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Author: admin | Category: Loan For Car | Date: 16.02.2014

The process of entering your information is simple and should take only a few minutes (assuming you have your loan information readily available…I had to collect my information across many websites). Starting from the top left (cell C4) you will enter your starting date (normally the current date).  The sheet uses this to judge when to start all of the monthly principal and interest calculations.
Next, you use the drop-down menu (cell C33) to select your payment strategy.  Available options are no snowball (minimum payment), snowball, avalanche, order entered in table, and custom order.
Upon choosing a strategy, the sheet will sort your loans in the bottom table by payoff order from top to bottom, and display total interest paid, number of months to pay off, and payoff date for each loan.  In cell D57, you will see the total interest paid. Try out the different payoff strategies and see what the results are.  Maybe, like us, you were making just the minimum payments.  How much interest were you set to pay following the minimum payment method?  How much could you save by using the snowball or avalanche method?  How does your starting snowball change the payoff dates for each loan? Congratulations, you’ve done 90% of the work.  The remaining two tabs will give you more information on a monthly basis. Tab 3 is a simple chart that shows your monthly snowball amount (blue bars) and your interest paid per month (red line).  You can experiment with how the chart changes as you select the different payoff strategies on the two previous tabs.
Now that we’re acquainted with the spreadsheet, let’s take a look at each method applied to D3’s debt (discussed in Part 1 of this series). We’re all familiar with the minimum payment method.  Salesmen love nothing more than for us to think of buying things in terms of the minimum payment.  That sunroof only ads $10 extra to my monthly minimum payment, that’s nothing in the big scheme of things, right?
Looking at the cumulative data, you can see the advantages to the snowball method over the minimum payment method- even with a zero initial snowball, we stand to shave off $6,000 and 7 years of making payments.  Higher initial snowball amounts save you even more over the minimum payment path, $2,200 and 9 months more for the $500 initial snowball, and an additional $1,400 and 5 months on top of that for the $1,000 initial snowball scenario.
Regardless of the method you choose, you can see how powerful snowballing your payments can be vs making the minimums.  Try the sheet out for yourself and see how much you can save. Enter your email address to subscribe to this blog and receive notifications of new posts by email.
I’d like to use this blog post to provide a place to answer questions and hopefully get you to share your success stories and ideas.
The debt reduction calculator was designed to simulate the debt snowball effect and allow you to easily select and experiment with different payoff strategies. Combining the Avalanche Method with paying the bare minimum on all but your currently targeted debts results in the fastest payoff possible. People may get frustrated if they don’t see success right away, so throwing a little snowball at your biggest debt might not be the best option.
If you can knock out a couple easy debts, the psychological momentum of early success can help you stick to your goals. For example, let’s say you generally prefer the Lowest Balance First approach but Student Loan #1 has a balance of $4900 at 4% interest, and Auto Loan #2 has a balance of $5000 at 12%. The Student Loan as the lower balance but if you just swap the order of those two debts, as indicated in the Custom order column (with lowest being paid off first), you’d save about $750 in interest. On the other hand, if you prefer the Avalanche approach but want to experience an early success, you could target Auto Loan #1 first, then proceed Card #2, Card #1, etc. Consider these types of opportunity costs when you are deciding on the order to pay off your debts.
There may also be other factors to consider besides the Balance, Rate and Total Interest Paid. A balance transfer involves moving the balance of one credit card, usually one having a high interest rate, to another card that has a lower rate. If you are capable of resisting the temptations and spending that got you into the debt mess in the first place, then a balance transfer may be a legitimate debt reduction strategy. Debt consolidation is based on the idea of transferring the balance of your debts into a single loan with a lower interest rate. Another major update was the creation of the Credit Repair Edition for the case where the primary goal was improving a credit rating rather than paying everything off as fast as possible.
So, instead of waiting until a credit card is completely paid off to start applying the snowball to the next debt, you may decide to reduce the balance to 50% of the credit limit and then move on to the next card.
Disclaimer: This article is intended for educational and informational use only and not as professional financial advice. I got an email today from somebody asking about comparing paying off debt to investing in something like a mutual fund. Anyway to incorporate a 0%, or even better….multiple 0% offers, into the debt calculator to see how it would work to replace higher interest balances on cards?
First of all, thank you for the great site you’ve put together, and for making such great spreadsheets available.
