What to do when you realize your Ture Expenses & Goals exceed your Income

This is my first time setting up a budget with true sinking funds. I have always just tried to cover the expenses for the month in the month that they happen and while it has worked to a point, I am always stressed I am missing something. 

I am also working on paying off debt and have two 0% interest credit cards that I want to ensure get paid off before they accrue any interest. 

When I plug in my monthly obligation, estimates for true monthly expenses, yearly expenses, vacation goals and debt payoff goals, I am finding I am around $400 short each month.

I am actively working on increasing my salary by about that much but it may be a few months before that money comes through.

I am committed to taking Vacations as it is key for my mental health and my willingness to stay on a budget.

When you were first starting, how did you figure out priority for the shortfalls when you realize that your true expenses and goals exceed what you have coming in?

Bonus Question: Is there a report where you can see all of your goals for each category in one list so I can see  it all at once.

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  • If you can't increase your income then you need to cut your expenses and/or your savings goals. Up to you to decide what your priorities are, as no one else can make those decisions for you.

    You say you are committed to vacations, so maybe look for less expensive vacation options. Look over all your spending and see what you can cut, even if it's just temporarily until you get the debt paid off. Or take longer to pay off the debt if that's not as much of a priority as those other things. Only you can decide.

    Like 3
      • PhysicsGal
      • Nerdy female homo sapien
      • physicsgal
      • 3 wk ago
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      nolesrule Yes, I like that idea.  If you're paying off debt and are not able to meet all your obligations, you can't really afford a fancy vacation, but yes, I agree, we need vacations for mental health, a long camping trip or staying with friends somewhere on a short road trip might be a viable option for rest and relaxation without breaking the bank.

      It's hard to meet all your goals if you are ambitious.  But you're already going to be better off than you were before because you are paying attention and making your money work for you.

      Like 1
  • It's good to realize cuts to the budget can also come from small streams.

    Go through your phone, internet, and other bills and compare the price you are currently paying to other providers and deals around - could you find a cheaper alternative to change to? 

    Go through all the subscription services you have - could you get by with out some of them permanently  or even temporarily? With things like streaming services, if you have multiple, cut down to one for now and switch between services instead of paying for multiple at the same time.

    Look at your discretionary (not set bill) categories - could you for now shave some money of them until you make more money? This includes things like clothing, money budgeted towards hobbies, fun money, etc.

    Check your savings goals - how much is the minimum buildup on them you are OK with? Is it less than what you are currently contributing to them? Keep in mind that after you have your income increased and your dept payed down you can again budget more to these things.

    And so on. Usually you don't find one thing you can simply cut to fix the budget but you have to take hard look at most of your categories. But every small thing you can cut down even a bit or cut out temporarily or permanently will take you towards more balanced budget.

    Like 3
  • You either make adjustments or you go further into debt. That’s the reality.

    Like 3
  • A lot of people have success with Dave Ramseys methods (https://www.daveramsey.com). He is intense in his methodologies to get and stay out of debt by making your money behave. I started out reading a lot of his material and watching a lot of his YouTube videos as well as listening to him on the radio for years. He can definitely help get you in the right mindset for debt free living and is very motivational in his presentation. He is totally against credit card usage period but I think by using YNAB you can still use them if you let the budget determine your spending, however, there are studies out there that show you spend more using a credit card vs debit card vs cash in that order.

    It all really boils down to priorities and discipline.  You have already made a good first step by using YNAB to identify the problem.  Good luck.

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  • Adventure Awaits congrats on starting to use YNAB.  It sounds like you've made a great start and have got a handle on most of your expenses and are working on increasing your income.

    Can I suggest a reframing of your situation?  where you are is great news.  You have enough income every month to more than cover all of your immediate obligations, plus funds to put aside for longer term expenses, vacation and debt.  You also have started to develop a clear picture of your actual spending and desired savings. 

    However,  your current estimates of all the things you'd like to fund is $400 over each month.  As such, you need to either increase your monthly income, cut your expenses, reduce your debt payments or reduce the amounts you're allocating to your estimated true expenses or your vacation goals.  Another good thing about this situation is that you're in a position to do that before things hit a crisis point and have control over what you choose to do.     

    I like the ideas already posted, and of course, the extra income you're working on will help.   

    Since I've restarted YNAB, I've cut my ongoing monthly expenses by cancelling two subscriptions I didn't really use, choosing a new phone plan, swapping electricity plans and reducing the interest rate on my credit card (although you're already doing great on that).  I've also saved a lot on groceries.   One of the articles on the YNAB blog talked about questioning every spending assumption. 

    Another option might be to not fully fund all estimates of true expenses for a while, especially the variable ones like car maintenance or the annual bills that aren't due immediately.   Some people prefer to fund one variable true expense fully and then start on another when they have a sinking fund saved eg. the $1500 in case they need major car repairs.   

    Like 4
      • Adventure Awaits
      • Busting debt while fitting in Life's adventures
      • adventure_awaits
      • 3 wk ago
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      Yes I can thanks so much for pointing out the positive of where I am at. I have paid off $20,000 in debt in the last two years. I still have a hole to climb out of but also want to break paycheck to paycheck cycle I have lived in while paying off debt.

