Calculating your debt payoff date can seem overwhelming. In all fairness, it kind of is. It’s also simultaneously liberating and terrifying. But this is definitely a date you should find out and remember (and then probably attempt to move closer). My guess is if you’re reading this, you’re probably pretty committed to the idea of becoming debt free, or at least toying around with the idea.
Today, I’m going to walk you through the three basic steps of calculating your debt payoff date: collecting, talking, and calculating.
Now you will need to discuss your debt with your partner. This conversation is incredibly important. You will need to discuss if you will tag-team your debt, or if you partner is willing to contribute any amount monthly. Discuss the absolute minimum you are willing to apply monthly. Discuss how you will handle any extra income. Finally, you should discuss what repayment method you would like to use (Snowball, Avalanche, Other).
Optional step: Download this spreadsheet. It’s the one I use and highly recommend. It offers options to customize your debt payoff plan (Snowball Method vs. Avalanche Method, custom number entry, etc.). You can read more about it here.
Next, you will need to determine which debt calculator to use. There are several pre-existing calculators, including spreadsheets, online calculators, or even formulas to calculate by hand. As I mentioned above, I use this spreadsheet, but I’ve also seen this one recommended by others. There are several good online calculators, though I prefer a spreadsheet so I only have to update information as the months progress. Here are a few good online calculators:
Regardless of which calculator you select, you will be able to calculate the date.
You will need to follow the instructions for whichever calculator you select. All of the above options allow you enter additional contributions to show the difference between a minimum payment plan and your scheduled payment plan.
Enter your information into your calculator. Be sure to enter all of your debts. Be sure to be attentive to the specifics of your calculator (such as entering them in a specific order, etc.). After you have entered in all of your information, each calculator will provide you with the option to calculate everything. Some of the aforementioned calculators even show you the difference between a minimum payment plan and your selected plan.
Utilizing my preferred calculator, I have been able to determine that my scheduled pay-off date is March, 2020. I arrived at this date after I entered all my debt information, including principal balance, interest rate, and minimum payment, as well as my total monthly contribution into my calculator. My monthly contribution includes an additional $650 above my minimum payments, drastically reducing the life of my loans. I also use the avalanche method for my loans because it best fits my goals.