In my previous post, I talked about strategies to pay off credit card debts. Today I’d like to expand on the topic and introduce a financial tool I usually recommended to my clients to help manage their debts more effectively.
The tool is a calculator spreadsheet called Debt Reduction Calculator provided by Vertex42that helps you calculate your debt according to your chosen payment strategies–snowball method or avalanche method–which were mentioned in the previous post. The calculator can help you answer the following questions:
- How fast can I pay off my debts?
- How much can I save in interest payments?
As you can in the screenshot, the spreadsheet will require you to input each creditor information (name, balance, rate, and monthly minimum payment) in the Creditor Information Table.
The Monthly Payment fieldbeneath the first table is where you input the total amount you put aside every month to pay back the debts. It is the maximum total payment you can afford based on your budget.
After taking in your numbers, the Initial Snowball field will tell you how much money you have left to put in the focus account on top of the minimum payment.
The Strategy field is where you select your strategy, Snowball or Avalanche.
Once you select a strategy, the bottom table will give you a summary of when each of the debts will be paid off based on the strategy you use, and how much in interest you will have paid.
The spreadsheet is very useful to help you compare different strategies and come up with a plan. Click here to visit Vortex42 for more information and download the spreadsheet in Excel and other formats like Google Sheets or OpenOffice.
