12 months of YNAB… progress… is happening... Decision Time?

12 months of YNAB… progress… is happening.. Decision Time?

Started YNAB in earnest in October of 2020. Progress thus far is basically that we’ve stopped creating new debt. And fixed a lot of previous bad spending habits. (Impulse purchases still spring up, but many more are squashed)

Basically we’ve stopped adding to our credit card debt and have a general understanding of how much it costs to maintain our current life. Other than reigning in impulsive spending, we haven’t made many other changes in terms of reducing our outflows.

So overall, definitely a good year. But now, it is time to start making some progress. I feel that sense of, “It can’t be like this forever” frustration rising in me… and especially with my spouse. I think they definitely need a few carrots harvested soon or they are going to fall off the wagon. (To be clear, we have kept some spending money in the budget and neither of us are going “without”)

Some Context

Early and mid-forties; We make “good money” … so much that we just went along without ever having serious budget discussions. I did a number of budget systems, listened to Dave Ramsey’s TMM audiobook (twice!), and even made a really sophisticated google spreadsheet that was meant to forecast and turned into a yearly calendar of spending… it was all really enforcing a bad system (oh, how much I’ve learned in 12 months) of looking to see if the amount in the monthly paychecks was bigger than the monthly bills and then moving on with life. (It always was… yet credit cards kept slowly climbing up… how weird.) I tried a number of things, but none really stuck with my spouse. And without them onboard, none of them really stuck with me. (Heck, I even got a YNAB 4 license through a software bundle back in 2014! I bought a lot of software back then… part of the issue, I’m sure.)

There were many other things that contributed to our current situation, like, we managed our money separately without ever really talking about anything and who was paying for what when.

So, my spouse finally hit their limit last October. Not sure how or why, but they were at their wits end and willing to do or try anything. I still our had our monthly expenses calendar and was keeping it up to date, but I knew that wasn’t going to work. Enter YNAB.

I started building the budget in October 2020 and we started using it starting November 1st, 2020. Our YNAB renewal date is November 29th. (it’s in the budget!)

Current State

Credit Card Debt
October 2020 - $75k
October 2021 - $63k
(24k paid in, 12k reduced)

Other debt current balance
HELOC - $8k
House disaster repair Loan - $11k

Not counted
Mortgage - $74k (8 years left)

That is just the debt and not our monthly expenses. The only minor, good news was that after “doing the budget”, we had enough to pay credit card minimums and monthly bills as well as what we believed to True Expenses. (Oh… how much we’ve learned!) and begin a trickle into an emergency fund.

I watched all the YNAB YouTube videos (Thank You Hannah, and Ben and Ernie… and Nick True), I listened to Jesse’s YNAB podcasts, I even dusted off Total Money Makeover audiobook (I didn’t like tone, but some of the info was still pretty good)

Thing is, now I want to start accelerating this puppy.
But it feels like since the pressure is off or released to where my spouse isn’t having a breakdown, I’m back on the front lines by myself.
They get it, but don’t really *get it*… The cooperation is there, but not the “let’s get radical” and really blast out of the hole.

The thing that sticks in my craw
We pay $2k in credit card minimum payments monthly
$1 of that comes back in interest.
So $2k out, $1k benefit (that’s why we went from 75 to 63… there is no spending on these cards for the last 12 months, but they are still costing us)

Even with pinching a couple hundred out of the budget (which would be the “let’s get radical”), I don’t think it moves the needle all that much.

Debt Repayment
So I modeled out our debt payments
https://www.vertex42.com/Calculators/debt-reduction-calculator.html

Potential Tomorrow?

