How the optimisation process works ... and why you should bother


As first installed, Become: Debt Free includes some model data for you to play around with before entering your own. The data relates to five cards as follows :-

Enter this data into Become:Debt Free and you can immediately see on the Analysis screen, what the current overall position is, how long it will take to clear with current payment patterns, and how much time and money you could save by optimal payments. What B:DF does is to take your usual payments, add them together and use that total as a fund to use across all the cards. In the example given, B:DF would pay the minimum on all cards except (Which has the highest interest rate), on which it would pay the minimum payment, (3.22) plus the surplus it has saved on the other cards making a total of 88.81 for this month. Doing the same next month will clear and start overpayments on the next highest cost card (MegaBank Visa). In this way you are saving not just the higher interest, but the interest on that interest you would have paid compounded.

As you can see, the benefits of optimisation are two-fold. Firstly it costs less, not a lot less but every saving is welcome. Secondly, the debt is cleared over three years earlier in this example.

It is the combination of using an intelligent tool, and the motivation provided by seeing your debt free date coming closer by the month, that ensures that you have the best possible chance of seeing it through.

You could do this each month by making a simple decision to dedicate surplus funds to overpaying the cards with the highest interest rates, but that doesn’t give you the overall picture, especially the bringing forward of the date when all debts are cleared. Without the encouragement of seeing a debt free date, and seeing it become closer every time the balances are updated in B:DF it can be difficult to see the benefit, especially in the early months.

You could work it out using a spreadsheet, but this is tedious and unwieldy if you want to make changes to your payment patterns. Which brings us to Modelling. Having seen the benefits of optimally allocating surplus payments as above, and the benefits of a simple, fast and accurate tool to calculate the outcomes, the next stage is to consider the possibility, and benefit, of making even small further payments. The modelling screen of B:DF allows you to model (or play) with extra payments and instantly see the impact on the overall sum you will pay, and the time it will take to clear all debts. Just moving the slider to the right increases the payments and the graph and calculations instantly update.

The Modelling screen shows a graph of your debt falling from its current value at the top left, to zero at the bottom. Across the scale is time, i.e. the number of months it will take to clear the debt.

The orange line plots usual payments, the blue optimum payments at the current level of repayment, and the red shows the benefit of using the optimiser to allocate a larger overpayment each month, should you be able to afford it.

The slider moves between values of zero and double your current payments in units of five. As you move the slider, the red line redraws in real time, and the values at the bottom update so you can play until you see a result you like.

When you are happy, pressing the Payments button takes you to the Payments screen where the recommended payments for each card are shown, including any additional payment you have chosen here.

Should you decide you don’t wish to add any extra funds, move the slider back to the left and press Payments again. Every time you leave the slider your current preferred extra payment (Even if zero) is stored and remains until you change it.

You can change your mind as often as you like. The process is that every month you will update the data for all your cards from their statements, then proceed through the analysis and modelling screens, choosing whether to increase payments this month or not. When you get to the Payment screen you see the optimal payments for each card for the month.