Let me just start this off by saying, I still love you, YNAB. I do.

So why do I feel so GUILTY???

Because I installed quicken.

DON’T LEAVE ME YNAB! I PROMISE I WAS THINKING OF YOU THE WHOLE TIME! *sniff*

OK, let me back up.

We are not operating on a buffer yet. For those of you who do not know, Rule #1 of the YNAB methodology is to live on LAST month’s income. It is ingenius, really. If you’re living on the last month’s income, then you’re not touching this month’s income as it gets deposited and there’s never any fear of anything bouncing or being out of whack. No waiting until paydate X to pay bill Y, etc.

when you are living on last month’s income, this extra padding of money in your spending account is called the “buffer,” because it buffers you from that $0 balance.

Now, we are not living on last month’s income yet, and honestly, at least until we pay off our credit card debt, I don’t see this happening. We have the opportunity to build up to it, but at this point, I’d rather put everything we can towards debt, even if that means we don’t have a buffer. I think after the credit cards are gone next march, we may take a month and do it, but right now - no buffer. And also, our paydates are spaced pretty well so that for the most part, there usually isn’t any intense juggling going on, mostly, I just have to be careful about the beginning of the month when a lot of things are due/paid.

So I sat down today to enter in the last few days worth of transactions into YNAB and just check up on finance things in general, when I realized I made a mistake.

In YNAB, it’s easy to forget about your running checking account balance, because the only balance for the account is up in the tab for the account that you’re in, rather than a running balance in the actual register. Our mortgage payment is going to be high next month because we just refinanced and instead of prepaying the interest that would be accrued up to our first payment, that interest is due in our first payment.

So, I was going to time things carefully and wait until after my husband’s paycheck hits the checking account (on the 3rd) and then send the mortgage payment. However, I had already entered the mortgage payment into my bank’s online bill pay for 4/1, and unfortunately, it is now “processing” which means I can’t modify the date on it. Doh.

So I kind of scrambled a bit, not totally sure whether the plethora of things coming due at the beginning of the month would interfere with the mortgage payment going through. Even when I enter things ahead of time into my checking register in YNAB, without a running balance, it’s hard to see how things are going to play out.

So I installed quicken, I am sorry to say. I still love you YNAB, but there are some things that quicken just does better. And when I was entering all my past transactions and carefully cross-checking with YNAB to get it in the right category — I found a few errors that I had made in YNAB. One transaction I had never entered, and another I had entered twice.

So I guess now, I am going to be a dual software user - both quicken and YNAB. On a whim, I checked out the budgeting screen in quicken, and was quickly underwhelmed. YNAB does awesome budgeting, hands down. Now if it only would download transactions automatically, reconcile, and show a running balance, I will go back to being faithful to YNAB, and YNAB only.

Until then… I have to sneak out and meet my dark quicken lover in the dead of night, in seedy motels, and quickly shower afterward to get rid of my shame…

*Ahem* Sorry, got a little off track there :)

I still love you YNAB.

ps - no quick transfers from e*trade account necessary, looks like the mini buffer in our checking account from our savings categories, as well as category overages are enough to keep us from going in the red until some paychecks hit.

Thank you for the comments on the last couple posts.

We were all set to go forward with our plan, when I noticed something (thank goodness). The offer on the citibank mc had NO CAP on the balance transfer fee. So if we had gone ahead and transfered $15k, the fee would have been $450. NO THANK YOU. We called, and the best they could offer was to credit our account half the fee, after the transfer had gone through. I don’t want to do it at $225, either, so this is a no go. We have already transfered a chunk of our debt to a 0% discover card, and we’re calling that good for now. We may look into this further in the future. So for now, we will continue paying straight onto our last card not at 0%, which is our usaa mc at about ~10%, for 13k (put the bonus money onto it already).

The numbers are looking VERY good for march, I’m happy to say. I am still waiting for our usaa mc statement so I can see the interest charges for it and finalize my spreadsheet for March. I’m so excited that we paid $3,830 toward credit card debt in March - yeah to the hoo to the yeah-hoo-hoo!

