I am terrified of Getting Off the Float

I started YNAB in July but I really wasn't doing it right. It has taken me a few months to get the hang of it, especially with credit cards. We have one card for me and my spouse that we share.  We use it for everything - gas, groceries, etc. We have always paid the statement balance on it (not the full balance)  and avoided interest, but of course, I've since learned that this is the float. But this year my spouse's income, which is variable because they have their own business, has dropped significantly due to the pandemic - they just aren't bringing in what they used to prior to late 2020. They used to bring in 10k to 15k a month, with the occasional off month. We got trapped by that variable income monster and our expenses match that sort of income. We also just lived on the float all month.  But now its like 5k or 7k if we're lucky. We didn't notice at first, but its gotten worse almost every month in 2021 and although we continue to pay the card in full, its been tougher and tougher. I tried to get off the float in July when we started YNAB by taking out our savings to do so, but it didn't help because I wasn't really FULLY understanding just how much we needed to cut expenses, plus I STILL didn't have enough cash after that to save ahead for things that would be in "sinking funds" such as car repairs or whatever. So now we're in this cycle: Expenses big and small  have gone on the card, the bill comes due, and its huge, so we scrape together the money, and boom, back to square one. We end up in a situation where the CC bill is paid (well the statement balance at least),  but there's nothing left cash-wise, and then we're charging up everything all over again.  Right now I have no extra cash beyond $1500  that I've budgeted to my sinking funds and we owe about $9000 on the card coming up next month as the statement balance. We had a huge medical bill (about 2500) and a family member's funeral (travel was 1500) which is why it is so big - ordinarily its not quite that bad.  In fact, my sinking funds cover that travel expense! But the TOTAL balance is closer to $12000 as I type this because we have been using the card for everything as usual. HOWEVER, THIS TIME, I have been tracking everything in categories like YNAB has you do, and I am sticking to a strict budget. No eating out, no unnecessary expenses etc. It is all orange because its not backed by cash, but I'm tracking it.

If we can pay the 9k in early November, my goal is to slash our expenses enough that the bill due in early December will be much lower - i.e. maybe 4000 or 4500 total. But I have a feeling we aren't going to be able to pay the 9k. We may - it depends on how much my spouse brings in by Oct 31/Nov 1.  (I also get paid then but my paycheck really covers the "keeping the lights on" expenses - our mortage and car loans etc. Since I know what I get paid monthly and its always the same, I use that to pay what we HAVE to. It takes up almost my entire paycheck but there is usually a bit left over - maybe $500). 

I hate this. I'm tired of it. I want to get off this train ASAP. But I'm pyschologically terrified of not paying that bill. I was taught NEVER to carry a balance and never pay interest. This mind-shift to understanding that unless we DO those things, we're never going to get out, is still  very hard for me even though I understand intellectually that its necessary.

Let's say my spouse can give me $4000 on October 31/November 1 to use as cash. I can go ahead and use the $1500 in my sinking funds to make a payment to the card.  That means about 7500 will start accuring interest as unpaid, and whatever else we've charged up since the closing date- so like 10,500, 11k or so.  

But we now have 4k in cash plus whatever small amount is left from my paycheck.  I can use that to live on and squeeze our expenses as much as possible. Stop using the card for purchases not backed by that cash. We can try to budget what we can to the debt paydown - probably 11k. AHHHH. That is terrifying. 

Repeat monthly to get off the float -  correct? 

Ugh. Can anyone tell me they went through somethign just like this? We are both resistant to paying interest (and my spouse does not agree with this plan at all even though I've tried to explain the YNAB logic) and not paying in full. But I no longer see any way around this. 

Encouragement and examples of what happened to you welcomed. 

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  • Two separate things going on here -
    1) You need to cut expenses and/or increase income. Have you checked with the credit card company to see if you are eligible for any reductions in your interest rate? If you own your home, have you explored a refi that could lower your monthly payments? Shop around car and home insurance as well as mobile phone plans, internet plans, etc. Are you using all of the subscriptions that you have? Like if you have Netflix, Hulu, Sirius, Audible, Calm, and Disney Plus, could you cut it down to 1 or 2 of those? If you have Amazon Prime, do you need Amazon Prime or could you just wait to order stuff from there once you have enough in your cart for free shipping? If you have a gym membership, are you actually using it? Do you have anything that you could sell - handbags on Poshmark, video games on Facebook marketplace, etc? It's all fine and dandy to say I'm going to go super draconian on things like eating out and groceries - but is that sustainable?

    2) You need to work your way off the float. First, just liquidating all your savings and getting off the float in and of itself isn't going to fix things. You need to address #1 so that based on your lowest monthly income you can cover your standard monthly expenses and make a go at saving up for True Expenses like annual bills, car and home repairs, and generally the stuff that you simply know you will need to spend on. Otherwise, you're just going to end up right back on the float since you don't have enough to cover your True Expenses.

    Are you in the US? If so, are you eligible to open any 0% interest cards? If so, what you could do is open a new card and start using it to slow the accumulation of interest and focus on paying off the debt on the existing card. This can be a bit tricky so hopefully someone who has actually done this will come along and explain - I've not had to do balance transfers or use funds budgeted for 0% interest card to pay a card with a higher interest rate and it takes a lot of diligence to stay on top of the situation so it's really better if someone with experience explains it in detail for you.

    Like 2
  • Navy Blue Python said:
    We have always paid the statement balance on it (not the full balance)  and avoided interest, but of course, I've since learned that this is the float.

    This alone does not mean you're on the float. Most of us that are paid in full (PIF) also only pay the statement balance. The difference of being on the float or not is that us PIFers could pay the balance in full if we so chose. You'll know you're PIF when your CC Payment category balance always matches your full CC balance.

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  • Uggh.  This is hard.  Well done for facing into this issue - accepting you're on a float is the first step of changing it.   

    You are in debt on the credit card, but while you're on the float its harder to see the full extent of that and to get a clear picture of what you can actually afford.  I know - as part of my financial mess (which I'm slowly turning around) was using a credit card to supplement my living expenses which were above my income.  Paying interest may be the cost of this clarity. 

    I found getting off the float made it easier to avoid creating more debt as you can see exactly what you can cash flow.  I could lean into options to cut costs, review utilities and subscriptions (eg. a lower cost phone or internet plan) and pay things on repayment.  I had more brain space to do this, as I wasn't juggling.  YNAB was also great at helping me make progress.  

    I wonder if you could go cold turkey on the credit card for say 3 months. Stop paying the float and just budget what you actually have in the bank and as income in YNAB.  Each month, pay the minimum on the credit card and any interest.   Create a new Debt Repayment category and include CC Interest as a category as well as Extra CC Payments category.  You can start funding that Extra CC Payments in YNAB, but no making payments for now.

    This three months will give you time to really see what is going on and a clear view of your expenses. 

    Perhaps your spouse will accept it and the interest as an experiment.   You might also be able as jenmas suggests to switch some or all of the debt to a 0% balance transfer might be an option to reduce that - but only if you don't spend anything else on the card.    You'll still be able to see the debt in YNAB clearly, 

    Good luck.  You can do this!!

    Like 1
  • Yes I can said:
     Paying interest may be the cost of this clarity. 

     In my budget that interest is named Stupid 

    As for the float, I didn’t even know about the float until YNAB. As an accountant I liken the float to cheque kiting. We are now off the float AND a month ahead and positive net worth. I say go for it. Read articles on here that can help.

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  • I just want to second jenmas first point. You need to go through your monthly expenses/spending with a fine-tooth comb to see if there is anything that can be cut or lowered. Reducing monthly spending is going to only help to get you off the float

    Like 2
  • Navy Blue Python welcome to the YNAB family.

    YES, there are LOTS and LOTS of us that have been in the exact same boat. And there are many of us that have made it out of that boat, and into much better, nicer, prettier, no interest boats. It's possible.

    But the first step is clarity - which you are gaining now. You can not change your situation without awareness of what the situation is. It sucks, it hurts, it's humbling, and frustrating. But without it you won't be able to do anything. So kudos to you for taking the first step.

    I HIGHLY recommend (if you're in the US) getting a 0% balance transfer promotion for your float debt. Shop around and see what offers there are (make sure you check to see how they calculate the minimum payment to know how much you'll have to put directly towards the debt every month). Most of these offers charge 3% of the entire balance as interest, and then give you so many months to pay it off. As long as you are making the  minimum payment, you don't have to pay it off within the promotional period... but you do need to know that it will incur charges as soon as the promo period is up. I believe we are on our 4th 0% balance transfer promotion with the BF's outstanding debt from years ago. We just keep rolling it between cards that have offers and chipping away at it. I think this will likely be the last year because it's down to a low enough number that we can throw a chunk of the tax return at it, and then keep paying it off over the course of the year to get rid of it.

    Once you do this you'll be able to see what is actual debt vs what are your expenses now. You have the advantage that you've been working with YNAB long enough that you can use the reports to figure out what your average monthly expenses are in variable categories (like groceries, gas for the car, the power bill, etc) so that you can start budgeting the average instead of throwing money at it hoping you put enough in there. This strategy totally shifted my ability to keep from WAMing every month in my budgets, and helped me really get ahead.

    At this point you need to consider your anxiety level and your ability to stretch your budget to keep things covered. You certainly don't have to do a 0% balance transfer, you can just leave the debt on the card that it is on for the time being and deal with the interest. But the important thing to consider is your mental health. Which of those options feels better? The one that feels better will help support you in getting the best results out of your budget in the long run. Sometimes the numbers matter a lot, and sometimes what is 'logical' doesn't feel good, and the end result is that we will end up causing ourselves more trouble than we realize by going with the 'logical' thing and not the thing that makes us feel good.

    If you haven't already, I would also suggest sitting down and figuring out the monthly expenses (and making a list of annual ones, too, to keep them on the radar) and include your averages from things like groceries and gas. Figure out exactly how far your budget can stretch from your income, and how much you NEED from your spouse on a monthly basis in order to keep things covered. As others have said - figure out what you can trim down (subscriptions, phone/internet plans, etc). Take advantage of any perks (I get hulu with my phone plan) and use those, even if it is only temporary in order to get this squared away. Once you know what can be trimmed, and then exactly how much you need to put towards the expenses out of your income plus your spouses income, you can start to knock the float debt down in a hurry. It won't take you long to start being able to fund those unplanned expenses and build up some cushion again.

    Best of luck, you're in the right place to make a change, and there's lots of inspiring people here who are happy to encourage and help! (Come join the Debt Smackdown Challenge when you're ready and we'll help motivate you to ditch the debt!)

    Like 5
  • Since I was in a similar situation, I will post my two bits...

    I'm not sure that it helped as much as I thought when using a debt consolidation service because they were allowing me to minimize the payment so I could keep my other bills, then I suddenly got in trouble. Not by not paying enough, but by accidentally paying off an entire hospital bill that was on their consolidation plan so suddenly they didn't owe that part of what they had negotiated with debters.

    Best thing I ever did was these two:

    1. Cut every unnecessary thing including TV/streaming services and even life insurance policy. It was important that I remembered this is temporary, I'll get them back as I go.
    2. Don't start spending that on new things and don't divide it up among all the debts, but instead pick the one I could pay off soonest, and dump it all on that. Then quickly I could make even larger payments on the next debt, and cascaded until I paid all of them qucker than I thought!

    It surprised me how quick because there was 16k on student loan, a couple medical over 8k, and some others. I think my total debt was about 32k... but before I knew it, that was all gone and I now had too much money to know what to do with so my savings started building up. Back then, I sure wish YNAB existed because it would have helped me know what to do from there to plan things. It really helps to put the budget in front of your account balance, even in the times when I was not earning enough to pay monthly bills.

    My credit card shot up more than when I used to have good employment. Now I have been able to keep only one credit card (always pay balance before the due date which means I could go without the card but I like the cashback rewards), and I've avoided creating another debt because somehow it was easy to have extra in savings before I found the big thing that I wanted. My self employment has not even been very successful, but somehow I started enjoying my life because the budget helped me both plan what I want and to know what I'm ready for.

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