Living Within Your Means: The key that unlocks the door to debt freedom, peace of mind, and buying any Halloween costume you want.

Earlier this year, Jenny and Aaron were feeling like their income was at risk. Aaron’s position at work didn’t feel stable, and they both started feeling like a transfer within the company would solidify things. Without getting into detail, I can say their feelings seem valid, and I’d probably have made the same move given the same circumstances.

They applied for a transfer across the country that would keep Aaron in the same position, but working in a more stable office with realistic opportunities for advancement he had earned through his great performance.

The challenge would be the cost of the move, which the company would not cover.

With that backstory in place, let me give you Jenny and Aaron’s debt balances at the time they were making the decision to sell their house and move:

Loan Balance Interest Rate
Credit Card 1 $1,484.02 16.24%
Credit Card 2 $3,600.00 17.99%
Credit Card 3 $4,625.00 12.99%
Car $10,441.24 4.5%
Total $20,150.26

We’re looking at a little over $20,000 in debt. I’ve left the payments out of the table for now, because what I want to tackle with today’s post is the debt balances, and the decision-making process that protected these balances when they could have been eliminated.

See, those balances are as of February 28, 2013. It happens that January and February gave Jenny and Aaron a big cash infusion:

  • January was a three-paycheck month for Aaron, who’s paid bi-weekly (giving them an extra $1,400 and change above their typical monthly income).
  • They received $6,179 in tax refunds.
  • Aaron received a $3,000 bonus at work.

Jenny and Aaron are tithe-payers, so 10% of that cash went to their church.

Alright, so what’s the approximate “score” at that point in time?

  • $9,709 in credit card balances.
  • $9,521 in cash surplus (net of tithing).

Now, keep in mind, Aaron’s normal bi-weekly paychecks are coming in, so none of this bonus cash should be necessary for day-to-day living.

Jenny, I have to talk directly to you right now, because in our conversations you felt pretty strongly that the circumstances surrounding the move to the midwest were absolutely the reason your total debt has increased this year.

I’m sorry to be so blunt, but the math is right in front of you: the tax refunds and the work bonus could have effectively zeroed the credit cards. But they didn’t, and it really didn’t have much to do with the move. In February, when the tax refund money hit the checking account, here are some of the ways you budgeted it:

Birthdays: $300
Kids’ Parties: $65
Anniversary: $180
Christmas: $310
Other Holidays: $50
Halloween Costumes: $20
Date Night: $380
Couch/Furniture: $150
Movies: $48
Wedding/Baby/Grad Gifts: $20
Aaron’s Money: $553
Restaurants: $259
Miscellaneous: $707
Vacation: $1,768
Flight Lessons: $200
Weekend Fun: $67

I point out those categories and amounts because a) none of them have anything to do with moving and b) the amounts were much higher than what you budget to those categories in any other month. In other words, you took most of the tax refund money ($5,077 out of $6,179) and put it into your normal day to day living, rather than using it to pay down debt.

In your defense, it’s not like you spent all that money in the next month. Most of those categories still have positive balances. I’m pointing out the thought process that’s keeping you in debt. Rather than attacking the debt with the extra cash, you made sure your day-to-day living was intact.

THAT is how a person stays in debt.

You’ll say you funded those categories because you wanted to avoid surprise expenses that would force you to use the credit cards again. Better to get ahead of the expenses so you can comfortably work on the debt going forward, right?

No. In order to avoid future debt, you didn’t have to front-load a bunch of your categories. You simply needed to build a budget that fit inside your income, then fight to make it work.

79 Responses to “Living Within Your Means: The key that unlocks the door to debt freedom, peace of mind, and buying any Halloween costume you want.”

  1. bob

    Commented deleted.

    Note from Mark: maybe you missed the part where I said I’d delete comments that weren’t supportive and encouraging. We’ll work on their budget tomorrow, but I’ve made it clear that I can support people in their desire to protect certain personal categories in their budget – whether that means premium cat food or tithing.

    • Patty

      If you look through the discussion forums and through older blog posts, you will see the reasoning that people use to justify tithing. It’s something that is very personal and many people hold as sacred or as their duty. As an atheist, I am not a tither myself and I don’t understand feeling that responsibility to a church, a book, or a higher power that says you have to do this. I can guarantee you though, that they do not feel like they are throwing their money away. I think we need to respect other people’s choices in this matter (to some, it’s not even a choice), but I do agree that 10% would have made a decent dent in their debt.

    • Justin Miller

      While tithing may not be important to you, it is important to them (and me), there is no reason for you to get on them for what you consider to be throwing money away.

    • BKC

      I don’t tithe, I’m not a believer. On this you and I seem to be on the same page. But you cannot possibly believe that your comment is helpful in any way. It’s not like YOUR sarcastic inanity will be their “wake up call.” Chillax, man.

    • bob

      What good is encouragement or being supportive if it isn’t going to help? Is your goal to help them get out of debt, or continue to let them justify throwing their money away when they are in massive debt? If they are paying interest on loans it is in their best interest to repay those debts as soon as possible.

