You've Got To Have a Plan...Tracking your Loan Payoff

If there's one thing I learned from the classic film Tremors, it's that you've got to have a plan.

Debt is similar to large subterranean predators in that you can't defeat it without a plan. Also, it will eat you alive.

So once you've decided what debt/loan you are going to hunt down, let's talk about how you can track it.

I was working with someone yesterday going through their budget and looking at the different ways we could attack their loans. As long as you have a plan, put milestones and goals for yourself, you can pay off the debt.

It helped me to put a pay off plan in place for each loan.

Here's a hypothetical situation where someone who has a pretty good take home pay, say $1600 every two weeks and $1400 monthly living costs is going to aim to pay off their car by 12/25. Here is how I would map out their pay off plan. They can check every two weeks to see their progress and update it. They can add extra payments as well (sometimes called snowflake payments). Maybe they get birthday money, spend less on food one month, spend less on pg&e, or get a discount on their auto insurance.

Here is snap shot of what that can look like.

Individual is paid bi weekly.
Individual is taking their monthly expenses out of their 1st paycheck.
Here the individual beats their deadline for debt pay off and also fluctuates on their pay off schedule slightly.

Evil Car LoanGoal: Destroy Car Loan before ChristmasActual Payments
Loan Amount $8,000 $8,000
Pay Day 8/18($1,600)($1,600)
Pay Day 9/1($200)($150)
Pay Day 9/15($1,600)($1,600)
Pay Day 9/22($200)($350)
Pay Day 10/6($1,600)($1,600)
Pay Day 10/20($1,600)($1,600)
Pay Day 11/3($200)($100)
Pay Day 11/17($1,000)($1,000)
Pay Day 12/1  
Pay Day 12/15  
Loan Remaining$0 $0

IMPORTANT NOTE: For simplicity's sake, I did not include the monthly accrued interest on the loan. I recommend including the interest rate so you can estimate the monthly interest. You would owe more than $8k due to interest, however, not much would accrue during this small of a pay off window (the magic of only focusing solely on one loan at a time). In this case, the person would still have met their goal, even with a 5% auto interest rate. (which would be pretty high given current auto loans)

I love breaking down pay off into your actual pay checks because it helps you stay accountable for each pay check along the way. I also do monthly goals and check in at the end of each month to see if I reached or even surpassed my goals.

Also, creating a ritual of updating your spreadsheets every pay day makes your accomplishments feel more real. Every time you pay off a debt, you have hunted it down a little bit more. Think of it as St. George slaying the dragon, or Moana sailing closer to Te Fiti. Whatever you need to do to pump yourself up, do it. I know some families will even post something on the fridge and color a chart in every time they pay off more of their loans or mortgage.

What helps you track your money progress?


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