Debt payment wizard

[isildo]

For users paying off credit card or overdraft debt, the payoff system in Financier can be a little confusing. To help with that, add a button to the credit card account register that will calculate how much a user can pay at that time.

[Debt Payment =    ]  [Reconcile Account]
Put the button in the blank space next to the Reconcile Account button. When the user clicks it, Financier does the following calculation: |Credit card balance - Pre-Financier Debt category balance - overbudgeted amount - overspent amount| = payment. The number can be displayed on the button itself and then cleared when a transaction/transfer is entered or when the user navigates away from that account. (Actually, you could have it continuously displayed and auto-updated, but it would have to recalculate every time the account or category is updated. I'm not a programmer, so I don't know whether that's a problem, but it seems like it could slow things down.)

If the overbudgeted amount or overspent amount is nonzero, give the user an alert: "WARNING! Your debt payment has been reduced due to overspending and/or overbudgeting. Correct these errors on the budget screen to ensure your budget is accurate and reliable."

Thoughts? Modifications?

[Joel]

Why the overbudgeting and overspent amounts?


This would require actual linking of the account to category balance.


Also, what would it say for paid in full credit cards?

[isildo]

Overbudgeting and overspending create fake money in the budget and artificially inflate all categories. For debt categories, this creates an illusion that there is less debt and that the user can send more money to pay it off. I may be misremembering, but I thought I recalled some threads in the YNAB forum where people used the [card balance - category balance] formula and still got into trouble because they had red elsewhere in the budget.

Usually I understand "linking" account and category balances to mean "keeping them the same." That doesn't happen here. The program just needs to know which category balance to use for the calculation, and since it creates the debt category to begin with I thought that should be doable. Again, not a programmer, so feel free to tell me I'm crazy.

For PIF cards, the debt category will have a 0 balance. If there is no overspending or overbudgeting, the calculation will return the account balance as the suggested payment. If there is overspending or overbudgeting, the user gets a heads-up that the budget is not completely accurate and it may not be safe to send the full cc account balance.

[Joel]

Overbudgeting and overspending create fake money in the budget and artificially inflate all categories. For debt categories, this creates an illusion that there is less debt and that the user can send more money to pay it off. I may be misremembering, but I thought I recalled some threads in the YNAB forum where people used the [card balance - category balance] formula and still got into trouble because they had red elsewhere in the budget.

The way that overbudgeting and overspending impact your available to budget, I would think they should be excluded from this formula. The [card balance - category balance] should be the formula. - If card balance > category balance, it suggests you pay the difference.
- If card balance =< category balance, it should ask the minimum payment you need to make and suggest that you budget the minimum payment plus the difference to the category to make them balance. It would be great if you could click a button and have it increase the budgeted amount by said amount above.

Usually I understand "linking" account and category balances to mean "keeping them the same." That doesn't happen here. The program just needs to know which category balance to use for the calculation, and since it creates the debt category to begin with I thought that should be doable. Again, not a programmer, so feel free to tell me I'm crazy.

The linking is where I'm not sure how easy that will be. I think it's easy to create a new category based on the account name, but I don't think the link stays after that (at least currently). I have a few concerns here. First, PIF credit cards where the users often delete the pre-software debt category. So if you were forced to link a credit card account with a category, you would need to be able to indicate that you "always pay the statement balance in full", and it would therefore, not require you to link a category to it. Second, how would it work for users who pay the statement balance monthly but are riding on the credit card float? I don't think it's a good idea to recommend carrying interest on a card (like YNAB used to do). Third, what happens with balance transfers amongst credit cards? Fourth, for PIF credit card users that need to start carrying a balance, how would that be handled? I don't have the answers for all of these situations, but just wanted to bring to light how tricky this becomes.

For PIF cards, the debt category will have a 0 balance. If there is no overspending or overbudgeting, the calculation will return the account balance as the suggested payment. If there is overspending or overbudgeting, the user gets a heads-up that the budget is not completely accurate and it may not be safe to send the full cc account balance.

