LOC as bank account?
First, apologies if this has been asked before.
I took out a LOC to fund a home renovation. No big deal and we are paying it off. However, I have (as a long time user of YNAB), many buckets with a significant amount of accrued money (emergency funds, college savings, new car savings, april tax payment etc) for costs that are not due any time soon. They are just sitting in my savings account not doing much of anything, while the LOC is accruing interest. It seems to me to make sense to dump most of these savings into the LOC, and then to withdraw them again when needed.
Heres my example (#s are random):
LOC is 50K. I have 10K sitting in "college costs" and 5K in "April tax payment". These are known expenses I have been budgeting for. I also am budgeting a regular monthly payment to the LOC. I would like to take the 15K in my savings and pay down the LOC to 35K , so the interest accruing is less, knowing that in 6m or a year I will need to take that money out again. How do I do that?
Here's my conundrum. If the LOC is listed as a credit card, as you suggest, then I have to essentially "clear" each of these buckets and I will lose track of what I have saved. Is it ok to treat the LOC like another bank account that carries a negative balance? That way I know there is xxx dollars allocated to taxes, for example. I understand that the LOC IS debt, but it is a managed debt that will be paid over time and which I have access to if funds are needed. I am loathe to lose track of the monies I have been saving for college fees etc. It seems much less "clean" to randomly take from the LOC when needed rather than knowing how much in each "bucket"
Thanks for any advice.
Hi Mommadoc1 !
If you add the LOC as a Checking account, that negative amount will affect your budget. While YNAB recognizes that LOCs and Credit Cards can be paid back over time, it sees Checking and Savings accounts as cash - if you add a Checking account with a -$50k balance, your To Be Budgeted will be -$50k.
It might be easier to use the Notes section for those different savings categories (College Costs, April Tax Payment, etc) to indicate how much you had saved. As you save more and send more to the LOC account, you could update the balance listed in the Notes section.Reply