Explain credit cards in YNAB to me like I'm 5
March 24, 2023 5:29 PM Subscribe
I signed up for a year of YNAB after reading the book from my library. It makes sense to me! I can follow it! I can even reconcile it against my bank accounts! ... Except for my freaking credit card debt.
Goal: Pay back anything that I spend on the cards as well as my minimum payment and/or interest. But the math will not math for me like the rest of the program does. Every time I think I have it I realize that I don't and I've broken something.
I have spent 2 days watching I don't even know how many YouTube videos both directly from YNAB and from YouTubers that aren't associated with it and I cannot do it. From what I can tell it is extremely complicated anyway but my ADHD and dyscalculia brain will absolutely not grok it. Please someone explain this to me like I'm five, using metaphors if possible, hand puppets, anything.
Are the positives negatives? What color should it be? Do I have to have an interest category or can I solely use the credit card accounts? I still have absolutely no idea.
I have spent 2 days watching I don't even know how many YouTube videos both directly from YNAB and from YouTubers that aren't associated with it and I cannot do it. From what I can tell it is extremely complicated anyway but my ADHD and dyscalculia brain will absolutely not grok it. Please someone explain this to me like I'm five, using metaphors if possible, hand puppets, anything.
Are the positives negatives? What color should it be? Do I have to have an interest category or can I solely use the credit card accounts? I still have absolutely no idea.
I don’t know the answer but they have fantastic email support.
posted by raisindebt at 6:48 PM on March 24, 2023 [1 favorite]
posted by raisindebt at 6:48 PM on March 24, 2023 [1 favorite]
As suggested above, contact Support.
...but I say that because I was once kinda in your place -- I had YNAB and simply could not wrap my head around how it worked relative to how I live my life. I just ... I don't quite know how to describe it, but somehow it was just impervious to me, so I ended up going with a much crappier (but comprehensible-to-me and thus successful) solution.
Point being, don't make my choice -- don't try to figure it out by yourself if you're missing some fundamental concept. Ask them, and they'll explain things, and you'll very likely suddenly "get" how it works and you won't have to keep track of things in a stupid spreadsheet with questionable macros.
posted by aramaic at 6:57 PM on March 24, 2023 [2 favorites]
...but I say that because I was once kinda in your place -- I had YNAB and simply could not wrap my head around how it worked relative to how I live my life. I just ... I don't quite know how to describe it, but somehow it was just impervious to me, so I ended up going with a much crappier (but comprehensible-to-me and thus successful) solution.
Point being, don't make my choice -- don't try to figure it out by yourself if you're missing some fundamental concept. Ask them, and they'll explain things, and you'll very likely suddenly "get" how it works and you won't have to keep track of things in a stupid spreadsheet with questionable macros.
posted by aramaic at 6:57 PM on March 24, 2023 [2 favorites]
YNAB support is pretty good as others have stated, but I'm going to offer different advice in case it's helpful: I paid off my balance in full before adding my credit card to ynab. I made it a category in my budget and threw money into it same as my savings categories, tried not to use it much in the meantime (unless I already had the money to immediately pay that purchase off), and waited until the balance was zero to actually connect my credit card as an official account in ynab. I did this because I had heard horror stories of confusion in how ynab handles credit cards. Adding it at zero made it pretty easy to understand how it works in the program.
(Basically, adding a credit card creates a new category of "credit card payment" in your budget. Any time you make a purchase on it and categorize that purchase, say "groceries," that amount comes out of your groceries category and gets transferred to your credit card payment category.)
I'm not sure how it handles it if you already have a debt but can see how that would make it way more confusing. If it's truly keeping you from benefiting from the tool, just focus on getting the balance down and adding the credit card later once it's paid off.
posted by carlypennylane at 7:36 PM on March 24, 2023 [1 favorite]
(Basically, adding a credit card creates a new category of "credit card payment" in your budget. Any time you make a purchase on it and categorize that purchase, say "groceries," that amount comes out of your groceries category and gets transferred to your credit card payment category.)
