HELP! Avoid Debt or Build True Expenses
We've just been trying to put out fires in our budget.
I restarted with YNAB last month after an awful August and September. We drained our savings and true expense categories to pay for $2,000 in vet bills and $1,000 in dental bills.
Now we have a car repair that I have absolutely no idea how expensive it'll be, and we have exactly $450 to our name.
So my question is, do I just put this on our credit card and start building up our true expenses/emergency fund again? Or do I just continue to put out the fires the best I can but have no savings/true expense money?
Putting out fires sucks. I've been there, and for many years it felt like two steps forward and three steps back.
This really is only something that you can answer because questions like this a very personal.
But here's some things to think about:
Between now and next pay day, what MUST be paid?
Of those things what can go onto a credit card, and what must be paid out of the checking account?
Is there enough in the checking account to cover those expenses (and could any of them be shifted to a CC instead?)
Once you take a look at that, you can decide what needs to be prioritized to come out of the checking account vs what gets put on the CC. You'll probably slide backwards into debt. But guess what? THIS time, you'll do it knowing EXACTLY how much you are back sliding, and you'll know how to look forward and prioritize for the future.
Being really aware of what is debt vs what you have the funds to cover is really important, and even though it SUCKS to go through it, going through it with eyes wide open is way better than wondering if something is going to bounce, which costs WAY more money in the long run anyway.
I hope this helps a little bit, even if it doesn't directly answer your questions.
Thanks for your response!
So we get paid on Wednesday. With that paycheck we can cover all our bills for the first half of the month and possibly put a little into the emergency fund.
My main question was I have $430 (that's draining everything in our account, plus @$20 in gas) in the auto maintenance category today. If it doesn't cover it all I'm considering just letting the remaining roll over into debt so I can build my other categories back up. The alternative would be to cover the overspending as much as I can with the paycheck on Wednesday and then have $0 in savings.
However, I feel like if we don't get our savings back on track, we'll be stuck in this cycle forever.
I use to be a die hard Dave Ramsey follower, and I believe even he would agree to stop everything until you have your baby emergency fund back in place. Who knows, maybe this car repair won't be as bad as I'm imagining it to be and I can just cover it today and move on.
I also have a hard time when overspending occurs that I want to restart the entire budget instead of seeing that negative category stare at me. It's a very bad habit.
I also have a hard time when overspending occurs that I want to restart the entire budget instead of seeing that negative category stare at me.
Oh man, I would have to restart my budget all the time if I did that! Remind yourself, Rule 3 is part of the rules, moving money to cover overspending is not breaking the rules, it is following the rules. Yes, when you're low on money and high on spending priorities budgeting is going to much harder than when it's vice versa, but as mentioned by someone else above, at least you're paying attention and not letting it happen without being mindful of it.
I think you should wait till you know how much the car repair will cost, then decide what to do about it. If it were me, if I couldn't cover it now I would probably put it on a credit card and then try to pay it off next month before the due date, if that was my only balance on the card, to avoid paying interest. But yeah, you're in a bind right now with cash flow and it would be nice if Murphy would leave you alone for a little while so you can get things back in shape. If there's one thing you've learned it the value of having funded your true expenses.
Good luck! I hope your car repair is much less than you imagine it will be.
I want to restart the entire budget instead of seeing that negative category stare at me
If it was a conscious choice to finance something, then so be it. Cover the negative from the CC Payment category. (Make offsetting budget entries, negative on the Payment category.) This makes that a budgeted purchase, which flows the funds right back to the CC Payment... putting it right back where it started. The best part: no nagging for something you CHOSE to do.
As with any reallocation, there's a consequence to that source category. When you reallocate from the CC Payment category, you're merely stating, "Maintaining my debt at present level is less important than <insert destination category here>." Your priorities shape the budget.
do I just put this on our credit card
This is easy... yes.
Whether you pay it off or not is a different question, but by putting it on the card, you guarantee that you have that option.
lindsfin this is really hard but the good news is that you actually had some money saved and have choices. I’m also new to YNAB - five months in - and similar issues with heavy true expenses early on without time to save. If you read the forums it seems pretty common. Over time it will get better and you’ll be slowly get ahead. Hang in there.
Oh, ugh! I hope the vet and dental expenses were for things that have improved, and that the car repair doesn't eat up your whole remaining savings.
What I did in your situation was to put the repair on the credit card, and continue on with the plan that I had set for us. I was able to fund true expenses and build the emergency fund tiny bit by tiny bit, while throwing money at the credit card until it was done.
The advice given to me when I was in your exact situation was that building up your true expenses will function much like a traditional emergency fund would, so building them both up simultaneously wasn't really necessary. I have found that to be entirely true, so I focused on fully funding True Expenses and Debt Reduction, and put a little ($50) aside each month toward the emergency fund.
As the pandemic wore on, I focused on aging my money and slowed the debt payments down, but now that I've aged my money 90 days, I'm boosting up the debt payments again.
Ultimately, I've decided that it's best to do what "feels" right to me. If having cash on hand "feels" better to you than paying down debt does, then build up that emergency fund. If staying debt free "feels" better, then focus on that. If you ignore your gut feelings on this, you'll "feel" like you're doing the wrong thing no matter who advised you to do it.
Best of luck to you!