Thursday, September 13, 2012

Paying Off Debt Will Take Forever?! Or will it?

I love to plan. I always have, always will. My biggest problem though is following through with the plan once I made it.

I went back to Excel and made a spread sheet to figure out my debt, and how much I can put towards the payment. I came up with this set up:


In column A is the month. Each black outlined box is one month. On the top in row 1 are the credit card names, or type of payments. In row 2 will be your annual interest rate (APR).  Card 1 has an APR of 25%.

Balance: The balance will automatically update each month based on your previous month's payment and interest rate.
Payment: This is manually typed in by the user
Interest: The interest will automatically update based on what the current months balance is.

The Break Down per Month

Let's say the following is your minimum payments:
Card 1: $50.00
Card 2: $50.00
Card 3: $100.00
Car Payment: $150.00
Mortgage: $500.00
Total: $850.00

The first step is to put in the minimum payment amount for the current month, so we're currently looking at the month of September. Insert the minimum amounts in row 4 for September:


As you see based off the minimum payments inserted the month of October updated. 
Card 1: Balance of $250 - $50 payment + $3.52 APR =  $203.52 new balance for October.

Okay, here's where you start paying things off. Let's say you're able to spend an additional $250.00 a month in order to help get yourself out of debt. Add that to which ever payment you wish to pay off first, and what I'm doing is highlighting it in a color. So...let's add $200 of that to Card 1, and pay that off, leaving us with $50 more to spend, and we'll put that towards Card 2, raising that payment from $50 to $100. It will look like this:


Now, as you can see, there was a payment of $250 for Card 1, and a payment of $100 for Card 2. The only thing I have figured out yet is how to get rid of the interest rate once it's paid off without deleting it. For now, just delete the interest information once you have paid off the card, because you wouldn't owe that $3.52 anymore, if you paid it off.

Just repeat this process until you determine how much to pay/how long it's going to take you to pay it off. Based off my calculations if we pay $500 more a month we can get out of debt in 13 months. Here's to hoping!



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