If I took out a 401k loan for $40k, that would squash a bunch of high interest

Strategy

It would accelerate our departure from debt by only 3 months…
BUT, it would reduce our interest paid by $16k
It would also greatly reduce the number of monthly payments and the general stress involved with multiple credit card bills\dates

Understanding that we would lose some compounding interest by taking out 40K
calculated that I would lose potentially about $7k in savings in the 401k
(https://www.vertex42.com/Calculators/compound-interest-calculator.html)
That would reduce our overall savings down to $9k

 

Here are the PROs as I see it

  • The math seems to work out pretty okay. (of course if the market outperforms, I lose more… though it would have to perform at 15% for me to lose all the benefits)
  • We’ve gone 12 months without putting a charge / increasing the balance on any of these cards
  • This doesn’t increase our monthly outflow. (including continuing contributions to 401k)
  • This isn’t a complete drain of 401k funds (40K out of total of 310K of just my 401K) (I’m in my early 40s)
  • Removal of stress/management of 5 monthly payments (which granted are on autopay but require account money moving, YNABing, etc…)
  • 9k interest savings (though I’m not interested in that weighing that too heavily, it does mitigate the “losing out on compound interest”)

And the CONS

  • 401k loan repayment danger if job loss (I would think that the 401k loan repayment danger in the event of job loss ALSO exists in the lost job and $65k credit card debt world.)
  • Not “learning the lesson” (Though we’ve had 12 consecutive months of not accruing new debt using YNAB)
  • Me using my 401k to largely pay off the debts of my spouse (though we’re married 15 years, so these debts are technically both ours as are the 401ks, right?)
  • Missing that market growth

I KNOW the 401k loans are greatly frowned upon.
But they are usually because they are seen as the easy way out in terms of not having managed the overall spending and budget.
We have a solid YNAB budget, with money going to most true expenses (even things like YNAB and AAA renewals)
We’re slowly building up an emergency fund, but it’s slow going due to everything you see above.

I know we, as YNABers,  have lots of subjective feelings on 401k Loans (DON’T DO IT, pinch more, side hustle etc…)
I’ve read as many threads as I could find on the forums, but I’ve not seen the math behind any of them or any nitty-gritty details.

Hopefully someone in a similar situation can use the above method and links as some resources to do their math.

For the record, I’ve discussed with my spouse and they are of the, “if it’ll work” mindset… though they aren’t interested in splitting the 401k loan into 20k for each of us.

I honestly haven’t decided either way, though it may sound like I have decided to do the loan… pushing the button is a whole different affair.

(if you’ve made it this far, thank you… you must be a Super YNAB Angel)

So I guess, in the end, my question is, are there any considerations I am missing? Something I haven’t thought of that I should add into the overall decision making process?

Thank you so much for even being interested. And thanks for the countless amount of advice I've gotten from this forum.

(also, if you found this even mildly helpful or similar to your situation, I'd be interested to hear about it.)

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  • Is there any way you can negotiate interest rates to be lower?  That might help reduce the amount you're losing in interest.  Sometimes all it takes is a phone call, and they'll reduce it.

    worth a shot?

    Like 1
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      Bruce Absolutely! I was able to do that with one. (Down to 13.9.. yippee 😐) But you are correct we should be able to do it with a few more. 

      Like
  • Well done on the progress Believe   And I did read to the end...I also write long posts in YNAB, knowing full well that no-one else may read it.  This stuff is hard, and leaning into it is really hard. 

    The Numbers

    I can't shed any light on the maths, because I'm more interested in the motivations and behaviours associated with finances and what will make this year's behaviour long term.  People aren't rational and don't behave rationally.    The numbers are just useful to help you understand consequences.

    Similarly the 0% and switch to lower rates makes lots of sense.  

    What do I think?

    My gut instinct here is that I don't think you should do this, as there is no incentive to keep paying off what is a substantial amount of remaining debt.  What is to stop something shifting for your spouse and spending increasing again? Or some real emergency where you need to use that 401k loan which you can't use 

    That said, I know the numbers stack up (despite the issues re: secured vs unsecured and retirement and divorce etc etc)  and if this gives you an incentive then do so. 

    But the real issue remains that you need to actually cut some things out and turn them into debt repayments, not necessary radically but at least significantly.  You're not making real progress on the debts yet as it took you a year to turn this ship around. 

    Now is the time to dial up a bunch of strategies for the remaining credit card debt and to get rid of the $40k so you can start paying for your future not your past. 

    What would get your partner more involved?

    I'm single these days so can't speak with great knowledge but I'm going to anyway....  Your partner needs to get some skin in the game even if the loan goes ahead.  I feel strongly that if there's a loan it should be 50:50 or some other significant trade off.     

