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3 Oct 2013

When You Make Gains in Your Budget, Lock Them Down

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by Jesse Mecham

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?

0?

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 daughter’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.

Solution?

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.

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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