I have a stupid question...
My wife and I have been doing our debt payoff snowball (been 6 months now) with a $1k emergency fund until everything but the mortgage is paid off (Dave Ramsey style).
Our monthly costs are ~ $2500 (still trimming in places) but we have $5600 in our checking account so I think we have a good chunk of extra $ that I didn't realize.
I would like to figure out how much $ we have extra as we are using every last $ to pay down debt as fast as possible.
Is it as simple as looking at my balance at the end of March, making sure all our bills are paid for, and then subtracting April's budget from the balance and then that gives us the extra $ we have (perhaps allowing a couple hundred for a cushion)? So lets say we have $5500 at the end of March, I would subtract $2500 from that as that is April's budget and the difference would be $3000 which we could use to pay down debt?
I'm fairly sure that this is right but it just seems too darn simple and I could use a 2nd opinion.
Technically yes, just make sure that you're also saving for any irregular expenses like car maintenance or home repairs unless you feel comfortable with absorbing all that with your efund.
Basically, same as arebelspy said.
Well right now we are in debt snowball or debt emergency mode so every penny not budgeted at the end of the month goes towards our debt with exception of the $1k emergency fund.
I know that is a fairly small fund for now, but after we get our debt paid off it will be 4 to 6 months of income.
This is a stressful trap that I've found myself in many times before during my debt repayment journey over the past two years. The problem is basically that your lifestyle has a bunch of expenses in it that should be spread out among the months before that lump sum is due. By not spreading them out, you're just borrowing money from your future self that either causes stress (rice and bean month again!) or debt.
My favorite example is tires. My tires have to be replaced every two years, and they cost about $500. This means that I consume about $21 in tires per month. If I don't factor that in to my monthly spending, then when that tire bill comes due, I either have to:
a) spend $500 less that month,
b) increase my income by selling something or freelancing to the tune of $500 that month,
c) use my emergency fund for that, and then put debt repayment on hold to refill the efund, or
d) use credit.
Of course, I could do some of each of these, but the end state is the same: stress.
Your monthly expenses are usually not as simple as what you spend each month, because you consume small parts of items that you buy irregularly every time you use them. Taking responsibility for this fact by somehow budgeting for it reduces stress and gives you a more accurate picture of the actual cost of your decisions. It's also why living within your means usually means using less stuff, buying an air conditioner for your home and adapting your lifestyle to it means that you will eventually have to replace an air conditioner, financial responsibility means that you have to take that fact into account.
I've found
YNAB to be the best tool for accounting for this type of expenses, and it's very popular here. And free to try!