      What happens if they add little bits and pieces here and there to the ‘list of things that are acceptable instead of paying off our debt’ that tithing currently occupies, and they end up bankrupt?

      I’d ask everyone who gives their money away, to ask themselves this:

      You have to give the bank the equivalent of 10% of your monthly income to prevent being declared bankrupt.

      However you have already spent all your income on vital necessities, you have no money left.

      Except the 10% you normally ‘tithe’.

      What is their choice?

      They cannot afford to give away 10% of their income, because their income isn’t really their income, it’s the banks income. They have to pay off their bank before that money becomes theirs again.

      Once their money becomes theirs again, they can spend all of it on tithing, or throwing it out onto the street. They can go burn it in a fire for all I care.

      What I care about is getting these people out of debt.

      If they are giving 10% of their income away they aren’t trying hard enough to get out of debt. Fine, that’s their choice.

      But if they aren’t trying hard enough you should spend your time (and ours, through these comment sections) on people who want to give 100% and not 90% on becoming debt free.

      • Julie Hart Davis

        I think what Mark and YNAB is trying to achieve here is a lifestyle change, not just a get out of today’s debt change. If you do not change your lifestyle, then even if you completely pay off all your debt today, you will be right back where you started in no time flat. The analogy you use is flawed because your gift to the church is only blessed if you give it freely. Obviously, if you are bankrupt you are not in a position to give freely to anyone. Change your mindset first. Learn to live with what you have, and ultimately you will find that you can live without that 10% of your income and honestly, never miss it.

      • bob

        I don’t see how anyone can be consider giving away 10% of their income while in massive debt to be ‘living within their means’.

      • Julie Hart Davis

        Bob, I think you missed my point. If you are in massive debt, you are not in a position to give freely… “massive debt” meaning, to me, debt you have no way of getting out of while living within your means. If you are in these circumstances, then your money is not your own, and you are not in a position to give freely.

        If, however, the problem lies not with the inability to live within your means, but the desire, then there is room for giving if you choose to make that lifestyle change.

      • MrMcLargeHuge

        “They cannot afford to give away 10% of their income, because their income isn’t really their income, it’s the banks income.”

        From a Christian viewpoint, the money is never theirs. Everything they earn belongs to God, because without God they would not have the skills and abilities to earn it. So you earn money, then you give to the church “God’s share,” which is 10%. That 10% is not yours, it is God’s. If they think of it as theirs, and of tithing as a gift, then they’ve got it all wrong. Tithing is not a gift, it is a responsibility.

        Just like you earn money and the government takes a share without you thinking about it, so it goes with tithing. That money was never yours in the first place. Please try to understand this. It is an act of faith, and of submission, and of humility. It should be revered, not criticized.

      • bob

        Why aren’t they giving away 11% of their money then? or 15? or 20? or 25? or 50? Or all of it?

        Anyway, I don’t have a problem with people don’t that, I just don’t think people here should have their time wasted on people who aren’t giving 100% of their effort into removing debt.

      • Julie Hart Davis

        Many do give more than 10%. I know several families in our church who give much more than that, but 10% is all we are asked to give, so it is all that is included in the budget. I would love to be at the point someday where I can freely give more than 10%.

        Bob, I love your questions. I think they are thought provoking and have provided an opportunity to share my beliefs with you. I just hope that you are truly listening and hearing what I am saying. YNAB is not just software to get out of debt. YNAB is really about changing your attitude toward money and changing your lifestyle to live within your means and, as a benefit, to get out of debt. I am all for throwing everything at debt as quickly as you can to get out from under it, but if you do not have that attitude change first, then your lifestyle will not change and your debt will return.

    • Liz

      Wait a minute. If tithing is just another category, then why is it the ONLY THING ITALICIZED in this whole blog post? Just another personal preference, like premium cat food? Really? Almost every single YNAB blog pushes tithing. It’s not just this post – it’s a pattern. You shouldn’t be deleting people’s comments when they push back.

      • mark

        Actually, none of YNAB’s blog posts push tithing. Many of them mention tithing because tithing is part of the budget being reviewed. If you follow link with the cat food reference, it will take you to another post where I reviewed a budget and respected that person’s choice to spend an unusual amount of money on her cats and on her desire to go out and socialize with friends. Those were her “untouchable” priorities, so we talked about how she could make progress without giving up those things that matter most to her.

        If you go back through posts and comments, I try to avoid talking about tithing at all, other than to recognize that some people have it in their budget. It usually ends up being debated in the comments because someone will criticize it, then others will defend it, and round and round we go.

        What no one has yet recognized is I haven’t reviewed a single budget yet where the person had to give up the thing that mattered most to them (whether tithing, cat food, or socializing with friends) in order to make quick, substantial progress in their finances. We’re all too busy bickering over whether this or that line item is appropriate/crazy/”I’d never do that” rather than talking about how the person can make as much progress as possible while honoring their own values.

        I deleted the comment because it was rude, not because it mentioned tithing.