That's fine. But as mentioned above, the first thing I do is delete my debt categories as all my cards are PIF. I don't want to be forced to have a slew of categories for credit cards that I always pay in full.

[isildo]

The account and category do not need to be linked. The program would do the same thing that users currently need to do: look at the budget, find the appropriate number(s) and plug it (them) into a formula. All it needs is to know what category to look for, so perhaps the automatically created debt categories should be name-locked. If there is no matching category, a value of 0 should be used for the category balance.

For credit card float, users who don't want to incur interest can set up a new debt category and call it, for example, "Float Loan To Self," and consolidate their on-budget debt there. Then the button will tell them to pay the full card balance because the associated debt category will be 0 or nonexistent. The overspent amount would be the same number in the next month's header, so a new debt category with the red arrow right would not be included in the calculation.

Balance transfers would be no more or less complicated than YNAB 4. The user would need to create a transfer between accounts and update the budget screen.

For overspending and overbudgeting, the user will need to decide which categories to reduce. Either they'll look at the budget and decide "Yeah, I don't need that much in Entertainment for the rest of the month, let's use that to cover the overspending/correct the overbudget." Or they'll decide "Crap, I'm barely scraping by in all my categories. I can only fix the budget by taking on more debt." If it's the second, the payment amount will have to be reduced. Better to do that before sending money off to the credit card.

[Joel]

The account and category do not need to be linked. The program would do the same thing that users currently need to do: look at the budget, find the appropriate number(s) and plug it (them) into a formula. All it needs is to know what category to look for, so perhaps the automatically created debt categories should be name-locked. If there is no matching category, a value of 0 should be used for the category balance.

That makes sense to me. There would have to be a way to add a debt category for a credit card (if it was previously deleted).

For credit card float, users who don't want to incur interest can set up a new debt category and call it, for example, "Float Loan To Self," and consolidate their on-budget debt there. Then the button will tell them to pay the full card balance because the associated debt category will be 0 or nonexistent. The overspent amount would be the same number in the next month's header, so a new debt category with the red arrow right would not be included in the calculation.

This also makes sense. If there is a category balance, would it make sense to ask what the statement balance and minimum payment is? Based on that information, the software could suggest what is needed to make the minimum payment (acknowledging interest will be paid). The software could also suggest what needs to be budgeted to the category balance in order to be able to make the statement balance. Lastly, the software could acknowledge that the user is relying on credit card float, but can at least pay the statement balance and avoid paying interest. I may play around with some examples to make sense of this and how it could look.

Balance transfers would be no more or less complicated than YNAB 4. The user would need to create a transfer between accounts and update the budget screen.

With the "linking" discussed above, I think this would be fine.

For overspending and overbudgeting, the user will need to decide which categories to reduce. Either they'll look at the budget and decide "Yeah, I don't need that much in Entertainment for the rest of the month, let's use that to cover the overspending/correct the overbudget." Or they'll decide "Crap, I'm barely scraping by in all my categories. I can only fix the budget by taking on more debt." If it's the second, the payment amount will have to be reduced. Better to do that before sending money off to the credit card.

Again, I think this is best handled outside of the credit card payment workflow. However, if the category balance exceeds the account balance, the software should suggest that the user budgets money to the category balance to make them match (or at least cover the minimum payment). With a warning that says other category balances are overstated by this difference plus the amount of overspending and overbudgeting.

[isildo]

I didn't really consider bringing in the statement balance or minimum payment, primarily in the interest of keeping the tool as simple as possible. Push a button, get a number. But then again, I never had to really wrangle with debt in YNAB. Are those numbers enough of a pain point that it would be worth entering them just so they can be subtracted from another number? Maybe rather than input fields, the software could give a reminder to compare the suggested payment to the minimum payment and statement balance?

