Targets for Categories Paired with Accounts
YNAB has three special target types that can only be used when a category is paired with an account. A Credit Card Payment category is automatically created and paired with a credit card account when the account is created, and you have the choice between two target types that are specific to those paired Credit Card Payment categories.
You can also pair a spending category with a loan account, and you'll then have the option to create a Monthly Debt Payment target with some great information to help you pay that loan off.
Credit Card Payment Category Targets
Pay Specific Amount Each Month
This target type, only available in Credit Card Payment categories, will prompt you to assign a certain amount towards your balance each month, no matter what, without having a specific payoff date in mind. The target doesn't care how much you've paid towards your balance, or how much you've added to it.
Once you assign that monthly amount, the target will show as met. This is great for helping to pay down a balance that you want to make a specific monthly payment on, or where you don't have a payoff date in mind, but you want to work on getting that balance paid off over time.
If you use progress bars in your budget, keep in mind that because this target type is based on a set monthly payment, it will only show the percentage of funding for the month that you're in. If the target shows 50% funded, that means the category is half funded for the month, not half funded for the balance owed on the card.
Pay off Balance by Date
This target type will calculate a monthly amount to assign in order to pay off your credit card debt by a certain date that you choose. Since this target type is based on paying off the balance owed on the card, progress is based on the available amount in the category. The balance you're paying off changes as you spend on the card, so the amount needed to pay may be different every month. The amount will also adjust month to month if you are making slower or faster progress than your original plan.
If you're using the card at the same time as you're paying down the balance, money moves from the spending category to the Credit Card Payment category, and shouldn't affect the amount needed to assign in order to fulfill the target, unless there is overspending!
If there is overspending on the card that isn't covered, then when the month rolls over and that additional balance is absorbed into the card, the next month's target prompt will be more, in order to make up for the additional debt created on the card.
This type of target's progress bar will show the percentage of the total balance that is funded, not just the percentage of the target itself. This means that you can have a balance on the card, but if there is enough in the Available column to pay that balance to zero, then the target will be considered funded (even if the balance itself hasn't been paid yet).
Monthly Debt Payment Target
When a budget category is paired to a Loan account, the debt calculator becomes accessible in the budget inspector. Assign a set loan payment amount, and YNAB will calculate the payoff date. Or, choose a payoff date, and YNAB will calculate the monthly payment needed to meet that debt-free goal.
Debt Payment targets for paired categories give a summary of the Loan payoff progress right in the budget sidebar. You can also view the Loan’s balance, minimum payment, and record a payment by clicking the Record Payment button.
Calculations are based on an amortization calculator, so the interest rate for the loan needs to be entered into the loan account for the target to be accurate. Any debt added to the loan account means you’ll need to delete and create a new Debt Payment target, since this type of target doesn’t take into account any new debt added after the target is created.
Once you set the target, YNAB will also calculate how much interest is saved if you increase the monthly payment amount (or how much you’ll need to increase the payment amount if you’d like to pay it off early).
Every little bit that you’re able to put towards that loan every month will save you interest, and get you out of debt faster. 🎉 With this target type, you can know exactly how much time and money that extra payment amount saves you, so you can make more informed decisions on where to focus your debt paydown efforts.
This type of target is based on a monthly payment, so the progress bar will show how much progress you’ve made towards your payment this month, not the progress towards paying off the total amount of the loan.