Debt Avalanche unlocks financial freedom.
The Johnsons, with a combined income of $450,000 and $2.1 million in retirement savings, felt overwhelmed by their $85,000 in non-mortgage debt, comprised of car loans, a personal loan for home improvements, and credit card balances. Juggling three children (ages 8, 12, and 15) and planning for both college and retirement simultaneously, they sought a structured approach to eliminate debt efficiently without sacrificing their long-term financial goals.
Using the Debt Avalanche Calculator, the Johnsons identified that prioritizing their highest-interest debt first – the credit card with an 18% APR – would save them significant money. By focusing extra payments on this card, followed by the personal loan and car loans, they reduced their total interest paid by an estimated $38,000 and shortened their debt repayment timeline by four years, freeing up cash flow for college savings.
The advisor input the Johnsons' debt details – balance, interest rate, minimum payment – into the Debt Avalanche Calculator to generate a prioritized repayment schedule. This schedule included the optimal order of debt repayment and the estimated time and interest savings.
$38,000 in interest savings and 4 years reduced debt payoff time.
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