I'm not sure how it handles it if you already have a debt but can see how that would make it way more confusing. If it's truly keeping you from benefiting from the tool, just focus on getting the balance down and adding the credit card later once it's paid off.
posted by carlypennylane at 7:36 PM on March 24, 2023 [1 favorite]
For those curious:
YNAB = You Need A Budget
https://en.wikipedia.org/wiki/YNAB
https://en.wikipedia.org/wiki/Envelope_system
https://www.ynab.com/
posted by intermod at 7:43 PM on March 24, 2023 [8 favorites]
YNAB = You Need A Budget
https://en.wikipedia.org/wiki/YNAB
https://en.wikipedia.org/wiki/Envelope_system
https://www.ynab.com/
posted by intermod at 7:43 PM on March 24, 2023 [8 favorites]
I couldn't figure it out either. Like carlypennylane, I made credit card debt a category in my budget, and stopped using the card until I paid it off. (Which I was able to do, thanks to YNAB and a pandemic!)
posted by unknowncommand at 8:11 PM on March 24, 2023 [1 favorite]
posted by unknowncommand at 8:11 PM on March 24, 2023 [1 favorite]
I struggled with YNAB credit cards for a while, but finally came to an understanding.
In the list of accounts on the left, the balance next to your credit card is your total balance owed. In the budget section, the number in the right column is how much money is in your budget to send to the credit card company that month. If the two numbers are the same, you are paying your balance in full. If the right column number is less, you’re carrying a balance.
The number in the right column is made up of all of the charges on your credit card that are in categories that have available budget. So say you overspend your grocery budget by $100, if you don’t add 100 to groceries, the budgeted credit card payment will not cover all of your spending.
But that only covers active spending that month. If you want to pay down old debt you need to add money to the budget column for that credit card line, just like you were budgeting money for any other category.
If you make a payment that is larger than your budgeted amount, the right column turns red, and you HAVE to add money to the budget line or else your reconciling is out the window. If any line in the program is yellow, that means that is the amount owed to the credit card that isn’t in your budget to pay for. Red is serious (read: cash imbalance), yellow means you’re adding debt.
So for the case of pay new charges in full plus the minimum amount, you would make sure that all new charges are in categories that aren’t overspent, and add the minimum amount on the budget line for the credit card. The number in the far right is what you would send that month.
posted by hwyengr at 8:36 PM on March 24, 2023 [3 favorites]
In the list of accounts on the left, the balance next to your credit card is your total balance owed. In the budget section, the number in the right column is how much money is in your budget to send to the credit card company that month. If the two numbers are the same, you are paying your balance in full. If the right column number is less, you’re carrying a balance.
The number in the right column is made up of all of the charges on your credit card that are in categories that have available budget. So say you overspend your grocery budget by $100, if you don’t add 100 to groceries, the budgeted credit card payment will not cover all of your spending.
But that only covers active spending that month. If you want to pay down old debt you need to add money to the budget column for that credit card line, just like you were budgeting money for any other category.
If you make a payment that is larger than your budgeted amount, the right column turns red, and you HAVE to add money to the budget line or else your reconciling is out the window. If any line in the program is yellow, that means that is the amount owed to the credit card that isn’t in your budget to pay for. Red is serious (read: cash imbalance), yellow means you’re adding debt.
So for the case of pay new charges in full plus the minimum amount, you would make sure that all new charges are in categories that aren’t overspent, and add the minimum amount on the budget line for the credit card. The number in the far right is what you would send that month.
posted by hwyengr at 8:36 PM on March 24, 2023 [3 favorites]
Response by poster: I missed that Reddit post when I checked there, and it's cemented for me that what's tripping me up is specifically the cards I actively use for rewards. I understand that if my assigned is +$45 and activity is -$45 then my available is $0.
What I don't understand is where I assign +$50.45 my activity is -$9.96 after I spent $40.49 and paid $50.45 and my available is still +$40.49 instead of +$3.55
I get that the $9.96 is all that qualifies as a payment but as I already made the $50.45 payment I assigned, to my mind, it shouldn't show up as green $40.49 available to pay, because I've already spent the assigned amount.
Thanks for all the positive reviews of support, I'll reach out to them. I'm usually wary of doing so because so many places just give a canned, unhelpful response. In the meantime if anyone can explain my better example, thanks in advance!
posted by Saucy Possum at 8:39 PM on March 24, 2023
What I don't understand is where I assign +$50.45 my activity is -$9.96 after I spent $40.49 and paid $50.45 and my available is still +$40.49 instead of +$3.55
I get that the $9.96 is all that qualifies as a payment but as I already made the $50.45 payment I assigned, to my mind, it shouldn't show up as green $40.49 available to pay, because I've already spent the assigned amount.
