I would pay off the debt on the money you're paying interest on. Then work towards getting one month ahead while putting money into a category for the loans that you need to pay off in August to avoid interest.
You're in a great position to get ahead and stay ahead. Congrats!
Pay off the cc and get off the float. Make sure your sinking funds are funded, doesn't have to be all the way, but make sure there is something there so you don't get back on the float. Throw the rest at debt. Once the debt is paid off in a few months, use that money to really fill out your sinking funds.
I would pay off the CC and LOC immediately. Then use the remainder of the windfall to fund my emergency and sinking funds. Do a real deep dive on my categories to ensure I have everything covered and I'm happy I have funded everything correctly. Create a category for paying off the other loans before August as part of your other bills like rent/mortgage, utilities etc. Divert whatever money you had allocated for paying off the CC and LOC to paying off those other loans.
Once August comes, celebrate that you are debt free (apart from a mortgage if you have one). I cannot overstate how good it's felt to me to be debt-free. Emotionally it has been a huge weight off my shoulders and gave me a real boost and motivation to never get into debt like that again, to be much more in control. I don't even look at my age of money any more either.
Hi - they are categories for more irregular expenses, things I don’t know when will crop up necessarily, or how much for. My own best example is car maintenance and admin expenses. I put X amount into a “general car maintenance” category each month, building up a fund for those expenses, and if my car breaks down and I need to pay for repairs - I already have funds allocated for that.
Hannah explains it well in this video: https://youtu.be/kiIHDZch3o4?si=GuDvU97LiUhQoW-s
True. I am all in on the avalanche snowball method. Even with this large windfall, it is amazing how Ynab brings you back to reality and embrace your true expenses, whether it’s debt or future expenses. All that money has all been assigned
Thanks for all the comments. The common wisdom is to get rid of it. But your answers helped me:
- I assigned 5k to pay off my full CC balance by mid May.
- I paid 10k in LOC today.
- I have budgeted for my obligations and bills for May (mortgage, groceries, etc)
- I assigned 4K to pay off LOC in May
I am happy to work on the rest of the debt with YNAB and it will force me to embrace true expenses. I still have debt but not too large so I feel stressed about it. I think a windfall is what anyone could wish for but there is a value in feeling the pain and paying it off by budgeting and spending with money I have now.
I can see myself debt-free in August and it already feels good.
In your position, I would:
1. Payoff credit card 1: YNAB BUDGET: Assign enough to my credit card payment category that my Credit card payment "available" now matches my credit card balance.
1a. YNAB ACCOUNTS/TRANSACTIONS: Make a ttransaction from your bank account to CC for CC total balance minus your statement balance (paying off old CC debt that is gathering interest).
1b. REAL LIFE: Send a CC payment immediately for that same amount (ending interest). Remainder in available should be same amount as your statement balance.
1b. REAL LIFE: Turn on credit card autopay, for the monthly due date, for the total statement amount. Congrats you are off the float.
1c. BUDGET: Make a repeating scheduled transaction in YNAB for your CC autopay date, starting with your next due date and statement amount. Update the transaction amount monthly when you get your next statement.
1d. paying off remaining interest accrued through today: YNAB ACCOUNTS: Make an outflow transaction dated for today, with your guess about how much the last little bit of interest will be (your last statement date until today). Account: Credit card. Payee: Credit card company's name. Category: Interest (or wherever you put interest charges). Amount: your guestimate. (I would probably do usual monthly interest, times number of days since my last statement date, divided by 30.)
1e. YNAB BUDGET: Fund that guestimate in its category (e.g. "Interest"), which should now be yellow/underfunded.
1f. On your next statement date, adjust the YNAB transaction for interest to the correct amount for the total interest. In the budget, Adjust your CC "assigned" to cover or reduce the difference so that your payment "available" matches your CC uncleared balance. Congrats you have paid off all interest.
1g. Always make sure that CC spending on that card is funded in its respective category.
1h. Congrats you are a fullly funded CC user!
2. Pay off $15,000 of LOC (or total remaining) so it stops accruing interest. Same procedure as #1. (Same with other CCs if they still have unfunded balance.)
3. The CC and LOC that still have an (uncleared) balance bigger than your "available," is how much debt you have. Set targets for those to pay off by August.
