At some point in our lives, we find ourselves with some or a lot of debt. Here are some of the biggest questions: How a simple debt calculator can make all the difference.
How fast can I get out of debt?
How much can I save in interest payments?
First we have to find out were did the debt come from (credit cards, loans, medical, car, etc). Then we find the interest rate of each of the debt vehicles, this will be on the statement and on the web portal. Finally we find the exact monthly payment down to the penny.
We need to write this all down. In my experience seeing is believing, if I have the data but cannot visualise it into information then it is worthless and I will forget it. However, if I can see that:
Debt Reduction Calculator for Excel
| Personal Loan #2 | 23,415.24 | 8.99% | $542.22 |
| Interest Paid | Months to Pay Off | Month Paid Off |
| 2,341.80 | 25 | May-2022 |
Now we have turned that data into information and can use it to make better decisions.
Dave Ramsey is a leader in this space of debt free living. I agree in principle but some of the tactics I may want to debate. Such as where you pay off debt in order of smallest to largest, gaining momentum as you knock out each balance. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance.
I have “played” around with Debt Reduction Calculator which is set up to help you do case studies and see what works for you. I found that if I paid off the highest interest first I would save $9,000 in interest and still be able to Snowball. Also, according to Dave all debt is bad, I disagree on this point. Yes, some unsecured debt is bad however, I was able to borrow money at a great interest rate to pay off a higher rate loan.
This gets into the Time Value of Money (TVM) not to get to deep for this article it states that,” money today is worth more than tomorrow.” Given that money can earn compound interest, it is more valuable in the present rather than the future.
| Creditor | Balance | Rate | Payment | Interest Paid | Months to Pay Off | Month Paid Off |
| Good Loan | 23,262.00 | 0.88% | $396.66 | 87.99 | 10 | Feb-2021 |
So what does this mean? Well first you would save about $2,300 in interest payments. The $542 monthly payment could help pay off the new debt faster.
With this calculator you are able to see which of the different strategies works best for you.
The decisions you make today will affect tomorrow. So make smart ones.
Warning: It may be tempting to put your full financial strength into paying off your debts. Be careful about doing that. You need to balance your debt reduction goals with the need for an emergency fund and other important financial goals. In these cases, it can be useful to seek the advice of a qualified professional.
Conclusion
Debt is not always a bad thing, it helps to start a business, buy a house or car. When debt is out of control and unserviceable it can be so scary that your health, relationships, and life can be affected all in negative ways. My intention is to wake you up, and help you take control back. For me it was: What am I not teaching my children about life? and What do I not know about life? Debt is one big facet of life. Lets get smarter for them.
