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4 Jun 2013

Sometimes Happiness Demands Credit Card Debt

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by Jesse Mecham

Imagine this scenario:

You’re a new YNAB user, excited to gain total control of your money. You’ve worked through the Quick Start guide; you’ve attended the Getting Started class.

You’ve filled out your Rainy Day categories, and though you’ll be living check to check for a while, you see how your new budgeting habit will break the stressful cycle.

And then your college buddy sends you a text:

“Got your plane ticket for NYC yet? Can’t wait.”

Oops – you forgot about the getaway you do every few years with your college roommates. It’s a blast: three days of hanging out, reminiscing, eating well and catching up. A highlight of your year.

But how are you going to pay for it?

Going through old bank and credit card statements, you calculate the last buddies’ weekend cost you just over $2,000.

The trip is four months away. As a savvy YNABer, you know Rule Two advises you to set aside $500 each month for the next four, allowing you to board the plane guilt-free.

But where’s the $500 per month going to come from?

You’ve already budgeted your most recent paycheck, and you can’t see any wiggle room.

In fact, based on your current budget and your typical income, you don’t see how you can find an extra $2,000 over the next four months.

I see four ways to get you on that trip:

1. Reduce spending in other categories.
2. Sell stuff.
3. Make extra money with overtime or freelance work.
4. Use a credit card.

The first three tactics stir no controversy. With four months’ notice – and heightened spending awareness only budgeters enjoy – you might surprise yourself and sock away the full amount in time for the trip.

But what if you fall short? What if you only manage to scrape together $1,000?

Should you stay home? Or should you put the shortfall on a credit card?

Your long-term happiness is at stake here. I’d say your happiness demands the use of a credit card.

What?? Didn’t we just have a massive discussion about the evils and perils of credit card debt? What does a trip to New York have to do with long term happiness? Nothing, actually. The trip isn’t the point.

Your habits have created a certain momentum in your life. If you try to stop and completely change directions all at once, the shock may overwhelm your desire to “get good at budgeting.”

Which is more costly? A few hundred dollars in credit card interest, or the death of your budget?

The death of your budget is much, much worse.

YNAB doesn’t demand “all or nothing.” It demands participation and persistence.

When you take on new debt, track it in YNAB. Then use your budget to pay it off. Work with your budget to form new habits – a new direction in your financial life. Practice patience and self-forgiveness all along the way.

If you stick with it, two things will happen:

1. You’ll pay off debts incurred during your transition to budget mastery.

2. Budget mastery will create a savings that protects you from new debt.

In other words: sticking with YNAB helps more than new debt hurts.

Remember, YNAB doesn’t suggest you roll with the punches – it demands it (even if you’re the one doing the punching).

*I’ve edited the section of the post after “I’d say your happiness demands the use of a credit card” to clarify that the imaginary trip to New York has nothing to do with long term happiness. The point is the protection of the budgeting habit. Thanks for the feedback!

Your Next Step

Remember, budgeting is not restrictive. You won’t be spending less, you’ll be spending right. You can do this! Today. Right now. What do you have to lose? Except all that debt and stress. (Ok, so kind of a lot.)

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