You see before you… (well, you’re reading on your screen, at least..) a lady most informed on the calculations of interest. You’d think that this would be easy to find, but Google wanted to point me to lots of calculators that would do it for me (but only based on a year) but nothing that would tell me HOW to figure it out myself.. But I finally found this very easy to read and understand tutorial of sorts. I highly recommend it.

So using my newfound knowledge, I set to work. I decided to run numbers just based on the 16k balance that will be on our citi amex card, which the 0% rate expires in October. The goal is to get it paid off by October. However, the balance won’t be 16k in April, it will be $13,250k, due to a big payment courtesy of my husband’s bonus.

Behold, the “just pay it down already!” scenario A:

So you know where those bigger numbers are coming from, $1300 is going to come from the regular debt snowball.

We will be receiving $1k back from our state taxes, and my husband gets an extra paycheck in april, so April’s numbers are 1300 + 1000+ 1800 = $4100.

In May, we’re expecting the tax stimulus check: 1300 + 1600 = $2900.

The rest of the months are “normal”.


Next, scenario B, let’s call it the, “Stuff it into savings instead” scenario:

Obviously, we will need to pay the minimum on the card, which I am going to say is $250. Now that I think about it, that’s probably high, but oh well. You can see the running balance for the card on the right, in yellow.

On the left in green, you can see the savings account. Each month, the month that would have gone to debt (minus $250), is instead put into savings. The bright green column is the interest earned for that month, with a tally of all the interest earned at the very bottom of that column ($189). The middle column is the running balance, adding the deposit as well as the interest from the previous month.

So when October comes, instead of making a deposit into the savings account, there will instead be a withdrawal of $10,700, and then that money, paired with the same $1050 debt payment we see in scenario A, is enough to pay off the amex balance in it’s entirety.

And the result? Instead of the 2k we started out with, we have $2189 - $189 in interest. Which we could then use to pay off our other debt.

THE RESULTS:
I’m nervous about my numbers. I calculated the interest using this formula:

.035 (our interest rate) x balance x 31/365 (a month’s worth of a year’s interest)

So if you take the initial $2000, it works out like this:

.035 x 2000 x .0849 = 5.94, or as my google doc spreadsheet rounded it off, $6.

If anyone wants to check and/or correct me, feel free (all THREE of my readers, haha!)

If the numbers are somewhat accurate… I am a little surprised. A benefit of almost $200 bucks in only 7 months is nothing to sniff at, in my opinion. This is looking like a decent scenario! Which makes me think I must have screwed something up somewhere! If I am … in the ballpark of accurate, then perhaps we shouldn’t even put the $2.5K from the bonus towards the debt this month - I could stuff it back into savings and transfer over a 16k balance to the 0% card instead of 13ishk and reap even better interest benefits.

This is definitely something to mull over. I’d welcome any thoughts and comments.

Look at me, I’m a blog-posting poster person. Two in one day!

So, when I was persuing the whole “I don’t wanna pay interest!” thing, another idea kind of poked it’s way into my mind that I shoved onto the back burner, at least until all the balance shuffling has stopped. I brought it up my husband, who agreed to do it, and then I immediately changed my mind and said we shouldn’t do it. I am nothing if not fickle. So here I am, writing it all out to you people, because you know, the internet always gives good advice!

RL (who comments here now and then, hi RL!) sent in her debt situation to Free Money Finance, who posted it on the blog and asked his readers for suggestions. There were a lot of suggestions- A LOT! It’s kind of interesting to see how many different possible scenarios there are for a situation! It was one of the many suggestions for her that has been tinkering around in my noggin. (I posted my thoughts over there too, just FYI.)

Here is the specific comment that has been “festering“, but so you don’t have to clicking around, the jist of it is, put the debt snowball into a high interest savings account while only paying the minimums on the (0%) cards. So the cards are staying current, but the balances are not going down drastically. Instead, the money that WOULD be going to the cards is sitting and earning interest month after month, and then whisked out before the 0% rate expires on the card and is used to pay it off.

In theory, it seems like a good plan. If debt A, B & C is at 0% interest, why not take the money you would be paying on them and earn 4% (although our etrade is now down to 3.5%, grr) and then lump sum it at the end of the 0% period?

