Debt Dumpers - 2014

[pigletto]

Is YNAB worth the cost? I wanted to find some kind of budgeting system like this, but felt stupid paying money for something to help me save money. Lol

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As someone mentioned earlier, you can get a 20% discount for being a Disboard member.
I am currently using the free trial and absolutely plan to buy it. I get what you are saying about spending money to save money but honestly, the money I will save in the long run far outweighs the initial expense. This system is exactly what I needed to feel in control of all aspects of our household budget. We are loving it, and I highly recommend it.

 

[aliceindisneyland]

I am a long time reader of Money magazine. I am a Boglehead. I know that what I am proposing goes against all basic investment advice. Please don’t anyone send Suze Orman to my house to beat me down, because she would. But one thing I have learned from my years of reading Money magazine is that, in the end, all that matters is net worth. Literally, that ‘bottom line’ in Quicken. Is your net worth increasing? Or is it decreasing? With the market going up and up, mine is increasing. For our age, it actually looks pretty good because we were smart before the kids came along and made disposable income a thing of the past.

Like I said, I stare at Quicken. I see lots of black lines, of which the $8,100 in question is one of the smallest, and I say to myself, “Self, why do we live like this? Why is there still a red line there when we have all the pretty black ones?” No car loans, just the mortgage, and the glaring red credit card line that could be taken out in one fell swoop. And knowing that immediately after: emergency fund will begin to increase, ROTH IRA balances will be added to, 529 balances will be added to. If you take a snapshot of where we are right now, and where we will be one year from now, won’t we be better off? Because otherwise a year from now that red line would still be there. Two years from now that red line would still be there. Really, doing this would just be a blip on our financial radar screen. My blood pressure would be lower and I would sleep much better at night, and I really cannot put a price on that!

I would totally do it. $8100 will not become millions, even if you retire at 90. [lol, I'm just making that up - indeed it may.] You know a lot about personal finance, obviously, and if you feel like it would help you move toward your goals, do it.

 

[aliceindisneyland]

Check out youneedabudget.com - it's essentially an electronic envelope system, so works the same way but you don't deal with cash. I love it, it has been a real lifesaver for us.

I love it. During my trial I was still trying to use cash for groceries, gas, etc. and with 2 adults in the household it was a nightmare to keep track of the cash categories and figure out how to mesh them with the software. Now we're using ONLY our bank credit card (debit card, but never used as debit, just credit as I'm paranoid) and after one day of multiple errands I feel like I never want to hold an actual dollar in my hand again!

Is YNAB worth the cost? I wanted to find some kind of budgeting system like this, but felt stupid paying money for something to help me save money. Lol

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. I think it's worth ten times its cost, given how much clarity and peace it has brought to us. Try the free trial. They give 20% off to dis members.

If YNAB took 5% of our income for the rest of our lives I think we'd still be ahead from when we were trying to do a typical budget and/or envelope system.

 

[AlohaNow]

Thanks so much to everyone for their input. I really do value your thoughts and I love this board for bouncing things off you wonderful like-minded people!

This weekend I ran the numbers every possible way and checked how it would affect the timeline of credit card payoff. And then I ran some numbers a different way and came up with something interesting. The number two. That is the percentage of our total investment portfolio that the SIMPLE IRA in question represents. If you add in our home equity and cars, this percentage drops down to one point something. As soon as I saw this, I prepared the paperwork to cash out the IRA and I also slept much better that night. I had never thought about it this way before; I had just been clinging to the well-known fact that you do not cash out a tax-advantaged retirement asset. But I am certainly willing to give up about two percent of what we are worth to get rid of the credit card debt once and for all (come January). Taxes and the penalty, yes I know, but I consider that a cost of doing business. I would not advocate for everyone to do this, but I know that for us, it is the right decision at this time.

And I did actually take a screen print of Quicken and saved it as a Word doc. Then I put a reminder in my calendar to check it one year from now to compare net worth. Because, yes, I am a huge geek like that.

I continue to cling to the following quote. I do not recall which of you posted it, so I cannot give proper credit, but I copied it over from a thread and please know that it has been a daily reminder and inspiration to me:

“I'm amazed at how much progress we make when we make a conscious effort to get rid of it all. I'm also amazed at how long it took me to wake up and stop accepting that debt is a normal part of life.”

P.S. How many people Googled ‘Boglehead’ after my last post? Welcome to the world of low cost indexed mutual fund investing! It’s a great place to be. I love Vanguard and will sing it’s praises to anyone who will listen!

 

[ruadisneyfan2]

Thanks so much to everyone for their input. I really do value your thoughts and I love this board for bouncing things off you wonderful like-minded people!

