Full Buffer VS Paying Down Debt

jeniferbjeniferb Posts: 481Member
edited September 2012 in Desktop
I'm sure I'm not the first one who has asked about this, but I am now at a point I feel I can actually decide between the two.

In November, I get paid three times and husband gets paid five times. Between the two, that will make up the rest of our buffer. I already have 1k of my buffer, and I was just going to operate at partial buffer until our debt is gone. But I thought maybe I should ask people who've been through it.

So, anyone out there buffered and still in debt? Has it really helped you to be buffered?

Is there anyone out there partially buffered and paying off debt? Why did you decide not to buffer fully? Is it your intention to buffer when you're done paying off debt?

I know with the extra money I /could/ be fully buffered without too much trouble. Just need some perspective! :)
Post edited by Unknown User on

Comments

  • blackdiamondblackdiamond Posts: 2,313Member, Beta Tester
    How long would it take to pay off the debt if you didn't do it now? Are they high interest debts?

    There are a lot of Dave Ramsey people on the forum and his recommendation is to a $1,000 emergency fund first followed by paying off all debt other than your home. After that he suggests saving 3-6 months income. I would equate the 3-6 months income to be where he'd suggest the buffer would come in and be 1 of those months. He's a least a financial adviser by profession. I'm paying to take his class so I'll defer to him!

    There are two huge benefits from paying off you debt. One is that you are no longer losing money to interest and the other is that you gain back control of your money that is obligated to pay the minimum payments. I suspect that if you treated the buffer as the final goal in your debt snowball you could have it fairly quickly.
  • mmccordmmccord Posts: 77Member
    +1 to all of blackdiamond's points.
    jeniferb wrote:
    So, anyone out there buffered and still in debt? Has it really helped you to be buffered?

    I am buffered and still have some debt. My minimum debt payments are only about $100 a month and I'm only paying a small amount of interest. I'm paid once a month on the 15th. When I was starting YNAB I had a really hard time trying to figure out how to budget across two months. Most of my bills are due around payday, but the dates are never the same (life in S. America), so as confused as I was, a buffer seemed to be the solution. In retrospect, I'm sure I would have figured out how to make it work and could have paid off more debt.

    The thing I love the most about having a buffer is not feeling the pressure of being "on the edge" financially. I love being paid on the 15th and knowing that I won't even touch that money for 2 weeks.
  • teburgessteburgess Posts: 21Member
    I asked this specific question during one of the live sessions... and it all comes down to personal preference. YNAB methodology does not tell you which way to go when you are starting out. But it can help you keep from making bad decisions and going furhter into debt.

    I am operating with a $1000 emergency account right now, not really a buffer.

    I am focusing all my attention on snowballing debts. Once those are taken care of, I will devote that amount towards the buffer.

    My reasons for doing so is: 1) I hate making several payments each month to creditors so I want the payments gone, 2) My interest rates are higher than I would like.

    Do what you are comfortable with. If something doesn't work or sit well after you have tried it, you can always change your approach.
  • litterbuglitterbug Posts: 3,636Member, Beta Tester
    I love my buffer and my rainy day funds, and wanted both in place before focusing on debt. I'm having a little trouble figuring out how I want to focus on debt, but at least I'm sufficiently set on the financial stability front to change my focus.
  • sarahs219sarahs219 Posts: 165Member
    When we started YNAB we wanted our credit card debt gone and gone fast. We hated that debt. We also have a car loan and an ungodly amount of student loans. We felt overwhelmed. The credit card debt was the smallest amount of those three types and the one that pissed us off the most. So we started out unbuffered but with $1K emergency fund. We dilligently did our budget per pay period. This kept us motivated because we were sending a payment to the CC's on a weekly basis, it was very satisfying every Friday. It kept us focused and pissed off at those CC for 7 months. We paid off our last CC on Feb. 6, 2012 (a day I will probably never forget). We then had to decide our next step. Do we increase our savings, do we pay off the car and work on the student loans, do we build our buffer? I was still pretty excited to budget on a weekly basis so we increased our savings, using the same focus and drive that helped us pay off our CC's. This lasted until July 2012. I started dreading that process each week. I was tired of spending so much time juggling pay days and due dates. I moved some money around throughout August and used my extra paycheck to create our full buffer which is equal to one month's pay. September has been great, not having to do that juggling act. I love it. Do I love that our emergency fund has been reduced to build this buffer? No, not at all. But we are more tired of having a car payment, so we are keeping our emergency fund at $1K and tackling our car loan. I hate that car loan more than I hate the low balance on our emergency fund.

    Here's the point of the story. What do you want? Here's the questions I would ask myself if I were you.
    1. Do you have money set aside for emergencies and/or rainy day stuff? This should be a priority before anything.
    2. Do I have the time and energy to devote to budgeting per pay period? (This will most likely require timing your due dates with your pay periods) If you answered yes, then operate without a buffer and focus on your debts. If you answered no, then there is your solution, build you buffer to at least an amount to cover all of your bills so you don't have to do the juggling act.

    I hope this helps. Also, please note, if you are doing the no buffer thing a spreadsheet can be your best friend to keep things straight.
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