If you’re looking into debt consolidation, first you need to figure out what kind of debt you’re in. This will help you to make an informed decision as to which direction to go, as well as learn what options may be available to you.
Many people have no clue how to even begin figuring out how much debt they have. I’m surprised by this, because everyone in America did have to have at least 11 years out of 12 of math. Still, this probably explains why many people are in financial difficulty; not only are we not taught the proper math we need to know, but we’re also not taught the financial skills we need as we progress through real life.
Let’s start with this fact; your minimum amount due isn’t indicative of what your debt really is, although if you add all of those up it’s a pretty good indicator of if you can at least pay all of your bills. If you’re only paying the minimum amount on your card, you could be paying on your balance for years, sometimes close to 10 years, and that’s if you stop spending. That has to be scary for almost everyone, especially if you have more than one card.
Don’t believe me? Do you know how to use Excel? Even if you don’t, follow the down and dirty I’m going to give you now and see it for yourself.
1. Pet the outstanding amount of your credit card in A1.
2. In A2, put in the amount of your APR, multiplied by 12. If your APR is 15.9%, it will look like this: (+.159*12).
3. In A3, type this: (+A1*B1).
4. In A4, type (+A1+C1). This is your new balance, which, at 15.9%, is $506.63.
5. In A5, put in your minimum monthly payment amount.
6. In A6, (+C1-D1); this shows the new balance, minus your payment.
7. Drop down one line. In A2, type +F1. This copies the amount as in A6.
8. Highlight all the other entries in the first row, select copy (Edit – Copy at the top is easiest if you don’t know the program), go to B2 and do (Edit – Paste).
9. Highlight the entire B-line, then go to A3 and drag your mouse all the way down to at least A100, and paste.
10. Count every 12 lines as a year, and go down until you see a negative balance in the last column. That determines how many years it’ll take you at a minimum payment to pay off your bill. If, at 100, it’s still not a credit balances, drag further.
That’s what you need to do, for each credit card, or any other bill you have that has an APR. At least then you’ll know what you’re in for long term.