    • What will they agree to do or give up if you go ahead with this loan?
    • What assets do you both or they have that can be sold? 
    • What would work with them in terms of agreeing to hit one of the debts hard for a while?
    • What are they willing to give up to live with the fact your current spending is unsustainable? 
    • What do they think would happen in case of an emergency? 

    I'm sure you've already read and watched all the YNAB stuff and read all the forums on how to get your partner involved with YNAB, but maybe another next step is to revisit 

    For Me

    I'm not terribly wise, but I have had the experience of paying down all my credit cards some years ago (using YNAB)  and then recreating the debt in 2019 when I had a major financial and then health crisis.  Then COVID hit my business and I had no backlog or remaining credit to help.    I'm slowing turning it around now with a contract saving me from having to sell my investment property - which was funded under a much higher income.

    I have changed my expense quite profile a bit - but there are still choices to make to really hit back on the debts - which are now slowly going down.   Am I happy to keep working a contract like this? (assuming i can find another one in January)

    I'm just about finished paying back some arrears and some other big debts, plus allocating enough for true expenses.  Next is to save a month or two of income replacement and keep making regular payments on the remaining debts. I also want to keep saving for true expenses.  I'm also going to try again re: the high interest credit card. 

    I know motivation is going to be hard for me as I'm not paying off $1k here or there each pay day.  So I'm also thinking about what would help.  Mini milestones like $1k paid off and debtris charts? Rewards at each $5k?  Old credit card bills where I cross of what I've just paid for? I did the last one in 2011 back when we had paper statements.  A temporary challenge? 

    Best wishes for what ever you decide.  You've got this!  Your spouse is very lucky to have you.

    Like 2
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • 1
      • Reported - view

      Yes I can Thank you for the thoughtful feedback. And for sharing your ups and downs. We definitely don't want this to be a temporary removal of debt. And glad you are righting things, even if it is "once again"

      I agree with much of what you said with regards to maintaining the change in behavior. And sort of searching for guarantees. And I totally understand the idea of earning our way out of debt, so to speak. Part of our YNAB experiences so far have been budgeting and building up those bigger funds (like childcare, Christmas, Emergency Fund) and not touching them. It can be pretty tempting to grab hold of that extra money that is "just sitting there"... which is totally what the Previous Us has done for many years (married 15 years.) Except now it isn't "just sitting there", it's waiting to do its job. Totally different than a number in a bank account.

      My partner is involved, just not YNAB Radicalized. They are on-board and playing the rules, but not interested in nerding out and/or fully optimizing.  

      This past year has been quite a difference experience than of any time in our lives. We have had a plan. We've had a method. And we've actually discussed and talked about the spending of dollars in our life. I can only think this first year has been practice and it's only going to get better from here. 

      The good thing about this, I guess, is this doesn't have to be a decision that has to get made today. We can certainly continue to float along for a bit, seeing if we can implement some other changes. In a few months, all the work done above will be able to be slightly modified to be brought up to that month. The difficult part has now been done, in a way. (But, I did start this work >3 months ago in July, if that gives you any idea of how long I've been gathering numbers and chewing on this post)

      Like 1
      • Yes I can
      • yesican2020
      • 1 mth ago
      • Reported - view

      Believe I get the feeling of how much of a shift it has been, yet still feeling like the hard work is ahead of us.    And well done on building those reserves.

      I'm amazed at how differently I feel about the money which is allocated to paying next month's water bill.  I had to WAM yesterday to pay a vet bill that I was planning to fund in this Friday's budget.  The appt wasn't until next week, but we moved it forward as my dog was unwell yesterday.  And I really felt like the money wasn't there, despite the amount being in my bank account.   Roll on emergency fund!!

      Also, glad your partner is onboard even if he's not joined the cult - I love the phrase "YNAB radicalised"

      Like
  • (Minor) Update... Noticed I did not include the cost of the loan. After modeling it on the 401k site, the cost would be $156.25.

