You will write a month-by-month repayment plan with a payoff date for each debt that fits inside your budget.
Open the spreadsheet that holds your budget, add a new tab, and put your latest statement for each debt beside you. Set aside 30 minutes. You'll take the fixed repayment amount from lesson 5.1 and the debt order from lesson 5.2 and turn them into a month-by-month plan that shows each balance falling to zero.
Writing down a payoff month changes how debt feels. Each debt stops being a weight with no end and becomes a date you're working towards.
Give each debt its own block of columns: month, opening balance, interest, minimum payment, extra payment and closing balance. Put the blocks side by side in the order you chose in lesson 5.2, with your target debt first. Leave a row at the top of each block for its payoff month. In the first row, enter today's balance and the interest rate.
Use your own lender's terms from your statements. The card terms in the example below, 26% a year interest and a minimum of 3% of the balance or S$50, are invented for teaching.
Wei Ling's figures run through every step. She has a credit card with S$3,000 owing and a personal loan with S$5,400 left, paid at S$300 a month over 18 instalments. The card is her target debt, so its block goes first.
Each month, the interest is the opening balance x yearly rate / 12. Add it to the opening balance, then subtract the minimum and any extra payment. The result is the closing balance, and it becomes next month's opening balance. In a spreadsheet you need one formula per column, copied down the rows.
This is a simplified version of how cards charge interest. Most cards work it out daily, but working it out monthly is close enough for planning. To check your formulas, put the same balance, rate and payment into a loan calculator. For the months where the payment is fixed, it should give nearly the same answer.
Instalment loans are simpler. The lender has already fixed the schedule, so you don't need to model the interest. Enter the instalment amount and the number of payments left, both from the loan statement. Wei Ling's loan block shows S$300 a month for 18 months, and 18 x S$300 = S$5,400, so the loan is paid off in month 18.
In months 1 and 2, most of Wei Ling's money goes to building her S$1,000 starter buffer, as lesson 5.1 explained. The card gets the minimum in month 1 and the minimum plus S$160 in month 2. From month 3 it gets S$570 a month, which is the S$90 minimum line in her budget plus S$480 of future you money. In her figures the minimum is worked out on the balance after interest is added, so in month 1 it is 3% of S$3,065, which is S$91.95. Her card block runs like this:
Month 1: S$65 interest, S$91.95 minimum, closing balance S$2,973.05 Month 2: S$64.42 interest, S$251.12 paid, closing S$2,786.34 Month 3: S$60.37 interest, S$570 paid, closing S$2,276.71 Month 4: S$49.33 interest, S$570 paid, closing S$1,756.04 Month 5: S$38.05 interest, S$570 paid, closing S$1,224.09 Month 6: S$26.52 interest, S$570 paid, closing S$680.61 Month 7: S$14.75 interest, S$570 paid, closing S$125.36 Month 8: S$2.72 interest, S$128.07 paid, closing S$0
The card is clear in month 8. The eight interest figures add up to S$321.16, so she pays about S$321 in interest in total.
When a debt reaches zero, its payment moves to the next debt on your list and is added on top of that debt's minimum. This is the rollover. Write the payoff month in the row at the top of the cleared debt's block.
Before you roll a payment onto a loan, ask the bank for its settlement terms. Settling a cheap loan early can bring a fee and save you little interest, and in that case letting the loan run its course is a reasonable choice. A payment freed from a second credit card should be rolled straight on to the next debt.
Wei Ling's next debt is the personal loan, so she asks her bank for settlement terms before moving her S$570 across. Settling early would bring a fee, and because the loan's rate is far lower than the card's, she would save little interest. She lets the loan run its course and sends the S$570 to her buffer instead. Module 6 picks it up from there.
For each month, add up the total repayment across all your debts. This total is your repayment line, and it has to match a line in your budget. Compare it with the budget you built in module 2, as you updated it in modules 3 and 4.
If the repayment line doesn't fit, lower the extra payment and leave your starter buffer and sinking funds alone. A slower plan is better than one that breaks the first time an unexpected bill, such as a dentist's bill, arrives.
Wei Ling's repayment line from month 3 is S$870: S$300 for the loan plus S$570 for the card. About S$390 of that, the S$300 loan instalment and the S$90 card minimum, was already in the needs part of her budget. The extra S$480 is her full future you amount. The line fits her budget, and nothing comes out of her S$1,000 starter buffer.
Your finished plan has one block per debt, with a row for each month until that debt reaches zero, the payoff month at the top of each block, and a total repayment line that matches a line in your budget. Wei Ling's plan shows the card clear in month 8 and the loan clear in month 18.
Start with your target debt's first row.
Build your repayment plan, write the payoff month for each debt, and add the total monthly repayment as a line in your budget.
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