My Debt Elimination Calculator provides the capability to calculate the optimal injection amount with the press of a button in the HELOC Details Tab. The "optimal injection amount" is defined as the injection amount that will save you the most interest over the term of your debt. This value is computed by trying every possible injection amount starting at $10 all-the-way up to the credit limit value on the HELOC in $10 intervals. The inject amount that pays off the debt with the least amount of interest paid is the winner. Note: If you have a large credit limit or a slow computer, the calculation of this value may take a while.
In order for this capability to work, the details you have entered into
My Debt Elimination Calculator must produce a paid off estimate. When the Calculate Optimal Injection Amount button is pressed, it will first verify that the debt will be paid off with the current information. If the debt is not paid off, it will display a message and not continue.
If the current information does produce a paid off estimate, then the following window will be displayed:
This window shows the progress made so far computing the optimal amount. It also gives you the ability to click the Cancel button to abort the action.
Upon completing the computation, the window changes to look like this:
The optimal injection amount is displayed. At this point you can either press the Cancel button to close the window (without using the computed value) or click the Use Value button. Clicking the Use Value button will replace the current Injection Amount in the HELOC Details Tab with the computed optimal injection amount.
The Truth about the Optimal Injection Amount
Take the calculated optimal injection amount with a grain of salt. When I implemented this feature, I thought it would be a significant number to calculate. For the most part, it is a significant number. It will give you a solid value to use for your injection (as opposed to just guessing.) However, the number has a few weaknesses. First, the difference in interest savings between most of the injection amounts close to the optimal value tend to be only a few cents or a few dollars. Any number of values could be returned that are good enough to be used. The reality is that you will save more money in interest in this system by reducing your expenses or increasing your income than you will by finding your optimal injection amount. Second, the computed value is based on the information you have entered into
My Debt Elimination Calculator as of right now. If in a few months you have a big expense or income event, the optimal value may change.
Something Else to be Aware of
At the time I developed this feature my HELOC interest rate had dropped below the interest rate on my P&I loans. When I computed the optimal injection amount it returned a value near the top of my HELOC credit limit. My credit limit is high. While
My Debt Elimination Calculator computed this to be the optimal injection value, it did not consider that the interest rate on my HELOC was not going to stay lower than my P&I loans forever. The computation correctly generated a number that took advantage of the cheaper money based on the unrealistic information I had entered. To "solve" this problem, I added an extra HELOC interest rate entry with an effective date in the future with an interest rate higher than my loans. Since my HELOC interest rate is set quarterly, I added an entry of 10% effective the first date of the next quarter. This brought the computed optimal injection amount back into a realistic range.