Now, first off… I have only a very general idea of how savings interest is calculated. I understand the basics of daily compound interest and the whole average daily balance business, but I am not sure if my simple understanding really allows me to work through the numbers in an accurate fashion.

Secondly, the payoff dates we’re talking here is not far away. $16k will be due in Oct, and it’s not like we have 16k just sitting around now, that could earn interest the entire time.

And third, there is the feeling you get when you see that balance go down down down each month. This is outside of the numbers and not really quantifiable, it just feels AWESOME. The equation I would have to work in my head is whether X amount in interest earned is really worth giving up that feeling of watching the debt go down. I am pretty geeky with my spreadsheets and looking to cut out paying interest finance charges and getting the numbers to work in the best possible manner… but I’m not sure I’m geeky enough to give up that “YES!” feeling when I make a payment. Especially if we’re talking piddly numbers here.

But you never know until you work the numbers, so, I’m going to have a go at it, and lordie lordie help me because I know this will probably be screwed up big-time!

Tomorrow: the number crunching results.

We recently sat down and looked at all the interest we’re paying on credit card debt and tried to figure out how we could cut it down.

First, we called the 2 cards that have an interest rate (the 3rd of our cards is already at 0%) to see if they could lower the rate. They both would not - although, both pointed out that the rate for this month would be lower, since the prime rate had dropped. They were correct, each fell a bit, so that the 2 cards are at 11% and 10%, but we still weren’t happy with this.

So I looked around for any 0% balance transfer offers, found one for discover, and applied. We were approved, and the $6.5 balance on our citi amex (previously at 11%) has now been moved over to this new discover card. The discover card 0% rate is good until next april. Now with the citi amex card balance at 0, we can move our $16k usaa mc balance over to citi amex, using their 0% balance transfer offer which will be good until this October.

A couple of thoughts about all this swapping around.

First off, I realize that some people are not keen on the 0% balance swapping. That’s fine, stick with your beliefs, whatever you feel is right. I don’t like paying interest, period. If I can find a way to NOT pay interest, I’m going to use it! Now, having said that, it is true that in the past, we have transfered a balance over to a new 0% card, and then run up the balance on the old card. Not good. THIS is the practice that one should not be keen on - with good reason. It got us into this mess! We are on a plan now, and there will be no more debt racking up!

Next: Credit cards are tricksy. They like to play favorites with the balances. Take the citi amex. We had a balance of 6.5k on there at about 11%, with a credit limit of $20k. They have offered us additional 0% balance transfers. Sounds great, right? that’s 14k of unused credit we could be using at 0%. Perfect!

Not so fast! If we had transferred a balance while we had a balance NOT at 0% (the $6.5k was at around 11%) — then every payment we sent in would automatically go toward the 0% balance, and NONE toward the 11% balance. That would mean that the $6.5k balance at 11% would NOT GET PAID DOWN AT ALL, until the 14k at 0% balance was GONE. That would be a lot of months, with a LOT of interest each month, which is the entire reason we’re doing all this swapperoo-ing — to AVOID INTEREST. No thank you, Citibank, get another shmuck to fall for it.

So, we are now currently WAITING. The $6.5k balance has been transferred, and I’ve even sent in about $60 so that the balance on the card is a CREDIT of around $60 (I’m anticipating the finance charge). I am waiting until after the next statement to instigate the next balance transfer, just to make SURE that there will be NO BALANCE that may incur finance charges during the time we have a 0% balance as well. In the meantime, I’ve switched our main debt snowball payments from the $6.5k balance on the citi amex (that is now on the discover card) to the $16k balance on the usaa mc, which will be moving over to the citi amex. Pay down the one with the interest charges first, is my philosophy.

Finally: the $16K balance will only have a 0% interest rate until OCTOBER. That is REALLY pushing it. Hopefully we can get that paid down before it reverts back to an interest rate, but even if we don’t quite make it, we will still have saved a bundle on interest. It seems like an awful lot to pay off by October, until we do a few calculations.

