Pay down credit cards or age money?

I've used YNAB off and on over the last 4 years or so, but I've never made it stick, especially when it comes to anything beyond just tracking spending. DH and I make a good living, but we have a lot of debt (mostly credit card and a personal loan, but also a small-ish student loan, and a mortgage) and we live totally paycheck to paycheck and don't have an emergency fund. I'm focusing on trying to pay down our debt, but I'm also wondering about aging our money.

For the past several months, I've been putting all of our extra funds towards paying down our debt and "buying" us some breathing room. In June, I turned in my leased Camry and am driving a 2002 Jeep Grand Cherokee that is fully paid (and that my husband is able to do maintenance on), so that saved us a nice amount of money each month. We are about two months from paying off one of our cards if I continue throwing all of our efforts towards it, before moving on to the other debts. (Yes, we're the type of people blog posts are written about!)

So, should I continue tackling those debts aggressively, which means continuing to live paycheck to paycheck, or should I back off a little bit and try to age our money, at least by one pay cycle (we get paid 2x monthly)?

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    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 2 yrs ago
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    Pay down your debt.

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  • If you are doing lots of timing bills to paychecks, have irregular income, or irregular pay periods, being a  month ahead (which is not the same as aging your money, no matter how much the support materials say so) will help you in the debt paydown because it will enable you to budget an entire month at a time which will almost undoubtedly allow you to find more money to pay down the debt.

    The two major factors to consider are how long the debt paydown will take (the longer it will take, the more benefit you'll get from being a month ahead first), and how much being paycheck to paycheck is straining your ability to see the big picture. If you'll be debt free in a year or so and you have regular paychecks and regular income, it's probably less important. If you're not getting out of debt for several years and/or you have income that is inconsistent, either in timing or amount, being a month ahead is probably the best place to be. 

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      • Stacey K.
      • staceychev
      • 2 yrs ago
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      WordTenor Can you explain the difference between being a month ahead and really aging your money? 

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      • Stacey K.
      • staceychev
      • 2 yrs ago
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      WordTenor Also,  just noticed your tagline. I had a dream last night that we went to see Hamilton, and my daughters dragged me out to the lobby halfway through Act II to look at souvenirs and we missed the ending! Thank goodness it was only a dream! 😂

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      • jenmas
      • jenmas
      • 2 yrs ago
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      Stacey K. Being a month ahead is an action you can actually take first and foremost whereas aging your money just kinda happens at you. What is means is that you do not need any of your September income in September and it is sufficient to fully fund October (true expenses, discretionary categories, savings goals, etc). Just because your AOM says 30 does not mean that you are in this position. So, I get 2 paychecks per month on 7th and 22nd. On the 22nd of Sept, I fully funded October. This was a huge weight off my shoulder when I was laid off in 2015. They told me at the beginning of Sept that if something didn't change in the company (ie win a new contract) during the month, I would be laid off effective Sept 30. Because I was a month ahead, I knew that October was going to be covered with my 2 September checks. Because of the pay schedule at that company I received a regular paycheck on Oct 10 to cover Sept 15-30 and that was used to cover half of November and my 2 weeks of leave payout covered the rest of November. So I didn't even have to touch my severance until December.

      Now, I was unemployed from October 1 until maybe mid-March when I started a consulting job. During that period my AOM climbed and climbed. It hit a high of 400. Now is a high AOM a "good" thing in that case? It wasn't telling me anything useful or actionable. It wasn't even telling me that I had lots of money saved. Or let's take another example. In 2018 I replaced my HVAC. Knowing that the system was getting really old, I had started saving for it in 2015 (yes even while unemployed). By 2018 I had the $8K saved up. After I paid the bill, my AOM dropped from 303 to 233. Should I have felt bad that my AOM took a hit? No, because I had done what I was supposed to - I knew there was a significant expense coming up so I saved for it and paid for it.

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      • Stacey K.
      • staceychev
      • 2 yrs ago
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      jenmas Thank you for this really thorough explanation!

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  • Since you can't seem to make it "stick", I'd suggest getting a month ahead first. This makes using YNAB much easier, which may be enough to make it permanent.

    Yes, this obviously has a price in some interest, but I suspect that will MORE than be made up for by continuing to use YNAB to guide spending decisions.

    Like 2
  • First of all, hopefully you're both finally serious about it. When you're in credit card debt, everything you purchase is on debt. Make sure you are using YNAB the way it is meant to be used rather than just as a spending tracker.

    Based on what you've said, my strategy would be to continue aggressively paying off the credit cards and personal loan. Once those are knocked out, then give yourself a little breathing room and start building a small EF fund and some buffer.

    Once you're in a good position, then you can continue to knock down the student loan and the mortgage (if that's a goal for both of you).

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      • Stacey K.
      • staceychev
      • 2 yrs ago
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      Superbone I keep coming back to this: "When you're in credit card debt, everything you purchase is on debt." That's really profound, and so different than how I've been thinking of it - which is of my credit cards as this corralled part of my finances. Thank you.

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