Account (or rather don't) for interest on fixed monthly CC payment.
Unless I'm misunderstanding something, I'm really not a fan of the way YNAB sort of forces the hand on how to handle CC interest. It's very, very confusing.
Right now I have a fixed monthly payment to credit cards (snowball). I'm not setting a pay-down-by-specific-date amount, just a monthly amount.
For the sake of illustration, let's say I've:
- Budgeted with a monthly goal $100 each month for a CC
- Paid down the amount (it clears my CC account)
- But then an interest amount shows up, again for illustration, for say $10.
Now the CC reads like the following in YNAB:
- Budgeted: $100
- Activity: -$90 (this is the first weirdness)
- Payment: $10
That -$90 and $10 is triggering, causing cognitive dissonance. I want it to just be an even $100 I've budgeted and paid. I'm fine with rolling, accruing interest going on in the background until I reach some magical date in the future.
I get that this is reapportioning the budgeting from the interest category back into my CC category / account. But I don't want that. I don't even want the interest to show up in my budget. I'm 100% fine with it *just staying* in the main CC account without being accounted for in my budget.
Basically, because I'm trying to stay on a fixed $100 I don't want to account for accruing interest at this point in my budget.
How do I solve for this? The type A in me is coming out really frustrated that there's nothing simple to solve this.
If you've budgeted for interest in its own category, funds would move from there to the Payment category, adding to the activity. If you previously paid $100 (resulting in an activity of -$100), that would make the activity -$90. The activity is largely useless, as it's just the net of expenses (interest in your case) and the payment and will vary just because of timing of each.
The next time you budget $100, you will actually have $110 available (including the money that was backing the interest transaction) and can make the larger payment. The benefit of keeping interest separate is that you make a full $100 of progress (exactly equal to the budget entry).
So that's the recommended approach, but there are a couple other approaches that will sweep interest "under the rug" so to speak:
- Don't even make an account for that credit card. You're not using it for budgeted purchases, so you can just treat that payment like any other bill with just a category (that you create) to reserve funds for the payment.
- Categorize interest as Inflow:To Be Budgeted. TBB is effectively "Debt Management" in a credit account.
Yes. It will impact the Income v. Expense report, but many people don't care about that. Contrary to what you might expect, it will NOT affect the To Be Budgeted value in the budget.