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I've started a new thing for my family. I know YNA...
# budgeting
m
I've started a new thing for my family. I know YNAB is supposed to make it so I shouldn't need this but I think this is easier. Pay every credit card current balance (not statement balance) on the first of the month. No more making sure auto pay worked No more trying to remember which months expenses led to my CC bill being high No more making sure there is enough money in the account for autopay Clean slate every month Keeps cc utilization down for a better credit score What do you think?
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m
You're not going to have a credit utilization history because credit utilization is based on the statement closed balance. This method will definitely help you with budgeting
s
I pay statement balance at the first (or last) of every month, along with all my other bills. Autopay is too stressful for me!
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Not sure what you mean by "which months expenses led to cc being high"
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m
I have my statement balance on auto pay
Most banks also allow for paying the current balance on autopay
m
I'll still have a closed statement balance... @microscopic-psychiatrist-27869
https://frumfinance.slack.com/archives/C04FDNE1056/p1706828772333889?thread_ts=1706828476.769179&cid=C04FDNE1056 Let's say autopay on the 25th for 2k. I expected this cc bill to be 1k per month. When did I make the overspending?
This would directly remove some of my pros in the list, so I wouldn't want to do this. https://frumfinance.slack.com/archives/C04FDNE1056/p1706828846182249?thread_ts=1706828476.769179&cid=C04FDNE1056
Unless you pay it off the day before the statement closes, you'll have a balance. I can't figure out what confusion is leading to your conclusion here. https://frumfinance.slack.com/archives/C04FDNE1056/p1706828604329249?thread_ts=1706828476.769179&cid=C04FDNE1056
f
Here is more info on credit utilization and how it affects credit score for anyone who wants: https://www.bankrate.com/finance/credit-cards/credit-utilization-ratio/#credit
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m
@fresh-pilot-83865 Its so hard to remember that people are reading this at all levels of financial knowledge. Thank you for keeping us inclusive.
n
No more making sure auto pay worked
Never failed on any of my ~10 active CCs in the past 15ish years. And the cc company would probably stand behind it, since if it fails, it would be their fault.
No more trying to remember which months expenses led to my CC bill being high
Okay, but why does this matter?
No more making sure there is enough money in the account for autopay
Ally can automatically pull from savings if checking is overdrawn. Now that the limit is 10 transactions in the savings account, I leave my checking balance pretty low
Clean slate every month
Too feel good-ey for me 😂
Keeps cc utilization down for a better credit score
Only matters if you spend a lot relative to credit lines and need to apply for credit on less than a month's notice. To me, this plan seems like a headache for little to no gain (and a loss of some not completely negligible interest), but I suppose headaches are in the head of the beholder 😁
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m
While many of us are able to keep all these numbers and processes in our heads well, not everyone can. The Niebloom household has another partner to it that isn't into finance. I'm trying this out to see if this simplifies things for them. Obviously this is a specific system for a specific issue. If you don't have an issue with the complexity of overlapping months, then the conversation is over. If you have a bill due in February from January and that is confusing to someone who is managing a February budget, then it helps with this issue.
@nutritious-raincoat-28876 don't you not do a low level budget for each month anyway?
If you don't make envelope method style budgets you aren't the target demographic of this post anyway 😛
n
Ah, the Davis household has a wonderful system where I do all the finances and no one else has any involvement - makes everyone happy 😂 But yes, you are correct about the budgeting. My budget means buying things I need and looking at my spreadsheets for "expensive extras." So I guess I wouldn't be the target demographic. But even if I did budget monthly, I would focus only on transactions and ignore cash flow, so I would still stick with my arguments
m
So my wife is not involved at all in the finances but im trying to make her in charge of the budgeting since she does all the spending and we keep going over budget.
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n
s
So once a month (later tonight!) I sit down with a spreadsheet, go through all my ccs, utilities and income. I calculate maaser, and figure out if I need to transfer any money from checking to savings (yay!) Or from savings to checking (hey it happens). You'd be surprised how variable a monthly salary can be come as certain taxes come into and out of play, and as day camp charges months before actual camp happens. This takes me about an hour. I'd love to reclaim the time, but I'm really not sure which parts I could automate without risking overdrawing my account (I'm not primarily on Ally and don't wish to be), or losing an understanding of my finances. Would appreciate input!
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t
@mysterious-tomato-10057 How much money are you saving/earning using a credit card that it is worthwhile to use it over a debit card.
b
@steep-dog-55906 I like to use a separate account called an annual account. I would guesstimate how much I would assume all the expenses that happen yearly such as Yom tov, camps, vacations etc. Add all of it together, then divide it by 12. Whatever that number is I would take that from my regular account and put it into this annual account this way I am prepared for those expenses when they arise and wont be "surprised"
s
@brief-night-11169 thanks! I do something similar, by having this buffer account. I don't account much for it, just stick in extra when I get a bonus, or have some extra in a month when the buffer is low. The time consuming part is monthly when I need to figure out how much to transfer out or in. (Was about 30 min last night which wasn't so bad! Hooray for spreadsheets)
b
@steep-dog-55906 Do it once a year for all your annual expenses. Once you figure out the amount needed, it just needs to be transferred at the beginning of the month. If you were off just readjust the amount needed for next month. It shouldn't take that long.
