As I have noted previously in other posts, I use a handful of online tools and apps on my phone and computer to keep a pulse on our finances.
One of the most important things for us in making progress in our financial journey has been having a clear picture of the money that we owe. As the saying goes, the first step in recovering is admitting that you have a problem. This is true with debt as well. And one of the best tools to track that “problem” that I have come across is called Undebt.it.
The concept is pretty simple. You manually add each account that you owe money on – the total balance, interest rate, due date each month, the monthly payment, and other information if you’d like to add it. You go through and add each account separately, whether it is student loans, credit cards, personal loans, medical debt, whatever it may be. While this can seem overwhelming, this is an awesome way to come to terms with all that you owe. Once you know what you owe, it’s much easier to come up with an effective gameplan to get moving in the right direction financially. For the sake of transparency and for an example, here is what my main dashboard currently looks like. The Quicksilver credit card has an introductory 0% interest rate, and we are going to pay it off in the next couple of months, so not to be too alarmed.
Once all of the information is entered for each of your debt-related accounts, you can begin to get an idea of how to best attack each of the accounts to effectively and efficiently pay each of them off. That’s where the usefulness of this tool really begins to shine. Under the Payoff Plan section, you’ll find the Debt Snowball table.
I’ll quickly review two of the most popular methods for paying off debt: the Debt Snowball and the Debt Avalance. The Avalance method is the logical way to pay off debt. You start by making the largest payment on the debt with the highest interest rate and work your way down the list, paying off the highest interest debt to the lowest interest debt, until all of the debts are paid. This method will typically guarantee that the least amount of interest is paid over the lifetime of your loans. The second method, the Snowball, is slightly less logical, but more psychological. With this method, the smallest debt is attacked first, followed by the next largest, and so on. We’ve been using the Snowball method ourselves as it has proved to be an excellent motivator to stay the course as the smaller accounts have “dried up” and gone away as we have successfully paid them off. It’s how I was able to extinguish all of my undergrad debt, paid off our initial credit card debt after getting married. We still are running with this strategy today.
The real fun comes in with Undebt.it when you start to calculate what you can pay on your debt each month. To be able to know what you will be able to put toward your debt each month, an existing budget is necessary. With the zero-based budget, you’d basically add up your total income, subtract all of your monthly expenses and spending categories and then whatever is leftover would be part of your debt snowball. In this screenshot, you’ll see what the first few months of paydown would look like for us if we were sending $2,000 per month toward debt:
If we did this $2,000 per month toward debt between the two of us, all of our debt would be gone in 39 months, or 3 years and 3 months from now.
Perhaps we were only able to send $1,500 per month toward that debt instead. This would balloon the payoff timeline to 4 years and 5 months. Much less appealing.
Now say we were able to really ratchet down our spending and send an outrageous amount of money to our debts, say $3,500 per month. That would shrink down the pay-off timeline down to only 1 year and 9 months. Pretty crazy swings in the amount saved in interest and the time it would take to pay everything off. Even making an extra $50 or $100 payment each month on debt can make a pretty large impact on the amount of money you save and the amount of time you take to pay it all off.
For me, this “hypothetical situation” tool is awesome in keeping me motivated. Every dollar that can be freed to help fight debt is a small win that multiplies.
You can see here that there are two very basic truths that arise with this payoff process. Decreased expenses are extremely valuable, and so is increasing income. Side hustles, getting a raise, a promotion, a bonus, or any other influx of income can make a huge difference in making this process a better experience. Got a tax return in your near future? You can use the Additional Payments section of this site to visualize what kind of progress this would help you make if you sent some or all of this amount toward your debt instead of potentially spending it elsewhere.
Tools like this can be daunting and sobering, pushing you to stare your true financial situation square in the face. But this can also be a huge opportunity to realistically evaluate your situation, construct a gameplan, and start to execute it.
Perhaps this is a tool that you would like to use, but don’t know where to begin. I would be happy to get you going in the right direction with a free tutorial and quick test drive of the website. I think it is that valuable! You can reach me at email@example.com.
I will also mention that the creator of this website offers a premium Undebt.it+ version and subscription to their site. I think it is great to support other people’s work, and this is a great way to show appreciation for this innovative author’s creation if you feel so inclined.
4 thoughts on “Tracking Debt and Creating a Payoff Plan”
Hey man! I’d love the free trial
Cool man! I think I have your university email address so I’ll try and hit you up there.
This article was written beautifully and is motivating me, once more, to can debt. You are a strategic influencer with a very important voice. Keep at it!
Thanks Jace! Glad it is motivating for you! Love you bro!