Some artillery in our arsenal:

• one month (i think it’s May) we’ll have 3 paychecks from my husband instead of the usual 2, he gets paid bi-weekly
• we’re expecting $1k back from our state taxes, and
• of course can we all say together, TAX STIMULUS! That’s another $1600 that will be going toward debt

So along with our usual debt snowball, we’ll have an additional $4400 going to debt between now and October (and that’s not counting the $2.5K from the bonus that’s heading over to debt this month!) It may be crazy, but my goal is to get that 16k GONE by october! Let’s run some numbers to see if it’s doable:

Seven months between March and October to pay off $9100:

$9100 / 7 months = $1300 a month.

That is doable, baby. Very doable. We may have to crank it up a notch, but we can do it!

So the moral to this post is: Credit card companies are tricksy, we must watches them, yes we must!!

It has been a busy few weeks with birthdays and work and car stuff, but I have not forgotten about the little 99kby2001 blog in blog-land. I feel as if I’ve left a couple things hanging that I should probably finish up.

Our power bill came in at $350. $100 lower, but still not fabulous. It is not as high on my radar now, but I think we may call our power company and have someone come do an energy audit. I wonder if our (faux wood 2″ slatted) blinds are not as good at holding heat in/out as I think they are. I am happy that it wasn’t another $450 bill though. Very happy.

We received our escrow refund check, and promptly replaced the clutch in my SUV. It was in dire need. It was even starting to STINK. My husband drove it one weekend on an errand that needed a bigger car this his sportymobile, and the first words out of his mouth were, “We’re replacing that clutch MONDAY.” It’s amusing to think that at the beginning of this year, I might be able to wait until the end of summer to have this done. My husband’s car is getting new tires this weekend. Nice to get these things out of the way with “earmarked” money.

The april budget. We tweaked and twokked and twakked and it is generally working now. Part of the problem is that when I enter in future paychecks for estimating purposes, I always enter them low. If I usually am paid 1,792, I will just enter 1700. Multiply that by 4 paychecks, and the “estimate” is off by a decent chunk of change.

Our taxes are done. Luckily not the $5k tax bill I was dreading, but we do owe $3600. We will be getting $1,000 back from our state, which will be nice (and be directed straight to debt, when it comes in!) To have our taxes prepared for us, it cost us $360. I am a little uncertain it was worth it, but my husband has pointed out that it would have taken me HOURS and HOURS to do it myself. We have a freelance business and a partnership to figure in. Also, our last year’s return was lost, the hard drive it was on crashed, and we had to get copies of our tax transcripts to recreate those, which probably inflated the preparer’s cost somewhat. Hopefully next year it won’t be that much. All in all, especially with the missing returns from last year, it really was worth $360 to just not worry about it! AT ALL!

So, with that computed, we are free to deal with the bonus my husbad received at the beginning of this month. As you recall, we were just letting it sit until the taxes had been done, as we were unsure of what we would owe.

So, on to the bonus. First of all, for some reason I had it in my mind that it would be around $12k. That wasn’t even what we got last year (~$10K), so I got a little nutty in the head there, overestimating.

Second of all, it was lower this year. It is determined partly by employee performance, and partly by company performance, and the company didn’t perform as outstandingly as it did last year (like, last year it met it’s goals by 120%, and this year only 110% or something crazy like that.) So the total bonus amount was about $9k.

So where does it all go?

• $2K of that will stay in our etrade savings account as an emergency fund.
• ~$4k of that goes to tax and tax prep ($360),
• $500 was “blow” money (already spent, and consequently, LOWER than the original $1k we had planned, yay us!), which leaves
• ~$2.5K for debt.

So, I am currently moving money around, waiting for it to clear, and then I’ll send off the tax returns and pay a big chunk on our debt. That will feel GOOD.

I have more to share, but I think I’ll wait and post it tomorrow. So tune in tomorrow for how we are going to try to get out of paying interest!

My husband and I both work full time salaried jobs, which means there’s no variations in our income to worry about.

Entering in our april paychecks into YNAB and doing a quick runthrough for april, entering categories willy nilly, I came up alarmingly in the negative. For those who do not know how YNAB works, you enter in your income, and it becomes the “available” balance with which to budget. Then you enter in dollar amounts in your budget categories, and as you do so, it subtracts those amounts from the available balance. You continue to enter until your available balance is down to 0.

