It seems like everyone is in need of a good debt tracker – the ultimate tool to corral what you owe. After all, the average household in 2016 had 134,643 in debt. (P.S. Did you know you could buy five Ford Mustangs with that much money?) Debt is one of the great financial white whales – almost everyone has some sort of debt, but repayment seems to be increasingly out of reach for many. Student loans are crippling young adults’ financial wellbeing young, while mortgage rates climb and a wider variety of credit options become available. I know that if you're reading this, you're well aware that debt can be a vicious cycle of overuse and slow repayment that can leave you forced to open more credit to make ends meet.
From using credit cards to pay off bills, student loans, increasing housing costs, and poor budgeting choices, getting in debt is a common way of life for most of us in America. But with high-interest payments each month, it's hard not to think about what you could be getting if you didn't have those pesky debt bills.
But before we can get you set up with your debt tracker, you'll need to decide how you want to tackle the beast.
Debt Reduction Techniques
There are many different debt reduction techniques available. You may have heard of a few debt repayment techniques. Some of the most common include:
#1 – Snowball
debt snowball: this works by setting aside a specific amount each month. Even if the required minimum decreases each month, you'll put that money aside to work towards debt. This creates a snowball effect since more of the money you pay will go towards the principal amount as time goes on. If you have multiple accounts, you'll start with whichever account has the smallest balance.
#2 – Avalanche
debt avalanche: this works well when you have multiple credit card balances. Unlike the snowball method, you won't be targeting smaller accounts first. Make all of the minimum payments on each account, and then put the remaining money you have to pay off debt with towards the account with the highest interest. This will help you reduce the amount you pay on interest over time.
#3 – Consolidation
debt consolidation: this consolidates all of your debt into one account so you are only paying off one interest rate each month. In theory, this approach can be helpful, but in practice, it can get dangerous. It makes it easy for you to rack up even more on your credit cards and get yourself even more in debt.
No matter what method you choose, a debt tracker can help you get a handle on your debt, because it provides an opportunity to put all of your financial information in one place.
If you miss even one account, credit card, or loan, you won't get a complete picture of your debt situation. Instead of logging in to all of your accounts and trying to remember all of the numbers, having a place to write down all of the numbers will help you stay on top of your debt.
Getting the big picture in front of you is just the first step towards financial freedom.
Once you have an idea of where your finances stand, you can figure out what needs to be tackled first. Got a credit card that's costing you hundreds each month in interest? Have a small loan you could knock out in a month or two? Using a spreadsheet will help you compare account information and identify where you can start. (And this, personally, is my favorite reason for recommending one…it's just so simple. So visual.)
If you feel mathematically challenged, spreadsheets are a great solution to making sure you don't make any glaring errors when tackling your debt. One of the biggest benefits of using a spreadsheet is the number of functions you can perform. Instead of crunching the numbers by hand, you'll be able to just put the numbers in each cell, select a function, and watch the magic happen. These functions are much less subject to error than the calculations you do by hand.
5 Benefits of Using a Debt Tracker
I'm not crazy, there are sound benefits related to getting your debts down “on paper.”
1. It's A “Screenshot” of Your Financial Life
If you are utilizing credit from many different institutions, it can be hard to know all of your balances, rates, and monthly payments off of the top of your head. A good debt tracker will let you input the details of all your loans or credit lines, letting you view your repayment information in one place. No more bouncing from app to app or looking through old documents every month.
2. You'll Be Able to Set Reasonable Goals
You might be tempted to aim high in your debt repayment goals – that’s great! – but it is just as important to set goals that you can reasonably reach. While paying off $8,000 of debt in 90 days is realistic for some (including our editor, Lauren) it may not be an achievable goal for you personally. Since you’ll have all your debt info in one place, it’ll be even easier for you to prioritize what you want to pay off first.
3. You'll Stay on Top of Due Dates
Late payment is a big financial no-no. Not only does late payment affect your credit score, but you could also be paying more because of late charges. It’s amazing the difference just having your dates in one place can be. Your debt tracker will help you stay on top of what is due when, saving you the mid-day terror of trying to run from bank to bank during your lunch break.
4. And Keep Motivated
Debt repayment burnout is real and dangerous. It can start with “Well, I’ve repaid a lot lately. I should treat myself,” and end with “How did I max out my card again?” The trick to avoiding burnout is in not denying yourself rewards – but rewarding yourself responsibly. Think of little treats (around $25) that you can give yourself when you reach a milestone of repayment or other financial goal. Write these rewards down on your debt tracker so that you don’t lose sight of your goals!
5. Accountability for When You Do Backslide
Since you’re using a debt tracker, you are probably already planning for your financial future. Why not take it a bit further? Debt repayment is a great time to reassess your financial priorities and habits. Always go over your grocery budget? Start making shopping lists! Can’t go to the mall without buying a new outfit? Find other places to hang out with friends! Cutting out bad habits can help you pay off debt now while also hopefully keeping you from making the same mistakes later.
Overall, debt trackers are great tools which can help you succeed financially. Wondering where you can get one for free? You’re in luck!