      Like 4
  • Can also push back timelines of various expenses (e.g., vacations). The monthly contributions are therefore reduced (a.k.a., more affordable).

    The other aspect of the timeline is that it does typically get easier. A $360 non-monthly expense due 3 months after you start will suck up $120 per month. However, after that, it only requires $30. That extra $90 can be put toward something that had to initially wait.

    Like 3
  • Adventure Awaits said:
    Is there a report where you can see all of your goals for each category in one list so I can see  it all at once.

    The 3rd-party Toolkit Extension (browser only, not mobile) adds this and many other useful features.

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      • Khaki Case
      • Khaki_Case.5
      • 3 wk ago
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      dakinemaui dakinemaui 

      Please can you give me more information on the toolkit extension...I'm really excited to hear about that!

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      • Adventure Awaits
      • Busting debt while fitting in Life's adventures
      • adventure_awaits
      • 3 wk ago
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      dakinemaui thank you. I found a video by Nick on YouTube last night and will get the budget goals column and total goals view set up tonight

      Like 1
    • Like 1
  • Thanks all for some helpful tips. I took another look at everything and realized that I have some yearly expenses in my budget that will come due after my goals for debt payoff and my planned April vacation have passed.

    I am going to keep the yearly expenses listed with their respective goals but wait to fund until one or all of the four things happen

    1. Increase my salary. I have started initial negotiations but may take some time.

    2. Tax return or potential stimulus comes in. I average a $800 tax return. I know I can adjust withholding to have more $ each month but I like the security of knowing there are no tax surprises. 

    3. Vacation is done. I am committed to a family vacation in April. After that is done, $250 frees up to fund yearly expenses. I want this fully funded so not adding to debt after trip.

    4. Finish debt round 1 payoff. In 8 months all my 0% credit cards will be paid before accrued interest freeing up $750 a month to fund the yearly expenses or work on getting a month ahead.

    Like 8
      • Bruce
      • Software Engineer
      • Bruce
      • 3 wk ago
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      Adventure Awaits Awesome!  You've got a plan, and it sounds achievable.  As soon as all that money going toward debt is gone, you'll wonder where all this money came from, and what to do with it!

      Like 1
    • Adventure Awaits Don't forget your next vacation will consume some of that $250, assuming that's still a priority. 

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      • Adventure Awaits
      • Busting debt while fitting in Life's adventures
      • adventure_awaits
      • 3 wk ago
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      dakinemaui , I have some monthly funds set aside for trips to my extended family and camping for the rest of the spring and summer. I may need to find some money for a trip to the Oregon Coast but that probably won't be after my first round of debt payoff is over. Once I have wiped out all my debt, the long term goal is to start saving for an African Safari. We will see how the numbers play out.

      Like
  • nolesrule said:
    Up to you to decide what your priorities are, as no one else can make those decisions for you.

     This is the secret.  And it is an uncomfortable truth to see that your income doesn't cover everything. Which is why people end up in debt but feel like they aren't buying anything (people without YNAB or another budgeting/tracking method).  

    Since vacations are important to you I would suggest looking at your debt payoff plan and see if its too aggressive.  I had to back off of the debt payoff plan because the cuts required to meet the goals were not acceptable to my husband in order to get him to commit to this.  I had to loosen my reins a bit in order to get him to tighten his.  Not everyone wants to commit to the Dave Ramsey scorched earth approach.  If you have a lot of debt, even scorched earth can take a long time.  

    Years ago, I was going full on "nothing but essentials and debt" mode. My kids were young. Then my stepmother died suddenly and unexpectedly in her sleep at age 56. It made me realize that sometimes you have to live life now. We ended up buying a ski boat to use at my parents cottage and the kids and us have so many amazing memories.  They are now in their early 20s and for the most part prefer NOT to spend loads of time with us. So while we might be out of debt now, those moments of enjoyment with our kids would have passed.  

    All of this to say that every line in your budget is up for debate and the priority can only be decided by you.  Yes you can have it all; just not all at the same time.  No one approach is right or more morally correct.  

    I recommend you look at undebt.it (if you are not using it already) and play with your debt payoff to get real estimated payoff dates.

    Like 5
      • Adventure Awaits
      • Busting debt while fitting in Life's adventures
      • adventure_awaits
      • 3 wk ago
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      MXMOM I don't do well on "all debt payoff, all the time". I put a goal out there that makes me work for the goal but I have to have other things to do or my debt payoff becomes overwhelming. I have found that balance works for me best. My debt payoff has made the best progress since I allowed myself some more room to fit in vacations and actually bought a house that better suited me than the condo I was living in.

      Like 1
      • MXMOM
      • MXMOM
      • 2 wk ago
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      Adventure Awaits If you know the story of the tortoise and the hare, it is the tortoise that wins the race.

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  • ynaber2613 said:
    He is totally against credit card usage period but I think by using YNAB you can still use them if you let the budget determine your spending, however, there are studies out there that show you spend more using a credit card vs debit card vs cash in that order.

