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.

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  • 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. 

    Like 3
  • You're off the float when your Payment amount matches your balance in the opposite direction. For example, if your CC balance is -$2000 then your Payment amount for that card is $2000.

    You're a month ahead when all income from this month can be used to fully fund next month.

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  • Okay, thank you both.  That's super concrete and easy to follow.  Fully funded credit card categories indicate off the float.

     

    Now off for a root beer float to celebrate.  Cheers!

    Like 4
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
      • Reported - view

      Saish Dawg Mmm... Root beer float. Yum. I just went and read the "quicker" option. I guess he's saying you'll have more funds available to fund your monthly true expenses if you don't use them to pay the card in full while riding the float. It's not very straightforward, is it? This quicker method also means you'll be paying more overall as you'll be accruing interest.

      If I were trying to get off the float and I could afford to pay the card in full, I think I'd personally stick to the "slower" method.

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      • Saish Dawg
      • saish_dawg
      • 1 mth ago
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      • Reported - view

      Superbone Yeah, that was what confused me about the recommendation.  It seems that not paying in full reduces available (next month) dollars.  And perpetuates debt for longer.  Likely a clarification needed from the founder.

      Like 1
  • 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./

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    • Vibrant Hah.  I think I joined after then.  Though happy to hear your thoughts on rule four and can furnish a sofa.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
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      Vibrant Are you sure it's originally from 2018? As that statement is based on the old Rule 4 from YNAB 4 and before. Circa 2015 and earlier.

      Yeah, if you're going to update the date then update the content to match your current software.

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      • Vibrant
      • No more counting dollars, we'll be counting stars
      • vibrant
      • 1 mth ago
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      Superbone 🤷‍♀️Like I said, Wayback Machine doesn't have any hits before 2018, but I'm sure it's older than that.

      Like 1
    • Vibrant that used to be Rule 4. 😉 Some of us old timers still use an "Income Available Next Month" category to manually categorize our paychecks. I just couldn't live without that when we transitioned from YNAB 4 to YNAB Web. Age of Money is a fun novelty feature but I prefer the actual one month buffer for ease of budgeting.

      Like 4
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
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      CPA Budgeter You are not alone. I think the only reason it went away was because it was something you had to work up to and most could not do it “out of the box.” AOM is much more nebulous and unclear how to implement.

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    • Superbone yeah the buffer was tough when you first start. I remember that. Maybe Age of Money is less soul crushing for newbies than the buffer was. 😂

      Like 1
      • Vibrant
      • No more counting dollars, we'll be counting stars
      • vibrant
      • 1 mth ago
      • 1
      • Reported - view

      CPA Budgeter preaching to the choir. 😂

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    • Vibrant ha!

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    • CPA Budgeter I too come from the days of YNAB 4 and I am with you.  I'm not a super smart guy so I need things to be as simple as possible.  What I did was use a separate credit union account for building a Buffer, and which I transfer money to each month.  Eventually I hope to get it to a point where the money in that account equals a full month's worth of income.  

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  • 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.

    Like 2
    • nolesrule I haven't seen the podcast in question--nor will I bother to watch it.  No way in the world am I going to carry a balance on a credit card.  

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