    Establishment Fee $50.00
    Quarterly Maintenance Fee $6.25
    Total Fees (Loan Establishment + Quarterly Maintenance Fees) $156.25
    Like
  • It sounds like you're highly motivated by minimizing the total amount of interest you're incurring, but it also sounds like you're growing weary of the debt paydown because you can't see the progress - that might be because haven't been able to get rid of any one debt entirely, and won't for another year with your current plan (and then another year and a half after that!).

    I wonder if it might help you to try the snowball method for at least some of your 13%+ interest loans, to gain some momentum (and cash flow) from smashing through several loans over the course of 2 years. Run a couple scenarios through undebt.it, but I think you could probably get through each of the smaller credit card balances every 6-8 months and then by October of 2023 have three fewer bills every month. All those minimum payments, plus the original snowball, can go towards the larger debts and you'll hopefully be energized by the feeling of accomplishment every time you close out an account. Either way you've got a few years to go on this journey, so I vote for whatever method keeps you motivated to keep up the fight!

    [I'm not gonna touch the 401k loan because I don't know enough about them, but it seems like the above method might help with some of the more emotional frustration you're feeling right now and have less overall risk? I also think it is a red flag that the debt is mostly your spouse's but you're the only one willing to pull from your own 401k]

    Like 2
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • 1
      • Reported - view

      mandiferous Thanks for the vote of confidence. It’s not all my spouse’s debt, but theirs do get the payoff since they are the highest interest. I got that big boy Amex though and a few of the little ones.

      I only called it out in the sense that I thought it was relevant to the emotional side of the decision that you are rightly tugging on…

      Regarding the high interest versus low balance decision, I had a similar thought as you as I thought we needed to see something. And so, we did manage to quickly squash one other card (yet another department store card) by throwing the unexpected ‘windfalls’ of the COVID stimulus checks at it. And it did feel great. We even had a celebration. But progress has been slow since then. I think we could reduce down one more pretty quickly, but it gains just $31 onto the snowball. (Which trust me, I do remember when $31 was a big deal in this process!)

      I do think that is a valid consideration. And I think it yields us a similar result but without the potential $9k interest savings since we would be going snowball and leaving things like citi and REI at over $10k and 20% until the end. 

      Funny, with how all the numbers and everything work out… it seems that we could make this “quick decision” and still have to live with for nearly the same amount of time as not making the decision at all and staying on our same course. It’s just a matter of how much it costs at the end. 

      Like 1
  • Just one small comment: why don't you keep the same monthly payment between the case without and with the 401K? I understand the min. payments will reduce but instead of cashing in the difference for yourself, why not add the difference to the debt repayment? It would result in the debt being paid even sooner.

    Or are you also looking at freeing some cashflow?

    Like 2
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      Hi Ceeses … Yes… the monthly payment from before/after does decrease by $150 (from $2250 to $2100) but both are employing the “debt snowball” type of method where the payment from the recently zeroed account is rolled into paying the next chosen debt. Just it is called the ‘Avalanche’, I guess, since it is going after the high interest debt first rather than the smallest debt. 
      I could’ve kept things at the $2250, but my plan was to roll that $150 difference into monthly emergency fund build up since that has been so slow going. 

      Like
    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 1 mth ago
    • 2
    • Reported - view

    Have you verified that you can continue contributions while you have an outstanding 401k loan?

    How much are you contributing? What (if any) is the employer match?

    You will be taxed on the withdrawal of the interest paid to the 401k loan because it is post-tax money that will be treated as pre-tax upon withdrawal. This means it is essentially double taxed. That is a hidden cost.

    Like 2
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      nolesrule I do need to verify that I can continue to contribute with an active loan. Thanks for that. (I guess I just figured I could. But need to verify.) It's on the list, thanks!

      I'm currently contributing 12.5%, there is no employer match (employer provides a pension instead.)
      I toyed with the idea of decreasing contributions to increase debt payoff, but I do not like that for a number fo reasons. (The numbers didn't change all that much after considering pre-tax contributions versus post-tax debt payoff.  And just generally part of staying as close to "not robbing from the future" as possible.)