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n
@tall-forest-41668 I would sooner argue for leaving a much larger amount in checking, since the lost interest pales relative to cc rewards. I get a minimum of 2% back, often more, which is way more than interest on even double my monthly spending. @steep-dog-55906 maybe just ensure more than any possible expense at the beginning of each month? Is the time really worth the lost interest?
t
What do you mean by leaving a larger amount in checking? Also was asking about overspending with a credit card as well. Even people who have a written budget seem to on occasion overspend with credit cards. So has anyone done a full cost benefit analysis of the value of using a credit card.
m
@tall-forest-41668 How much money are you saving/earning using a credit card that it is worthwhile to use it over a debit card.
I am not sure what you mean by this, considering its free for me to use my credit card. Not sure what "worth it" means. We probably make ~$3k a year in credit card points, but I would use it even without that for the customer protection component. We have used that many time to for fraudulent charges or for lets say travel protection or even going beyond manufactuer warranties
If you use YNAB, I don't see how its possible to overspend on a credit card vs a debit card.
I could see myself spending less if I used cash, but definitely not by using a debit card.
@tall-forest-41668 Can you please add your first name to your profile? Thank you 🙏
t
I'm a bit confused since it seemed like you were facing an issue with overspending due to credit card use. I must've misunderstood somehow. How much would you value the credit card benefits at. 3k for rewards plus how much for everything else? And how much of that value is dependent on using it for every purchase not just specific targeted purchases (like airline tickets, or appliances)
m
I see the confusion. Here is the distinction. There is a budgeting method I teach and promote. Then there is my household. Those are different things 🙂 If you notice, my wife is not an active member of this slack 😅 We are not currently using YNAB in the way I teach others to do. 🤷‍♂️ Separate problem 🙂
Though I still don't see any charges that I think we wouldn't have if we didn't use credit cards. But it could be!
n
Yeah, that's why I don't use YNAB - it would just be satisfying my financial OCD and not actually saving me any money lol
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m
Yeah that is why I don't push it so hard in my household. I'm slowly trying to integrate it but it's not worth a massive push yet because we are pretty conservative and our monte carlo looks good
But if I was spending more than i could I would certainly be on YNAB religiously like I recommend, that just isn't my situation.
s
@nutritious-raincoat-28876 I have a reason your suggestion doesn't work but I'm also reconsidering now. I wonder if I just pick a really large number and at eom just make sure I have that in checking, and transfer the difference to savings, would be good enough and would save my time...
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m
https://frumfinance.slack.com/archives/C04FDNE1056/p1706907411763179?thread_ts=1706828476.769179&cid=C04FDNE1056 This is exactly what I used to do. I stopped for unrelated reasons but it's a great method.
n
Even better is the ally overdraft method lolsob
s
I mean you're not wrong but I'm not changing my banking just for that
n
Yeah, I'm just kidding - it's a shame other banks don't offer that
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m
I'm thinking of migrating to paying everything with my m1 savings account. There is no withdrawal limit like no 6 times max and the percentage is 5 percent so I don't even really need a checking anymore.
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f
When you say paying everything with your m1 account do you mean they have payment methods from the account (like checks or Zelle)?
m
i mean paying my credit card bills via ACH
I just did it for this whole month from that account. It was great
f
Noice!
s
Can you direct deposit your paychecks to your m1 savings account? (Or automate transfer there?)
m
yes
its basically a 5% checking account
s
Hm, maybe worth considering...
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n
Fascinating idea - that would probably completely offset the $36/year fee
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f
This is kind of a lazy question because I could probably find out on my own but is that 5% just for a promotional period or does M1 from your experience to be at the high end of APY as a standard?
m
@steep-dog-55906 You can even set up automation. Like “if there is more than 10k in the account, move the rest into my brokerage and automatically invest in VTI”
@fresh-pilot-83865 Since they launched their savings account its been at a constant 5%. Idk if it will end at some point. It’s been almost a year since they launched it
s
Ok I'll probably have more M1 questions when the time comes but this sounds promising. Thanks all!
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m
Baruch Niebloom not frum finance reminding you that if you use my link we both get 250$ lol
f
@mysterious-tomato-10057 can you repost link here?
m
Here is the non referral link for those who don’t like kickbacks https://frum.finance/m1
#transparency
f
lol I would love to interview anyone who dafka chooses the link where no one gets an extra $250
s
Oh I'd totally use the $250 but I'll point out that I'm a frequent nudger of @mysterious-tomato-10057 to make sure not to use referral links anywhere associated with frum.finance :) but I'm happy to use the referral link from a random frum finance community member who just happens to be Baruch Niebloom!
m
@steep-dog-55906 I have changed the referral link for even more clarity! https://frum.finance/m1/baruch-niebloom-personal-non-business-referral
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@steep-dog-55906 I appreciate the nudging. I hope everyone is okay with how i'm doing it.
l
To the original question: if you have a credit card closing date on say the third of the month, wouldn't you miss the window between the closing and due date?
m
Hmmm I guess I just don't have that case. You can always move your closing date around to make this work if it doesn't for you.
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