We are now on day #14 of our Be Intentional Challenges! We hope it has been wonderful, productive and life-changing so far.
As a reminder, the 30 Be Intentional challenges this month are designed to get you on the right foot, the right track and give you energy, efficiency and organization which will propel you into a life that is able to develop an overall financially smart, happy and frugal home.
As part the second part of two on getting rid of debt during our Be Intentional Baby Steps – it is about the “planning on how to get rid of it.” We know you most likely won’t be able to get rid of it this month, but planning is what we are all about and it is a very important step to help you in your debt-free journey!
Baby Step #14
Complete the Debt Payoff and Goal Planner
Now while being in debt is not a new thing for us, getting out of debt is not either. We did get it paid off with diligence and planning. We are going to now challenge you to get your debt payoff planning done! This next challenge is taking the information that you collected on the previous challenge and formulate a payoff plan/goal, knowing that with income changes (hopefully more income) your plan needs to be flexible. This planning will go into your home binder (presented soon!) for your quick level view of debt payoff. And we encourage you to print off more of these downloads to update your goals and hopefully they will be sooner than proposed initially.
Why It’s Important To Complete The Debt Payoff and Goal Planner
- The first reason is just this “A goal without a plan is just a wish!”
- It is motivating
- It makes it real
- It makes it attainable as you can see the end in sight (even if it seems miles and miles and miles away)
- It is your quick reference of where not to go further
- It is your quick guide to remind you where you were
- It helps to keep you on track
- It helps to make those small baby steps that are a part of the whole debt payoff goal!
So for this baby step, we have provided a download to visually prioritize your debts and write down a goal payoff date. Please note, if you haven’t completed the previous debts form, we suggest doing that first HERE before completing this step.
Here’s how to fill this out:
- Print off this sheet
- Then place each debt under the right dollar amount category based on the current balance.
- Then fill-in the interest rate
- Fill-in the balance
- Then skip to the last line and your “rolled amount” will be the payment you are currently making.
Once you complete that part, then next steps are figuring out the priority and your goal payoff date.
To do this, there is a really neat tool on Bankrate HERE that allows you to plug-in all of your debts with current interest rates and facts and they will do a bunch of calculations and come up with what they think is going to be the fastest way and the way to pay the least amount of interest to pay it off. I find this tool to be quite slick and handy. Although I do not totally agree with the priority and plan that it came up with using my sample numbers, it is at least a great place to start and very simple.
When Cassie and I were working on our debts, we created an amortization schedule as well. But we did it the old-fashioned way of creating an Excel spreadsheet and then prioritizing our debts based on all factors (balance, interest rate, whether it was a fixed or adjustable payment and if it was tax deductible). I ran all sorts of queries to figure out how I could reach our debt payoff goal in the shortest amount of time possible. But I am also a math geek, and so I liked creating these queries myself and figuring it out. Plus, I don’t ever remember coming across any free online tools that figured it out either at that time.
So you can do what we did and figure it all out yourself, or you can use this free tool from Bankrate.
Using the 8 debt examples I created on this list, it took me about 10 minutes to enter them into this Bankrate system for them to give me what they thought was the best payoff plan.
Before you complete this, take a look at your budget now and decide how much extra you can realistically contribute to debts. This is a starting point because we hope to help you increase that amount by helping you find extra money by saving in all areas of life and by potential extra money making opportunities that work for you and your family. So this is going to be your first-run, worst case if we have no extra money at any time payoff goal planner.
Part #2 steps:
- Head to Bankrate HERE and enter the facts of all of your debts (interest rate, balance, payment, etc.)
- Once you enter all of those in, you will be asked how much extra you can contribute to paying off your debts each month. For the purposes of this example, I put in $400 (again, we hope to help you find more each month, but start somewhere realistic currently)
- The next questions will ask you of any raises or windfalls that you know of that are coming. For the test, I just left these blank. Many of those things cannot be predicted, but if you do know, then by all means, add that in.
- Now what Bankrate will do is take all of this information and calculate a payoff plan and priorities for you.
- So with my 8 debts example which totaled $45,794 in total debts, they have come up with a plan to have it paid off in 31 months with only the $400 extra, plus the rolled over payment amounts from the previous debts. Just think, if you were able to find that 2% extra each month that we talk about, it would be that much quicker!
- Click on “Get Plan” and you will then see a detailed plan and the priority in which they place your debts.
- You can then use these numbers to prioritize your debts on the download we provided as well as the payoff goal debt. So as you can see, I put a “priority #1” on the Visa CC#2 with the $6,200 balance and the payoff date of November 2013 and went through my list to do this to all of them.
That is a simple, easy, effective way to set your goals.
Now like I mentioned, this is a good starting point, but I don’t totally agree with the order of priorities. Instead decide the priority based on what makes sense! Here’s some factors I would consider when prioritizing your debts:
- I would actually payoff the two in the $0-$1,500 category first starting with the low balances as it looks like I could get them both paid off with this plan in just a few months and that would give motivation to see one or two drop off right away and two less payments. Plus it would also give me $82 extra per month right away to roll into other debts.
- I also would wait on the cars until the end as the payments are most likely fixed and they don’t free up any extra cash right away. Debts that have adjustable payments means extra cash to roll into the debts immediately.
- I would also payoff any Student Loans at the very end because they generally have the lowest interest rates and any interest you pay is typically tax deductible.
So you can think about those additional factors that would help you in deciding which debts were the priority too.
Here’s the download that you need and print this off as often as you need to update your numbers!
|<== Download your printable Debt Payoff and Goal Plan HERE|
One final thing….. we also have a Facebook Group where you can engage in discussions, receive encouragement and talk to others that are participating in the challenges too for more ideas! Head to the Be Intentional with The Thrifty Couple Facebook Page HERE and ask to join us there! You can also invite friends and spouses too!