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I Found A Magic Number
I’ve got a million magic numbers when it comes to hitting goals. It’s an unfortunate side effect of being a spreadsheet geek. One of the best, yet worst of those numbers is the one in my goals sheet, that tells me how much I need to reduce my debt every month to hit my five year goal. It is accompanied on either side by how much I have averaged so far, and what my ideal, or “comp” average is (flat-lining from the start). Read that again, though – it’s how much I need to reduce my debt per month, not how much I need to pay on it. It doesn’t take interest into account.
I was just rummaging through some old spreadsheets, looking for wherever I put my effective overall interest rate table. It happened to be in the sandbox, naturally (and my current overall effective interest rate is 2.39751% for those who are curious). While I was doing that, however, I happened upon a spreadsheet I grabbed from somewhere else, and used to use extensively. It’s the debt reduction spreadsheet from Vertex42. It’s simple enough to figure out how to use, but I just found a new use for it.
After you throw all your debt information into the spreadsheet, it asks for a monthly payment, and calculates your initial snowball amount. The common usage is to put in the amount of money you intend to spend on debt every month, and is generally best for folks with predictable paychecks (which mine aren’t, so I used averages, generalizations, and some good old fashioned guesswork). But then it hit me – I can reverse the thought process, and use it as a monthly goal to reach my long-term goal!
Doing so was a simple matter of trial and error, but I found that as of right now, I need to pay $1,168.68 on my debt to hit my five year goal. This figure also assumes snowballing my debts in that particular order, which is easy to change (and not necessarily the order I’m going in). The other sheet in the file also gives the amounts to pay on each debt, each month (among other information).
My initial thought on all this was that I don’t need yet another magic number to deal with. However, this seems to be special, a super mega magic number if you will, since it tells me so easily how much to budget for debt each month. So simple, yet extremely important, and I’m definitely adding it to my monthly routine, probably to be included in my net worth updates.
How I’m going to be able to spend that much on debt every month is an entirely different matter. I’ve said here before, somewhere, that since I have a main goal to get out of debt by a specific date, I need to budget my debt payments first, and then budget everything else around that so that it all fits. With the amount of overtime I’m getting, it’s doable right now, but won’t be later on. These big paychecks during the busy season need to be used to cancel out the small paychecks of the slow season.
With that, I pose two questions:
- Do you have a super mega magical number like this, to know how much you need to spend on debt each month to reach your goals? If so, what is it?
- Now that I’ve paid off that loan, which debt should be next on my list?
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I don’t have an answer to the first question, hell I dont even know what you’re talking about up there. But it sounds real purty.
In answer to the second question, what should you pay off next? I would probably go with the landlord or met ed cause they’re small. Or maybe AES. Those are all doable in a short amount of time. Gotta love that feeling of paying things off!
That sounds like a pretty high amount to be paying off monthly. Are you sure you’re up for the challenge?
Never sure about anything, and especially about this. It’s tough to judge from the past, as my monthly debt payments have been pretty erratic. I think I’d need to give up a lot of things to be able to nail it, but I can only go so far before life is a total bore. A total bore for three and a half more years would be, well, unbearable. BUT, the important thing, is that I know what number I absolutely have to shoot for every month, even if I don’t make it. And then I can be all sad face every month when I watch that number creep higher and higher as I continually miss it.
Don’t have an answer to the first question.
As to the second one, I’d leave the 0% debts alone for now and hit the AES debt next. That one looks like it would take the lowest number of payments to get paid off.
Based on your post with the interest rates – I’d go after the scooter next. It’s got the highest interest rate and it’s small enough you can knock it out pretty quick.
Right now you are paying $14 or so a month in interest on that loan.
Yeah, hadn’t even considered that, Ken. It would be nice to get rid of that $105/mo payment, as well as get it under my own name (instead of my mom). Based on that magic number, I could do it in 4 months.
Good thing I’ve got 2 more weeks to figure this out.
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