      • Liz

        Tithing was “mentioned”? It was given its own line and italics. Tithing was EMPHASIZED.

      • KJUU

        So I’m guessing if I submitted a budget, that hundred bucks a month we spend on avocados would probably stir the comment pot a bit. :-D

        (No joke, btw. It’s helping us lose weight and get healthy, so aside from developing an avocado tree that grows on the northern plains, it’s fairly non-negotiable, lol.)

      • Ian Tyrrell

        If it has it’s own budget category, quite possibly :)

        (We had quite a discussion internally trying to figure out how one spent $120 to feed cats!)

      • KJUU


        Like anything else lately, feeding pets quality food is expensive. We recently put our two on grain-free food from a decent manufacturer, and they are thriving. But it still pains me to pay $50 for a 30 lb bag (plus a few cans for our older one with bad teeth).

        Hopefully it’ll offset vet bills.

      • Liz

        We’ll never be able to judge for ourselves if the comment was rude, because you deleted it. If it’s rude, let it stand for itself.

        I’ll give you the benefit of the doubt that you’re not pushing tithing … but the budgets you present are obviously not selected at random. So maybe the agenda is that some things are sacred. Like, tithing perhaps. But in order to prove that point, the budgets you select are tithing heavy. So far, the only other “sacred cow” is premium cat food. I can only assume that not much else proves your point.

        Maybe the issue I’m having is just that … and other people have said the same. There shouldn’t be anything in a budget that is “off limits” … no sacred cows.

        Of course, I understand that for those who do so, tithing is non-negotiable as they believe it is for a higher purpose. But your argument that it’s just another choice seems disingenuous if the best alternative you’ve come up with is premium cat food.

        That’s what annoys me. Respect tithing for what it is and stop trying to pass it off as “just another choice.” I know I come off as a jerk, but I think my position is actually more honest and respectful on the matter than yours. Peace!

      • SQ

        I disagree with your position that there shouldn’t be anything off-limits in a budget. A budget is supposed to reflect your values, and if you value tithing – or premium cat food, or even going skating every week – more than you value financial comfort or the ability to get out of debt 3 months earlier, then your budget should reflect that. I have some expenses in my budget that are absolutely off-limits and if anyone tried to tell me to just take that line out I would probably decline quite rudely. Because frankly, I could probably clear my debt out within 4 months if I didn’t spend that $300, but that’s not going to happen.

      • Rebecca Rice

        No, the budgets aren’t selected at random. People choose to submit them, and neither I nor you know how many have been submitted with and without tithing. I will say that I have sent mine in, and I do wonder what people are going to make of my sacred cow. I’ll give you a hint… $120 a month for cat food is nothing compared to my pet category!

      • mark

        Hi Rebecca –

        Sorry, I can’t find an email from your address anywhere in my inbox. Did you use a different one to get in touch with me? Send me the info again – I’d love to look it over. You know, even if it doesn’t mention tithing. ;-)

      • philospher77

        I re-sent it. I think you will find it interesting: no tithing, no credit cards, definitely “first world” problems. But it is a good example of how you still need to budget, even after getting out of debt. And just as a head’s up, my pet category runs somewhere around 500/month (this month it’s over 1K, because of vet expenses).

  2. Sunflower

    Tithing is very much a personal choice and some people see it as a non negotiable. In some countries, charitable donations are tax deductible and therefore very efficient.

    • Jodie

      If their tithing is to a church, it’s not tax deductible in the US. If their tithing includes other charities, it has to be to a registered 501(c)(3) for the deduction–and even then it makes no difference if you’re not itemizing when filing taxes.

      • Charlie

        tithes are tax deductible since a lot (maybe most, not sure never researched it) are 501(c)(3) and if you itemize it, or as in my church the pastor sends me a letter detailing my giving from a year then yes I can use it as a tax deduction.

      • MrMcLargeHuge

        Everything I’ve ever read in the past suggests otherwise, that tithes are deductible, as long as there is a receipt. Dave Ramsey even talks about deducting them. Now, perhaps it’s a mix, and some churches have set up 501(c)(3) organizations just for this purpose, but I’m unaware of that.

      • Jodie

        This is what I get for not closely reading what I post! (And for multitasking.) Yes, you’re right, I meant that they need to be registered with the IRS for the deductions to count.

      • MrMcLargeHuge

        Disclaimer: I am not a tax professional. I’m just a regular guy looking things up on the Internet. Do not take my word as infallible.

        I’ve done a bit of research, and it looks like as long as the church, synagogue, mosque, etc. has tax-exempt status, tithes are deductible. It is not necessary for the church to give you a receipt, though that may be the easiest way. The IRS will accept cancelled checks, bank or credit card statements, or other kinds of paper trails.

        And as Jodie stated, you must itemize when you file.

      • Jodie

        All 501(c)(3) organizations must receipt you if the individual gift is over $250.

