How to Calculate a Credit Repayment Timeline

Deciding to become debt free is an important decision you have to make because it’s not going to go away if you ignore it with damaging your credit.  It sounds silly but like most other endeavors, deciding to do it can be the hardest part.  Years can pass by if you allow them to and your credit will only get worse.  Deciding to do something about it is the first step and one you will never regret.  Debt has a tendency to sit on your back and hover over you like a dark cloud.

The best way to tackle the large task ahead of you is to create a debt repayment timeline.  This will be your road map to credit repayment and will keep you from feeling too overwhelmed about the whole thing.  Without a timeline it can feel like your debt will never get paid off and therefore you will be less likely to act.  Seeing what your balances were six months ago and what they are after six months of repayment can be extremely motivating.

Why is it Important to Pay Off Credit Debt?

Credit debt will be a burden on your life for as long as you have it.  It can keep you from having things in your life that should be easily attainable like a reliable vehicle or a nice home.  It is not only purchasing power that is affected by your credit debt either.  These days your credit can impact many parts of your life including your employment or your insurance rates.  These troubles can even affect your children when they go to get student loans.  If your credit is less than desirable you may not be able to help them as a co-signer.

Another important reason to start paying off your debts today is that the sooner you do so the less money you will end up spending over time.  Interest is piling up every day your debt goes unpaid.  This is how credit card companies make their money; from interest.  Make a choice to start paying off your debt now, even if it is a little bit at a time.

One more good reason to act on this now is that you will look much better to your debtors if you are at least trying to pay off your debt rather than simply ignoring it.  Paying off what you can is an act of good faith and it will not go unnoticed.  You should be in communication with your debtors as well to let them know you are not ignoring them and you fully intend to make good on your debts.

Knowing How much You Earn

Now that you have decided to pay off your credit debt and you know why it is important, you may be wondering what comes next.  The first step is taking inventory of how much you currently earn (surprisingly many people don’t know how much liquid cash they have on a monthly basis and where it’s going).  If you work for someone else or a company and that is your only source of income, this part is fairly straightforward and easy. If you work for yourself you will need to consider a few extra things like taxes and exemptions.  Also if you work for yourself, make sure you are calculating every single form of income. One frequent mistake from those self-employed is that they forget to add some of the smaller sources of income, sometimes they may not come every single month, but they must be considered.

Create an income and expense report and add every monthly bill that you need to pay.  Another frequent mistake during this step is that people often miss some of their bills, particularly smaller ones and then things don’t add up later.

Make a list of everything you need to pay for from groceries, to clothing, to car repairs and housing payments.  Food and gas must be accounted for as well; anything that is going to cost you money each month must be added, if it is forgotten now your calculations won’t be accurate.

Deciding What You Can Pay Each Month

Now you should know how much you earn versus how much you spend each month.  From here you can decide what you can spend every month on your debt.  You should still be putting money away in your savings account during this time, even if it is very small.  Your savings budget may take a hit now that you are actively paying on your debt but that is okay.  This is something that needs to be resolved in your life.

Even if the amount you are paying on your debt is minimal, it is better than nothing.  If what you can pay is less than what the debtor is asking for, write them a letter asking if you can pay the amount that is comfortable for you.  At least you will be reaching out to them with good intentions.  Chances are they will be happy to receive any amount of money from you rather than zero.

Now you can create a timeline of how much debt will get paid off month by month.  You can look ahead a year or more and see how much debt will be left to owe.  To get discouraged thinking you can pay it off in a year as many people have accumulated credit debt over many years.  Consistency is the key to becoming debt free.

How to Make Up the Difference

So now that you have done the right thing and are paying off your debt you will need to figure out how to make up the difference.  Chances are there are plenty of things you can cut out of your life in order to pay off your debt and stay comfortable.

For many people it means being frugal and living within their means.  Maybe you have to sell your vehicle and get one that is less expensive and gets better gas mileage.  It may also mean not driving as much in general.  Many people could save thousands a year if they planned trips better. For example you can lump all your errands together so that you only need to make one trip to town.

Pinching pennies is no way to get rich, but when you owe money to debtors you may have to turn into a penny pincher.  Once you have become debt free you will feel a great weight lifted from your shoulders and your life will be better for it.  You still need to allocate money to live and enjoy life, but you can significantly cut back on the luxuries that are clearly not needed. These may include: coffee at a shop, too many dinners out, fast food, outings to the bar, lottery and gambling and much more.


Creating and calculating a repayment timeline based on your income makes paying back debt seem much less daunting and can give you confidence.  You will not feel so overwhelmed, like most things, having a plan makes it much easier.  Create your timeline by figuring how much you earn and how much you pay in bills each month.  This way you can look forward and know how much of your debt will be paid off and when.  Take control of your life and eliminate your sources of credit debt.

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