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Milestone – $10,000 Paid Off
A couple of clicks here, a couple of checks written there, spread it out over about a year and what have you got? Ten thousand dollars less debt, that’s what! Only $54,000 or so to go.
Okay, when you put it like that, it sounds a little less exciting. One could also say 16% but that doesn’t make for much of a milestone. What’s more important is how I got here. Over the past month and a half I’ve been working on rule #1 of the YNAB way – to stop living paycheck to paycheck. This meant moving to a monthly budget, which I wasn’t really accustomed to. I thought my old system was better for me, because I was hanging on to my money longer by waiting until the paycheck before (or right on) the due date to make a payment. I also tend to see others ponder greatly over what to do with triple-paycheck months, almost as much as I see folks decide what to do with their tax refund, and figured I was avoiding that conundrum by living paycheck to paycheck.
I’ve been seeing my budget in a whole new light now, but one problem I ran in to is the fact that most of my payments are right at the beginning or the end of the month. End of month due dates aren’t so much a problem, because I have all month to pay them, but it would be really difficult to build a one-month buffer when you’re making payments a few days before the end of the month so that they get there by their due date… at the beginning of next month.
The solution? Somehow I managed to get all of my bills paid ahead by two months. Or one month, depending on how you look at it. On average, the due dates are now 65 days away. Through the magic of spreadsheets, that works out to a total of $1,300 ahead, which is actually a pretty useless number because I’m going to keep those due dates that far away. The lone exception is Capital One, which I have no control over, and as such can’t pay ahead. I still can’t figure out where I got the money to do that, but knowing that I somehow had the cash to do so makes me a little more optimistic about everything.
And, to top it all off, I have now achieved rule #1 of the YNAB way. My buffer is fully funded, and I am officially no longer living paycheck to paycheck. I have $84.81 left to budget in March, solely from February’s income, and that not only includes random minuscule savings here and there, but also $140 (just a guesstimate) for a new back tire on the scooter. The scooter that I hope to get back out on the road this week.
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{ 9 comments… read them below or add one }
Could you explain “rule #1″ of YNAB? I’m so anxious to get out of the paycheck-to-paycheck cycle too! I was thinking I would need to save 1 months pay(or be 1 month ahead in bills) to finally consider us not paycheck-to-paycheck. Is this the same method?
Rule #1 is to stop living paycheck to paycheck – that’s it. The method used is building a buffer with your extra money (that you would otherwise use to pay down debt, or whatever) until it’s equal to one month’s expenses – not income. It’s also not the same as building an emergency fund, as you’re not moving it in to a different account, it typically stays in your checking account. Once you are completely living on last month’s income, your buffer is complete. For example, I don’t need to bring in any money in March to live through March, because I made enough in February. Whatever money I bring home in March will be used in April, rather than right after I get it.
Wow – congrats to you! That’s awesome that you’re out of the cycle. It sucks. I think it may take us close to year to finally NOT be paycheck to paycheck, but it’s the bed we made. And once we are out – we will NEVER go back!!
There’s actually a poll on the YNAB forums for how long it took people to build their buffers, and trust me, you’re not the only one. Good luck!
Congrats Jake!! Pretty cool Gravatar too! Are you planning on getting even further ahead with your paychecks or just sticking to being 2 months ahead?
Actually, if I were to keep getting ahead further, I wouldn’t be making any progress. There wouldn’t be much of anything left over for savings or snowballing, or my other debts in general.
You are awesome…It took us about 16 months to get fully buffered, with murphy & setbacks along the way. But, you will find that being buffered magnifies the power of the snowball – you can identify and isolate the additional income that isn’t going to be assigned to expenses the next month and get those sent off to the debts. Good on you and here’s to the next 16%!!
Congrats on reducing your debt by $10,000. Have you tried consolidating your debts under a lower interest rate? Or to pay off the remainder of your debt, you could arrange for a debt workout or extended repayment plan.
The most common arrangement between debtors & creditors is an extended payment plan (EPP). With the EPP, you would pay say a $1,000 debt that is due now in 5 equal instalment payments of $200 each. Other types of debt arrangement plans include settlements where the creditors have to lower the interest rate or totally eliminate it. Source: http://www.debtconsolidationblog.net These types of debt settlement plans are more difficult to work out and plan. An interesting feature of debt settlement plans is that the creditors sometimes settle for 50% of the debts owed, for example they will accept $500 to settle a $1,000 debt and call it even. In the below sections, we explore why creditors are willing to settle for less.
good job. debt sucks. keep paying it down.