This week started a new month and a new topic! It looks like September will be about debt repayment. This week we started looking closely at our debt.
Dealing With Our Debt
For this task, the Debt Repayment Worksheet is needed. It is a pre-formulated excel spreadsheet that will allow you to easily calculate how long your debt will take to pay off.
Find the Debt Repayment Worksheet here: MoneyProblems.ca
The Debt Repayment Worksheet has spots for:
– Your creditor (ie. credit cards, line of credit, money owed to family–include everything)
– The amount that you owe for each specific debt
– The interest rate for each debt
– The minimum payment you are paying for the debt
The remaining sections will calculate automatically:
– The number of months it will take to pay off the debt
– How much interest you will pay by the time the debt is paid
– The cost of interest per month
– The principle amount divided by 36 months, so the minimum amount to be debt free in three years
– The total repayment needed to cover interest and principle
|Creditor||Owed||Rate||Payment||to payoff||Cost||Int Cost||Principal*||Repayment|
|Credit Card #1||$1,500.00||21.00%||20.00||-240||-$6,300.00||$26.25||$41.67||$67.92|
If you’ve taken the time to input all of your debt into the worksheet, it could feel like A LOT. This is hard work, but having everything laid out in front of our eyes is such a valuable thing. It allows a realistic picture of what needs to be done.
If you’re like me at all, your eyes might go cross-eyed at all the numbers in Gail’s tweets for this section, but don’t lose sight of the main concept.
Knowing your required minimum payment to get out of debt means considering the interest cost as well as the amount of debt.
The Debt Repayment Worksheet can be used to your advantage here. It allows you to play with the repayment amounts and allows you to see the length of time it will take to get out of debt.
Next Gail asked us to put away our credit cards–whether freezing them or cutting them up. If you’re committed to this task, it is also important to delete any credit card information from online stores if you’ve saved it.
How much do you need to pay?
Next it’s time to decide how long you want to be in debt. There are a few things to consider as you look at this choice:
- Your budget–how much can you afford to pay towards your debt
- How long you want to be in debt/how fast you want to pay it off
- Debt fatigue–Gail will be touching on this topic later, but there comes a point where being in debt becomes overwhelming and paying it off feels futile
Time to “Do Differently”
With hard work and determination, being debt free is possible. Here’s a little bit of inspiration from one of Gail’s followers:
How are you feeling after looking at your debt in such detail?
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