I am new to budgeting after leaving my abusive marriage about 3 years ago. My husband used to control my income. I carry over 10,000 of consumer debt from starting again which I have been working hard to pay off. I want to use the equity in my home to purchase another in about two years’ time, if I can.
Right now I have allocated as much as I can to the debt repayment each fortnight plus all of my other expenses. I may need to revise it so I can actually live, but I expect some categories like health and groceries not to spend to the envelope amount each fortnight and to flow over from time to time.
I have set up an envelope simply called “debt repayment”, each fortnight I will spend the whole amount depending on which current debt I am targeting.
I see you can set up debt and debt repayment as well. What is the advantage of this? I do not want to overcomplicate things since I am new. Is it ok the way I have done it?
The advantage of a Debt envelope is that you’ll see the total due but it won’t count against your current holdings. For example, if you had 1,000 in a checking account but owe a 10,000 debt in a regular account, your available monies would show up as negative 9,000. In a Debt account, this won’t be counted against you since you’re paying it off over time. You would just budget a minimum monthly payment amount (which you’re more than free to go over!) Additionally, Goodbudget can help you calculate the interest due if your debt is one that charges it.
If you’re not tracking the total amount of the outstanding debt in the budget and are only using the envelope to “spend” the money to pay it down, then your way is fine. However, you won’t get the reporting capabilities you’d have if the account were tracked as well.
Does that help?
Thanks. I’m still not actually sure. I don’t want the debt to cancel out my income and have me in the red all the time (even though that’s my net position in terms of cash). As I am paying my debt off over time. So is there a debt account option and debt envelope option?
There is! You’ll list a debt Account, then you’ll have a corresponding debt Envelope which you’d fill for each budget period. So the debt Account might show 10,000 (total owed) while the debt Envelope might have a budget of 100 (planned payment this budget period).
On the Accounts page, you’ll see your accounts grouped: all Checking, Savings and Cash envelopes with their individual and cumulative balances, Credit Cards paid in full with their individual and cumulative balances, and then Debts with theirs. Your “All Accounts” figure will include all of these (the accurate net position you mentioned above) but the Unallocated balance from which you Fill your budget envelopes will not, since that money isn’t ALL being taken from each budget period.
Here are a couple of screenshots to demonstrate what I mean:
Accounts page:
Ok thank you. Yes that is helpful. So if I want to see in one spot what I’m tackling, I should set up each debt account and each debt envelope. Otherwise doing what I’m doing, with an envelope called “debt” is ok, but it doesn’t give me the picture within Good Budget.
That’s the best way, IMHO, of tracking. With a debt account you can also enter the interest rate so you’d want each debt to track individually even if you’re only really focusing on one at a time. There are some good tutorial videos put out by the Goodbudget Admins that can show you more!