This weekend I ran the numbers every possible way and checked how it would affect the timeline of credit card payoff. And then I ran some numbers a different way and came up with something interesting. The number two. That is the percentage of our total investment portfolio that the SIMPLE IRA in question represents. If you add in our home equity and cars, this percentage drops down to one point something. As soon as I saw this, I prepared the paperwork to cash out the IRA and I also slept much better that night. I had never thought about it this way before; I had just been clinging to the well-known fact that you do not cash out a tax-advantaged retirement asset. But I am certainly willing to give up about two percent of what we are worth to get rid of the credit card debt once and for all (come January). Taxes and the penalty, yes I know, but I consider that a cost of doing business. I would not advocate for everyone to do this, but I know that for us, it is the right decision at this time.

And I did actually take a screen print of Quicken and saved it as a Word doc. Then I put a reminder in my calendar to check it one year from now to compare net worth. Because, yes, I am a huge geek like that.

I continue to cling to the following quote. I do not recall which of you posted it, so I cannot give proper credit, but I copied it over from a thread and please know that it has been a daily reminder and inspiration to me:

“I'm amazed at how much progress we make when we make a conscious effort to get rid of it all. I'm also amazed at how long it took me to wake up and stop accepting that debt is a normal part of life.”

P.S. How many people Googled ‘Boglehead’ after my last post? Welcome to the world of low cost indexed mutual fund investing! It’s a great place to be. I love Vanguard and will sing it’s praises to anyone who will listen!

Oh my gosh, that quote was from me! I'm so touched!
I'm also a big Vanguard fan. I first found them through my work and their return rate is decent with very low costs.
I have to say with all of the stupid financial decisions I've made, at least I can say I did start saving early for retirement, in my early 20's as soon as I got out of school and got my first real job.

 

[AlohaNow]

ruadisneyfan2 – Why am I not surprised that was you? You are one of my favorite forum posters! Really, that quote has made a difference in my life. Thank you!

at least I can say I did start saving early for retirement, in my early 20's as soon as I got out of school and got my first real job.

This. Young people, take note. This is kind of and pretty much the entire key to building wealth. Even while, as I mentioned, we temporarily stopped retirement contributions due to childcare costs, the money we had previously put away was making money for us. It is still there and still making money for us today in fact. Even if it is only $10 per paycheck, get started now. When you see your balance grow, you will get excited about investing, and you will want more! Take it from two ladies who know (ruadisneyfan2 and me), this is the way to go!

 

[ruadisneyfan2]

ruadisneyfan2 – Why am I not surprised that was you? You are one of my favorite forum posters! Really, that quote has made a difference in my life. Thank you!

Awww...Shucks...
You made my day!

I'm glad to know I can help others the way others have inspired me. I feel a million times better about our finances than I did this time last year when I first discovered this thread. It's been a life saver.

Just keep swimming!

 

[gracie1]

Hi everyone Just checking in and catching up on the boards. Seems like everyone is doing a fantastic job with dumping debt

We made it through the party for my mom, and boy oh boy did that cost! But luckily it was already in savings - so didn't have to accumulate any debt I'm at my new job and loving it! I have been working on a spreadsheet as to how much to put in savings which will be able to offset the unemployment that I will be collecting in the winter. But it is so nice to be stress free and not a sick and nervous wreck! I do believe this was the best thing I could've done for myself.

 

[zy144622]

Well I'm still swimming! LOL and dreaming if being debt free! Soon enough. Our home ended up with ice and water damage over this wonderful winter. I live in West MI and we had a terrible winter. This is all covered by insurance and we have started the process for the repairs. BUT it's so crazy to see a check that would pay off almost all my debt...and no be able to put it towards debt. I wish these repairs were not needed so I could!

 

[rusafee1183]

As someone mentioned earlier, you can get a 20% discount for being a Disboard member.
I am currently using the free trial and absolutely plan to buy it. I get what you are saying about spending money to save money but honestly, the money I will save in the long run far outweighs the initial expense. This system is exactly what I needed to feel in control of all aspects of our household budget. We are loving it, and I highly recommend it.

Thanks everyone for the advice! I like it, but I am kind of struggling with it so maybe you guys can give me some advice on how to make it work for my situation.

My DH and I get paid bi-weekly, but on opposite weeks. So we have a payday every Friday, but it's pretty small. I was planning on taking 1/4 of every bill we have and putting that amount aside for each of our bills when it's due. The issue I am having, is that I won't necessarily have enough in my mortgage fund by the time it's due, but I would have enough for it if I used the money allocated for say, my cable bill - which is not due until the end of the month.

But, it feels like I will always appear to be "in the red" as far as YNAB is concerned. I am struggling to figure out how to get started with this system.

I hope that makes sense....

Also, do any of you use YNAB in conjunction with a true envelope system? I am really liking the idea of using cash for certain things, but not sure how to make the 2 systems work well together.