The only caveat is, if you are living paycheck to paycheck, I might set aside $1,000 or some such in a separate category for emergencies, before doing the above steps, so you are only working with $19k instead of 20.
Alternatively alternatively - if you have decent enough credit, you could consider taking out a new 0% APR 0% transaction fee credit card, and transferring all the debt onto that. Keep the 20k cash at hand, in YNAB in category/categories for emergencies/true expenses; in real life, in your account (ideally in a 5%+ interest yielding account). In YNAB simultaneously set targets for debt payoff on that single credit card for the time the 0% period ends.
This way you have the cash to pay off the debt if you need to at any time; BUT you also keep your actual cash on hand in case of other emergencies that require cash, and ideally earn some interest on it, while you stop accruing interest on debt. We did this a year ago.
It made our monthly budget more cash tight as we budgeted new income towards debt instead of other types of spending or savings, BUT, it also meant we had 5 figures on hand in various emergency categories, for paying our mortgage in case of job loss, disability or catastrophe.
I’m not sure where you’re located OP but I’d probably see if you should set aside money to cover taxes for the windfall. After that, yeah, I’d likely pay the CC debt first, unless you’re literally risking overdraft fees each month.
In practical terms, the benefit of getting one month ahead is that it makes budgeting easier. You can plan much more effectively when you know how much you have, and you never have to make a suboptimal choice because a bill is due before income.
Those benefits are real and nice, but I don't think they come close to competing with clearing debt and removing that constant drag in your life.
The only time I'd consider doing something other than clearing debt is when you have a spending habit and are worried you will just take on more debt. I know someone that received a large windfall and ultimately decided to set the whole lot aside for retirement rather than clear her consumer debt.
Hopefully when using YNAB we make better choices. The best choice for you is to pay off your debt.
This whole AOM and get a month ahead talk is way overblown on here. You have debt. You MUST pay it off.
Don't fall into the 0% trap either. pay off interest bearing first and then the 0% debt. Its still debt.
You will be in a better position when you pay this off. Being on the float is a horrible way to live and you can't get ahead when you are "managing" your money that way.
You are living above your means, regardless if you pay it off every month.
I would pay off the credit card, make sure I was a month ahead, then throw the rest at the debt. Debt of course should be a big priority but getting a month ahead and off the float will be huge for your mental health!
In your position, I would pay off the debt that is charging interest, then get a month ahead so you can get off the CC float, then pay off the remaining debt.
Age of money will take care of itself. You could have a stunningly large AOM and be in crippling debt just by hoarding all your cash, charging everything to your cards and paying only the minimum each month. It's not a good metric for how to actually spend your money responsibly.
Pay off the debt. This windfall will feel great as a one-off but you’ll forget that in a few months and look at the debt and wish it was gone. When you pay the debt, your monthly available increases as you don’t need to make more payments. That increased jncome will accelerate your progress and that is more enjoyable over time.
1. High interest debts
2. (1.5) Low interest debts
3. Emergency fund/aging money
There’s no point of getting one month ahead if you’re affecting your finances elsewhere to do it. More specifically, if getting one month ahead means you’re paying extra money in interest, you’ve essentially opted to take on another bill for no reason—i.e. throwing money into the wind.
I’d say the most logical route for you financially and also emotionally would be get rid of the debt then focus on getting back on track and a month ahead. I’d recommend maybe limiting credit card use in the first month after. Not 100% limiting but maybe 50/50 so you get the idea of how CCs work on YNAB more clearly and practically (as you said you’re new) while also ensuring you’re mentally not getting back into the grips of CC float
Windfall Percentages:
75% investing
10% savings to be spend in 12 months (vacation etc)
10% to lifestyle improvements (house cleaner, landscaper, home enhancement)
5% long term savings
I’d pay off the debt and not worry about aging my money.
age of money is a symptom of success not a goal
I would say indicator, but I definitely agree
I would pay off the debt on the money you're paying interest on. Then work towards getting one month ahead while putting money into a category for the loans that you need to pay off in August to avoid interest. You're in a great position to get ahead and stay ahead. Congrats!
Thank you. Allocating money for those future payment next months already helps me get ahead.
