Comments on: Out With The Old, In With The New: Create a Debt Repayment Plan http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/ Financial talk for the rest of us Sat, 16 Feb 2013 01:14:45 +0000 hourly 1 http://wordpress.org/?v=3.5.1 By: JJ http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/#comment-932369 JJ Wed, 08 Dec 2010 18:31:36 +0000 http://www.thesimpledollar.com/?p=6349#comment-932369 Re: Nick… You’re spot-on. That’s a commonly overlooked argument for the snowball method.

The highest-interest-first method is only “mathematically superior” if your primary goal is to get out of debt as quickly as possible with a minimum of interest paid.

But if your primary goal is to free up cash-flow as fast as possible (i.e., to reduce that minimum payment–$1100 in Trent’s example), and it’s worth it for you to give up some time and interest in support of that goal, then the snowball method actually has the mathematical advantage.

And that goal is perfectly valid, if you ask me. It’s great to have that freedom of not “having” to pay a particular debt’s required minimum. Even though you’re using that extra money to pay off the remaining debts, you’re nonetheless free to divert it towards emergencies if they arise, or to not pay it at all if you run into income trouble (disability, layoff, salary reduction, etc.) Well worth the often small trade-off, IMHO.

JJ

]]> By: Fawn http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/#comment-932313 Fawn Tue, 07 Dec 2010 22:07:44 +0000 http://www.thesimpledollar.com/?p=6349#comment-932313 I am in favor of paying off the smaller debt first. It is easy for me to lose motivation. I would also second the idea of having a small emergency fund in place. Most of my debt was/is due to poor savings. I should have all my debt paid off by September 2012. If I pay $50 more each month, I will have it paid off 5 months earlier!! :) Good luck, and it is possible, just keep working at it!!

]]> By: valleycat1 http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/#comment-932287 valleycat1 Tue, 07 Dec 2010 01:48:14 +0000 http://www.thesimpledollar.com/?p=6349#comment-932287 I ditto Brianna on the Snowball method (paying off smaller balances first). I don’t find long hard slogs very motivating… Also, I’d add the advice from D. Ramsay about having at least a small emergency fund in place so you don’t have to rely on credit to handle those unavoidable expenses that can crop up.

]]> By: Briana @ GBR http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/#comment-932282 Briana @ GBR Tue, 07 Dec 2010 01:23:33 +0000 http://www.thesimpledollar.com/?p=6349#comment-932282 I like the Snowball method because it does make you feel like you’re making an accomplishment. Going for the gold in 2011!

]]> By: sheila too http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/#comment-932273 sheila too Tue, 07 Dec 2010 00:15:32 +0000 http://www.thesimpledollar.com/?p=6349#comment-932273 For people with Apple computers, there is an inexpensive piece of software called Debt Quencher from No Thirst Software LLC. You can enter balances, interest rates, and the payment due date for each debt. Using that information, the program will generate a payment schedule for each debt, total interest paid for all debt, and the total of all payments for four scenarios: minimum payment, highest interest, lowest balance, highest balance. You can add an additional payment amount (that’s your snowball) and watch how the total interest paid goes down and the payoff schedule shortens.

I bought the software in October, and looking at the effect of a larger snowball has really motivated me to increase my additional payment amount.

There are also free calculators at the Bank Rate and other sites, but you would have to look at each debt and payment scenario separately.

]]> By: Des http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/#comment-932272 Des Mon, 06 Dec 2010 23:43:56 +0000 http://www.thesimpledollar.com/?p=6349#comment-932272 I’m curious to know: People who have paid off all your debt, which method did you use? I’d like to see if one has actually proved more successful than another from actual debt-free folks. Anyone?

]]> By: Nick http://www.thesimpledollar.com/2010/12/06/out-with-the-old-in-with-the-new-create-a-debt-repayment-plan/#comment-932260 Nick Mon, 06 Dec 2010 20:04:12 +0000 http://www.thesimpledollar.com/?p=6349#comment-932260 Don’t forget that the Snowball isn’t just for the warm fuzzy feeling you get when you pay off debts faster — you also free up your cash flow faster. You are trading a few points of interest for flexibility.

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