Thanks for all the positive reviews of support, I'll reach out to them. I'm usually wary of doing so because so many places just give a canned, unhelpful response. In the meantime if anyone can explain my better example, thanks in advance!
posted by Saucy Possum at 8:39 PM on March 24, 2023
Is 50.45 the additional minimum payment you wanted to make, or was it the total payment including new charges?
posted by hwyengr at 8:48 PM on March 24, 2023
posted by hwyengr at 8:48 PM on March 24, 2023
but as I already made the $50.45 payment I assigned
I think this is where you’re getting tripped up. The right column is telling you what you have available to pay on the card, between new budgeted purchases and amount budgeted; it doesn’t necessarily line up with what you have assigned in the budget line. Assigning in the budget line = paying down old debt. If you don’t do any unbudgeted spending on the card in a given month (no yellow category balances lower down) what’s available should be what you’ve spent on the card plus what you assign for paying down old debt.
The number should be green at the end of the month, the balance is rolling over to pay for this month’s purchases when you get your next statement. Once you’re out of debt, the green number for each credit card in the budget should match your credit card balance, so that if you stopped spending on that credit card you’d exactly be able to pay it off in full.
Some of this is trusting the software to tell you what you have available to pay on the card instead of what you think you should pay. It gets complicated because you’re balancing old debt and new purchases, which may or may not be budget overspends.
If you want to trust it even further, you can set up a goal for paying it off by a certain date, and you can enter your interest rate and it will tell you how much you’re saving in interest under various scenarios.
posted by supercres at 8:50 PM on March 24, 2023 [1 favorite]
I think this is where you’re getting tripped up. The right column is telling you what you have available to pay on the card, between new budgeted purchases and amount budgeted; it doesn’t necessarily line up with what you have assigned in the budget line. Assigning in the budget line = paying down old debt. If you don’t do any unbudgeted spending on the card in a given month (no yellow category balances lower down) what’s available should be what you’ve spent on the card plus what you assign for paying down old debt.
The number should be green at the end of the month, the balance is rolling over to pay for this month’s purchases when you get your next statement. Once you’re out of debt, the green number for each credit card in the budget should match your credit card balance, so that if you stopped spending on that credit card you’d exactly be able to pay it off in full.
Some of this is trusting the software to tell you what you have available to pay on the card instead of what you think you should pay. It gets complicated because you’re balancing old debt and new purchases, which may or may not be budget overspends.
If you want to trust it even further, you can set up a goal for paying it off by a certain date, and you can enter your interest rate and it will tell you how much you’re saving in interest under various scenarios.
posted by supercres at 8:50 PM on March 24, 2023 [1 favorite]
You can experiment with what you’re assigning and confirm the above: if you assign nothing, the green number on the right should match whatever you’ve spent on the card and not already paid (i.e. in the current month). Interest on pre-YNAB debt should be a budgeted for in a separate category, since it’s a new transaction in the credit card account. What would remain on the card balance (current balance minus green number on the right) is your pre-YNAB debt.
This gets temporarily hairy if you were making a payment other than what YNAB told you to (I.e. what it showed in the right column). But just adjust it in your next payment or two and you should be back on track. If it’s red, you paid too much (not covered by the “float” of month to month new purchases) and you’ll have to assign more so that you can trust your “available to budget” amounts.
posted by supercres at 9:03 PM on March 24, 2023 [1 favorite]
This gets temporarily hairy if you were making a payment other than what YNAB told you to (I.e. what it showed in the right column). But just adjust it in your next payment or two and you should be back on track. If it’s red, you paid too much (not covered by the “float” of month to month new purchases) and you’ll have to assign more so that you can trust your “available to budget” amounts.
posted by supercres at 9:03 PM on March 24, 2023 [1 favorite]
Best answer: Ok last comment about your example math specifically
What I don't understand is where I assign +$50.45 my activity is -$9.96 after I spent $40.49 and paid $50.45 and my available is still +$40.49 instead of +$3.55
You’re assigning 50.45 to pay down old debt. When you spend 40.49 you’re taking it out of another funded budget category, so it’s already assigned; you can pay this amount on the credit card too right away, it’s available for payment! (Or you can wait until next month when this transaction shows up on your statement.)