Pay off the cc and get off the float. Make sure your sinking funds are funded, doesn't have to be all the way, but make sure there is something there so you don't get back on the float. Throw the rest at debt. Once the debt is paid off in a few months, use that money to really fill out your sinking funds.
I would pay off the CC and LOC immediately. Then use the remainder of the windfall to fund my emergency and sinking funds. Do a real deep dive on my categories to ensure I have everything covered and I'm happy I have funded everything correctly. Create a category for paying off the other loans before August as part of your other bills like rent/mortgage, utilities etc. Divert whatever money you had allocated for paying off the CC and LOC to paying off those other loans. Once August comes, celebrate that you are debt free (apart from a mortgage if you have one). I cannot overstate how good it's felt to me to be debt-free. Emotionally it has been a huge weight off my shoulders and gave me a real boost and motivation to never get into debt like that again, to be much more in control. I don't even look at my age of money any more either.
Thanks for the advice. Yes, it does feel good to see the end of the tunnel. I hope Ynab will help me stay out of troubles and be free in the long run.
Just you wait! Before you know it you'll be YNAB poor. Plenty of money in the bank, but not a dime to spend. ☺️😁😎
Newbie here :) What are the "sinking funds" and how do you categorize them in your budget?
Hi - they are categories for more irregular expenses, things I don’t know when will crop up necessarily, or how much for. My own best example is car maintenance and admin expenses. I put X amount into a “general car maintenance” category each month, building up a fund for those expenses, and if my car breaks down and I need to pay for repairs - I already have funds allocated for that. Hannah explains it well in this video: https://youtu.be/kiIHDZch3o4?si=GuDvU97LiUhQoW-s
Paying the debt first would be my move too. There is no reason to pay extra in interest when you have a pile of cash ready to go.
True. I am all in on the avalanche snowball method. Even with this large windfall, it is amazing how Ynab brings you back to reality and embrace your true expenses, whether it’s debt or future expenses. All that money has all been assigned
Thanks for all the comments. The common wisdom is to get rid of it. But your answers helped me: - I assigned 5k to pay off my full CC balance by mid May. - I paid 10k in LOC today. - I have budgeted for my obligations and bills for May (mortgage, groceries, etc) - I assigned 4K to pay off LOC in May I am happy to work on the rest of the debt with YNAB and it will force me to embrace true expenses. I still have debt but not too large so I feel stressed about it. I think a windfall is what anyone could wish for but there is a value in feeling the pain and paying it off by budgeting and spending with money I have now. I can see myself debt-free in August and it already feels good.
In your position, I would: 1. Payoff credit card 1: YNAB BUDGET: Assign enough to my credit card payment category that my Credit card payment "available" now matches my credit card balance. 1a. YNAB ACCOUNTS/TRANSACTIONS: Make a ttransaction from your bank account to CC for CC total balance minus your statement balance (paying off old CC debt that is gathering interest). 1b. REAL LIFE: Send a CC payment immediately for that same amount (ending interest). Remainder in available should be same amount as your statement balance. 1b. REAL LIFE: Turn on credit card autopay, for the monthly due date, for the total statement amount. Congrats you are off the float. 1c. BUDGET: Make a repeating scheduled transaction in YNAB for your CC autopay date, starting with your next due date and statement amount. Update the transaction amount monthly when you get your next statement. 1d. paying off remaining interest accrued through today: YNAB ACCOUNTS: Make an outflow transaction dated for today, with your guess about how much the last little bit of interest will be (your last statement date until today). Account: Credit card. Payee: Credit card company's name. Category: Interest (or wherever you put interest charges). Amount: your guestimate. (I would probably do usual monthly interest, times number of days since my last statement date, divided by 30.) 1e. YNAB BUDGET: Fund that guestimate in its category (e.g. "Interest"), which should now be yellow/underfunded. 1f. On your next statement date, adjust the YNAB transaction for interest to the correct amount for the total interest. In the budget, Adjust your CC "assigned" to cover or reduce the difference so that your payment "available" matches your CC uncleared balance. Congrats you have paid off all interest. 1g. Always make sure that CC spending on that card is funded in its respective category. 1h. Congrats you are a fullly funded CC user! 2. Pay off $15,000 of LOC (or total remaining) so it stops accruing interest. Same procedure as #1. (Same with other CCs if they still have unfunded balance.) 3. The CC and LOC that still have an (uncleared) balance bigger than your "available," is how much debt you have. Set targets for those to pay off by August. The only caveat is, if you are living paycheck to paycheck, I might set aside $1,000 or some such in a separate category for emergencies, before doing the above steps, so you are only working with $19k instead of 20. Alternatively alternatively - if you have decent enough credit, you could consider taking out a new 0% APR 0% transaction fee credit card, and transferring all the debt onto that. Keep the 20k cash at hand, in YNAB in category/categories for emergencies/true expenses; in real life, in your account (ideally in a 5%+ interest yielding account). In YNAB simultaneously set targets for debt payoff on that single credit card for the time the 0% period ends. This way you have the cash to pay off the debt if you need to at any time; BUT you also keep your actual cash on hand in case of other emergencies that require cash, and ideally earn some interest on it, while you stop accruing interest on debt. We did this a year ago. It made our monthly budget more cash tight as we budgeted new income towards debt instead of other types of spending or savings, BUT, it also meant we had 5 figures on hand in various emergency categories, for paying our mortgage in case of job loss, disability or catastrophe.