  3. Julie Hart Davis

    This is something that I have struggled with my entire adult life… living within my means. I am finally, thanks to YNAB, on the path to doing so, and it is only through grace that I have managed not to rack up tons of debt before now. All the conversations about percentages of income and where it is going got me thinking… we would do better if I break our budget down into manageable chunks using percentages. I sat down one day a couple weeks back and figured up how many percentage points I needed in each category (giving, taxes, debt, health, housing, household, education, savings, & transportation) and am now working with these mini-budgets within my overall budget to make it work. This helped me realize that I can’t afford a few things that I thought I could and gave me the motivation to cut back and not purchase that washer and dryer that was on sale over Labor day. :-)

    • Mandy Huggard

      I’ve done this as well and it really helped me see that what I thought of as my small miscellaneous expense category was actually a lot more of my budget than I had thought! I find it interesting that the miscellaneous category here is the second largest one. Perhaps breaking that down further will help find places to save.

      I think a lot of paying off debt is the mindset though. I know I wouldn’t be able to enjoy my date night/movie/flight lesson/etc. with outstanding balances on my credit cards. I hope this doesn’t sound judgmental, but it really seems like they need to accept that they can’t afford these things until they don’t have the debt.

      • Julie Hart Davis

        Absolutely! This is my breakdown:

        10% Giving
        12% Taxes (this seems to be where it sits most months)
        9% Savings (originally I had this at 10%, but found I needed more in another area and had to cut back here)
        10% Debt Snowball
        10% Health/Insurance
        22% Housing (mortgage and utilities – any necessary expenses for the good of the house)
        12% Household (includes groceries and supplies, but also vacation and fun money)
        12% Transportation (car loan, gas, taxes, insurance, and maintenance – I live in the boonies, so this is necessary)
        2% Education (includes school lunch, sports, fundraisers, yearbooks, pictures, and any other school-related expense)
        1% Business Expense (this category is mostly reimbursed, but I need a bit in here for parking, which I then deduct from my taxes)

        These are my categories and percentages. Your family may need more in the education category and less in the transportation, housing or whatever. Basically when I worked on this I put them in priority order and worked backwards from there. I had to do quite a bit of adjusting to get these percentages where I could live with them, and this actually caused me to realize that some of the extra payments we were making on my Roth IRA and our HSA, we actually couldn’t afford right now. My plan is to get that 10% for the debt taken care of within the next year and then put those percentages to work in other categories (and before anyone says that I should put all my resources toward that debt, let me say that what unsecured debt we have is all on 0% and the payments we are making will have it paid off before the grace period is over, so there is no interest involved there).

        This is all still relatively new for me and I’m still tweaking it a bit, but I think it could work if I can just force myself to stick with it. :-) Good luck with your budget!

  4. Maquis

    Is there any clarification on what “Aaron’s money” is? Is it college savings? Or is it a kids savings account that they had raided previously and wanted to repay? Its a large chunk of change there, and I would love to know what it is.

    For flight school, is that in any way related to employment for either spouse? Or is it just something they are interested in? Is it a situation where they have an existing license that needs to be renewed or it will cost more? Or something where previous courses were taken, and it would be less expensive if the next course is taken in the next X months? (Not saying that all of those situations make it a good choice, but trying to understand the rationale)

  5. BKC

    Some of the things I see they spent their surplus on are things that would be hard for me to give up as well, and this is why: they are public. Birthdays, Christmas, furniture, gifts, even costumes, those are markers of wealth or “success” that other people can see and judge. By foregoing these things it can feel like you’re broadcasting to the world, “We can’t afford them!”

    Sometimes during the initial debt elimination push, you need to turn inward, and rely on your spouse to be as excited as you are about conquering that debt. You probably won’t get that validation externally. Lots of people (YNABers excluded, of course) can’t get past sacrifice as punishment.

    • BWK

      My wife and I usually look at people that live exuberant lifestyles, yet mediocre jobs, and try to guess how far in debt they really are. It’s funny / sad to see all the materialistic crap people buy to put up this front.

      I like that saying “We buy things we don’t need with money we don’t have to impress people we don’t like.”

      • MrMcLargeHuge

        While I feel you on gift giving, with things like furniture, costumes, clothing, etc. I take the position of “I don’t need it,” instead of “I can’t afford them!”

        Most people who act wealthy, are not actually wealthy. They probably earn high incomes, but high income is not the same as wealth.

      • benjamin

        Everyone is trying to keep up with the Joneses and the Jonses are broke.

    • softwaremonkey

      But… if you are borrowing money to do it, you really *can’t* afford it. Buying stuff you can’t afford with money you don’t have sounds like pride more than anything else, to me.

      • Susan C.

        In a nutshell, that is pretty much what is going on here.

    • SQ

      I get where you’re coming from, but I like to take the inverse of an old Andy Warhol quote here: rather than “Think rich, look poor,” tell yourself “Look rich, think poor.” Trust me, it’s entirely possible to have the “look” of success or wealth on a limited budget – my second-best business suit cost me $6 at Goodwill, and my favorite pair of boots was $20 at Ross. My family regularly gets jewelry from me for Christmas – I make it for less than half of what I would pay if I bought the same (or similar) piece. If you put an effort into being less concerned about brand names and more attentive to style, you can easily look just as successful as the Joneses.

