When You Make Gains in Your Budget, Lock Them Down

keysI’m supposed to be rolling this big debt snowball, right? Hating my debt, fighting to be rid of my excessive interest payments, and sprinting in the right direction. Right?

Wellll, right. Unless I get lazy and lose focus for a few weeks. In which case I’m on cruise control at 20 miles per hour.

Here’s what I mean:

A few weeks back I told you I had two Rainy Day categories I’d had to (almost) double-fund because they’re paid annually and I only had seven months to get ready for them (started saving in March for September payments).

I’d been putting $275 per month in my Life Insurance category in preparation for an $1,850 payment  ($275 x 7 = $1,925. Math may not be my forte after all.) I’d also been funding my Residential Lot payment at $320 per month in preparation for a ~$2,000+ payment.

Having made both those payments in early September, I can now drop the budgeted amounts to $140 and $165, freeing up $290 per month.

Dropping Sprint and moving to Ting is saving me another $110 per month.

Which means I should be able to open YNAB right now and see my Debt Snowball category with a $400 balance, ready to attack the nasty residential lot loan with the 10% interest rate.

So, let’s see…open up YNAB…go to the budget screen, scan down to the Debt Snowball category…and…huh?


I must be some sort of magician, because I just made $400 in monthly gains disappear into thin air.

Yes, I could dig into my spending report and pinpoint the leakage. Off the top of my head I can think of a couple medical things and my daugther’s preschool that chewed up most of the extra money.

But that doesn’t mean I can throw my hands up in the air and decide that $400 isn’t available after all. I have to secure my gains. I specifically went after expenses like the cell phone bill to free up money for debt elimination, so that’s where freed up money has to go.


Bill pay. I created a $400 automatic payment to go out on the same day as my mortgage payment each month. I never miss a mortgage payment; there’s no reason to miss a snowball payment.

Yes, the new snowball payment may require some scrambling. I may have to watch the account balances closely in the last couple of weeks of the month to ensure the new $400 payment doesn’t wreck the rest of the budget. I’ll have to increase my focus on collecting enough freelance hours to protect the snowball. The penalty for debt is discomfort.

By the way, I think this principle applies whether you’re talking about $400 or $40. When you make gains in your budget, secure them by automatically allocating freed-up money to your most important goal.

27 Responses to “When You Make Gains in Your Budget, Lock Them Down”

  1. P.R

    Good things happen financially when you automate them, no doubt about it. Having YNAB makes it far more likely to occur for me, these “small” leakages from my budget and their elimination has been my biggest gain or boost since I started.

  2. Cynthia Hankin

    I had auto transfer to saving each month of 1000 dollars for long term bills. Things went fine until one emergency and one being forced to pay for something 30 days early (at a great discount). This month, I am feeling the emptiness of that bank account. I have to pay a tax bill on a credit card, and pay it off the first of the month. I felt such a failure…but then I realized, the emergency would have been on the credit card…and I have a plan. So back to square one Nov. 1 and back to our plan. Validation that my budget works.

  3. Sylvain

    Do you have an actual Category named “snowball”?
    I usually put the extra on the account in question that i’m “snowballing”….
    I’m wondering which is better?

    • mark

      I don’t know whether one is better than the other. For the moment I do have the dedicated “Debt Snowball” category.

      • Brenda

        Hello Mark,
        I read your emails and enjoy them very much. Like many if us I also have lots of debt .

        Yesterday I was thinking what my budget will look like when all my debts are paid off. Can you create a second budget and see a graph of where your money will go? I am a visual person and my husband too and it will be nice to compare the before and after snowball budget.
        Thanks !!!!

  4. Ronald Spencer

    $275/month for Life insurance? (OUCH!!!) I have 660k on my and 440k on my wife for a grand total of $71.45 per month.

    • Rebecca K.

      I don’t think it’s quite as bad as it seemed — if you read the paragraph before that, he had only 7 months to save for the premium instead of 12. So a premium of 1850 is ~154.17/mo.

      • Ronald Spencer

        still, that is high. Term life insurance (for healthy individuals is extremely cheap)…

      • Charlotte

        He posted previously about medical issues that affected health insurance costs. I would assume those are in play here as well.

      • mark

        My asthma and the size of the policy (it’s pretty big) are the factors in my higher-than-average premium.

  5. Susan C.

    Yes, I agree. Nearly $300 for life insurance is a bit high. I would do some research and trim that down.

  6. Rebecca K.

    We had a similar problem after we paid off all debt except for cars and house. I thought we’d snowball the money into paying off the car faster, but we ended up funding more rainy day categories and saving for some home remodeling and the like instead. I will admit though, a chunk went to medical for a bit too. I feel like we should almost start our next month as though we were still paying the old debt, and go crazy on paying off the cars next. I’m just not sure we’re motivated enough to do it yet. :-/

    • mark

      The master skills seems to be fighting the leakage, doesn’t it? It’s one thing to free up cash (whether through debt elimination or expense reduction), it seems to be another skill to funnel all that cash to the most important goal. Definitely feels like the finish line is always moving, but (in my case), that’s just another penalty for being in debt.

