Create a Debt Pay-Off Plan

Paying Off Debt

Welcome to the second lesson in this course. This lesson is all about paying off your debt! We will create a complete debt payoff plan which will be tracked on a Google Sheet. Once you fill in your debt info one time, the sheet will give you instructions to follow with real calculated numbers. The formulas are all done for you. All you have to do is add the names of your debts, the minimum payments, make a monthly commitment, follow the pay instructions and remove debts once they are paid in full.

Before getting too deep into the “How-To” part of this lesson, let's talk about why it's so important to pay off your debt. Paying off your debt is important simply because holding debt means you are paying interest. Paying interest means you borrowed money and every month you don’t pay in full you now have to pay for time. Interest is literally you paying for TIME you are borrowing. Time is the most expensive thing you can buy (especially from the perspective that it can’t be refunded). As far as I’m concerned time should be free and spent doing things you love with people you love. You don’t get any value out of paying interest AND in addition to the interest, you still owe the money you originally borrowed.

One of the best ways that I can illustrate the value of paying off your debt fast is to do this exercise: Write down three numbers. First write the amount of money you net monthly. For most people this is double your paycheck minus things like taxes, health insurance, etc… Next to that number, write down the amount of money you spend on debt every month. This includes credit card payments, vehicle loans, student loans, personal loans, even money borrowed from friends and family. Lastly, next to those numbers, write down the amount of money you feel have left AFTER paying all mandatory living expenses which include debt, housing (rent or mortgage), transportation, food, utilities person items, household items, random expenses you didn’t consider, gifts, and everything else you spend money on that isn’t something you chose from your own desires. For most people this third number is very close to $0 left after all living expenses. Many times it feels like you have a negative amount left.

Now, if you don’t like the numbers you wrote down, this lesson will help you to fix them on autopilot and fix them permanently!

Debt Snowball Strategy

To pay off debt quickly, you are going to use the Debt Snowball Strategy made popular by Dave Ramsey. The way that this works is you will pay only the minimum amount on every single one of your debts except for one. The one that you don't pay the minimum on, you are going to pay the minimum plus an extra amount that you commit to paying every single month until you are debt free. The more you can commit to, the better! The total commitment amount is the sum of all debt minimums plus the amount you are committing to pay extra on one single debt.You will pay the same amount on each debt every month and since the first debt (your least expensive) will have extra money going towards its balance, you will pay it in full before any others.

Once the top debt is paid in full, the entire monthly payment that you were paying towards that debt will now be added to the debt on the next row which should be the debt with the new least balance owed. The rest of the spreadsheet update itself and next month you are to proceed according to the values shown.

Following the instructions on the spreadsheet will literally save most people years of debt payments! The best part about this is in 15-45 minutes you can have the spreadsheet completely filled out and you will now have a written debt pay off plan!

How To Use The Digital Spreadsheet

1. Only modify white text! Add names of debts, balances to be paid and minimum monthly payments in order from least to greatest. DO NOT MOVE, REARRANGE OR SHUFFLE ROWS!!! If you accidentally mess up this spreadsheet its usually easiest to start over by re-downloading the spreadsheet. If you don't need all 20 rows, leave the blank fields blank and the minimum payment amounts will show as $0. DON'T DELETE UNUSED ROWS!

2. Commit to a monthly debt pay amount. This will have to obviously be enough to cover much more than all minimum payments BUT you want to commit to more so that you can pay the debt down fast. My suggestion is to add double your first debt minimum monthly payment or at least $100 extra (which ever is more). You should commit to as much as you can without over extending your budget. Write your commitment in the white underlined box at the bottom of the sheet on line 29.

3. Once a debt is paid in full, change its white values to $0 (Debt Balance and Minimum Payment) no need to change the actual monthly payment amount, it will be done automatically showing that you have paid it off, but still don't delete the row!! (this will mess up the formulas, plus we want to see how far we have come).The rest of the spreadsheet will automatically update the next debt to pay extra on.

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