      BTW, I completely agree with the rest of your argument.

  6. BWK

    Living debt free is the greatest piece of mind.

    The budget reflects your / family priorities. Spending on what to some may seem frivolous, maybe important to you. That said, you should enjoy these things, vacation, flight lessons, parties, etc, only after you have zero debt.

  7. savethestationery

    I am very dismayed at some of the responses here. Tithing seems to be throwing away money to those who are not religious but to those who are it is more than a belief it is an obligation more sacred that owing debt to a bank which for the most part they created!

    Staying in debt for longer versus betraying their code of conduct to get out of debt more quickly simply isn’t an option for them.

    Let’s focus on what they can and are willing to affect and be done with it. Too much of these posts are turning into a grudge match between those who believe and don’t – this isn’t the place for that.

    That being said, as a rule I think they should think of all bonuses as debt income instead of addition house income. Or as much of it as can be afforded at the time.

    • philospher77

      I am always conflicted about tithing. Yes, I know that to some people it’s a sacred duty. But, just as a “walk a mile in another man’s moccasins” moment, do tithers grant other people the same grace when they have “sacred” categories that they don’t want to cut? For example, if I told one that I spent 10% of my salary on cruises and other vacation trips, and that I really valued those and wouldn’t consider cutting them, even though I am 20K in debt, would they say “It doesn’t make sense to me, but if you feel that strongly about it, ok” or would they say “You can do that when you get out of debt, but until then, cut back”?

      • Julie Hart Davis

        That’s an interesting thought. To me, it all comes down to having a plan. If you have a plan (a reasonable plan) to pay off that 20k and your plan manages to include 10% for cruises every year, then go for it. Now, that said… unless you worship the cruise God, I’m not exactly sure you are comparing apples and apples here. Perhaps the 10% could be toward supporting the Met, or something like that. If you are 20k in debt, but get a great sense of well-being from supporting the Met, then I would support that as long as your budget allows it and you are making headway with your debt snowball.

      • Jess_Esq

        Julie, I think your comment supports Phiosopher77’s point – you are placing a value judgment on the 10%. If it’s 10% to God, you would have no comment on it. If it were 10% to the Met or the Library, you might think “gee, that’s not the same thing I do with my money, but I think that’s an important value to this person” but if it’s 10% to cruises and the person doesn’t “worship the cruise God,” well then THAT 10% is different. I don’t think you can have it both ways. If you can make a comment/value judgment about 10% of someone’s budget, then they get to make the same to you. Who is to say they don’t feel closer to their Maker when out on the water? And even if they don’t… so what. I guess my point is, no one gets to make a decision about values/importance except the person who holds those values. If they say it’s non-negotiable, then it is non-negotiable.

      • Julie Hart Davis

        Ok, I see your point, and I think you definitely addressed it better than I did… and I do agree. I try not to judge anyone’s values, no matter what they are… so, at least for me, if they wanted to put that 10% on cruises and that was their non-negotiable category, then fine by me.

  8. Sue Finch (@finchfam)

    Thank you for post a very-much-needed topic. Imagine how life could be different if we all lived within our means…no matter what the personal priorities are. Looking forward to watching this unfold.

  9. Susan C.

    After looking at these budget scenarios, it astounds me how couples (I’m single, with one income, folks) just seem to have problems not living within “their means.” And, many of them have regular, bi-weekly income. I run a small admin business for now, having several contracts. My monthly income has been about $2000/month. Yes, my needs are minimal I guess. And, several hundred of that is for taxes – IRS self-employment tax plus New Mexico Gross Receipts Tax, which is a tax, like a sales, tax, but is taxed on services, too. You pay your bills first is how I was raised. And, giving every dollar a category works well, but $700 for a Miscellaneous category, is missing the point. I see many people, particularly couples, perhaps in cookie cutter neighborhoods, having to spend to constantly impress their neighbors, work associates, and friends. Oh, did I mention that of my YNAB, $150/month goes into a Vanguard fund. I will send my budget soon to the YNAB folks for them to assess. I’m proud of it, although more income may be on my way, and that is just for Rule #4.

  10. Jess_Esq

    Wow. DH and I easily could have made a similar decision with regard to a bonus received this year and some savings (partially funded with a tax refund). I am grateful that we let a lot of that money sit & then chose to pay off the CCs (reserving a $1,500 emergency fund while we fill the Rainy Day Categories). However, making that payment was PAINFUL. I can definitely empathize with this couple – maybe they thought about using the cash to pay the CCs but it was difficult to think of letting go of the money. I know it was a struggle for me (somewhat less so for DH). I will look forward to reading more tomorrow.

  11. jackie

    I tithe because that is what my faith teaches me to do. I budget for my belief as simple as that. Secondly the discipline of tithing means sacrifice at times. This is what I like about YNAB. Budgeting isn’t restraining but liberating; giving you power (should you accept it) over the need for instant gratification. What I give up for tithe or simply my budget, I gain so much more. Thank you.

