Consciously going INTO debt...

I am currently debt free. I rent. I own my crappy old van. I budget. I have a YNAB buffer and a bit of emergency fund.

Yay me.

But I also have support payments and supporting the mother of my kids while she goes to school to become a nurse. All good.

I have income. And I can cover off my expenses.

But my mom is turning 70 this year and there will be a family reunion - involving travel expenses. I dont' have this budgeted. I don't have the cash to budget it. And I don't want my kids to miss out on seeing their cousins and enjoying this special event with them.

So....I want to go into debt.

Any suggestions on this? I know it's counter-intuitive, but sometimes it's the right thing to do.

Cheers

Ryan

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  • There's nothing wrong with going into debt if you have a plan to repay it. I did a bathroom remodel that had to be done because I was having friends visit from out of state (bathroom was ripped out but I didn't have the funds saved to finish the remodel). I took a zero interest credit card advance (cost me 3%) and I am taking 18 months to pay it back. For me that was manageable and worth the peace of mind getting my bathroom done. The moral of the story is take on the debt if you can repay it within a reasonable amount of time and enjoy the reunion!

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  • Thanks for the support Jayne. Yeah, the plan will be:

    a) minimize the overall cost of the trip as much as I reasonably can

    b) pay it off with my tax refund and my extra paycheck which comes in July

    And pray my van doesn't kick the bucket this year. :)

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  • Not entirely clear on the question.  Are you asking if it's a good idea to go into debt?  Debt is a tool.  If it's something you're willing to pay for, and something you're willing to pay more for in the future because you don't have the cash now, then go for it.  So long as you're making the decision with open eyes, why not?

    Are you asking about the mechanics in YNAB?  Just categorize as normal, and pay your credit card according to the payment categories.  You'll accumulate debt on the card when you have a month rollover while the category is negative; you'll need to budget into the payment category over time to bring it back to an even keel.

    Another consideration:  You're going to debt-finance this trip.  But realize that you probably have rainy day funds set aside for things that could also be debt-financed in the worst case:  car repairs, medical expenses, home repairs, etc.  You might consider dumping those funds into your payment category, reducing the amount of debt (and therefore interest) you take on in the expected case, and incurring additional debt if you actually did need access to those funds.  Then you'll pay yourself back with no interest by refilling those categories, rather than paying the bank back with interest while that money sits around.

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  • Hi Ryan Oakley!

    I have a workshop for you: When You Have to Use A Credit Card.  

    No, debt isn't ideal, and interest payments are even worse, but sometimes life happens. 

    When debt is the answer, the key is to approach it with a goal and purpose - like you described. You'll want to find the lowest interest rate you can, minimize the amount you use and pay it off as soon as you can. 

    archbish99 makes a great point. Utilizing a portion of your emergency fund to balance out and lessen that debt would save you in the long run. That balance is up to you to decide.

     It sounds like you have a stable grasp on things, so try not to let it eat at you! Enjoy the reunion!

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  • Ryan Oakley I'm going to move this over to the Managing Debt discussion thread to see if it picks up traffic there. :)

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  • I'm not sure about interest rates, but around here we have a credit union that does good personal loans. That could be an option (I trust our credit union more than credit card companies)

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  • If you get a tax refund, can you adjust your withholdings to give you more money back in your paychecks now so you can use that money every month?  Otherwise, you're giving the government an interest-free loan for the year.

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      • jenmas
      • jenmas
      • 3 yrs ago
      • Reported - view

      Heather In general this is a good idea. However I would recommend waiting until the IRS has redone the W4 later this year and you game out 2018 withholding as employers may be making changes blind in order to meet the goal of changing withholding by Feb 15 so there is a possibility of over or under withholding this year.

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  • There's nothing amiss with venturing into the red on the off chance that you have an arrangement to reimburse it. I did a restroom rebuild that must be done on the grounds that I was having companions visit from out of state (washroom was torn out however I didn't have the assets saved to complete the redesign). I assumed a zero revenue praise card advance (cost me 3%) and I am requiring year and a half to repay it. For me that was reasonable and worth the significant serenity completing my washroom. The lesson of the story is assume the obligation on the off chance that you can reimburse it inside a sensible measure of time and appreciate the get-together!

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  • I myself just went into more debt willingly. 

    I agree with some others here. No it's not ideal to pay interest but if you know you can afford the payments and perhaps even paying it down faster than that, then if the purchase is important to you go for it.

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