How to calculate your real debt-free date

“Someday” is not a plan. A month on the calendar is. Your debt-free date is the month your last balance hits zero if you keep doing what you plan to do, and you can work it out today. Here is how, step by step, plus the things that quietly move it.

What you need

For every debt you want to pay off, write down:

• The balance you owe today
• The interest rate (APR), which is on your statement or in your card’s app
• The minimum payment

Then one more number: the total you can put toward debt each month, minimums included. Be honest here. A number you can keep paying beats a bigger number you cannot keep up.

The quick way: use a calculator

The free Haluvra debt payoff calculator does all of the math below in about a minute. Add each card, enter your monthly amount, and it shows the month you could be debt free with the avalanche or the snowball, next to paying only the minimums. It runs in your browser and does not save what you type.

If you want to know what is happening under the hood, or you like to check the math yourself, keep reading.

The method, step by step

1. Work out this month’s interest on each debt. Multiply each balance by its APR, then divide by 12. A $5,000 balance at 24% APR is about $100 of interest this month.
2. Pay every minimum. On each debt, the payment covers the interest first, and the rest lowers the balance.
3. Send the extra to one target. Whatever is left of your monthly amount goes to one debt: the highest APR for the avalanche, the smallest balance for the snowball. (Not sure which? Read avalanche vs snowball.)
4. Roll payments forward. When a debt hits zero, its payment joins the extra for the next target. Your monthly amount stays the same, it just has fewer places to go.
5. Repeat month by month until every balance is zero. Count the months. That count, starting from your next payment, is your debt-free date.

It is simple arithmetic, repeated a lot of times. That is why a spreadsheet or a calculator is the practical way to do it.

A shortcut for a single debt

If you have one debt and a fixed payment, there is a formula for the number of months:

months = −ln(1 − r × B ÷ P) ÷ ln(1 + r)

Here B is the balance, P is your monthly payment, r is the monthly rate (APR ÷ 12, as a decimal) and ln is the natural log, which any spreadsheet has. For the example: r = 0.02, so months = −ln(1 − 0.02 × 5,000 ÷ 200) ÷ ln(1.02), which is about 35. If r × B is equal to or bigger than your payment, the formula breaks, and that is the math telling you the payment does not even cover the interest. With more than one debt, go back to the month-by-month method, because payments roll from one debt to the next.

What makes a date “real”

A date is only as good as what goes into it. These are the things that move it:

• New charges. Every new charge on a card you are paying off pushes your date back. If you can, stop using those cards while you pay them down.
• A shrinking payment. If you only pay a minimum that shrinks as the balance shrinks, your date can be many years away. Keep your payment fixed instead. We show the difference in why your minimum payment feels like it does nothing.
• Rate changes. A 0% promo that ends, or a variable APR that rises, moves your date. Put any promo end date on your calendar.
• Fees and late payments. A late fee or penalty rate adds to the balance and slows everything down. Autopay on minimums helps.
• Extra money. A raise, a tax refund or a side income pulls your date closer. Run your numbers again whenever your monthly amount changes. If you are looking for ways to make more money, start with our guide on how to negotiate your salary.

Your date is an estimate, not a promise. Check it once a month. A debt tracker like the Haluvra debt app keeps a running countdown of the months to go, so the check takes seconds. Seeing it hold steady, or move closer, is one of the best ways to stay motivated.

Or try the free debt payoff calculator

Keep reading

• How I paid off $95,000 in consumer debt in under two years
• How to make a budget when no one ever taught you