At the same time, if the user is only getting one number it needs to be one that won't lead to trouble. You can always send more money to the credit card company but you can't get it back from them, so I thought it would be better to err on the side of a smaller payment and keeping more money in asset accounts. I recognize that that also means erring on the side of more debt and more interest, but I feel that it's the user's job to minimize interest and the software's job to keep things accurate.

I completely forgot about the scenario where the category balance exceeds the account balance.   
Definitely need to fiddle with that and see how the formula responds.

Please do test and poke holes and let me know what you come up with!

[Joel]

Thinking about this some more, there are really only 3 scenarios:
1) Users paying at least the statement balance, when the Account Balance - Category Balance >= Statement Balance.
2) Users paying at least the statement balance, when the Account Balance - Category Balance < Statement Balance.
3) Users paying at least the minimum payment, when the Account Balance - Category Balance < Minimum Payment.

With that said, this should be a simple calculation. However, it will require the user to input the statement balance, minimum payment, and due date. With those three inputs, the software should be able to suggest the payment the user should make on the due date. I'll define "Available to Pay" as Account Balance - Category Balance.


Each of the three scenarios will suggest the user can pay the statement balance, the amount available to pay, the minimum payment amount, and any other amount they input. It should indicate whether or not the user will have to pay interest (if they are not paying at least the statement balance). It should also alert the user if they are not paying at least the minimum payment. Lastly, it should suggest how much the user needs to budget to the category balance in order to pay the statement balance and/or the minimum payment. It would be great if you could click that button and have the software add that amount to the category balance.

Note: you will want to warn users that the Available to Budget should always be >= $0, and that they should not have any other categories with negative balances. Otherwise, their positive category balances are overstated.

Under all these circumstances, the user should still be able to choose to pay any amount they wish. You know what, if the program can find the appropriate number on the budget page, this could actually be pretty easy and straight forward. See the attached excel file for my math and examples.

[Joel]

I didn't really consider bringing in the statement balance or minimum payment, primarily in the interest of keeping the tool as simple as possible. Push a button, get a number. But then again, I never had to really wrangle with debt in YNAB. Are those numbers enough of a pain point that it would be worth entering them just so they can be subtracted from another number? Maybe rather than input fields, the software could give a reminder to compare the suggested payment to the minimum payment and statement balance?

At the same time, if the user is only getting one number it needs to be one that won't lead to trouble. You can always send more money to the credit card company but you can't get it back from them, so I thought it would be better to err on the side of a smaller payment and keeping more money in asset accounts. I recognize that that also means erring on the side of more debt and more interest, but I feel that it's the user's job to minimize interest and the software's job to keep things accurate.

I completely forgot about the scenario where the category balance exceeds the account balance.   
Definitely need to fiddle with that and see how the formula responds.

Please do test and poke holes and let me know what you come up with!

I posted right after you did. I think it absolutely makes sense and should require the statement balance and minimum payment required, as well as the due date even. Take a look at what I posted though.

[isildo]

I was actually thinking of something similar to this when I first came up with the idea, but it eventually simplified down to a tool that just says what's currently 100% safe to pay according to the budget. I guess calling it a "wizard" isn't really accurate any more. Your wizard is actually more involved than my original idea, and functions half as a calculator and half as a credit card tutorial--tweak the phrasing a little and it would tell the user exactly what to do on the account and budget screen in order to pay the amount they want to pay.

Maybe we can have both? Click the button to get a quick payment number--just the amount that's currently available. Under the button, have a link to launch the full wizard where the user can see the calculation and enter their statement information if they want.

Note: you will want to warn users that the Available to Budget should always be >= $0, and that they should not have any other categories with negative balances. Otherwise, their positive category balances are overstated.

I'm still hung on this. It's not just the positive category balances that are overstated--ALL categories are, including the debt categories. Which means that the calculations, while very snazzy, aren't actually reliable. I've added a tab to your spreadsheet with an interactive calculator showing how it would work to correct for those.

I also realized I had the formula incorrect. It should be (Credit card balance - debt category balance - overbudgeted amount - overspent amount)*-1 = payment.