When I was done entering budgeted category amounts, the available balance was around -$1000. NOT GOOD.

Now, I had been fairly generous in places, so I did a quick re-run through and try to hack off some of the excess. Good, but I only managed to get it down to about -400.

The biggest culprits:

• Mortgage payment: we have a larger payment than usual on our mortgage. We refinanced in february, and instead of having us prepay the interest in our closing costs, they tack that on to the first payment. It’s about $500 more than it will be in May.
• Savings goals: There are several things we’re saving for with monthly budgeted amounts, even though they won’t be paid/used until later.
  • car tax: We have $70 going into a car tax category for a estimated $700 bill that will be due in october.
  • tuition: my husband is completing his bachelor’s degree at night, taking 1-2 classes a semester. His employer pays for a good bit of it, but as he starts taking more general electives, they will cover less of those costs. We have $375 going to tuition each month.
  • christmas: we know it’s coming! We’re putting $110 toward our christmas category so we’ll have a tidy sum at the end of the year for all the festivities.
• Debt Reduction: When we started getting serious about budgeting, we decided we could throw $1k/month at our debt.

Please understand: I’m not saying I want to cut back on our savings or debt reduction. AND I’m not saying that the rest of the budget couldn’t use a little trimming. I just want to be sure to recognize (to myself & my husband, at least) that these are not insignificant portions of our budget. Tuition, Savings, and Debt reduction add up to $1555. Tag that with the addition $500 bucks going toward the mortgage payment, and you’ve got over $2k. Yeouch.

I’m mostly thinking about our debt number. When we decided to put $1k toward debt a month, I HAD NOT YET figured out what we should be saving for tuition costs, or other yearly expenses. Could it be that we were too hasty in picking this amount? I hope not, because I WANT TO PAY OFF THIS DEBT!! Unfortunately for our debt, that is the category that it is the easiest to lower down.

We have a busy rest of the week in front of us, as well as a busy weekend planned, but maybe Sunday night, Husband and I can settle in and take a look at April and see if we can figure something out.

JUST THE CREDIT CARDS, PLEASE

At the beginning of February, we had $31,511 in credit card debt.

In February:

we paid $1,267 on our cards,
$139 was charged in finance charges
for a total of $1,084 debt paydown.

Our new credit card debt total is $30,428.

THE ENTIRE PICTURE

We are now at a total of $96.4K.

I used to schedule the bills carefully according to when we got paid. I also set up automatic transfers between our two checking accounts when we were paid to make sure mortgage & daycare tuition payments were ready and waiting when the first of the month came. The problem with this method was if we started to run short of money, I could always transfer some of it back (and often did).

The two debts that are currently scheduled to be paid off last (car loan & home eq) in our 3 year plan, are through our credit union, which we don’t use for our every day checking. So, we have the exact amount of those 2 payments direct deposited into our credit union account, and the payments are automatically taken out when they are due. Everything with those two loans are completely automatic and seperate from our daily banking, which is very nice. Even though these last two debts are somewhat more “legitimate” debts, we are still going to get those suckers gone. (Notice I only say “somewhat more.” I don’t like that debt, and I don’t want that debt, and we don’t plan on ever incurring that kind of debt again. However, in the level of “evilness,” in my mind, those two are less evil than the general credit card debt.)

I used quicken and would enter future transactions (bills as well as paychecks) so that I could see how the next couple weeks would pan out. I would notify my husband if it looked like we would need to tighten things up. However, inevitably, at some point during the month, I would say, “We’re out of money, better use the credit card until my paycheck hits on Thursday.”

It would (almost, but not really) be better if there were some big ticket tangible items we could point to and say, “Look, we have $30k in credit card debt because of X, Y & Z,” but there really isn’t. Our car debt is obvious - my husband is driving that debt around every day. Our home equity loan paid off some credit card debt at the time, as well as finished part of our basement. Groceries, eating out, clothes the kids didn’t really need, and other small items make up the bulk of it. The rest, yes, probably some computer purchases and vacation spending could be found on there. Not that we haven’t purchased some whiz-bang gadgets, but we probably bought them with money from our checking, and then ran out of money early, and would “live” on our credit cards until we caught up.