      There is a finish line out there: Being debt free and fully funding my retirement accounts.

  7. Anners

    I think it’s all about intentionality.

    I used to do this as well… I would get so frustrated with myself for spending my “extra” money. But that’s not really a holistic approach to budgeting. And one thing YNAB is really doing well for me is taking a holistic approach!

    I’m a big Dave Ramsey fan, and he actually addressed this issue yesterday on the radio show. His suggestion: Do a monthly budget that’s unique for the total amount, not just the extra amount.

    YNAB’s fifth rule should be: Every month is different.

    So maybe the savings is $400, but you have pay $200 for preschool this month, and you didn’t over the summer.

    Looking at the total amount through the lens of this month’s expenses shows that you can put $250 to the snowball while paying for preschool, but maybe only if you dip into your restaurant category by $50.

    See how that works?

  8. Michael Paul (@mpaul)

    Mark, I hope I can help as I’m just one blissful month away from erasing $73K in debt. What I’ve done is this: Each month, I map out my budget for all categories except debt reduction. Once I’m done, any leftover goes toward debt. All of it. I don’t believe in having a “Savings” category as long as I have debt because, well, what exactly am I “saving” precisely? If I have a TRUE emergency, I always have credit available to me. Meanwhile, the most important payment I can make (next to rent/mortgage) is knocking the snot out of the debt.

    So, again–budget the month out and anything leftover, allocate to the Debt category. This creates a situation where windfall profits immediately get funneled into the right place (say you get a birthday present or some other cash inflow you weren’t expecting) and a situation where I’m never surprised that I don’t have enough money because I made that $400/mo debt payment.

    In an average month, I make a debt payment anywhere from $1,000 to $2,000 depending on extra income available after all other monthly expenses are budgeted. I’ve found this to be an incredibly effective way to reduce the debt.

    Remember, if you’ve got debt, your “Savings” account isn’t really “Saving” anything at all since you’re still living on borrowed cash. Once you pay down the debt, then you can start building up a true Savings account with the money you’ve saved from not having that massive debt payment!

    Good luck, and let me know if you adopt this approach.


    • Christina

      This is what we do except that we don’t have credit to lean on, just a baby emergency fund.

      We make it into a game to see how little of what we’ve budgeted we can use and then we empty any categories with balances that don’t need to be carried over – groceries, misc, work lunches, family activities, etc. Then we are prepared for the unexpected, but striving to avoid it.

      Every month we are amazed by how much we can scrape together and we gladly make that big payment.

  9. Stacie

    I live in Alaska and received our annual PFD today. ALL of it went to paying debt before I could spend it anywhere else. I had a similar approach to a chunk of money I was “gifted” from my Grandma when she sold her car (bless her!): it went immediately to completely paying off one of my cards.

    I also am rethinking my “rainy day” funds and considering putting that money into paying off debt. Like Michael said above, my “saving” is fruitless if I’m still paying monthly interest on cards. Thanks for helping me rethink that aspect of my budget!

    • Ronald Spencer

      These are great plans. I would caution you on but one thing. Don’t completely deplete your “rainy day fund” to pay off debt. If you do, it is likely that you will end up with a big expense that will push you back to debt (ie C.C.). If you delete it down to say $1000, then you insulate yourself(ves) from the minor emergencies that are a part of life.

    • gpamerritt

      I am fortunate enough to have a home equity credit line which we used to pay for a 2nd country home. My pre YNAB debt balance is now paid down to $68,500, but the actual balance is $57,200 today. How can this be? Because my buffer, my rainy day funds, my 2 savings goals and my credit card float are all “loaned” to the HECL until the funds are needed. My HECL is an on budget account. I keep $1,000 in checking as a base. When I need cash to pay off a credit card balance, or pay out one of my savings goals,
      I simply transfer the money from my HECL to checking and execute the payment. Loaning $11,200 to my HECL in this fashion saves me $35 a month in interest charges. Over the last 3 months, my HECL float has averaged $10 to $12,000. Thus, my rainy day funds are earning 4% on their average balances by reducing my HECL interest.

      This would work as well with a credit card available balance if you can charge the rainy day item.

  10. Micro

    That is the first thing I try to do if I get any kind of a raise at work. I might take a bit of it from the first paycheck to celebrate (I worked hard for it after all). After that first one though, I am looking at whether I should invest it or put it towards debt payment. Since I’m already living a certain way, it makes no sense to inflate my lifestyle.

  11. Douglas Lawson

    What a wonderful idea!!!

    I think you just totally solved my lack of debt snowball issue. I keep putting money in the budget, but using it and taking it out… :-/

    This way will LOCK IN that payment, and make it permanent.


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