Financial Planning Tools We Use to Payoff $20K of Debt in 1 Year
Financial Tools to Pay Off Debt and Live 110%
This last year was a debt doozy for sure. Purchased our first house. Said house needed a new electric panel. Both cars needed tires. Student loan grace period ended.
Like I said… a doozy.
So the last thing on our mind should be paying off a butt-ton (and yes, a butt-ton is a quantifiable measurement) of debt this next year, right?!
Nope. That is EXACTLY what us crazies are going to do because we set out to live 110%!
Now is a perfect time because we have the motivation to do it! If you want to hop aboard our train of awesomeness, we gladly welcome you!
Whether you’re looking to pay off student loans, a massive medical bill, or even save up for a down payment on a house, our financial planning tools will lead you and us to the destination of (insert power pose here) Success Mountain.
Snowball Debt Calculator and Plan
Because I believe in it this much, I will never stop promoting this tool. For those number-lovers like me, it gives us REAL numbers, a REAL timeline, and REAL motivation to dig ourselves out of our hole of debt!
Your monthly expenses never increase with the debt snowball, but it can save you thousands on the interest that would otherwise be incurred. Yup, thousands!
How can that be possible?
It works by paying off the highest interest rate liability first, then transferring that payment to the next highest interest liability. Yes, it would be nice to see your overall expenses decrease and your savings account increase… BUT understand that you have ALREADY prepared your budget to allocate that payment to your expenses.
Why stop now? You still have debt.
First, though, you will need to gather information about your debts such as:
- Principle owed
- Interest rate
- Monthly payment amount
After you’ve gotten all your numbers (don’t try to guess here, actual numbers are needed even if they’re not pretty), input them in a Snowball Debt Calculator and explore your results.
Feel free to play around with things!
Sometimes I spend hours playing with how much extra money can we allocate to debt each month? What happens if we pay this debt first? What month will we actually be finished paying on this debt? Seriously… hours.
The calculator I use gives me a nifty spreadsheet of the payment schedule, so I always know how much to put towards what debt. Easy peasy lemon squeezy.
In fact, it’s so easy that if anything changes (say your stinking awesome husband sells some stuff on Craigslist) and you knock out a debt quicker then planned, just put in the new numbers and hit submit. Three minutes later you’ve got your new updated plan!
Once we had our numbers, payment planner, time frame, and motivation from seeing that large amount of interest we’ll NEVER HAVE TO PAY, we knew exactly what we needed to do to make our goal of $20K debt to disappear!
All Bank Statements
Getting a good grasp on where your money is going is the difference between almost paying off our debt and kissing that debt goodbye forever!
To do this, we don’t guess… we gather information. Cold, hard numbers folks.
Every number we need comes from banks statements (with the VERY occasional cash receipt). Once our statement is available, we sit down to review where our money went for that month by categorizing each entry into food, entertainment, home improvement, pet care, etc.
Then, we review said categories.
Reviewing how much we spend on things each month gives us knowledge on how we live, what’s important to us, and where we’ve been too lax.
These are the numbers to support your budgeting decisions.
Really look into money being spent on unnecessary items that could be applied towards your snowball calculation each month.
We were able to tighten up our spending on some frivolous things, and managed to find an extra $300 EVERY month we can contribute towards our debt payments!
How much can you find?
Monthly Bill Tracker
They come around every month and yet still manage to surprise us (at least they do me). It was about six months into our marriage (and our water getting shut off once) that we decided we needed to get a system in place so we can keep track of all those stinking bills.
Oh bills, glorious bills!
One day my wonderful husband surprised me with a spreadsheet he created where we could not only keep track of if we paid that bill or not, but also how much it was for that month! (Have I mentioned how much I love him?)
Systems are a wonderful thing, especially for paying bills on time. Not only are you avoiding throwing money away on late fees, but you can also be confident that they’re taken care of and leave time and brainpower to more productive things.
Like doing the things you want to and living your life at 110%!
Also, if you decide to pay a little extra towards a certain payment you have a neat record of what you paid the preceding months. Keeping track of where you’re at per your Snowball Payment Plan will show how paying off your debt is not only possible but is actually happening each month!
Running Average Expenses Spreadsheet
Once you have your Monthly Bill Tracker filled out, you can input those expenses in your Running Average Expenses Spreadsheet.
Averaging your expenses is a HUGE help when working a budget.
When we average out the expenses we can work our plan based on solid numbers backed by historical data instead of guessing and hoping we’re on the mark (this could just be me… but GUESSING what my financial future looks like doesn’t sound too appealing).
And just because I like to be even MORE accurate in my financial planning, we use a running average of the previous three months expenses. Using this method allows you to incorporate current changes or trends to your average expenses that could otherwise be ignored by old data.
Changes like these might include a new, lower insurance policy or adding a new puppy vet bills (those cute puppies get me every time…).
Trends that get taken into account are seasonality and usage (those summer and winter bills are WAYYYYY different, huh).
Most importantly though, is when you have this accurate monthly expense amount, forecasting for your financial future becomes an achievable, realistic, and exciting part of your monthly routine!
Financial Goals Planner
I want you to take a moment to dream as big or as little as you like. There are no wrong answers here, every single dream is free game. Take me… I want to travel the world and be financially independent while doing everything that I love. My husband… he would like a new drill (isn’t that so cute). See what I mean?
But here’s the point (because everything has to have a point), GOALS WITHOUT A TIME FRAME ARE JUST DREAMS.
Obviously, my goal time frame is much, much larger than my husbands.
If you’re a big dreamer like me, sometimes we know we can choke on a goal that big and shy away, so we break it down into more manageable bite-sized pieces. That is where my personalized Financial Goal Planner comes in handy! For me, breaking up my planner bi-yearly works fantastic… mostly because both my husband and I are in that growth period of our lives.
Once I have my time frame set up I put our starting balance at the top. Then I fill in income and our most current average expenses information for each month and calculate the final monthly balance.
Now comes the BEST part!
I take that list of bite-sized goals I want to accomplish and start plugging them into my goal planner. I look for months where our budget will allow these bigger ticket items without interfering with our debt payoff. If there is a month where we should have enough to purchase tires for the car, then I work that into the plan. Able to buy hubby that new drill, work it in. Now you have real dates to achieve your goals!
Why is planning for goals important while paying off a massive amount of debt? Isn’t that a little counterproductive Whitney?
Nope! Because we don’t want to stop living life. Paying off debt is exhilarating and addicting… don’t make it torture.
If you have a helpful hint on your journey please, please share. Together we can do this!
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