I guess really, it’s po-taye-to, po-tah-to, because it all added up to the same mess we’re in now.

So there’s the “before” our little “aha” moment. What have we changed?

Lawncare:

Last summer, we had someone mow our lawn for $20 each time. I was growing increasingly frustrated as it seemed to me they mowed way too often, and when they mowed twice in November (TWICE! IN NOVEMBER!) I finally moved “cancel lawn guy” from the bottom of my todo list to the tippy top and got it canceled. We’ll be mowing our own lawn this summer, and saving ~$80/month.

House Cleaning:

We had a house cleaning service come every 2 weeks, and let me tell you, this is a big sacrifice. With both of us working and 2 small children, I’d rather pay someone to scrub our toilets and oven then to spend the few hours we have together as a family cleaning. But we could not afford it, and so we canceled the service. We will be having them come in once or twice over the next few years, especially when we do any entertaining, but it will be budgeted for accordingly. We are cleaning our own house and saving ~$250 a month.

Eating Out:

My husband and I both work, and both used to eat out at lunch. He has always been much better in this regard, bringing in leftovers when he could and eating out only about 3 days per week. I was not nearly so attentive. I, not only bought lunch every day, I usually bought my breakfast on the way to work as well. My eating TWO MEALS out of the house a day cost us probably $12-13 a day. I was spending $230 a month on eating out. Add in the estimated expense of my husband’s eating out (3 days x $8 X 4 weeks) and our eating out was costing us $326/month.

Now, we both bring in our lunches. And if we forget, or want to go out with our co-workers in a group lunch, then it comes out of our own individual “fun money” budgeted amounts. So if I blow $10 on lunch that week, that’s less fun money I can use for the rest of the month. Ditto for my husband. It’s very motivating.

Menu Planning:

BEFORE: It’s the end of the day, I’ve just gotten home from work and my husband and the kids also just rolled in the door. “What’s for dinner?” he asks me. I stare at him blankly, and just shrug my shoulders. “Um… PBJs for the kids maybe?” I might say. “What about for us?” I have no answer. We’re both too tired to try to think about what to make for our sustenance.

This sort of scene no longer happens. Every Saturday we sit down and plan out the week’s menus. We decide who will be making it, what day. We scan through the fridge and pantry and determine what we need to purchase. Sometime over the weekend, we go shopping and get everything on our list. Now, when we come home, we know what we’re having, who’s making it, and we know we have everything we need to make it. We plan big meals for Sunday so we can take in the leftovers. We no longer have “kid dinners” and then eat our dinner later after they are in bed. We sit down and have a family dinner every night.

I’m not saying that we don’t still have surprises where we have to scrap what was planned for something else, but we are planning in advance and our grocery bill is pretty low! No longer are there trips to Super Target where I spend $200 on groceries, clothes, kitchen gadgets, and a miscelaneous toy for the kids and it all gets lumped into the “Groceries” category. We seperate everything out now, and toilet paper and kitty litter goes into “toiletries” and not into “groceries.” Clothes don’t get purchased unless something specific is needed and is budgeted for accordingly.

It’s hard to say how much we’re saving in our menu planning, but I think it’s got to be at least $500/month. Our grocery bill was $330 last month, with about $80 going to toiletries and household (for some reason, I like to keep household seperate. toiletries = handsoap, toilet paper, household = air filters). Not too bad!

All this is adding up. We never use our credit card anymore. Mine is still in my wallet, but I never touch it. I’m thinking about what we have coming up that will need to get paid for and planning ahead for it. All payments toward credit card debt would get eaten up with charges in the past, but now with our budget, goals and debt reduction plan in hand, we can make some real progress.

We had our own “wake up” moment at the beginning of the year and these things would have happened regardless, but I must say, YNAB has been an invaluable tool in really getting our budgeting goals accomplished.

ps- still waiting for our last credit card statement to post. BLARGH.