Debt Payment Schedule: Debt Snowball

Do you have multiple debts you want to pay-off, and pay-off quickly? There is no better way to get rid of debt than by using the debt snowball method. I originally heard of the debt snowball from the Dave Ramsey show and have found it quite useful in getting debt under control.

The jist of the snowball is quite simple.

1. Write out the list of current debts and payments.
2. Focus on one of the accounts ( usually the lowest balance or highest rate) and add additional amounts to pay off that loan

3. Continue to pay the minimum payment on the others debt

4. As soon as the first loan is at 0, roll what you were paying on that debt into the next loan

5. Continue to roll your payments as each loan is paid-off

It's important to have a Debt Payment Schedule to track payments and timelines. A comprehensive  schedule is available on this site for downloading.  A training video on using the Debt Payment Schedule is available on the Simple Saving Habits YouTube channel.

Simple Savings Habits YouTube Channel

Quick Summary on how to use the Debt Payment Schedule

1. List out all of your current debts

2. Determine how much each month you can contribute as an additional Payment, aka Snowball

3. Rank debt by importance of being paid off

4. 
   Optional: Breakout the Snowball amount among the debts to compare between payment methods

5. Using the Snowball Schedule Tab, toggle between the two options to see which is best for you.
1. You can continue to play around with the rank and new payment to create the best option for your payment plan

6. Once you found the best approach for debt repayment - Print off the Snowball Schedule  to keep you on track
1. If you are able to make additional payments during the repayment time period, note those extra  payments in the schedule. This will help decrease interest paid on loans, and decrease time it takes to pay off the loan(s).
1. 

Using an Amortization Table

An amortization schedule is a table detailing each periodic payment of an interest bearing loan. It is useful for knowing the true cost of a Loan, the breakout of a monthly payment for principle and interest, and changes in the loan due to additional payments against the principle.

Having an amortization schedule set up for a large loan like a mortgage can help a person make a plan to pay off the loan sooner and thus saving hundreds, or even thousands of dollars.

The downloadable amortization loan schedule for Simple Saving Habits is easy to use. You can use this schedule to analyze a current or future loan. For a current loan, you will need to know the Total Loan value as of today, your minimum monthly payment, and the Interest rate on the Loan. (APR)

A training video is also available on the Simple Saving Habits youtube channel that shows how to use the Amortization Schedule.

https://www.youtube.com/channel/simplesavinghabits

1. Create the schedule by filling out the required Loan fields (Today's Date, Current Loan, APR, and Monthly Payment)
1. If you do not have a current loan, use the box on the right side to estimate a monthly payment based on an expected APR and loan.

2. Loan Summary gives an overall snapshot of the Loan.  The Total Loan represents the Total Cost of the Loan. (borrowed amount + accrued interest). When you pay more than the minimum payment, that money will go against the principle of the loan and reduce the total interest and time  it takes to pay-off the loan.

3. The Loan Schedule shows every payment made until the Loan reaches 0. Important fields to note in the schedule are:
1. Principle and Interest - Each payment is broken down into a value that goes against the principle of the loan, and for interest incurred.  The Principle will always start off lower with the first payment, and increase over time.

1. Cumulative Payments - The shows how much you have paid for the loan at any given period of time.

2. Total Loan Cost - This shows how much the loan has cost at any period in time. It is calculated as total Payments + Remaining Balance of Loan

Ways to Save Money and Pay-off Loans ahead of Schedule

1. Increase the Monthly Payment - Determine an amount that can be paid as extra every month with the minimum payment. Adding $100 dollars each month, can save $33,000 worth of interest, and pay off a mortgage 5 years earlier.

2. Add occasional Payments that vary throughout the life of the loan - If you are unable to commit to a monthly payment increase, use the Extra Payment Column on the Schedule Table to make payments against the loan.  These could represent payments made due to Tax Return refunds once a year.

Using Mint.com

The hardest part of budgeting is having one location that stores all your financial information. In the past budgeters have had to pull bank statements, credit card statements, saving, and everything else in between in order to figure out the full picture. Enter MINT. The easiest, most efficient way to manage your money online. Best part...TOTALLY FREE. How are you not already using this budget miracle??

 If you are technology-challenged, the idea of using an online tool for money management can seem severely overwhelming. Just searching for a How To Video for Mint returned over 29,000 hits on YouTube.   Below I've outlined the best teaching Videos with My Tips and Notes.

I could never find a single Training Video that covers beginning to end How to Set Up and Use Mint.  I've broken out the best training videos on the web in a logical order, (Note some videos may seem to overlap in content. )

For additional resources, or questions on a specific task in Mint, check out  http://www.howtousemint.com/  and the mint.com YouTube channel

Watch the Demo first to get a quick overview before getting your hands on experience: http://www.howtousemint.com/learn-to-use-mint-com-via-the-online-demo-site/

Steps by Step Tutorials for Mint.com

1. Setup Mint.com Account and Link Accounts

http://www.grovo.com/set-up-an-account-with-mint/sign-up-for-mint

TIP:

• Add all Savings, Checking, Credit Card and Loan accounts. Any account that has money going in, or being taken out needs to be accounted for.  Other "Assets" such as your cars or house are not as important.

2. Review & Edit Transactions

https://www.youtube.com/watch?v=83uY_b2Ueq0

TIPS:

• Mint will import the last couple months of bank transactions. Take the time, and review each line and category. You will most likely want to change a couple of transaction categories to tailor to your Budget needs
• Keep Categories to a manageable count.  Having more than 20 categories to budget against will become more difficult to manage.

Group similar transactions into a single Category. Example: Starbucks will be imported as Coffee Shops. Unless you really want to track exactly what you spend on coffee, think about just using Food & Dining or Restaurants.

• Review your Transactions at least once a Week. This will make End of Month reviews so much easier.

3. Setting up a Budget

https://www.youtube.com/watch?v=TnfXX27Tfow&feature=youtu.be

TIPS: 

• Setting up a Budget will be the hardest task when using Mint. You may not even know what you think you should be spending on Gas. If you are struggling with where to start, checkout my other post on CREATE A BUDGET

• You don't have to create a budget for every single category of transactions. You may already know your big budget breakers such as restaurants, gas, or clothes shopping. Set up a Budget for those categories in which you'd like to monitor.

• Then set up an alert. Alerts are automatic emails sent to you when you are getting close, or over your budget.

4. Trends

https://www.youtube.com/watch?v=p3ceNFLLR3E

TIPS: 

• As great as Mint.com is, it has some enhancements it should do to the trends section. Trends are great to see how your spending is trending. I like to analyze this page at the end of the month to see a quick snapshot of that month's spending.

• It is difficult to see month-to-month budget vs actual spending. To do that, take a look at my other post on CREATE A BUDGET to see how you can compare your Expected Spending to Actual Spending.

Just going through the above steps in Mint will greatly benefit you monthly budget. More advanced Features of Mint include setting Goals such as Paying off a Mortgage or saving for a Big Trip.  The Investment feature tracks brokerage accounts and shows you how your investments fare against key Indexes.

1. Goals

https://www.youtube.com/watch?v=OtBa9gKcySI

2. Investments

https://www.youtube.com/watch?v=_RlBzDPulk4