      Yeah... I considered that... the interest will be $3,556, so I don't think it is too huge of a tax liability, especially  once all that debt money starts going to future investments and savings. But you are right... definitely hidden. 

      Like
  • Hey Believe ! I don't have any thoughts on your exact path to paying off your debt, but I just want to throw some encouragement your way. Those first years of debt paydown are. so. slow. So. Slow. But it really is exponential. Even though you haven't made much visible progress on paying down your debt, you've made massive progress by not relying on your credit cards. By funding your true expenses. By establishing an emergency fund - well done!! Regardless of the way you tackle your debt, a payoff by 2025-26 is huge! 

    Like 3
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • 1
      • Reported - view

      Thanks Marisa 

      Yeah... it feels kind of slow, certainly. But like I mentioned, even this loan solution doesn't speed it up... it just changes it a little. Which is what to me is the most interesting. So much of the reflex is to try to get this stuff gone FAST! However, it's all a process no matter how you slice it. Unless one comes into a major windfall, the money one has is the money one has.

      In my view, this simplifies some things for us and moves our risk to a different place. (With a small benefit of ultimately paying less interest if we stick to the plan)

      But again, there is finally a plan and a method and a tool and a support system... so, feeling pretty optimistic! 

      Like 1
  • 401(k) loan greatly increases your personal risk, reduces your investment return, and moves the needle by only three months. 

    No thank you. Get really good at the balance transfer game instead. Once you're done paying off credit cards, learn to productively use credit card float in YNAB to accelerate paying off the installment loans. 

    Also without looking at the rest of your budget, I'm going to guess there's more money for your snowball without even having to go hair on fire Dave Ramsey style. People who are deep in debt because they have no wiggle room and have had to charge things to get by do not end up owing $10,000 to REI. You need to get more serious about paying these down if you're serious about paying them down, not shift them to a different kind of more risky debt vehicle. 

    Like 4
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      WordTenor Thanks for the honesty. 

      I'm not looking to get good at floating debt... and I seriously don't love the idea of opening more accounts. I want less accounts to handle. Part of what got us here was not managing accounts. Taking a balance transfer that says "pay off this 10k in 12 months or else interest" means taking a minimum payment of 335/mo up to 833/mo just for that one debt... and then trying to find $500 extra in the budget while maintaining everything else. Or else, managing to float that thing somewhere else and then dealing with that account and those terms... leading to a bunch of frankly, yucky administration that isn't going to remove any stress.

      I'd rather keep on our current trajectory with slowly paying and trickling off the debt 

      And I get your point of potentially living above our means, but it's not like we have $10k of REI gear laying around or $6k of unopened Amazon boxes. As you know, these branded department store cards can be used anywhere and for anything. Yes... we could pinch an extra 200-300 out of the budget... and it's not that we haven't or aren't or won't stop doing that. 

      Like
      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 1 mth ago
      • 1
      • Reported - view

      Believe You're looking at the math incorrectly and perhaps confusing balance transfers and "0% financing" offers. You are not obligated to pay back a 0% balance transfer within the time or else interest. They serve as interest holidays on part of your debt which in turn, allow you to move the needle on other debts. "0% same as cash" requires you to make the payment each month or else get slammed. Balance transfers stay at their promotional APR and then eventually start charging the new APR, but by that time, you will have made progress on some the loans you can't put at 0%. 

      Using YNAB (you did post this in a YNAB forum, after all) keeping track of many accounts is simple. You're making the minimum payment on all but one, so those are all auto-scheduled, budgeted, and fired. Only one account gets the shoulder to the wheel at at a time; that's where all your debt reduction money goes. 

      Be honest with yourself, are you just looking for a warm fuzzy of feeling like you didn't get yourself in trouble with debt, or are you looking to solve the problem? Even the tiny moves you aren't willing to make here suggest that you're after the warm fuzzy. E.g. if you have $2250 to make payments before the 401(k) loan, you have $2250 to make payments after the 401(k) loan. In no mathematical world does it make sense to stuff $150/mo in an account earning less than 1% interest while you're being charged far more than that each month in interest. 