That would allow me the ability to record, the Creditor, amount owed, interest rate, % to interest and principal paid + remaining balance, due and paid date, as well as Previously paid date and a comment box. And no our marriage was not in jeopardy but it’s in a considerable better state as it relates to money because of the conversations that we have several times a month focused on our financial future. This article was featured in the Carnival of Personal Finance #212 be sure to drop by and check out all the excellent articles. Even if you’ve never heard of the debt snowball there is no avoiding the late night cable ads for debt consolidation or constant radio bombardment advertising a no pain way to take care of your ever increasing credit card payments and lump them into one manageable payment.   I implore you to consider your other options before you shell out even more money to do something you can manage yourself. Okay we’ve got our debts lined up here from smallest outstanding balance to the largest outstanding balance. The power of the debt snowball is the incremental successes as well as the power of applying payments from previous debts to add to the amount of money you are snowballing on your next debt in line. Before you get too carried away with your debt snowball my sincere hope is that you are operating on a budget or a spending plan so that you can readily identify how much money you are going to allocate to getting out of debt. If you need some assistance getting started you can check out my Zero Based Budget Overview a 3 part series to help you get on track. Now the only thing stopping you from getting out of debt is you. Millions of people have used these methods to get themselves out of mountains of debt and with some diligence, hard work and perseverance that could be you. I saw the spreadsheet has a choice of methods, and just wonder how much more you’d save by paying high rate first. I get some of the same feedback with the strategy I espouse, namely funding your contingency fund, paying off debt and giving to charity all at the same time. While the agency maintained the country’s top AAA credit rating, it said that authorities have not made clear how they will tackle long-term fiscal pressures.

If President Obama had not presented his sudden deficit-reduction proposal when he did, this new report would have read very differently.
The Simpson-Bowles plan shown in the first column is the product of President Obama’s blue-ribbon commission, which was released in December 2010. And yes, the President’s FY2012 budget proposal actually proposes to borrow money to pay for paying out Social Security benefits, which counts against the higher taxes and reductions in discretionary expenditures (everything but Social Security, Medicare, Medicaid and Net Interest on the National Debt) he was also seeking. Readers Question: What caused the massive decrease in the debt to GDP ratio for the UK following World War II? The main reason UK debt to GDP fell in the post-war period was the sustained period of economic growth and near full employment until the late 1970s.
Note – Debt to GDP fell, despite higher real government spending on the newly formed welfare state and national health service. This graph also explains the sharp rise in debt as a % of GDP 2007-2013 – real GDP stagnated and stopped growing. The UK economy benefited from the period of rapid global economic growth, especially in Western Europe.
In the post-war period there was a growth in university education and secondary education became more comprehensive. One of the cornerstones of William Beveridge’s Welfare proposals was the assumption that a comprehensive welfare state required considerable efforts to achieve near full employment.
In the post-war period, the government controlled monetary policy and fiscal policy, and had a willingness to cut interest rates during economic slowdowns. Many commentators state that although the UK did enjoy a post-war economic boom, it was actually a missed opportunity and our relative competitiveness declined. Despite the high levels of UK debt, the cost of servicing UK debt remained relatively low (less than 4% of GDP). The fall in UK national debt as a % of GDP reflects one of an important issues regarding to debt reduction – take care of economic growth and unemployment and this will play a considerable role in reducing debt to GDP ratios. The UK experience of the 1950s and 60s is in complete contrast to the current European experiment of sacrificing growth to meet deficit reduction targets – the result being often rising debt to GDP ratios in Europe. The outlook for global growth looks less promising – especially with our main trading partners. It is all very well saying all we need to do is to increase real incomes and boost economic growth, but in practise it might not be as easy as that. One final point is that debt as % of GDP is a more important statistic than a budget deficit.
You make the point that the debt to GDP fell in the post war period since the GDP rose faster than the debt but that still left the debt to be repaid and as such there was still the interest to be paid. If you move into a houseboat and work overtime, you know that you might be able to pay off the ?5000 within 3 years. Somewhere along the line, the ?5000 of credit card debt starts not to seem all that serious – even though it has now grown to ?10,000, plus the student loan of about ?90,000. Also, over those 10 years, inflation has been 100%, so when I said you end up earning ?80k, I actually meant ?160k.
Knowing the full extent of your potential, and having a sharp eye for inflationary trends, what kind of fool would you have to be to choose to move into the houseboat and take on the overtime – unless someone was drugging you up to the eyeballs and holding a gun to your head? Suppose the credit card company sent someone to drug you up to the eyeballs and hold a gun to your head. I think the effect of inflation has been left out of the narrative and it certainly deserves a mention. So that said, our National Debt at 80% of GDP by historical trends is low, so to is our deficit at 4%. This leaves the concern of who would lend the money to the UK if the debt were to increase especially with the UK being at the top of the economical cycle, during the next recession is when the additional monies will be required, i.e, we have a structural deficit. That leaves another debate, if the economy is going to be reflated, what is the best way to do this. About the AuthorTejvan studied PPE at LMH, Oxford University and works as an economics teacher and writer. More specifically, I’d like to find out what debt reduction strategies people are using. Let’s say your budget allows you $400 to pay towards your debts (not counting your mortgage in this case). After you pay it off, your new total minimum payment would decrease to $240, so your snowball will increase to $160.
