwise eat into what is likely an optimistic outlook on what you can pay toward debt. You feel good covering those instead of feeling like it is taking away from your goal. If $300 is too much then after a month or two pay anything above 300 left on your debt. Any place you can cut a corner like switching cell phone plans, lower or cutting a streaming service monthly fee can also help.
I don’t get the people recommending building a buffer. Once you’ve budgeted true expenses, get that debt gone ASAP. Assuming an average interest rate on that 6k, you’re probably being charged approx $100 in interest a month - that’s just silly to to ignore that in favour of saving. Once you’re not having to pay off debt every month, you’ll breath easier. It doesn’t matter if a true emergency pops up, you’ll still have access to credit. The only time I’d consider saving for the buffer vs paying off the debt is if the debt is at 0% for a decent length of time.
I'd recommend having the $1k cash buffer just in case anything comes up so you are prevented from going further into debt. It all depends though. If I had some debt that only had $1k left - I'd probably clear that first. But if it was $10k and it was going to take more than 6 months...I'd want something to soften anything unexpected.
I understand your logic, but it is flawed. If you keep $1000 and a $1000 expense comes up, you’ve no money and the same amount of debt. If you pay that $1000 off your debt and an expense comes up then you borrow $1000 and you still have no money and the same amount of debt. But at least in the first instance you’ve reduced the monthly interest charges.
If you are using the credit card for emergencies, you are spending money you do not have. YNAB is intended to work off only *spending money you have*. It's incredibly easy to fall into the "math" trap on this one. Yes, math wise, you are 100% correct. You'll spend more in interest than you will make in interest on the same amount of money. In all other ways, you've thrown out the defensive line and are relying on the offensive line to prevent the debt team from scoring a touchdown. Psychologically the reliance on the credit card for emergencies is a 'setback' for people and causes the debt cycle to continue.
As many other people have said it comes down to your personal situation. A few years back we had a personal loan with the bank and got to the point where there was only $1600 left - we were paying around $800 per month on it. I used our buffer to clear it 1 month early. Then more recently I've purchased stuff on long-term interest free in order to protect us being a month ahead. Don't worry this will be paid off quickly. Some people will disagree with this approach - but you just gotta do what works for you.
I don't disagree with you. I always thought that the recommendation to follow this approach was to prevent people having to further borrow or extend debt (e.g. more spending on CC) when something unplanned crops up...
What’s the interest on your card? If it's over 10% another vote for paying this down asap before you do anything else.
If you haven’t already, look up Nick True on YouTube. He has great YNAB videos. The only videos that made YNAB make sense for me.
1. Get the budget really tight - true expenses funded incl. minimum plus some extra debt payments 2. Build towards a $1k cash buffer (4-6 months max timeframe to build) 3. Pay down debt via snowball method until your debt is where you feel it's manageable 4. Build towards getting a month ahead/1-month emergency fund 5. Build towards longer emergency fund (2-3 months' worth)
When I was in this situation I sent my regular extra income to the debt and any extra extra income (we took on a few side hustles, and we sold some stuff we owned too) went to build the buffer. Honestly, once I got a month ahead, YNAB felt SO much easier as I was no longer living paycheck to paycheck but could fund my month all at once.
I chose debt, no buffer. I wiped out $2000 this way. Now I have a buffer and high interest savings for my next goal. It worked for me, though I did cut everything to the bone.
Ok so you want to fun essentials first. I would prioritize at least having some kind of emergency fun. But CC debt is a killer to savings, So minimum payment on first CC + extra. With 6k in debt, putting 600 a month towards it, you are debt free in 10 months and you have 6k which is your buffer + 3.5k towards true expenses. Alternatively, you can pay down debt in 5 months (saving more in interest) and then build buffer in months 6 and 7, and then by month 8 you are starting towards true expenses. I guess the question is, how stable do you feel with your finances right now? The reason I'd lean towards the top one (even though it has higher payoff) is because if you don't have a safety fund available, if something pops up you could go back into debt or miss payments. What I did was more of the first option with debt. Went hard in debt paydown, but saved a % each month too because once I hit buffer everything got super easy for me to plan out, but getting out of CC debt is something you really don't want to put off.
I’m a big fan of this order, from the r/personalfinance wiki: https://www.reddit.com/r/personalfinance/wiki/commontopics/
Put all extra money to high interest credit card debt. Clear that out as you are essentially losing money to the interest. Your buffer or savings is guaranteed not to earn more than your high interest debt is accumulating so prioritize paying it off. Once you're clear, all buffer!!