My spouse and I have set a strict househ
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My spouse and I have set a strict household debt payoff goal for our family. Our essential living expenses (rent, utilities, groceries, medical, childcare) are completely current and covered, leaving us with a total dedicated budget of exactly $550.00 / month to put toward our non-mortgage debts.
Our 3 balances are:
1. **Store Credit Card (Card A)**: Balance $3,400.00 | 26.99% APR | Minimum payment: $95.00
2. **Bank Credit Card (Card B)**: Balance $1,600.00 | 21.49% APR | Minimum payment: $45.00
3. **Emergency Auto Repair Loan**: Balance $4,500.00 | 12.99% APR | Minimum payment: $140.00
Total debt balance: $9,500.00. Total required monthly minimums: $280.00.
With our $550.00 monthly allocation, we have $270.00 in extra monthly surplus above minimums to attack principal.
We are debating between the two classic debt strategies:
- My spouse wants the **Debt Snowball**: knock out Card B ($1,600.00) first in just a few months to get an immediate psychological victory and eliminate one monthly bill.
- I lean toward the **Debt Avalanche**: attack Card A (26.99% APR) first to eliminate the highest compounding interest bleed.
Could you run the exact financial simulation and compare both methods:
1. **Mathematical Comparison Table**: What are the exact months to debt-free, payoff sequence, and total interest paid under Avalanche versus Snowball using a $550.00/month budget?
2. **Psychological vs Mathematical Trade-Off**: How much interest do we actually save by choosing Avalanche over Snowball ($79.92 interest difference), and how does the milestone timeline differ (clearing Card B in month 6 vs clearing Card A in month 11)?
3. **Execution Rules**: Why must we continue paying all minimum payments automatically while funneling 100% of the $270.00 surplus to the top priority debt, and why should we never cancel the paid-off accounts immediately if it hurts our credit utilization ratio?
Answer
Premise: rent, utilities, groceries, medical, and childcare are covered, so this is a repayment comparison, not a crisis ladder.
Both routes finish in **21 months** on a $550.00 budget. Avalanche saves **$79.92** in total interest; Snowball closes its first account 5 months sooner.
| Strategy | Surplus targets | Months to debt-free | Total interest | First card cleared |
| --- | --- | --- | --- | --- |
| Avalanche | Card A (26.99% APR) | 21 | $1,514.33 | Card A — month 11 |
| Snowball | Card B ($1,600.00) | 21 | $1,594.25 | Card B — month 6 |
**Payoff sequences** (this turn's `payoff.py` ok:true stdout):
- Avalanche: Card A (mo 11) → