Savings categories or send money into next month?

I have a strange question and I hope I can say it in a way that makes sense. First the set up for the question: 

We are currently budgeting about 70% of each month with last month’s income. We need to use the first of my husband’s paychecks each month to finish out that month’s budget. Our AOM is 23 days. 

We have $82,000 of debt that we are paying off using the snowball method ($2000 left on debt #1 and paying $425 towards the principal each month!!).  We only have $500 in savings designated for income replacement. We are working on raising this and have been balancing making this a priority while still prioritizing retirement and some debt repayment. 

Here is the question. Next month, my husband’s second paycheck will likely be around $600 more then we need to finish budgeting for the month. Would you send that into the next month or put it towards our income replacement category and/or debt repayment? 

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  • Depends on the type of debt. If it's a credit card, send it to the credit card. If it's a loan, I'd use it to improve the budget. If you do keep it in the budget, it's really up to you whether you want to use it toward getting the full month ahead or padding your income replacement.

    How many months of expenses is that $500, as far as a normal month and also a belt-tightened month? I'm guessing it wouldn't get you very far.

    However, being a month ahead in your budget is somewhat like having one month of income replacement.

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      • SLautman
      • Mom at large
      • Hot_Pink_Packet
      • 1 yr ago
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      nolesrule it’s student loan debt (6% interest). 

      $500 gets us through like 1/7th of a month if we cut out everything except necessary expenses. 1/12th what we actually budget for (including savings and padding true expenses). But my husband and I combined make almost 2x our absolute necessary expenses so really if one of us loses our income, we would be able to nearly cover all necessary expenses with the other person’s income. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      SLautman 6% isn't insanely high and that $500 would only buy you about $30 in interest savings per year (compounded at 6%) until the loan is paid off which won't be noticeable, so I would use the money to pad the budget one way or another. You really could go either way on Income Replacement or finishing getting a month ahead. I'd lean toward the latter, but you do need to build up that income replacement category.

      Do you also have categories for the general emergency trifecta (House, vehicle, medical) and are they being funded optimally?

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      • SLautman
      • Mom at large
      • Hot_Pink_Packet
      • 1 yr ago
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      nolesrule we do have those categories set and they are being funded, but still only have about $400 in each since we just started YNAB in March and I was a stay at home mom until June! It’s hard for me to figure out how to prioritize all of my goals 

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