Must Not Understand Breaking CC Float Quickly
Under the section in the most recent blog post by Jesse, in answering the question "Do you want to break the cycle quickly or slowly":
If you want to break it quickly, stop paying the card in full. It’s painful, I know. But it will allow you to budget for your current obligations. You’ll gain powerful awareness when you start connecting the money you have to a concrete plan. You can still budget to pay off that balance a little bit each month.
Stop paying in full? Would that not accrue real-world interest charges? What's the reasoning behind that? How does one actually move beyond the float?
Separately, the post never actually explains how you know, in YNAB, if you are a month ahead. Is the answer that the credit card categories are all fully funded? Something else? How can you see you are not riding the float? As expenses accrue, regardless of which month I am funding them from, they need to be allocated to the credit card categories as far as I can tell.
You know you aren't riding the credit card float when the available amount in your CC payment category inversely matches the negative balance on your credit card - i.e. if your credit card balance is -$1000, you have +$1000 in your CC payment category. In other words, every dollar of credit card debt is backed by actual cash that you already have, not by cash that you expect to have before the credit card bill is due.
When you have budgeted spending on a credit card, YNAB automatically moves money from the spending category and holds it in the CC payment category for you. But in order to be "off the float" you also have to allocate dollars directly to the credit card category for the balance on the card that existed before you started using YNAB.
"A month ahead" is a separate issue, and that's best defined as when you are able to fill out your entire budget for the current month - bills, groceries, credit cards, savings goals - with money you already have so that all of your incoming paychecks (and other income) can be saved for budgeting next month.
Saish Dawg said:
most recent blog post by Jesse
Hahahaha that's an old, old article that they put a new date on for some reason. (Wayback Machine dates it to January 2018, but I've been around since January 2018, so I feel like it's even older than that.)
We teach people to live on the money they made last month, so they’re a month ahead. (Rule Four)
I'm gonna shake somebody. YNAB Rule Four has nothing to do with "living on last month's income" or being "a month ahead." /Sorry, that's off topic./
Getting off the float quickly by paying interest is stupid advice. Yeah, let's convert debt at 0% into debt with a high interest rate, just to make YNAB easier to use. It's stupid and bad advice. It makes it more difficult to get off the float. The avergae credit card user would start incurring monthly interest of about $15-20 for every $1000 being floated per month... that's $15-20 they couldn't use to eliminate the float.
Really, they need to do a better job of helping users manage and eliminate the float.
P.S. I was on vacation for a week so I'm just now catching up.