CHAPTER INSTRUCTOR’S GUIDE

3 Activity:
Debt Snowball Calculator (1/2)
Objective
The purpose of this activity is for students to design a plan to reduce debt using the debt snowball.

Instructor Directions
Direct students to go to www.foundationsU.com and explore the Debt Snowball tool. They will create a plan to pay
off the debt in the least amount of time possible. The tool will automatically organize the order of payments for
them.

Once the debts are entered, have them answer the following questions.

Answer Key
The correct order of debts is: Mastercard, Electronics Store Card, Visa, Loan from Dad, Knee Surgery, Car, and
Student Loan.

 1 If only the minimum payments are made, what is the Debt-Free Date?
On the website, the Debt-Free Date is in the upper right corner.
September 2016

 2 If only the minimum payments are made, how much is going toward debt monthly? $916

 3 How much money is left over for living expenses per month?
Assume this person makes a gross income of $40,000 and pays 20% for taxes.
$1,751 (Net pay of $2,667, minus debt payments of $916)

 4 What is the percentage of debt compared to income? Is this sustainable over time? Why or why not?
Divide the total monthly debt payment by the monthly income.
34%. It is not sustainable—these debts will grow increasingly higher over the years.

 5 What are some ways you can get out of debt faster?
Answers vary and might include:
›› Paying more than the minimum
›› Selling the car
›› Living on a tighter budget
›› Asking the lenders for a lower interest rate once you prove your trustworthiness

FOUNDATIONS IN PERSONAL FINANCE COLLEGE EDITION CHAPTER 3: DEBT

 CHAPTER INSTRUCTOR’S GUIDE

3 Activity:
Debt Snowball Calculator (2/2)

FOUNDATIONS IN PERSONAL FINANCE COLLEGE EDITION CHAPTER 3: DEBT