Furnace fund v debt
New to YNAB, about 3 months. Am really struggling with too many savings categories v debt. I end up spreading thin to meet them all, and not making real progress.
My furnace is starting to get iffy. Had a quote of $7k, by a company upselling me who I no longer trust. It needed cleaning, not replacing.
I have started a "furnace fund," because eventually it wont be bs. (Really, you are going to pull that on a mechanical engineer who works at the gas company?) At my current rate of contribution it will take 5 years, assuming that price is ball park.
For debt, I snowball. Pay off 1, then add that payment to the next. etc. I will have paid off the "next debt" in less than a year. Then there is the next one, but that will take longer.
So am realizing I am inclined to pay off debt above everything. I hates it. At the expense of things that will be needed, like the furnace fund.
Tips for getting over myself? How do accept that the furnace is actually important too when the debt is costing money?
It is human nature to want to do all the things and have them all done yesterday.
YNAB encourages embracing true expenses even before debt pay down. The philosophy being that funding true expenses reduces the likelihood you will have to take on future debt.
For this particular category-given the timeline-contributing small amounts may be sufficient for right now.
Scarcity helps you dial in your priorities. And having to make the decision where to budget available monthly tests those priorities regularly.
Ask yourself is paying down current debt faster more important than funding this true expense category?
I had to spend 10k on a new hvac and replacement ductwork throughout in Summer of 2018; going w/out AC in FL is not an option. I had to put it on credit; it has been so frustrating b/c I cannot ever seem to get ahead of being 10k in debt. It is nice not to have to worry about heating and cooling though. I would not do it until absolutely necessary. I spent a few hot days and nights coming to terms with my payout. That was rough. Good Luck, and hopefully you will find a reputable service; that also helps the medicine go down.
👋🛶 Me waving to you from a similar boat…
I’ve been struggling with this also: too many savings categories, too little extra money. Here are my Long-Term Savings categories:
- Auto Replacement (17 years old)
- Auto Repairs (see above)
- Home Repairs (A/C unit is 19 years old)
- $7k Medical Debt; it's on a 0%-intro rate credit card, which expires March 2021.
- Loss of Income
- Unpaid Days Off (no holiday or sick pay with my employer)
I asked myself which one of these was causing me the most stress: I have a stable job in a stable industry (so far), my elderly (17 yo) car is still chugging along (and I'm only 2 miles from work, so walking is an option), the A/C unit is working even with 110 degrees days already, and I haven't had to take any unpaid sick days this year. So the answer is the medical debt - I do not want to pay interest on it if I can avoid it. I've already paid off $10k between 2018/2019 of previous medical debt, so I should be proud of that. But having this last bit hanging over my head is what causes me the most sleepless nights. This is my only other debt except for my mortgage.
So I'm with you in; the debt is my biggest priority right now. I'm still saving for my true expenses, but these long-term items are on simmer for the time being and they'll get whatever "extra" I have no matter how small that amount is. I was able to throw my tax refund and COVID stimulus towards these, so that helped too.
(I should note that since the medical debt is on a 0% rate, I'm paying a little over the minimum, and stashing the rest in a Savings account to earn interest until I have to pay it off. So worst case is that I would pay interest on whatever the balance is at the end of the 0%-intro rate in March 2021 rather than the entire $7k.)
I've found that I am better able to sustain focus on my goals when I narrow down the list and pick one to focus on, then tackle the next, then the next, and so forth. That could mean setting interim goals, like save $3,000 toward a new car, then pay off the $7,000 debt, then save $2,000 more toward the new car, and so forth until I accomplish everything.
I also try to monitor my long-term progress on that goal and all the others, so that I can look at the full timeline graph and see how money diverted elsewhere (say, an unexpected medical bill) does not completely cancel out the progress I've been making.
This is one of the powerful psychological tools that Dave Ramsey does skillfully take advantage of in his baby steps. He has you focus on one thing at a time.
I agree wholeheartedly. When you find yourself in the black pit of despair, you struggle to find a workable solution. If setting out on a multi-month trek through the barren landscape of Mordor with only determination and faith to guide you, it helps to have a proven and endorsed step-by-step plan that has successfully worked for others. DR's steps are frequently cited but are certainly not the only map around. Another one that's very popular is the personal finance flow chart from the Reddit community, and it considers the minimum amount for retirement matching to be a non-debatable essential. Link to the US-specific flow chart: https://i.imgur.com/lSoUQr2.png
There are also variants of this flowchart for Australia, UK, Canada, EU, Ireland, and New Zealand, link to main page where you can find those alternatives is here: https://www.reddit.com/r/personalfinance/wiki/commontopics#wiki_the_flowchart
Source: Reddit community, https://www.reddit.com/r/personalfinance/
It is really hard when it feels like you are being pulled in so many directions. I've started using the wish farm method to at least list out the things I want, even if I don't fund them. I can slide them up and down in the wish farm category so that I can keep an eye on them and what I'm working towards when extra money comes available.
As far as the debt goes, if it is costing you money, then yes, I would focus on that (especially if you can eek out a few more years out of the furnace). I would also explore options that can bring the interest down as well, like zero percent balance transfers. The less the debt costs you the faster you can pay it down.
The only other thing to remember is that funding your current expenses is really the first priority. If you don't, then you end up with debt, which is what you're trying to get out of. The game changer for me was looking at my averages in the categories that tend to fluctuate - primarily our power bill, groceries, and gas. If you have some history in YNAB, then you'll be able to see what your average monthly spending is, and that alone helped me to make sure I was properly funding things so that they were covered and reduced my need to move money around dramatically. Now that I have been working with that method for a few months, our budget is much more stable, and we've made more progress on the things we want and need because of it. And there's been no more stress with the power bill arrives. Generally it's already completely funded, and that feels SO good.
I've been in that struggle. It's almost impossible to guess when that unit will actually die. Mine is 25 years old. OTOH, it could die tomorrow. I believe that your best option is to pull together a small emergency fund for some incidentals and then focus on debt. If, god forbid, the furnace goes before then, you can probably finance it and just throw the on the additional debt to continue to hack at.
You are in no worse situation by having to finance the furnace or having saved for it and ignoring your debt.