  12. Laura F.

    Wow. Reading that, I have pretty much the same problem. You see, where I would have paid off the debt, my husband would have been “Hey, we need to save that money in case something happens”. I’ve been whittling my debt from 18k starting in Feb of this year to 11k now (in August) and just got sidetracked because I got laid off. I don’t know if Jenny would have paid it off and Aaron didn’t want to, but I can see that happening.

    I can’t judge them on their budget and I won’t. I’ve made many mistakes myself, but putting themselves out here for the whole community to see should not give people the right to judge. Not everyone is perfect – try to remember that when you are going to write something that you think is “helpful” but in reality is judgemental.

  13. Christine

    One thing this couple might think about is adjusting their withholding at work. It seems great to get a big tax refund, but really that money is just dollars that you could have had access to during the year. Too many people spend a tax refund as a windfall instead of using it to pay off the debt for expenses you couldn’t afford while you’re money was tied up in Uncle Sam’s savings account. Perhaps if they’d had that income available throughout the year, they could afford their life without going into debt…check with your tax preparer on how to do this without owing a lot at tax time.

  14. Jennifer

    Thank you for opening up your budget for this discussion and for the thought provoking comments. We are in a similar situation. While what we have is not credit card debt it is debt from a failed business that is on a HELoC loan and a 401(k) loan. It is stressful and shameful and we definitely want to be rid of it. We are moving forward but it is sometimes hard to know where to put the “extra” money when so many options seem appropriate – eliminate the debt? Save a buffer? Fill the sinking funds? Fix the 10 year old car and to what level so you’re not throwing your money away? Budget money to fix the cracked and heaved sidewalk so no one gets hurt or keep living on the hope that nothing happens? Is there an ultimate “right” answer or is it completely dependent on the individual situation?

    We are anticipating a bonus in December that will finally pay off the 401(k) loan. There will hopefully be a little left over. In the past I thought the best course would be to fill some sinking funds (e.g. vehicle repair/replace fund.) However, your post leaves me rethinking that the better option is to put it all toward debt and then use our monthly budget to fill the sinking funds. Is that what I’m hearing?

    But, but, but…if my car breaks and I don’t have enough in my sinking fund or savings or whatever then I’ll have to borrow and I’ll be right back to where I started. How do you get past this hump?

    • mark

      Hi Jennifer –

      Your debt is stressful, but it is NOT shameful. Acknowledge any mistakes you made that contributed to the debt, resolve not to make those mistakes again, forgive yourself, and move on. You are not a bad person or a stupid person. You’re a person with debt who wants to be free of it. Sorry to get all warm and fuzzy, but I think step one has to be self forgiveness combined with resolution to do better in the future. You’ll get there.

      To your other question: the more budgets I see, the more I like Dave Ramsey’s approach (as I think are taught in his “Baby Steps”): give yourself a $1,000 emergency fund and then attack your debt with every available penny.

      Yes, it’s scary because you’re worried about these other things that can go wrong (sidewalk, car breaking down, etc). There is risk that some emergency will force us to borrow again while we’re getting rid of debt, but it is what it is. I think we have to establish the standard in our lives that everything takes a back seat to being free of our debt – including the comfort we’d feel if we had a big, cushy emergency fund sitting there while we pay down our balances.

      How much debt are you dealing with, and how much extra are you able to throw at the debt each month? In other words, do you have a sense of when you could be debt free if you really got after it?

      • Jennifer

        Thanks for your reply. We’ve taken the Dave Ramsey class and are generally trying to follow it.

        Here’s a very short history.
        Aug 2008 we had $41,000 of “personal” debt e.g. cars, credit cards, store cards etc.

        By Aug 2010 we had paid it off. Awesome!

        Until 6 months later when the business we got out of 2 years prior went bankrupt and we were left holding the bag of $89,000 debt. We tried to get out of it, see a lawyer etc to no avail. Sigh. That was Dec 2010.

        Part of that $89,000 was taxes to Uncle Sam which had to be paid right away so we had to take out loans against both our 401(k) plans. We didn’t like it but we didn’t have any other options for liquid cash of $39,000. The other $50,000 was put on a HELoC to pay off the bank that was holding a loan for the business. (Full loan was $100,000 but it was a partnership and damned if we were going to pay all of it so the bank agreed (in writing!) that we only had to pay half of it – the $50,000.)

        So, here we are 5 years after resolving to do better, to make a plan, get rid of debt and we’re still here trudging along, worse off than when we started. Another sigh. (It truly does get to be a mental/emotional issue at times! – will we ever be rid of this and start to actually get ahead?! lol)

        Balances now are $54,000. $49,000 on HELoC and $5,000 on 401(k). We have $5600 in our buffer/savings (it’s all one category because we don’t have enough to effectively split it apart.) That $5600 is enough to pay off the 401(k) loan but then that leaves us with next to no buffer/emergency cash.

