Creating a Debt Avalanche Spreadsheet in Google Sheets and Excel for Debt Repayment

Formatting Your Debt Avalanche Spreadsheet

In this tutorial, I will guide you through the process of creating a debt avalanche spreadsheet. The primary objective of the debt avalanche method is to pay off your high-interest debts first, allowing you to save money on interest in the long run.

To begin, open a blank spreadsheet in Google Sheets or Excel. You can title it “Debt Avalanche Example” or any other name you prefer. If you prefer not to create the spreadsheet from scratch, you can download a free debt snowball spreadsheet, which follows a similar approach but focuses on paying off debts based on their balance rather than interest rate. You can find the download link in the video description.

Now, let’s dive into the steps to format your debt avalanche spreadsheet.

Building Your Debt Avalanche Calculator

Now, let’s move on to building your debt avalanche calculator. In column B, we will enter the payment amounts for each debt. There’s no need to use capital letters for this column.

Next, we will label each row with the corresponding debt name and interest rate. For example, in row 2, we can label it as “Debt 1” with an interest rate of 15%. In row 3, we can label it as “Debt 2” with an interest rate of 7%. And in row 4, we can label it as “Debt 3” with an interest rate of 5%.

In the next row, we will calculate the total amount owed for each debt. For instance, let’s say we owe $20,000 on Debt 1, $30,000 on Debt 2, and $10,000 on Debt 3. Make sure to format these values as numbers. You can select the cells and apply the “Currency” format if needed.

To ensure that the top two rows remain visible even when scrolling, we will freeze them. Simply select the row below the second row, right-click, and choose the “Freeze” or “Freeze Rows” option.

Now, let’s enter the minimum payment amounts for each debt. For Debt 1, we can use a minimum payment of $600 (approximately 3% of the total debt). For Debt 2, let’s use a minimum payment of $200, and for Debt 3, a minimum payment of $250. You can drag these values down as far as needed to represent the minimum payment made on each debt every month.

Next, we will add a column on the left-hand side to track the months and dates as we pay off our debts. This will allow us to monitor our progress and estimate our debt-free date. Additionally, calculating the approximate debt-free date is an exciting part of creating this spreadsheet.

Adding Dates to Your Debt Avalanche Spreadsheet in Excel or Google Sheets

Let’s now add dates to your debt avalanche spreadsheet. For example, let’s say we are creating this spreadsheet in May 2023. We can use a formula to make it easier to populate the dates.

In the cell corresponding to the May date, we will enter the formula “=EDATE” followed by a reference to the cell above (which contains the May date), a comma, and then the number “1” to add one month to each subsequent date.

For better formatting, we can center-align the dates. Select the column with the dates, right-click, and choose the “Format Cells” option. In the Alignment tab, select the “Center” option.

Now, we can simply drag the formula down as far as needed, and it will automatically populate the dates. This saves us time and effort compared to manually entering the month and year for each date. In this example, the formula is dragged down to February 2035, but you can extend it further if necessary.

Please note that this formula provides an estimate of the debt-free date based on the assumptions and calculations in your spreadsheet. It’s always good to review and adjust your repayment plan as needed to stay on track towards becoming debt-free.

Formulas to Automate Debt Repayment

Now, let’s add formulas to automate the calculation of approximate monthly payments with the interest rate included. While this method won’t provide an exact calculation, it will give us a good approximation for our spreadsheet.

In the payment column, we will enter the following formula: “=Total Amount – Payment + (Total Debt * Interest Rate / 12)”. This formula subtracts the payment amount from the total amount owed and then adds the interest for the month.

For example, let’s say the total debt is $20,000 with an interest rate of 15%. In the first month, the approximate interest added back in would be $250. So, if we make a $600 payment, the calculation would be $20,000 – $600 + $250, resulting in a payment of $350.

You can drag this formula down to automatically calculate the approximate payment for each month, based on the minimum payment in the payment column.

Repeat the same process for the next two loans. Adjust the formula for each loan, taking into account the respective total debt and interest rate.

For the second loan, if the total debt is $30,000 with an interest rate of 7%, the approximate interest added back in would be $175. So, if the minimum payment is $200, the calculation would be $30,000 – $200 + $175, resulting in a payment of $75.

Drag the formula down for the second loan as well.

You can observe that the second loan will take longer to pay off, while the first loan will be paid off relatively quickly.

By using these formulas, you can track the estimated payoff dates for each loan. In this example, the first loan is projected to be paid off in February 2028, the second loan in January 2029, and the third loan in February 2035.

Remember, these calculations are approximations, and it’s important to continually review your progress and make adjustments as needed.

Accelerating Your Debt Avalanche Spreadsheet

Debt Snowball and Debt Avalanche Methods

Now, let’s discuss the two popular methods for debt repayment: the debt snowball and the debt avalanche.

The debt snowball method involves paying off debts starting from the smallest balance to the largest, regardless of the interest rates. Each time a debt is paid off, the minimum payment for that debt is rolled into the next debt on the list. This approach provides psychological motivation as you see your debts being eliminated one by one.

On the other hand, the debt avalanche method focuses on paying off debts starting from the highest interest rate to the lowest, regardless of the balances. Again, as each debt is paid off, the minimum payment is rolled into the next debt. This method saves money on interest payments over the long run.

In this example, we are using the debt avalanche method. After paying off the first debt, which had a minimum payment of $600, we now have an additional $600 to allocate towards the next debt with a 7% interest rate. This increases the minimum payment for the second debt, which is now $850. We update the spreadsheet accordingly and continue dragging the formula down until the second debt is paid off.

Once the second debt is eliminated, we have an extra $200 from the minimum payment. We can now allocate this amount to the third debt, reducing its payoff timeline. By making these additional payments and using the debt avalanche method, we can pay off our debts faster.

However, it’s important to note that the timeline provided in the spreadsheet assumes only minimum payments. By applying additional payments, such as using extra paychecks or adding a little extra each month, you can significantly reduce the time it takes to become debt-free.

You can customize the spreadsheet by adding more debts and playing around with different payment scenarios. By experimenting with extra payments, you can see how it impacts your debt repayment timeline.

Remember, in addition to using spreadsheets to track your debt repayment, it’s also beneficial to create a budget and manage sinking funds. Utilizing tools like Google Sheets or Excel can help you track your spending and effectively manage your finances.

If you’d like more information on using spreadsheets for budgeting and managing sinking funds, I have additional videos available that can provide guidance.

Debt Snowball Spreadsheet Template Free Download:

Leave a Comment

Your email address will not be published. Required fields are marked *

Shopping Basket
Scroll to Top