Regardless of the balance on the card (and assuming no extra fees), if one charges 10% interest and another charges 20%, you’ll pay off the cards fastest by working on the one with the 20% rate first. You’ll get the power of the Avalanche and still be able to see some early success by wiping out the easy stuff first. The Debt Reduction Calculator makes it easy to choose your own order to pay off your debts using the Custom column. In my opinion, this is a case where it’s better to target Auto Loan #2 before the student loan, even though the student loan has the lower balance. Because reducing the amount of interest and fees that you are paying allows more of your budgeted $500 to go towards paying off the balance due.
The concept for that is based on the idea that a credit rating has to do with reducing your Balance-to-Credit-Limit Ratio. A column could be added to the Creditor Information Table to specify the number of months for the 0% period. Add to that, the ability to archive that information for that month on a different tab for reference. I have been doing this for the past three years and started out with six department store cards, 3 major credit cards, and an auto loan.

It’s all about getting small successes under your belt and establishing the habits that will pull you out of debt and propel you to financial independence. That’s not an error on the chart—that’s the equivalent of borrowing money for the purpose of meeting the payroll of a failing business! Bookmark the above link and you can support the Institute when you do your normal shopping!
GrahamEconomists Mustn’t Forget the Fallacy of Decomposition August 9, 2016 Gary GallesThe Dead-Weight Cost of Obamacare’s Loopy Tax Credit August 8, 2016 John R. From the early 1950s to early 1990s, we see a consistent decrease in the debt to GDP ratio. This growth saw rising real incomes which in turn led to higher tax revenues and falling debt to GDP ratios. In fact government spending as a % of GDP rose from around 35% of GDP in the early 1950s to the high 40%s in the 1970s. This lead to the mass immigration of the 1950s and 60s to help deal with the labour market shortages. The UK experienced boom and bust cycles, but the downturns were relatively minor and there were no real recessions of any significance until 1973. The benign global economic conditions helped give a low trade off between inflation and unemployment. The Second World War created a political climate which tolerated extremely high income tax rates. In 1965, James Callaghan, the then chancellor introduced capital gains tax of 30pc to stop people avoiding income tax by switching their income into capital.
In the post war period inflation was averaging 3-5% – with periods of near double digit inflation.
Total debt reflects the long-term situation better than annual deficits which are influenced by cyclical factors.
While I appreciate the convenient use of the debt to GDP ratio I feel that it tends to sidestep the truth about the remaining debt. If you take out a student loan and do a degree, you could be earning ?20k after 3 years, and ?50k after 6 years. And in bad times people seem more ready to accept 3% pay rises when inflation is 4% far more readily than no rise at all when inflation is 1%.
If the total of your minimum loan and credit card payments comes to $270, you are left with a snowball of $130 that you can throw at a debt of your choice.
In the example above, the difference between using the Snowball and Avalanche method ends up being almost $3000 in interest. Many people jump on the balance transfer bandwagon so that they can afford to continue spending at their current rate, and that just leads to getting into MORE debt. I will make sure to add you to my Facebook sit, i too have a second community account with 4k members which I will make your site available. After accessing the Google Sheets version you’ll need to go to File > Make a Copy to save a copy to your Google Drive.
I’ve paid off one of the major cards and closed it, paid off the car, paid off four of the department store cards, and this month will be able to pay off and close the last two department store cards. We’ll simply observe that Barack Obama can truly afford to learn something about the bond market from James Carville. Using the above measure of national debt, UK debt as a % of GDP reached a low of 32% in 1993. It is also interesting to note the current cost of servicing national debt is lower than in the 50s, 60s, and 70s. But, when politicians tell you the only way to reduce debt is through painful austerity, you could remind them of the 1950s and 1960s when the opposite happened.
This is almost like the government using the reduction in the deficit rather than the reality of remaining, possibly increasing debt. You have been struggling to pay the rent, so you have credit card debt to the tune of ?5000.
That will leave me with two major cards to pay off, only one of which I will keep and pay off in full each month if I use it, which I won’t. That, in turn, would make it much more difficult for the government to continue spending the amount of money that President Obama really wants to spend. The striking thing is the steady reduction in debt to GDP, whilst at the same time seeing real government spending levels rise.
Talks of reducing the deficit pale into insignificance in the light of reducing the total debt. Even if your creditors find a way to force you to cough up the capital, you can always take out another loan to cover it – probably at a more favourable rate too, given your present circumstances. Huston McCullochAnother Obamacare Architect Recognizes Its Unintended Consequences August 4, 2016 John R.
Time goes by whether we pay these things off or not, and they are betting on NOT, so you have to have a plan. GrahamChemotherapy Payment Reform: Medicare Is Missing the Elephant in the Room August 3, 2016 John R.
President Obama’s newly drawn-up deficit reduction proposal was released on 13 April 2011 and occupies the fifth column of the chart.

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