I have this handy line in my goals table that tells me how far on or off track I am from hitting my 5 year goal. For quite a while, I’ve been behind. I’ve been wondering for months what I can do to bring it back in balance, if not get ahead. The only thoughts that really came to mind was to hope for some random windfall (bonus at work, hit the lottery, the usual) to throw at my debt and get those numbers lined up. And then it hit me the other day – I’m doing it wrong. Or backwards, to be more specific.
The bottom line is the one we're looking at. Do note that I don't really have $35 in an emergency fund, it's actually zero, that's just there to prevent errors...
Backwards, you say? Well, since this is a time based goal, as well as a necessary one, my debt repayment should be the primary, rigid category in my budget, not the flexible one. All this time, I’ve kept all my spending the same (increased it, even) and adjusted my debt repayment based on “what’s left.” This is the completely, utterly wrong way to go about it. It would, however, be the appropriate method for saving for “want” goals, such as when I was saving up to build my computer. Instead, my discretionary spending should be the variable category, adjusting as need be to still meet my debt goals.
Obviously, there must be limits. I can’t just plan to spend no more money this month and expect it to work, because that would just be setting myself up for failure, which is the result of all unreasonable expectations. Right now, the difference between those two numbers in that table is $80.06. However, it’s not even the middle of the month and that table automagically updates itself every day. The real benchmark is where that number is at the end of the month, before I start making all my payments. If I pretend that today is May 31st, it goes up to $146.66. However, since we’ll then be halfway through the year, I’m pretty sure I’d have to double that amount in debt payments to bring myself back up to par by the end of the year. $293.32 in extra debt payments every month is a pretty tough goal, considering my discretionary spending budget right now each month is $325.
Maybe I’ve been a very bad boy, and haven’t noticed. If anything, I wish I would have realized this much sooner, but better now than later. Without working out some sort of crazy math, I think I’m going to just shoot for $50 or $100 extra every month for now, and see how that number changes. I also need to keep track of where it’s at at the end of every month, to see what sort of progress I’m making in getting back on track. Another thing I’ll be doing is changing the setting in YNAB so that when I blow my miscellaneous spending budget, it automatically reduces my budget for the next month, rather than letting me get away with murder.
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jake, this is one of the best posts you’ve written IMO. no need for shame. you’ve gotten so wise in the last few years! think what a mess you’d have if you had waited until you were older to work on these issues. keep up the good work! we’re all proud of the progress you’ve made.
This is a very informative piece that you wrote. I’m on the path of correcting my college sins and hopefully I can be on the track that you are on.
I definitely agree: better now than later. As debt repayment is your number one priority, so should it be when it comes to your budget. Everything else will have to fall where it may until you can get through it. Have you ever discovered what is the maximum amount you could contribute to your debt (meaning, how much would be just enough to get by, and throw the rest of your income at debt?)