How to Design a Payment Plan

Whether your goal is to save money for a specific purpose or to pay off an amount that you owe, a payment plan, if followed through, can take the worry out of meeting your financial goals. Debts usually come with a built-in payment plan devised by the loan or credit institution, but these are usually designed to favor the debtor by maximizing the amount of interest you have to pay and keeping you indebted for years on end. Devising your own debt-payment plan can lower interest and speed up the time it takes to pay off your debt.

Instructions

Method 1: Set a Deadline

1

Set a deadline for your goal. For example, give yourself 18 months to save $5,000 for a nice vacation.

2

Divide the total amount of the savings goal by the number of months you've given yourself to achieve it. In our example, we would divide 5,000 by 18 to get $277.77. This is your monthly payment.

3

Set up an automatic monthly withdrawal from your checking account to your savings account in the amount determined in Step 2 to help ensure you meet your savings goal each month.

Method 2: Set a Monthly Payment

4

Decide how much you can afford to pay toward your goal each month.

5

Divide the total amount of your goal by the monthly payment amount to determine how long it will take to reach your goal. Say you can afford to put $250 a month toward your goal. Using the example from Method 1, we would divide 5,000 by 250 to see that it would take 20 months to achieve your savings goal.

6

Set up an automatic monthly withdrawal as in Step 3 of Method 1.