| You have the below list of debts. | |||||||||
| Creditor | APR | Balance | Minimum Payment | Priority | # of payments made | ||||
| Discover Card | 19.99% | $ 2,000.00 | $ 50.00 | ||||||
| Bank Loan | 6.99% | $ 4,000.00 | $ 100.00 | ||||||
| Apple Store | 24.99% | $ 750.00 | $ 30.00 | ||||||
| Best Buy | 21.99% | $ 1,200.00 | $ 40.00 | ||||||
| Target | 14.99% | $ 400.00 | $ 25.00 | ||||||
| You have $500 a month of income that can be fully used to payoff debts. | |||||||||
| Your Objective: Be debt free as quickly as possible, minimize the total amount of interest you will pay. | |||||||||
| 1. Complete the entire yellow section of the worksheet ‘Payoff Strategy’ to show how you would pay each creditor from now until all debts are paid off. | |||||||||
| 2. Complete the yellow section above to show the order in which you prioritized the debts, and how long it took to pay off each debt. | |||||||||
| Hints: | |||||||||
| 1. First, determine the order in which you should pay off the debts, considering your objective. Cells E4 through E8. | |||||||||
| 2. Fill in rows 4, 5, and 6 of the payoff strategy with the information for each of the debts. | |||||||||
| 3. Fill in the associated minimum payment for Month 1 for all the debts, except priority 1. | |||||||||
| 4. Determine how much can be paid to Priority 1 Debt. | |||||||||
| 5. Calculate the interest you will pay for each debt. Formula: Interest = Prior Balance * (APR/12) | |||||||||
| 6. Calculate the new balance for each debt. Formula: New Balance = Prior Balance – Payment + Interest | |||||||||
| 7. Repeat for each month until debt 1 is paid off. | |||||||||
| 8. Now calculate the new payment amount for Debt 2. | |||||||||
| 9. Calculate the interest you will pay for each of the remaing debts. Formula: Interest = New Balance * (APR/12) | |||||||||
| 10. Calculate the new balance for each debt. Formula: New Balance = Prior Balance – Payment + Interest | |||||||||
| 11. Repeat the process until Debt 2 is paid off. | |||||||||
| 12. Now calculate the payment for Debt 3. | |||||||||
| 13. Continue for all debts until all are payed off. | |||||||||
| 14. Fill in # of payments made for each of the debts above. Cells F4 through F8. | |||||||||