      Don't be after the warm fuzzy. Get after it and do what it takes to get your spouse on board with the plan. You aren't even adding anything to your snowball in this math! 

      Like 1
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      WordTenor Perhaps I am looking at it wrong... 

      As a start, yes... all the credit card minimums are already set to autopay, though their budgeted amount is what their minimum payment was in Nov 2020, then when the auto-pay takes out less, the excess is rolled into a snowball category which is then thrown at the highest (so while Barclay is $31, $37 is budgeted, and the $6 rolls into the category to be thrown into an extra payment)

      And yes, that tracking is all thanks to YNAB... and Nick True for the lessons.

      Onto the real point, balance transfers and the math... The good folks at citibank are offering a balance transfer to a card I have managed to not have a balance on for almost 2 years. This card has a $5k limit. Here are the balance transfer terms... 


      APR for Check Transactions

      0% (Promotional APR on transferred balances until 9/1/2022).  

      After 9/1/2022, you will be charged the standard variable APR for purchases, currently 28.99%. This APR will vary with the market based on the Prime rate.


      Paying Interest

      We will begin charging interest on the date the transaction posts to your account. (The interest charge will be $0 while the promotional APR is 0%.)


      So my understanding is that if I transfer $5k to this card, this $5K must be paid before September 1, 2022. Or the interest they started charging will be added to the balance. Unless of course the Charging Interest part only refers to any new charges. I can't find words in the offer that say, "No interest is charged on the amount transferred... ever"

      I can say there won't be any additional charges put on the card other than the balance transfer. 

      And yes, you are absolutely correct that there is a warm fuzzy involved here. It isn't the driving factor (which is why I did all the homework above) but I'd be lying if I said it was not a factor at all.
       

      Like
      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 1 mth ago
      • 5
      • Reported - view

      Believe 

      Believe said:
      The interest charge will be $0 while the promotional APR is 0%.

       They are adding a $0 interest charge for all the dates that are included in the promotional APR date. Every day that it is in the promotional APR, they will add $0 of interest. On 10/28/21, you transfer $5K. On 8/31/22, that balance will be $5K + (365 * $0) or $5K. 

      On 9/1/22, they compound (28.99/365)% of interest, and your balance becomes $5,003.28. 

      In the meantime, the minimum payment on that amount is substantially lower, allowing you to pay a higher interest card at a rate that actually chews away at the principal instead of the 50% interest trap you're currently mired in. 

      Like 5
      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 1 mth ago
      • 1
      • Reported - view

      Honestly that information alone seriously changes your situation. You've just put your Old Navy Debt and your Chase debt at 0% (trading two accounts for one, I may add) and added $104 to your snowball for a year in one move. I'd take advantage of that 0% BT yesterday. Lean with that snowball amount + the difference in your original calculation, and you're adding $222 per month next year, which retires the Barclay before the 0% is up. 

      Like 1
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      WordTenor it's food for thought certainly. However, I have some concern over it all.

      It is close to what I was thinking... which is 28.99% kicks in on whatever is left on that $5,000. Which means, if I got it down to even $1,000. I'm facing $1,000 at what is now my highest interest rate. And to get it down to $1,000, I'd have to pay $400/mo on it. 

      OR... I have to have another sweet, sweet balance transfer lined up to move that money before the 28.99% kicks in. 

      I get that I can throw whatever is freed up at higher interest debt in the meantime. But this now introduces a ticking clock. 

      Thank you though... it is certainly another perspective to consider. 

      Maybe 5K isn't the answer... it's a smaller amount for a smaller impact... and a smaller risk of a ticking clock. 

      Like
      • bevocat
      • Sometimes, It Just Sucks to Be You
      • bevocat
      • 1 mth ago
      • 2
      • Reported - view

      Believe I'm given to understand that that ticking clock will light the fire under your rear that you need. I got myself out of credit card debt in 2016 taking advantage of 0% balance transfers. 

       

      DO NOT under any circumstances charge anything else to that card while you're paying on the balance transfer special rate. You will get charged that ruinous rate on it.

       

      You can do this. You cannot do this without change.