    Yes, but those studies don't include using credit cards the YNAB way. I firmly believe that there is no difference for somebody that uses YNAB correctly by letting your categories guide your spending.

    Like 10
    • Superbone Totally agree with this. I put everything on credit cards (if truth be known, I only have 1 and am perfectly happy to keep it that way) and for me, it's a lot easier than carrying cash around. And I always know what my credit card balance is just by looking at YNAB. I've learned to spend by category, not according to my bank balance!

      Like 4
    • KnitPurlKnit Superbone   Totally agree with both of you.  I only use credit cards as well, I usually don't carry cash at all unless I know I need it for something.  I was just pointing out the studies that say otherwise but agree that if your categories in YNAB determine spending then credit cards are good and offer benefits such as rewards and protection (just don't super size at McDonalds LOL).

      Another reason I use credit cards is to maintain a credit score as I am 100% debt free.  I know Dave Ramsey says you do not need a credit score if you have no intention of taking on debt but I disagree since it affects other areas in life such as insurance and other services.

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      • MXMOM
      • MXMOM
      • 2 wk ago
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      ynaber2613 

      ynaber2613 said:
       I know Dave Ramsey says you do not need a credit score if you have no intention of taking on debt but I disagree

       I agree with your disagreement. I believe in Canada the credit score system is different than in the US. I don't think a 0 credit score is attainable in Canada (although I am not 100% sure). It was just announced in Canada that Equifax is starting a program to include rent payments in the credit score.

      Also, I don't even know whether or not manual underwriting is a thing here.  We just did our mortgage renewal and we had to provide income info etc. but they also did a credit check.

      In my opinion, attempting to navigate the world without a credit card just for the principle is making my life way too difficult.  Car rental, online purchases, etc. are easier. And the protection with a premium (fee) credit card is superior to any debit protection.  With the card that we have, we earn over $600 (net after fees) in cash back per year.  Hello Christmas! I love the way that YNAB handles credit cards in that the budget is set aside to pay the card so I don't have to worry about double spending money.

      As much as DR says debit cards are the same, they are not. Particularly in Canada, where we have had debit cards for decades but they are through a system called Interac.  We do now have Visa debit but most in person debit is still through the Interac system. With debit cards, the money leaves your account right away. If there is an issue, then you have to wait for it to be redeposited. With credit cards, the transaction is pending and if you dispute the transaction, its not like you don't have the money.  

      Like 2
      • PhysicsGal
      • Nerdy female homo sapien
      • physicsgal
      • 2 wk ago
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      Superbone Ha, I didn't see your comment but mine below is pretty much the same.  

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 wk ago
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      PhysicsGal Great minds think alike! 😄

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      • Ceeses
      • Ceeses
      • 2 wk ago
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      MXMOM Another example, when I moved from France to the USA. I couldn't get a phone plan, I had to take pre-paid. Simply because I didn't have any credit history. Credit cards in France are extremely rare (except the ones from shops...). And I had no credit history in the USA. I never heard about a credit score before I lived in the USA, I don't think that exists in France (it may have changed since I left).

      The fact I could live for 20+ years without needing credit or accumulating debt didn't help in any way.

      Like 2
      • MXMOM
      • MXMOM
      • 13 days ago
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      Ceeses you may or may not have heard of Dave Ramsey. Suffice to say he is apparently a multi millionaire. And apparently has no credit cards and a zero credit score.  A funny story he tells is that because of the way everyone including landlords rely on the credit score to make decisions, he would likely be turned down from renting an apartment although he can afford to buy the whole building. 

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  • ynaber2613 said:
    He is totally against credit card usage period but I think by using YNAB you can still use them if you let the budget determine your spending, however, there are studies out there that show you spend more using a credit card vs debit card vs cash in that order.

     I've always wanted them to re-do that research but adding in comparing using a credit card the YNAB way, for on budget purchases with the money set aside when you buy to pay the bill, vs the way I USED to use my credit card, charge what I want and then scramble to pay the bill when it comes.  I always paid in full until I was going through a divorce and supporting myself and my ex at the same time in different households, but I'm sue I was spending more mindlessly by not budgeting.  And then comparing YNAB credit card, regular credit card usage to cash envelopes or just cash in your wallet.  I used to use cash envelopes for my major categories at the beginning of my debt free journey, and I didn't spend that differently, except when my grocery store budget was a bit too low and I had to add up what I put in my cart at the end of the month so I can pay my bill at the checkout.  That was always fun!

    Like 3
  • You need to find a way to cut down your expenses or increase your income. It is always easier to cut expenses than increase income so we will go with that. Make a list of all your regular expenses. Categorise them under mandatory and non mandatory ones. Look at the non mandatory ones to see how you can trim some out.

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  • MXMOM said:
    I don't think a 0 credit score is attainable in Canada

     I think you may be right about that.  At least, if you want to continue to use a cell phone because cell phone/mobility carriers all report to the credit bureaus.

    Like 1
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