 

[pryncess527]

Thanks everyone for the advice! I like it, but I am kind of struggling with it so maybe you guys can give me some advice on how to make it work for my situation.

My DH and I get paid bi-weekly, but on opposite weeks. So we have a payday every Friday, but it's pretty small. I was planning on taking 1/4 of every bill we have and putting that amount aside for each of our bills when it's due. The issue I am having, is that I won't necessarily have enough in my mortgage fund by the time it's due, but I would have enough for it if I used the money allocated for say, my cable bill - which is not due until the end of the month.

But, it feels like I will always appear to be "in the red" as far as YNAB is concerned. I am struggling to figure out how to get started with this system.

I hope that makes sense....

Also, do any of you use YNAB in conjunction with a true envelope system? I am really liking the idea of using cash for certain things, but not sure how to make the 2 systems work well together.

First, I'll recommend the YNAB forums. Everyone over there is really nice and helpful, and most of them are way better at helping people than I am. But I'll give it a shot.

It's perfectly okay to allocate, especially at first, to be in a situation where you might not spread the mortgage out over all four paychecks, but intsead do 1/2 with the first, 1/4 with the second, or something like that, to make sure that the funds are there when the bill is due. Concerns like this tend to get smoothed out over time as you build up funds and come closer to living on last month's income which frees you up from worrying about when you get paid.

Start by sitting down with your bank balance right now and asking, "what does this money need to do before I get paid again?" and allocate it out. Then stop. If you are in the red, then you are probably allocating future paychecks, but the YNAB system, like an envelope system, is designed to only deal with money you already have. You don't put an IOU in an envelope, and similarly in YNAB you don't budget money you don't have yet.

it can take some getting used to (or at least it did for me), but it's been very freeing now that we have the hang of it. And it's very nice not to have to worry about timing bills to paychecks once you get to Rule 4.

 

[rusafee1183]

First, I'll recommend the YNAB forums. Everyone over there is really nice and helpful, and most of them are way better at helping people than I am. But I'll give it a shot.

It's perfectly okay to allocate, especially at first, to be in a situation where you might not spread the mortgage out over all four paychecks, but intsead do 1/2 with the first, 1/4 with the second, or something like that, to make sure that the funds are there when the bill is due. Concerns like this tend to get smoothed out over time as you build up funds and come closer to living on last month's income which frees you up from worrying about when you get paid.

Start by sitting down with your bank balance right now and asking, "what does this money need to do before I get paid again?" and allocate it out. Then stop. If you are in the red, then you are probably allocating future paychecks, but the YNAB system, like an envelope system, is designed to only deal with money you already have. You don't put an IOU in an envelope, and similarly in YNAB you don't budget money you don't have yet.

it can take some getting used to (or at least it did for me), but it's been very freeing now that we have the hang of it. And it's very nice not to have to worry about timing bills to paychecks once you get to Rule 4.

Thank you! I think I am trying to do too many things at once and it's confusing me. We are in a lot of debt, which is what started us on this course. I started reading TMMO about a month ago and got my debt snowball plan together and that was what prompted us to start a budget. I am having a hard time reconciling both philosophies in my head at once. I would like to get to the point where I am living a month ahead with YNAB, but I am wanting to focus ALL my extra money on my debt and can't figure out how.

It's just hard to know how much I can allocate at a time to my debt. I know theoretically based on our past few months of paychecks/expenses how much we should have "extra" every month - but knowing WHEN is what I am struggling with. I keep wanting to assign those dollars to another upcoming bill instead of on my snowball when we get paid.

I am making myself crazy because I just don't want to waste any more time, now that we finally have a grasp on how to get out of this debt... but I am struggling.

 

[pryncess527]

Thank you! I think I am trying to do too many things at once and it's confusing me. We are in a lot of debt, which is what started us on this course. I started reading TMMO about a month ago and got my debt snowball plan together and that was what prompted us to start a budget. I am having a hard time reconciling both philosophies in my head at once. I would like to get to the point where I am living a month ahead with YNAB, but I am wanting to focus ALL my extra money on my debt and can't figure out how.

It's just hard to know how much I can allocate at a time to my debt. I know theoretically based on our past few months of paychecks/expenses how much we should have "extra" every month - but knowing WHEN is what I am struggling with. I keep wanting to assign those dollars to another upcoming bill instead of on my snowball when we get paid.

I am making myself crazy because I just don't want to waste any more time, now that we finally have a grasp on how to get out of this debt... but I am struggling.

