Q2004 Debt Planner Problem

I have never used the debt planner. However, the only thing I can think of is that the interest rate was set so large (i.e. larger than 100% per month) that Quicken is indeed correct.

Just as a test (Q2005 PH&B) I added $50K in credit card debt and went to the debt reduction planner. It complained that the *minimum* payment was not large enough to pay off the debt so I increased that to $1 more than the interest on the balance and Quicken was happy (it was not happy with the minimum payment equal to the interest per month). However, when I change the payments, the graph, total interest paid and the time to being debt free never update. So, I entered a New Plan and then it seemed to somewhat work. The "Old Method" was way off but the "Current Plan" seemed reasonable. Even when I set the payments for the New and Old to be the same it shows a huge discrepancy between the debt free times and the total interest payments. Makes me wonder if the debt planner really works!

Personally, I have never been able to get useful information out of any of these planners, with the exception of the tax planner, which is not tremendously accurate, but still somewhat useful.

Peter

Help? Using a debt planner with a fixed monthly payment is, for most people, a mistake.

I'll try to describe it in words, then if you are still interested I can find some old posts with examples.

Most people have a fixed amount of income each month that can be used for expenses. Since some months have larger expenses than other months you generally save in some months and then use those savings in months with large expenses. So when fixed monthly payments for debt reduction are added to this, the months with large expense get even larger and you have to save more money to meet those later expenses. In the case of debt reduction, however, what you want to do is pay on the debt, instead of saving (why save money to later pay on debt?) and then in the month with large expenses make only the minimum required payment.

dick w

I do agree with your comments in general, however, I have one additional comment.

Although, I might be wrong (having never used it, except to test it out), it seems that one use of the debt planner is to get an idea of how long it will take to pay off the debt and how much interest will be saved. So it might be useful as an estimator. For example, "If I pay an extra $100 per month, I'll save $10K in interest." Maybe it can provide some extra motivation to plow more money into paying off the debt.

Peter

Yes that is *exactly* what I use it for -- ONLY as an estimator as I do pay more when I can. It gives me a min. idea of how much interest I am saving/wasting.

It's not just that you pay more when you can. If you've done your homework there are likely one or more months when you make only the minimum required payment - because you paying down the debt as soon as you can, not holding money back so as to make a fixed payment every month.

dick w

Testing == sorry for the intrusion Manny Balfour Sayville, NY snipped-for-privacy@nospamieee.org