One off payment coming in... what to do with it?
Less YNAB specific and more money sense needed please!
I'm a complete YNAB newbie and tbh even though I've kept track of my out goings for years - I've never actually budgeted for anything and thus always run out of cash and ended up further in debt! So I ask this question with a completely open mind and a willingness to accept any advice people would be willing to give!
I am a teacher, in the UK, and I mark for the public exams each summer. This summer as I know I want to age my money and pay down debt and try and build some savings I really do not know what to plan to do with that income in July/August when it arrives!
In the past I've always just thought I should pay it off a credit card - but I don't always!
Should I budget it into the future? Save some? Or just pay off some debt? It's not crazy money but enough to make a difference in my world - £700/£800 - hopefully!?!?!?!?
So... any thoughts are most gratefully received! 😊 Thankee!
Ruthie Toothie said:
This summer as I know I want to age my money and pay down debt and try and build some savings I really do not know what to plan to do with that income in July/August when it arrives!
You're in luck. Building some savings is the same as aging your money, so your conflict between three choices has just been reduced to a conflict between two.
I'd say do a bit of both. For paying down your debt, throw half of the income at it, then with the remaining half look at your savings categories that I hope you've already set up and decide which of your goals are most important to you. Maybe you want to build an emergency fund, or perhaps it's vacation money or money for your next mobile phone. The choice is yours :)
From a strictly mathematical perspective, paying down high-interest debt is almost always your best choice. "Aging Money" -- by stashing it into an "Emergency Fund" or reserving it for future months -- comes at a very high cost ( £) when you have outstanding high-interest debt.
In a sense, when you have credit card debt your Age of Money is actually a negative number: Your money was already spent before you even earned it. You should focus on getting it back to 0 before worrying about making it a positive number.
But there's an emotional aspect to these things. Throwing every spare £ toward debt can be emotionally draining -- pushing that rock up the mountain forever can burn you out. And if an emergency happens along the way, you might have no choice for handling it except to grow your debt again, which can be very dispiriting.
IMO a good pragmatic compromise is to reserve enough cash so that you can budget one month ahead. E.g. on May 1, you should already have enough money set aside (that your earned during April) to fully budget the entire month. "Living on Last Month's Income" is a really empowering budgeting workflow -- it means you've broken free from the paycheck-to-paycheck cycle and have breathing room to see the big picture and budget in more comfortable monthly intervals. Many would argue those things are worth the cost of the extra interest.
In the end, it's 100% your decision. Compared to other budgeting systems YNAB is very unopinionated about how you should spend your money. It just provides a framework -- you identify your own priorities, and YNAB helps you implement them.