How the Software Works My Debt Elimination Calculator works by taking your information and simulates your finances one transaction at a time until either your debt is paid off, the term of all the loans have passed, or the limit on your HELOC has been reached. The Transaction Details section of the Detailed Estimate shows all of the transactions one-by-one as My Debt Elimination Calculator processes them. To really understand how the HELOC Based System of Debt Elimination works, study the Transaction Details.  My Debt Elimination Calculator begins with the 1st day of the month that the oldest loan starts in.  It processes all the financial events for that day. After they have been processed, My Debt Elimination Calculator moves on to the next day and repeats the process. Financial events are processed by moving monetary amounts between 3 accounts. The three accounts are: Debt Balance - the total amount owed on P&I loans HELOC Balance - the outstanding amount owed in the HELOC Cash Balance - the amount of cash being held (usually in a checking or savings account) Two Types of Financial Events: Income and Expense Events There are two types of financial events that need to be handled: Income events and Expense event. The rules for handling the events in relation to the three accounts define the HELOC Based System of Debt Elimination. If you understand these rules, then you completely understand how to implement the system. Rule #1: Income Events #1: When income is received, pay down the HELOC Balance first. Put any remaining income into the Cash Balance. The following table shows examples of the before and after account balances if $500 dollars is received as income: Before Balances     After Balances          HELOC  CASH  HELOC CASH Details  Case #1  $600 $0   $100 $0   The $500 is used to pay down the HELOC balance to $100. Case #2 $300 $0   $0 $200   The $500 is used to pay off the HELOC balance and rest is put into Cash. Case #3  $0 $100   $0 $600   The $500 is added to the current Cash balance. Rules #2, #3 & #4: Expense Events There are three types of expense events: Non-loan expenses (regular bills) Non-primary loan expenses Primary loan expenses The primary loan is the loan with the highest interest rate. This is the debt that is costing you the most money. (Even if the balance is small and the interest being charged per month is smaller than your larger loan with a lower interest rate, the loan with the highest interest rate is costing you more each month.) My Debt Elimination Calculator applies injections to the loan with the highest interest rate and treats any non-primary loans as regular expenses (which also lower the Debt balance.) #2: When the primary loan payment is due and the HELOC Balance is 0, add an injection to the payment. The total payment made will be the regular payment + the injection amount + whatever Cash Balance exists. The new HELOC Balance will be the amount of the regular payment plus the injection amount. #3: When the primary loan payment is due and the HELOC Balance is not 0, Take the amount required to make the regular payment out of the HELOC. #4: All other expenses are paid with money from the Cash Balance first. If Cash doesn't cover the expense, take the rest of the payment from the HELOC. The following table shows examples of the before and after account balances if a primary loan payment of $700 is due with an injection amount of $1000: Before Balances     After Balances          HELOC  CASH  HELOC CASH Details  Case #1  $600 $0   $1300 $0   HELOC was not $0. $700 was taken from the HELOC to make the payment. (Rule #3) Case #2 $0 $100   $1700 $0   HELOC was $0. A total payment was made on the loan of $1800 ($700 regular payment + $1000 injection + $100 cash.) All the cash was used. $1700 was taken from the HELOC. (Rule #2) Case #3  $10 $0   $710 $0   HELOC was not $0. $700 was taken from the HELOC to make the payment. (Rule #3) You certainly have the discretion to apply an injection in this case. I would have. The following table shows examples of the before and after account balances if a non-primary loan expense of $100 is due: Before Balances     After Balances          HELOC  CASH  HELOC CASH Details  Case #1  $400 $0   $500 $0   The Cash Balance is $0. Take $100 from the HELOC to pay the expense. Case #2 $0 $200   $0 $100   There is enough money in Cash to cover the expense. Use the money from Cash to cover the expense. Case #3  $0 $25   $75 $0   Cash exists but it is not enough to cover the expense. Use the money from cash to cover the first part of the expense and take the rest that is needed from the HELOC.