In Debt Until December 2011
I'm In Debt
- Posted:
11/7/2008
For months, I bugged the owner of
DestroyDebt.com to create some budget and debt tracking tools with reports that I could use to really look at my financial situation. I used the budget tracking tool first to enter in all the "stuff" I spend money on each month and compare it to my average monthly income. That alone is always an eye-opening experience. Most of us know whether or not we're in debt, but don't realize to what extent until we actually force ourselves to write out each and every monthly payment and living expense and view the total side-by-side with the average monthly income. If you haven't done that in awhile, I suggest you click on "budget tracker" under the Tools section here on DestroyDebt.com and see for yourself how good (or not) your financial situation is at this exact moment.
Since that didn't depress me as much as I was expecting, I decided to move forward and set up the debt tracker. I added most of my debts (individual credit cards with the total balance, minimum monthly payment required, and interest rate as well as personal loans I have). Doing this allows the system to create an approximate repayment plan, showing me how long it will take to get out of debt by making monthly payments. So once my debts were entered, I clicked on "edit your plan" from within my Debt Tracker tool, and decided to see how long it would take me to get out of debt if I paid $0 over the minimum payments each month. (We all know that paying just the minimum payments is bad and costs you hundreds or thousands of dollars in interest, but I just wanted to see).
My Snowball Payment Report told me: "You are currently
$25,492.00 in debt. By using the snowball method and paying an extra
$0.00 a month, you will be debt free in
November of 2012 and pay a total of
$27,249.57"
Then I decided to see what kind of difference I could make just by paying an extra $150 per month over the minimum payments. "You are currently
$25,492.00 in debt. By using the snowball method and paying an extra
$150.00 a month, you will be debt free in
December of 2011 and pay a total of
$26,325.36"
I shave almost a full year off my repayment schedule and save over $900 in interest. I've been debating whether I should be trying to save money each month for my future or pay off debt - a common question people have. It seems that unless I'm going to earn more than $900 in a year's time on the interest my savings would earn, I probably should be concentrating on applying as much money as possible to pay off my existing debts (and of course, avoid taking on new ones in the meantime!)
How long will you be in debt?
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