Age of Money vs. Debt Payoff
Hey fellow YNABers!
I'm finally getting my debts under control, and am making pretty aggressive payments on them with the goal of being 100% debt free in two years.
As much as I love the idea of these debts being gone, I'm worried that it's at the expense of aging my $$$. If I were to hold off on the extra debt payments for a month or two, my money would easily be over 30 days old. However, that would delay my debt payoff goal.
So, should I prioritize paying off the debts in the large chunks as I've been doing, put them on pause for a month or two to age some dough, or just trek along and will the money (kind of) magically age for me as I stick to the budget?
Thanks for your help!
Debt costs you money in terms of interest. Age of Money is just a number in the upper corner of your screen that does not in and of itself do anything to improve your finances.
However, by throwing all your money at debt, what will you do if 2 minutes after you send off the payments you get a flat tire? Are you going to take on more debt for the car repair? In that scenario, it might be a good idea to perhaps build up a small emergency fund of $1000 before throwing everything at debt.Reply
Hey there! I came to the Forum today with exactly the same question -- I desperately want to age my money, but whenever I have anything left at the end of the month, my first impulse is to make extra credit card payments. As a result, I've been using YNAB faithfully for about 9 months now and have a much clearer financial picture for myself, yet my Age of Money is very unimpressive. I do have an emergency fund and a debt payoff plan. My monthly budget (including all the "smart things" like realistic True Expenses and future bills) is pretty tight, and if I do have anything left over, it's usually no more than $100-200. So...should I continue to make those extra CC payments, or start aging my money now? Maybe split the difference?
I appreciate any and all advice!Reply
Let me start with saying I'm out of consumer debt and haven't had any for a while.
Debt can be expensive, depending on the interest rate you are paying. It's important to eliminate throwing money away on interest.
And, it's important to have money put aside for things that come up, like the tires suggested above, so you don't have to go back into debt when you have to spend on things.
I would like to recommend you keep a little, instead of sending everything extra to debt repayment. Maybe something like taking 10% of whatever extra you plan to put toward the credit card, and save it for future spending? This would help your AoM increase, and pay down your debt.Reply
Hi May2020 and everyone!
I agree that plugging ahead on debt is the right thing to do. I've been using YNAB since September (of 2017) and all this time, my money has never reached 30 days old. What I HAVE done, is pay of a very large amount of my debt. (I went from 3 cards, and now I'm only down to paying 1 card.) What this has done is free up the amount of money I've needed to "budget" for interest and fees. (Went form $300/month to about $100/month.
Obviously it's a personal preference, but I think that plugging away at the debt takes away more stress at the end of the day.
Also- Since I'm planning for less frequent expenses, my average bank is well over $1,000 which is "sitting and waiting" for those events to happen. Although that money has a purpose, if there was an "emergency" like that "flat tire. I could always move $1,000 around to roll with the punch for that and then re-budget for my upcoming less frequent expenses later. (That hasn't happened I'm very thankful. But it's a good thing to know is an option in the back of my head.Reply