      Like 2
      • Ceeses
      • Ceeses
      • 1 mth ago
      • 2
      • Reported - view

      Believe I don't think you get what WordTenor is saying. I believe they say to do this:

      1. Do a 0% balance transfer of your highest interest debt.

      2. Don't pay a cent towards that 0% card and snowball the min. payment of the previous debts to your now highest interest debt.

      3. Just before the 0% promotional rate stops, do another 0% balance transfer of your highest interest debt (in this case from the 0% card to another). 

      4. Keep paying only the debt that has interest.

      There is some work involved as you need to open and close credit card accounts every year or so. But it can result in a good reduction of your overall interest rate and allows you to pay down debts faster. That last point might motivate your spouse.

      Like 2
      • Vibrant
      • No more counting dollars, we'll be counting stars
      • vibrant
      • 1 mth ago
      • 1
      • Reported - view

      Ceeses tiny quibble, OP almost certainly would need  to make the minimum payments on the 0% card or the default rate will kick in. 

      Like 1
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      @Ceeses  I get it. It’s step #3 that I have a problem with… that ticking clock and interest rate of doom lurking over the horizon. As well as the closing of “open and close credit card accounts every year or so”
       

      But it is something to think about. 

      Like
    • Believe I would actually not recommend opening and closing accounts each time. Since you've established a good habit of not adding to the debt, I would keep the accounts active. Reasons:

      • opening and closing accounts each time will will lower your credit score and make it harder for you to find and receive good balance transfer offers.
      • keeping the accounts open will lower your credit utilization rate and increase your credit score
      • better credit score = better balance transfer offers; just keep checking your $0 balance accounts for special offers. When I say better offers, I mean that balance transfer fees will decrease and they'll offer longer promo periods
      • better credit score also puts you in a better position to keep negotiating for lowered interest rates on the other accounts and for better "post-promotional period" rates
      Like 1
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • 1
      • Reported - view

      Thanks mandiferous 

      Yeah... I wasn't super into the idea of opening and closing accounts. I have a between 720 and 739 FICO depending on which of the credit card "tools" I use. I think you have it on the nose that less utilization will be the key. 

      Like 1
  • I would lean against the 401K loan because as previously mentioned it may be too easy and the debt will be ran back up.  Cutting expenses and sacrificing will hopefully be a reminder as to why  y’all would never want to run the credit cards up again.  I might would keep a running total somewhere visible of the payment amount and how much of that payment went to interest.  That would motivate me to cut out all unnecessary spending. Good luck whichever way you choose. 

    Like
    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 1 mth ago
    • 1
    • Reported - view

    I think you might benefit from a neutral budget review. It might be painful but could help find leaks in your existing budget by having others review it.

    Like 1
    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 1 mth ago
    • 4
    • Reported - view
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • Reported - view

      nolesrule Absolutely understood. And I realize it is shifting risk. But I guess I feel it is less risk than the 4-5 large credit card balances it would be replacing.
      The thought around not decreasing contributions is that the money going in is not taxed and has more inherent value for the future (12.5% pre-tax is more valuable than 12.5% after-tax) I bet there is probably some fun math that could be done to calculate the difference $200 pretax dollars makes when compared to say $150 after-tax dollars.
      But, as I solicited "factors I haven't thought about" both you and WordTenor have offered valuable views.  So Thank You.

      Like
      • bevocat
      • Sometimes, It Just Sucks to Be You
      • bevocat
      • 1 mth ago
      • 3
      • Reported - view

      Believe You can't finance retirement.

      If god forbid you default on consumer debt, your retirement savings would still be safe. Do not trade unsecured debt for secured debt.

      Like 3
  • mandiferous said:
    I wonder if it might help you to try the snowball method for at least some of your 13%+ interest loans

     This is what I suggest.  You have made a few great strides. No new debt. Woo hoo!!!!  

    I think you are nerding  out too much.  I am an accountant so I run the numbers. And I wanted to get intense on the debt. And I couldn’t get hubby excited.  

    Fast forward to now. 2 months away from last credit card being paid. Hubby is so excited about YNAB he shows it to his friends.  