The “activity” column is not very useful for the assigned/available math. It’s just telling you the net amount on this account for the current month, current month purchases minus current month payments. If you made no more payments, your card balance would change by this much, irrespective of whether it encompasses new purchases or old debt. If you leave the green 40.49 there (i.e. don’t make a 40.49 payment on the card this month) it will be available for you to make a payment on the card next month.
Long story short: assign in the credit card budget category however much you want to pay down the debt. The payment you can make on the card is the green number on the right, which will be calculated from the assigned amount and current purchases on the card.
posted by supercres at 9:12 PM on March 24, 2023 [3 favorites]
What I don't understand is where I assign +$50.45 my activity is -$9.96 after I spent $40.49 and paid $50.45 and my available is still +$40.49 instead of +$3.55
You’re assigning 50.45 to pay down old debt. When you spend 40.49 you’re taking it out of another funded budget category, so it’s already assigned; you can pay this amount on the credit card too right away, it’s available for payment! (Or you can wait until next month when this transaction shows up on your statement.)
The “activity” column is not very useful for the assigned/available math. It’s just telling you the net amount on this account for the current month, current month purchases minus current month payments. If you made no more payments, your card balance would change by this much, irrespective of whether it encompasses new purchases or old debt. If you leave the green 40.49 there (i.e. don’t make a 40.49 payment on the card this month) it will be available for you to make a payment on the card next month.
Long story short: assign in the credit card budget category however much you want to pay down the debt. The payment you can make on the card is the green number on the right, which will be calculated from the assigned amount and current purchases on the card.
posted by supercres at 9:12 PM on March 24, 2023 [3 favorites]
Something else that can add a lot of confusion is if you use cash back rewards to pay down your balance. (and sometimes refunds for items on past statements you've already paid off on the credit card can mess with your numbers too.) I find these two situations can result in my numbers not matching or getting messed up, so I usually have to hunt down the discrepancy and re-categorize things so they reconcile (if it's only a few bucks, though, I'll just take those dollars out of my fun categories and put them towards the credit card category, and move on). Since you mentioned rewards but didn't specify which type, I'm just adding a warning that cash back can complicate things so you might want to wait on using it until you feel like you have a better handle on the ynab credit card system. I think YNAB support also does virtual workshops for their customers on stuff like this, so that might be a good resource too.
posted by carlypennylane at 9:33 PM on March 24, 2023 [1 favorite]
posted by carlypennylane at 9:33 PM on March 24, 2023 [1 favorite]
Response by poster: supercres, THANK YOU! You nailed it. That's exactly the part that my brain wasn't catching. I think I finally have all the pieces of the puzzle. Thanks again everyone! All of this was really helpful.
posted by Saucy Possum at 8:19 AM on March 25, 2023
posted by Saucy Possum at 8:19 AM on March 25, 2023
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Actually, after setting out to write out what you need to know, I'm going to just encourage you to contact YNAB support. They're actually extremely helpful in my experience and I'm 1000% sure they'll be able to answer this question more succinctly than I ever could here. More importantly, they will help you to really understand what's going on "philosophically" so that you're more successful in using YNAB for the long haul.
I suspect you're getting tripped up on having already existing large debt (that you can't pay in one fell swoop today) that you need to make monthly payments on while also charging new purchases and not trusting/understanding how the software (if you use it right) will automatically ensure you're not creating new debt (that you're actually only spending what you actually have in cash in your checking account) while also paying down your old (pre-YNAB) debt. Here's post on Reddit where someone is as equally baffled by how credit cards work in the software and somehow comes to understand it from the guidance given to them by other commenters.
I will say I really really encourage you to stick with YNAB as (I'm sure you've annoyingly heard before) it was really life changing for me back when I started using it 7 or 8 years ago. I even run my business using YNAB and even though its like one of the most expensive subscriptions I have I totally think its worth every penny.
posted by flamk at 6:48 PM on March 24, 2023 [1 favorite]