        Our budget right now is fairly tight- at least it feels that way. I’m sure you and others could pick it apart. :) We probably have a few hundred dollars to “spare” each month but we haven’t budgeted those toward debt elimination. We mainly use our big chunks at bonus/tax refund time to throw toward debt, sinking funds etc. I’m anticipating approx. $8000 bonus in December, which will completely kill the 401(k) loan and leave us some extra to put toward debt or sinking funds etc.

        We’re looking at probably another 2 years before we’re debt free – a total of 7 years of paying debt!!! Ugh!!

        So, there is more than you wanted to know! :)

    • Jodie

      I’m not advocating that you should set money aside for this right now, but regarding your sidewalks, you should learn what your local law is in terms of upkeep and safety. Where I live the law states: “Failure to maintain the sidewalk in good repair may result in condemnation by the City. In this case, if repairs are not made by the property owner within the allotted time frame, the City will make the repairs and assess the cost to the property owner’s tax bill.” And they only allow concrete.

      It’s a big issue in my neighborhood, as there are a lot of rentals where the owners live elsewhere, and a lot of sidewalks that are really REALLY bad. Perhaps get a free estimate just so you know what you’re looking at. And make sure your homeowner policy covers the worst-case scenario.

      • Erich Serediuk

        I can’t believe that you have to even worry about a sidewalk, surely the sidewalk is a public space and should be looked after by the council, and they should wear any liability!

        You americans are crazy :P

      • Jodie

        It’s really dumb. And the city owns the land between the sidewalk and the curb, but we have to mow it. But we can’t cut down trees on it, that’s the city’s job. (Which actually worked out in my favor when I had to have a dead tree removed and they just sent someone to do it and it didn’t cost me anything.)

  15. Michael Paul (@mpaul)

    My suggestion if you really want to make a dent in your universe and get out of debt: live *well below* your means. If I didn’t put 20% of my income away for retirement and devote $1,200/month to reducing my student loans, I could probably afford a nice 3 bedroom loft downtown, brand new construction. $2K/mo payment perhaps. Instead, I live in a 1 bedroom apartment built in 1950 with wall AC and no dishwasher for a mere $800/mo. This allows us to get that extra $1,200/mo to put toward debt reduction. By december of this year, we’ll have reduced our debt from $73K to $0.

    That’s the power of living well below your means.

  16. Liz

    Just some recent dates: August 2, 14, 16 and September 5 all mentioned tithing. I don’t think it’s a co-incidence. I have no problem with tithing being a budget priority, but what I find offensive is for you to go pretending like its inclusion is not intentional. LIke it’s just cat food. Let’s just be honest here, shall we? I bought a consumer product, not a hidden agenda.

    • Charlie

      You are right Liz, this must be a big conspiracy, they sucker you into buying their product then it secret forces you to tithe by slowly sucking 10% of your income into a hidden category….. Or you could just have an issue with tithing…… SMH

      • Liz

        I have an issue with censorship. I tithe to my own church. I just don’t push my priorities on other people and then pretend they misunderstand my intent when they disagree. I just honest that way.

      • Ian Tyrrell

        Hi Liz,
        Three things here:

        1 – Mark isn’t pushing tithing. At all. He’s dealing with people’s budgets, and for a lot of people (including some of the people who post on this blog) tithing is something they do, and it’s a big piece of their budget. Every single one of those posts you mention is referring to a real person’s budget (that includes Mark) and as such, it mentions a line item that all of them include, and many prioritise. Like Mark said in two of the articles you complain about, for him it’s such a priority it comes out before anything else. That has an obvious impact on his budget, and to ignore it makes no sense at all.

        2 – The italicised line item here is to call out why there is 10% gone straight away. As in it’s not available at all for budgeting elsewhere as far as Jenny and Aaron are concerned. There’s 10% of that money gone, and Mark was explaining why.

        3 – We do censor things from time to time. Like in this instance, where Mark asked people to play nice and the first comment was explicitly not, he pulled it out (and left a note explaining what he had done, rather than being silent about it). We have no issue censoring things that we feel aren’t contributing to the conversation at all. We think of it as pruning, getting rid of unhelpful comments so the rest can bloom. You’ll notice we don’t go around removing everything we disagree with — the attitude of the post is what Mark took offence to here. Had the comment been couched as a query “Why is that 10% not being used to help pay down debt?”, or even a comment along those lines, I’m sure it would have stayed. Being a jerk about it gets it pulled.

    • Lisa

      To beat a dead horse…

      Although I’m sure there are many who aren’t Dave fans, all of the people I know who use ynab found it through DR. DR is a Christian and is very big on giving. So it follows that a lot of the ynab people are going to have values that include tithing.

      I say that as a mostly agnostic ynab lover who happened to stumble on DR. I just ignore his preachy parts. :D

    • Maquis

      Well, a lot of ynab users tithe. Some don’t, but apparently a lot do.

      Perhaps this is related to where ynab is located in the US, since I know a lot of people who live in that area tithe. But a large percentage of the US tithes to a church of some sort.