    My suggestion is to get rid of that Old Navy debt and focus everything on it. Is your wife into games? Maybe one of the debt payoff colouring charts would help motivate her. It’s amazing what some of us will do to be able to colour an extra square. 

    No to the 401K loan.  Using debt to deal with debt is not a good plan. However, you should look into a balance transfer offer to help some of that interest.  

    You say you make good money. Maybe its time to squeeze a little on something. And then every penny of that goes to Old Navy.  Or sell some stuff.  Not Dave Ramsey level but is there anything around that can raise a few bucks?

    I could never get my husband to be intense on cutting expenses but I did give him way more leeway than I wanted. You say you have enough in the spending categories so you don’t have to go without. I don’t know what the rest of the budget looks like, but I bet you could shave a dollar off a category here and there.  Not drastic. 

    Basically you need to move to the next level.  Not crazy level just up the game.  Have you tried using just cash? We did that for a year and it made a huge difference. 

    I feel you on those total combined payments. But right now you have a log jam and you need to get rid of one of those debts.  And then have a celebration. So the month you pay off the Old Navy card take the payment amount that next month and spend it on something awesome. Dinner out. Theatre. Something you love. And then the next month throw that at the next debt.  

    it takes time. And restraint.  But its totally worth it. 

    Like 5
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • 1
      • Reported - view

      MXMOM Thanks for the perspective. Yeah... I agree with your overall sentiment. It takes time. And I am at the "let's get going" part of the curve. Perhaps, in the stages, I am at "Denial" at how long it should take. and I am hesitant to move to "Acceptance."  😂
      Maybe, I wasn't super clear, but there is a bit of a debt snowball.. but it's only at $150 extra per month... which just... is... so... little. Yeah. I know it adds up over time. But... ugh... 
      So I'll see... we'll hold steady for now... and look for some small gains. I'm still not super excited about playing the shuffling game with balance transfers. But we'll stick with this and maybe as breathing room opens, it'll feel different. 
       

      Like 1
      • Vibrant
      • No more counting dollars, we'll be counting stars
      • vibrant
      • 1 mth ago
      • 3
      • Reported - view

      Believe While we know that mathematically it's the most efficient to go largest interest to smallest,  it sounds like you would really benefit from the psychological wins of tackling the smaller debts first, getting them off your plate, and seeing your snowball grow. 

      Traditional snowball payoff schedule:

       

      Yes, it's about $1600 more in interest compared to the avalanche. But instead of grinding away at the REI balance for two years and treading water on all the rest, you can knock out four balances in the same amount of time.

      Although actually, I like this schedule better, it saves a over grand in interest (now you're only ~$450 over the avalanche method) and spaces out those later, bigger balance payoff "wins" even more.

        

      Obviously you don't have to follow this *exact* order (heck I changed it three times before posting and I still don't know if it's "perfect" LOL), my point was more, play with the calculator and find an order that is the right balance of "save on interest" and "feels like progress" for you.

      Just food for thought.

      Like 3
      • Believe
      • Orange_Memory.9
      • 1 mth ago
      • 1
      • Reported - view

      Vibrant Nice to know I'm not the only one playing scrabble tiles with my creditors! 🤪

      I've changed it around about a hundred times... and depending on my mood, I come up with a different "right answer" ... We actually did do some lower dollar amount debts in the beginning. Got rid of a dept store card and a lingering car loan. And it did feel pretty good. That's sort of the point where the initial post picks up.. sort of...  "Yeah, this is going 'ok', but could it be going better?"

      Like 1
    • Vibrant I did the same series of debt repayment configurations and also landed at the exact order you did! This order would free up so much more cash in smaller increments, which is going to a) feel great, and b) be more realistic if life circumstances change and require a change in the debt payoff plan. Plus, sometimes life circumstances are positive and I would hate to encourage somebody to take out a loan that would prevent them from seeking another job for years (and possibly also reduce any leverage they have for raises in the current job).

      Like
  • Have you thought about refinancing your mortgage? I would do that before a 401k loan. 

    Agreed that a budget review might help you get motivated. $150 is just $150  . . . . but the mentality of squeezing $150 wherever you can is a transformation.

    Like 2
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