Even Dave Ramsey suggests a 1k emergency fund before you go crazy on the debt -- think of DR's baby e-fund as similar to the YNAB buffer -- some breathing room is important when trying to get out from under debt. Paying down debt is only moderately helpful if you are so aggressive you don't save for known upcoming expenses (or likely ones) and end up having to borrow again. We chose to be conservative with our debt repayment for the first two months until we had a better grasp of things -- we'd budget towards the debt, but not make the full payment, just in case we later realized it had to be re-allocated to a more immediate priority. We get paid monthly though, so the timing wasn't quite as tricky for us - many on the YNAB forums are in the weekly paid situation, without a buffer, so it can work it just may take more thought/planning. Many of them use YNAB in conjunction with a spreadsheet to help them keep track of the timing of bills. I also do things like include notes in the title (i.e. (May) Car Insurance $600) to help me remember that how much we'll need in that category by what month.

 

[Eureka]

Thanks everyone for the advice! I like it, but I am kind of struggling with it so maybe you guys can give me some advice on how to make it work for my situation.

My DH and I get paid bi-weekly, but on opposite weeks. So we have a payday every Friday, but it's pretty small. I was planning on taking 1/4 of every bill we have and putting that amount aside for each of our bills when it's due. The issue I am having, is that I won't necessarily have enough in my mortgage fund by the time it's due, but I would have enough for it if I used the money allocated for say, my cable bill - which is not due until the end of the month.

But, it feels like I will always appear to be "in the red" as far as YNAB is concerned. I am struggling to figure out how to get started with this system.

I hope that makes sense....

Also, do any of you use YNAB in conjunction with a true envelope system? I am really liking the idea of using cash for certain things, but not sure how to make the 2 systems work well together.

Sounds similar to our pay schedule. DH gets paid every Friday and I get paid twice a month. I have a list of bills, how much, when they're due that I make every month. When one of us gets paid, I just go down the list paying what I can, leaving out some for food and gas, until the next paycheck. I don't have a formula of how much comes from each check for bills because we also set some aside for various purposes (vacation, sports for the kids, etc). I cross off each on the list as I pay it so it's easy to see what's left. Not scientific, but works for us.

Does YNAB not let you borrow from the other funds?

 

[pryncess527]

Does YNAB not let you borrow from the other funds?

It does -- it encourages you to roll with the punches! So yes, I'd say if the PP decides she needs to remove some budgeted money from cable and apply it to mortgage, that's perfectly okay. Expected even. There is really no "perfect" month and adjustments will often get made. I found that realization quite liberating.

 

[rusafee1183]

Sounds similar to our pay schedule. DH gets paid every Friday and I get paid twice a month. I have a list of bills, how much, when they're due that I make every month. When one of us gets paid, I just go down the list paying what I can, leaving out some for food and gas, until the next paycheck. I don't have a formula of how much comes from each check for bills because we also set some aside for various purposes (vacation, sports for the kids, etc). I cross off each on the list as I pay it so it's easy to see what's left. Not scientific, but works for us.

Does YNAB not let you borrow from the other funds?

It does -- it encourages you to roll with the punches! So yes, I'd say if the PP decides she needs to remove some budgeted money from cable and apply it to mortgage, that's perfectly okay. Expected even. There is really no "perfect" month and adjustments will often get made. I found that realization quite liberating.

You know, I didn't even think of this. They definitely made it seem easy enough to move funds from one thing to another. So I could do what I was thinking about an just take 1/4 of every bill and allocate it to that utility an then move it if I need it. At least that way, I know I have set aside enough money for each even if its in the 'wrong place' ... Then I can just move it.

Duh. I feel dumb!

Thanks!!

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[pryncess527]

No problem, glad I could help! I had quite a few Duh moments as I worked through learning YNAB before the lightbulb finally went off and I got it.

 

[writermommy6]

Okay, just had a huge vet bill that was twice what was expected. Well huge for me. $400
I was really bummed as this took away quite a bit that was set aside for other expenses. Well I got a new client this morning and I sold my washing machine ($40). Excited that I'll have earned back the $400 in the next week!! AND the new client is ongoing so we may get out of debt before the year is out!

 

[Eureka]

I just have to laugh because this is how life always is. Couple weeks ago we paid off the credit card. Sunday night the dryer's heating element died.

Today the repair guy came, said are you sure you want to do this because it's $120 to check it out, plus $110 labor on top of it and that doesn't include parts, so you're already at $300 on a 12 year old dryer. I didn't know about the labor charge…the company we used before took it out of the diagnostic fee. But glad he told me up front.

He was really nice and said "you think about it and I can tell them you cancelled once I got here" and then told me he hates doing work on things that are older because it's money down the drain. So, guess what we're doing tomorrow night after work….going to buy a dryer.

(And it'll have to go on the credit card bc we just drained the savings account to pay off the credit card…sigh).

 

[disneysnowflake]

Must be dryer death month. We had to go purchase a new one on Saturday. Our neighbor had to buy one the week before.

It's always something.

Good news though. Only 1 more student loan payment, and I'm done!!