Consider moving credit lines with balances "Off Budget" in YNAB.


Back in November, Jesse sent out a tweet that made me chuckle:

“If you want YNAB to be terribly simple–zero complexity…and simplify your finances in general. Just stop using credit cards.”

I chuckled for two reasons:

  1. “Yeah, right” (the reaction I assumed he’d get from most people).
  2. I knew the tweet was probably the result of another marathon conference call between Jesse, Adam (YNAB design lead), and Taylor (YNAB CTO) about how the heck to improve and simplify YNAB’s handling of credit cards.*

Fast forward to this week, and I’m working with a few new email coaching clients, trying to dial in their budgets so they can feel like well-oiled YNABing machines.

As I’m reviewing their budgets, I’m seeing the same thing too often:

Credit cards with balances “on budget.”

Can it work? Of course. Erin produced an excellent video about how to keep YNAB humming when you’re using credit cards with balances in your daily transactions. But I’d encourage (beg) you to stop.

First, as Jesse pointed out in his tweet, YNAB stays much simpler when credit cards with balances are treated as off-budget, fixed-balance debts. You budget the payment, make the payment like any other transaction, and go on about your life. So simple.

But my enthusiasm for moving credit cards with balances “off budget” isn’t just about the budgeting simplicity. It’s about finally getting out of credit card debt.

As a former chronic credit card debtor, I remember clearly how hard it was to zero out the card – or even set the goal to zero out the card – when I kept moving the target by adding new transactions to the balance.

I was finally able to pay off the cards for good when I went debit card only for a while. I stopped using the cards, treated them as a fixed debt to be repaid, and finally zeroed them out.

Once my primary card was at $0, I went into the online account, set it to automatically pay itself off in full every month, and then started using the credit card in daily transactions again.

With my budget directing my spending, and my card set to automatically pay itself off every month, I felt safe using the card again.

If you’re a chronic credit card debtor, consider drawing a line in the sand. You can’t create new credit card debt if you’re not using credit cards, right? Move them off your budget, use your debit card until the cards are at $0 – then decide whether credit cards have a place in your life.

*Jesse, Adam, and Taylor (with feedback from you and the rest of the YNAB team) are working really hard to improve YNAB in all areas. Be patient – all good things to those who wait. 🙂

Update: A note from Erin, YNAB’s Education Lead

“I totally see where Mark is going with this and he’s right that people who are trying to get out of debt need to draw some hard lines in the sand. No question there. 🙂

However, in coaching and classes, I’ve often found it more confusing for folks to be handling cards in more than one way. Also, if you do use the card again (I’ve seen that happen a lot) and it’s off budget, you won’t be able to categorize the spending, which eats away at awareness.

So if you’re considering this approach, and you want to draw that firm line in the sand that Mark is talking about, I’d recommend following guideline: Close the account. Then take the card and cut it up into pieces. Take the pieces into the driveway and light them on fire. Then bury the ashes. 🙂 Now you can treat that card like a bill because there’s no chance you will use it again! In fact, you can make it even simpler and just use a category to budget for the payment.”