      Do you have the same concern when Dave Ramsey talks about tithing? Do you think mark should just ignore the category entirely?

      If you want to see a budget without tithes in it, go ahead and submit yours.

  17. Dan McCurry

    Surprise, Mark. This time I completely agree with you. Next year, with possibly no bonus and no extra paycheck, will they be willing to cut the budget back to what it was? And if they can do it next year, why not this year?

    As for tithing, it has no relevance to the problem. The problem is that “extra” income is not being used to reduce debt. I have a feeling that without a change in priorities, the problem would not be solved by more income, nor would eliminating tithing help over the long term.

  18. Laurie

    When I first found the YNAB blog and forums, I distinctly remember thinking, “I can’t believe how kind, how civil everyone is on here!” It was *such* a refreshing change from any comments I had read anywhere else online. I came back each night to read comments and feel hopeful about our own financial situation. I hope that as a community we can quickly see the big picture of trying to save money to fund our priorities (whatever they are) and stop the argumentative banter.

  19. KJUU

    I use the Rule of Thirds for windfalls — which is any income that isn’t predicted or regular. One-third to the past (debt), one-third to the present (needs or fun), and one-third to the future (savings of any kind).

    This keeps me from spending it all in one place and regretting it, whether that one place is a credit card (potentially stirring up resentment because there’s no “reward” for me), or something that turns out to be frivolous (ex: buying an above ground swimming pool during a heat wave, that you can’t use in the winter so it just sits there reminding you of your decision).

    If I do this, I keep the bigger picture in mind, including future needs, obligations, and self-care. And sometimes taking care of things in smaller chunks builds more character than throwing large sums of money at something just because it’s there.

  20. BWK

    going on a limb here… maybe we see tithing in the budgets so often, is that many people who use YNAB also follow Dave Ramsey. DR is religious, his financial peace classes are taught at churches.

    I never think or have thought Mark is pushing a secret agenda about tithing. It’s nice to get to peek at others budgets and to see how they differ from our own. If people want to give 10% or 0%, that really up to them and priorities.

    I love the fact the the posts and the forums are filled with people who want to help people, and give positive advice. If comments are not helpful, rude, or just negative then they should be taken down. Looking around at different social media, I see tons of negative and hurtful comments. People like to hide behind anonymous cloaks so they can unleash all their hatred. it’s silly.

    • Susan C.

      Yes, I agree. The tithing part didn’t bother me at all. That is a personal choice. I would say this particular couple’s budget has other concerns and the tithing is not a problem at all. With “windfalls” as they have received, this couple could have eliminated their debt. Perhaps YNAB folks need to spend more time on their budgets. I spend time on it daily, since my income could fluctuate, and during a tighter month, I change some categories to zero, too. Just yesterday I was offered a part-time, seasonal job at a not-for-profit (I have several independent legal/admin contracts, too) at a fairly decent rate of pay. So, that money will pretty much move me towards category 4 for a few months. Since I had been meeting my budget on the contract work, with some tweaking here and there, why spend more just because more money is coming in for a few months?? True, I may take $100 of those extra thousands and make a few more charity contributions, but as for the rest -no I don’t need more toys, more eating out, to take a trip. I may sound judgmental here, but I’ve lived a fairly happy life on a lot less money. And, I would say one major problem with many people is they just do not want to live within their means, or live within neighborhoods more suitable for their income.

  21. Tanya

    If I may stray off the (endless?) topic of tithing for a bit. . . I have to say that I understand Jenny’s desire to pad those categories with the incoming cash. It’s quite nerve wracking to think that you may not be able to buy your kid a birthday present next month, or that you may have to skip Christmas this year. I think I would likely have made the same decision.

    I agree, though, that this decision keeps me in debt! It sometimes seems that our debt has been around so long, that we are just used to it. It’s like an annoying family member that we keep putting up with, because we just don’t have a choice!

    Of course, I know that we do have a choice, and we are instead choosing to plan for future “maybes” instead of tackling debt.

    • mark

      I think that’s a very honest and insightful comment. It seems like our hatred of the debt treadmill has to exceed our fear of temporary discomfort and the “maybes” in order for us to finally get rid of the balances.

  22. Tim

    Having read through all the comments I cannot believe how much energy was wasted discussing the tithing issue. In the numbers that Mark provided, had this couple used their windfall to pay down their credit cards they would have had a whopping $188 balance left on one card and then the car note. Yet how many comments were spent discussing, slamming, or defending the tithe.

    It was how they chose to allocate that $9500 that resulted in their not gaining any traction on their debt.

    With that kind of windfall they could have set aside for Emergencies, got one month ahead on all their expenses (assuming they were not at the time the money came in) and would have had a nice snowball going on their debt (instead of just paying off all the CCs at once). Obviously they realize this and have asked Mark for help. Having read the follow up article about their budget, it would have saved them a lot of sacrifice but now they know and they’ll have debt in the rear view before too long.

    This is a couple that will likely be out of debt in under two years despite how many years they may have spent in debt already, good for them :-)

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