how to guide

How to Use The Mastermind Within Debt Destruction Tool

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If you haven’t downloaded The Mastermind Within Debt Destruction Tool, enter your email in the form below and you will get it in your email inbox.

 

This page will show you how to use The Mastermind Within Debt Destruction Tool.

1. Inputting Your Debts

  1. Find the following information for all of your debts:
    • Debt Name, Outstanding Balance, Minimum Monthly Payment, and Interest Rate
  2. Fill in the Debt Tracking tab with your debt information

tracking debt

2. Creating A Budget

budget debt tracking

 

  1. Fill in the Budgeting Tab with your monthly take-home income, and monthly expenses (positive numbers)
    • Your monthly income should be post-tax, post-deductions (health insurance, 401k, HSA, etc)
    • Do not include your debt payments in your expenses
    • Keep the categories at a high level
  2. After filling out the Income and Expenses tables, decide how much you will use to save and how much you will use to pay down debt.cash savings balance
  3. Make the Budget Balance!balance the budget
  4. Fill in your starting bank balance.

3. Hit the Button to Calculate Savings!

At this point, the tool is calculating your potential savings using two different methods. There are two debt pay down methods: the Avalanche Method and the Snowball Method.

The Debt Avalanche Method

In the Debt Avalanche Method, you pay off your debts by paying extra towards your highest interest rate debt. Once you have paid off the highest interest rate debt, you put that payment towards the next highest until all debt is paid off.

The Debt Avalanche Method is the mathematically optimal debt pay down strategy.

The Debt Snowball Method

In the Debt Snowball Method, you pay off your debts by paying extra towards your smallest balance debt. Once you have paid off the smallest balance debt, you put that payment towards the next smallest until all debt is paid off.

Many people like the Debt Snowball Method because psychologically, you can see your debt accounts disappear. If you have an $1,000 loan and a $5,000 loan, it feels good to have the $1,000 loan gone.

The Debt Snowball Method is not mathematically optimal, but is still better than applying no strategy at all.

The Summary Tab

After the calculations finish, you are taken to the summary tab. On the summary tab, there are three subsections: budget, debt paydown, and savings.

The budget subsection shows how much money you have left over and how you are using that money. In the example below, the user had $125 left and decided to use $100 for savings and $25 for extra debt payments.

In the debt paydown section, you are shown how much you will potentially save by applying the Debt Avalanche Method or the Debt Snowball Method. In the example below, the user wanted to put $25 towards extra debt payments. By using a debt payoff method, there was potential to save at least $49,915! In addition, the user will be debt free in 150 months vs. the 290 months if no strategy is used.Finally, there is the savings subsection. The user decided to put away $100 a month to savings. Can you believe that nearly 70% of Americans don’t have $1,000 in the bank?

The Debt Paydown Tab

Finally, on the Debt Paydown tab, you are shown the order of debt paydown and total cost of the two methods. Looking at the left hand side of the figure below, you can see in the Avalanche method, we are paying off the highest interest rate debts first. Looking at the right hand side of the figure below, you can see in the Snowball method, we are paying off the smallest balance debts first.

debt pay down order

There is also a table that shows the time until you are debt free and the total cost of your debt over that time period.We’ve included the statistics if you increase your extra debt payments by $100. The difference is fairly substantial just by paying an extra $100 a month!

In our example, the user started out with $246,500 in total debt. If no method was used, it would take 290 months (just over 24 years) and cost $371,109 to become debt free. By paying an $25 extra a month, the user is able to save nearly $50k, and chop off 140 months (nearly 12 years) off their payment plan! If the user could find an extra $100 in their budget, they could save an additional $12,000 and be debt free 158 months sooner!

Limitations

There are some limitations to this tool:

  • There are no features for floating rate debt products
  • There are no features for adjustable rate debt products

Next Steps

At this point, you have the order of debt pay down. You know how much you are going to save. Now,it’s time to make it happen.

When you make your next payments on your debts, add the extra amount you determined from the budget tab. Over time, you will eliminate your debts one by one. When you eliminate one debt. Make sure to roll the payment over onto the next debt! This step is crucial – ignoring this step won’t result in an optimal result!

To conclude, paying off your debt will be a great accomplishment. We are very happy to be able to provide you this tool and help you on your way.

A journey of a thousand miles beings with a single step – Lao-Tzu

Questions?

If you have any questions, please feel free to reach out to Erik at etozier24@gmail.com or at themastermindwithin@gmail.com

Enjoy the interest savings!