Where debt repayment sits in the set-aside order

Minimum debt repayments are bills, so the method treats them exactly like the power bill: convert each one to a per-payday amount and set it aside. Anything you choose to pay on top of the minimum comes out of what's left, not out of the set-aside. That single split is the whole answer, and the rest of this post is what it means in practice.

Debt is where a lot of budgets get tangled, because it feels like it deserves a category of its own. Under this method it does not get one. A repayment with a fixed amount and a due date behaves like every other committed cost, and the part that catches people out is not the minimum at all. It's the extra.

Where does debt go in the set-aside order?

There is not a separate slot for it. The set-aside method sorts your money into two buckets on payday, committed and free. A minimum repayment is committed, the same way rent and insurance are, so it goes in the first bucket and gets smoothed to your pay cycle. Whatever you decide to pay beyond the minimum is a call you make from the second bucket, the free one.

So the order isn't debt-then-savings or savings-then-debt. The minimums come out before you ever see your leftover, because they are bills. Everything past the minimum, extra repayments and savings alike, is competing for the same leftover dollar. The method takes no view on which one should win.

Why a minimum repayment is just another bill

A loan repayment has the two features that make something a bill: a set amount, and a date it falls due. That is all the method needs from it. Take the yearly cost, divide by the number of paydays in a year, and set that much aside each time you're paid. Smoothing a repayment works exactly like smoothing a quarterly power bill.

Here are two fixed repayments converted to a fortnight.

Set aside $221.54 a fortnight and, across 26 paydays, you've put away $5,760. That is exactly twelve monthly repayments of $480. The direct debit still leaves your account once a month. The set-aside just means the money is already waiting when it does, including in the two months a year that carry a third payday.

What about a credit card minimum, which keeps changing?

Here's the honest wrinkle. A car or personal loan repayment is the same figure every month, so smoothing it is tidy. A credit card minimum usually isn't. It's often a small percentage of the balance, around two per cent, so it shrinks as the balance shrinks. On a $3,000 balance the minimum might be about $60; pay the balance down and next month's minimum is smaller again.

People handle that in one of two ways. Some set aside a round figure a little above the current minimum and revisit it every few months, treating it as a bill that drifts. Others set aside the amount they actually mean to pay, which rolls the minimum and the extra into a single number. Either is fine. The method only asks that whatever you've committed to sits in the committed bucket, so the leftover you spend from stays honest.

Should debt come before savings?

This is the question the method will not answer for you, on purpose. Once the minimums are covered, the leftover is yours, and putting more onto a debt or into savings are both choices drawn from that same pool. One person clears a high-interest card first. Another keeps a small buffer growing alongside it, so a flat tyre does not land straight back on the card. Both are reasonable, and picking between them isn't the app's job.

I built EachPayday to describe the mechanism and then stop. It'll show you the leftover to the cent. What you do with it, and in what order, is yours to decide. If you'd rather have a way to think that number through than a rule to follow, the post on what's left over each payday works through it without landing on a percentage.

When the minimums alone don't fit

Sometimes the sum comes out the wrong way round. The bills, minimum repayments included, add up to more than the pay does. The method will not paper over that. It'll show you the gap in dollars per payday, quickly and plainly, and while that's genuinely useful to see, it isn't a fix on its own.

That is a point to talk to someone. The National Debt Helpline is a free and independent service staffed by financial counsellors, on 1800 007 007, and it is not a lender or a sales line. Seeing the shortfall in real numbers is often the first useful step, and it beats a vague sense that things are tight without knowing by how much.

Running it without the mental arithmetic

The maths on any single repayment is easy. What wears people down is keeping it current: a repayment that changes, a card minimum that drifts, a loan that ends and frees the set-aside back up. To the app, a loan repayment is simply another fixed bill, so it converts to your pay cycle beside the power bill and the phone, and it tracks that the debit is covered. When a loan is paid off, that set-aside turns back into leftover by itself.

You can open the demo and enter a repayment as a bill to see where it sits. It's the full app on sample data, with nothing to sign up for.