Budget Debt Smackdown when Account remains the same

Hi Folks,

just a stupid question: For a better Budgetplanning I'd like to budget for a debt smackdown on my checkings account. The problem is: This is not an outgoing transaction. When my salary arrives, i just don't spend all the money. But when i create a budget category for it, there is money left i don't really have, same with a tracking account.

How can i solve this? I know exactly how much i earn every month. And I'd like to see this amount in the "Budgeted this Month" on top...

Kind regards

Orchid Beat

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  • Hi Orchid Beat !

    I'm not sure I completely understand what you're asking. You want to set aside a portion of your salary to pay down debt later, is that right?

    If so, you're absolutely right to create a category and budget funds towards that category. You'll categorize your paycheck as Inflow: To Be Budgeted and then budget the portion that you don't want to spend towards your Debt Smackdown category. :)

    We think of savings a little differently at YNAB. Here are a few resources:

    – Here's an article showing you how it all works.
    – Take a look at this 7-minute Whiteboard Wednesday about savings.
    – Attend a free workshop about savings called Reach your Savings Goals!

    Take a look there and let me know if you still have questions!

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      • Orchid Beat
      • On my way back to a Linux Geek
      • Orchid_Beat_b30dcd93535
      • 2 yrs ago
      • Reported - view

      Faness at YNAB thanks for your answer. Hmm how can i explain it better...

      Here in switzerland we don't have paychecks. We get our salary direct in a bank account. But lets say, my bankaccount has a balance of -2000$. Now i get paid 5000$, so the account is at +3000$.

      Now i do all my spendings etc, budgeted in YNAB with categories. This sums up to 3482$. So my Bankaccount after this is at -832$. The difference between -2000$ and -482$ is what I paid back in debt because 350$ goes onto a creditcard as a transfer (also not backed in Budget). But in the Budgetsection of YNAB, i see only: 3482$ budgeted in February. This even I "budgeted" the whole 5000$. 

      Now I tried to create a Debt Smackdown Category with 1518$ to sum up the "Budgeted in February" to 5000$, just to be sure my budget works and i covered everything, even the 350$ for the credit card. But as there is no outgoing payment from my bankaccount, the category stays at 1518$. In March, the next ammount, how high it ever will be, will be added and suggests that there is a category full with money. But in this case, this is a false positive because this is money I spent before i even started with YNAB.

      As you can see: It's not a saving issue, that would be easy as the category "Savings" really has some money in it and a transfer from my checkings to my savings account.

      I hope, it is now easier to understand what i try to achieve.

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    • HappyDance Ceeses

      Thank you both for jumping in here! I definitely missed the mark initially! 😅

      Orchid Beat

      I do think this comes down to how you added your account in YNAB. If your bank account is negative, you should see that negative balance on the account in the sidebar, and you should have a red number at the top of the budget. By chance did you add that account as a credit card? That would prevent the negative amount from affecting your budget.

      When you’re paid, the negative amount should be subtracted from the amount you receive - so, following your example, the To Be Budgeted amount would match that +3000$. After you spend and budget for all those transactions, it would go back into the negative.

      Here’s a short video walking through how to manage this - I didn't see it on the other thread.

      I hope that helps!

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  • Hi, Orchid Beat 

    Sounds to me like you are clawing your way out of an overdraft in your transactional account. There was some discussion on that topic on this thread linked here, and Faness at YNAB provided a step-by-step for that poster that you might find useful.

    You can do this.

    I think you are also trying to pay your credit card with your overdraft, so paying debt with debt. This gets a little complicated in YNAB, and the software seems to have trouble when we use credit accounts to pay credit accounts. I would respectfully suggest that until you can get out of overdraft and stay out of overdraft, you really don't have the extra funds to use as a debt smackdown; you are just transfering the debt from one account to another.

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      • Orchid Beat
      • On my way back to a Linux Geek
      • Orchid_Beat_b30dcd93535
      • 2 yrs ago
      • 1
      • Reported - view

      HappyDance thanks for your answer. That is exactly my problem. For this reason, I cut the CC payback down to the minimum I have to pay. When everything works as planned my Bank account will be on zero balance latest by the end of April. Luckily my bank won't take further actions except taking the 12.5% interest, as long as I have a positive balance once a month, even for an hour.

      Actual, I plan for all my expenses (and they are huge here in Switzerland as everything is expensive like hell. Just a regular Bic Mac Menu is about 14$, just as a hint for you) including the minimum payment for the CC. The money that isn't used there is for paying back the overdraft on my bank account.
      I "cheat" now a little bit, just for me, with an payback category i fill up when I plan my budget, just to check i haven't miscalculated. After this is done, i remove the amount from this category.

      Like 1
  • Actually using the method  Faness at YNAB  explained in the other thread, paying down both the credit card and the overdraft is easy. Simply when budgeting put some of your funds, that aren't needed for your expenses, in the overdraft reduction category and some in the credit card payment category. It simply means you will get out of overdraft slower. I'm guessing you are trying to do that because the interest on the CC is higher than in the overdraft. If so, why not put all the "excess" funds towards the CC? Do you have a min. payment necessary for the overdraft?

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      • Orchid Beat
      • On my way back to a Linux Geek
      • Orchid_Beat_b30dcd93535
      • 2 yrs ago
      • 1
      • Reported - view

      Ceeses It's the other way around. On my bank account i have an interest rate of 12.5%, but "only" 11.9% on my CC. This is, why I will first bring the bank account to zero balance and pay the bare minimum to the CC.

      Latest by the end of April, I can switch this, as my Bankaccount will be on zero balance. Until then, my bank account needs to have a positive balance at least once per month. This is achieved by my salary that is greater than my overdraft.

      Like 1
  • Faness at YNAB Ceeses HappyDance thank you all very much for your answers and help!
    As already written, I have now some sort of Idea how to deal with it :).

    Regards from switzerland

    Orchid Beat

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      • HappyDance
      • YNABing consistently since 2014
      • HappyDance
      • 2 yrs ago
      • 1
      • Reported - view

      Orchid Beat 

      Good luck.  I remember crawling out of overdraft. They make it so easy to spend a little here and a little there because they mix the available credit right in your account.  You can do this.  Keep reminding yourself that April is not that far away.  It is sooooo worth it!  I'm rooting for you.

      Like 1
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