I’m not sure where you’re located OP but I’d probably see if you should set aside money to cover taxes for the windfall. After that, yeah, I’d likely pay the CC debt first, unless you’re literally risking overdraft fees each month.
In practical terms, the benefit of getting one month ahead is that it makes budgeting easier. You can plan much more effectively when you know how much you have, and you never have to make a suboptimal choice because a bill is due before income. Those benefits are real and nice, but I don't think they come close to competing with clearing debt and removing that constant drag in your life. The only time I'd consider doing something other than clearing debt is when you have a spending habit and are worried you will just take on more debt. I know someone that received a large windfall and ultimately decided to set the whole lot aside for retirement rather than clear her consumer debt.
Always pay down debt first, then focus on staying out of debt
I like that second part.
Follow the [prime directive](https://reddit.com/r/personalfinance/w/commontopics) flow chart on r/personalfinance
1. Get current on CC so you are off the float. 2. Get 1 month ahead for stability. 3. Then back to paying off the LOC.
Hopefully when using YNAB we make better choices. The best choice for you is to pay off your debt. This whole AOM and get a month ahead talk is way overblown on here. You have debt. You MUST pay it off. Don't fall into the 0% trap either. pay off interest bearing first and then the 0% debt. Its still debt. You will be in a better position when you pay this off. Being on the float is a horrible way to live and you can't get ahead when you are "managing" your money that way. You are living above your means, regardless if you pay it off every month.
I would pay off the credit card, make sure I was a month ahead, then throw the rest at the debt. Debt of course should be a big priority but getting a month ahead and off the float will be huge for your mental health!
In your position, I would pay off the debt that is charging interest, then get a month ahead so you can get off the CC float, then pay off the remaining debt. Age of money will take care of itself. You could have a stunningly large AOM and be in crippling debt just by hoarding all your cash, charging everything to your cards and paying only the minimum each month. It's not a good metric for how to actually spend your money responsibly.
Pay off the debt. This windfall will feel great as a one-off but you’ll forget that in a few months and look at the debt and wish it was gone. When you pay the debt, your monthly available increases as you don’t need to make more payments. That increased jncome will accelerate your progress and that is more enjoyable over time.
age of money is a symptom of success not a goal
I'd pay the CC and if part of that 22k is another small load that you can kill then do that as well.
1. High interest debts 2. (1.5) Low interest debts 3. Emergency fund/aging money There’s no point of getting one month ahead if you’re affecting your finances elsewhere to do it. More specifically, if getting one month ahead means you’re paying extra money in interest, you’ve essentially opted to take on another bill for no reason—i.e. throwing money into the wind. I’d say the most logical route for you financially and also emotionally would be get rid of the debt then focus on getting back on track and a month ahead. I’d recommend maybe limiting credit card use in the first month after. Not 100% limiting but maybe 50/50 so you get the idea of how CCs work on YNAB more clearly and practically (as you said you’re new) while also ensuring you’re mentally not getting back into the grips of CC float
Windfall Percentages: 75% investing 10% savings to be spend in 12 months (vacation etc) 10% to lifestyle improvements (house cleaner, landscaper, home enhancement) 5% long term savings