I like your idea to take it a step farther and adjust the budget entry automatically. I also thought it would be cool to start the transfer transaction for the user. But both of those will bring up new problems: changing the budget will likely create an overbudget error where there wasn't one before, entering a transfer will be confusing if there's already an existing or scheduled transfer, and editing the transfer would require the software to identify the correct one in order to make changes. Maybe those can be resolved but this is all my brain can handle for the moment!

[Joel]

I don't think you can include overbudgeting and overspending in the calculation.

How would that work for multiple credit cards? It just wouldn't.

I also am afraid of the software "automatically" doing anything, as that's just bound to cause confusion.

[isildo]

Why wouldn't it work with multiple cards?

The program has to either reduce all suggested payments by the amount of monopoly money in the budget, or allow them all to be inflated by that amount. Reducing the payment errs on the side of keeping more money in hand. That money can easily be sent to the credit card company later, after the user reviews the budget and confirms that it is not needed. Or confirms that it is needed, and chooses which card should carry the debt.

I've updated the spreadsheet again to show two cards. $500 is budgeted to each card, but there is a $200 overbudget error. The user has an opportunity to evaluate the budget and decide whether to reduce debt payoff or another category, *before* sending money off to the card.

It would be great if you could click that button and have the software add that amount to the category balance.

This is what I was referring to re:automatic changes. How would you envision this step working to avoid confusion?

[Joel]

You know what, maybe making it clear the calculation would probably make sense:


Account balance $xx
- Category balance $xx
- Overspending $xx
- Overbudgeting $xx
= Available to Pay $xx


The user would then be required to input the minimum payment and statement balance. I would imagine seeing some type of bar graph that shows the range of payments that can be made (minimum payment, available to pay, statement balance, full account balance)


Depending on what you select, it would suggest how much money needs to be removed from another category to cover the overbudgeting, overspending, or increase the category balance. Perhaps it would flash to the budget screen (like YNAB4's reconcile account window) and shows you how much money needs to be freed up. As you make changes, it can then tell you if you have fixed the budget. The you can choose to save the work, which will update your budget amounts, and then go back to the payment screen where it tells you, "yes, you can now pay the amount you wanted to" or something along those lines.


For users with multiple cards, this would be difficult for the first card, but subsequent cards done at the same time would be easy. The part that is tricky is "automatically increasing the category balance", as that likely just ends up with offsetting overbudgeting, so then the user would need to fix the overbudgeting. The only way to really fix that would be to have a screen that shows the budget screen with a countdown of how much more you need to free up.

[isildo]

That seems redundant really. The full payment amount will be available when Overbudget and Overspent are both 0, and the budget screen already shows the Overbudget and Overspent amounts. And without the budget screen interaction, all the program can do with the minimum payment and statement balance is provide the difference between each of those and the amount currently available.

To avoid feature bloat and provide the maximum value per keystroke/click, I think the best approach is the button to trigger the calculation, a popup warning if there is overbudgeting or overspending, and a "How was this calculated?" link. Ideally, "How was this calculated?" should populate with the real numbers from the user's budget.

@Alex what do you think?

[Joel]

That seems redundant really. The full payment amount will be available when Overbudget and Overspent are both 0, and the budget screen already shows the Overbudget and Overspent amounts. And without the budget screen interaction, all the program can do with the minimum payment and statement balance is provide the difference between each of those and the amount currently available.

To avoid feature bloat and provide the maximum value per keystroke/click, I think the best approach is the button to trigger the calculation, a popup warning if there is overbudgeting or overspending, and a "How was this calculated?" link. Ideally, "How was this calculated?" should populate with the real numbers from the user's budget.

@Alex what do you think?

That could work as well. I just think it makes sense to allow for optional user input of the statement balance and/or minimum payment.

Personally, I won't ever need to use the module, as I just reconcile once per month, and then enter my scheduled transaction into the register and input the statement balance. However, it would be hugely beneficial for non-PIF users.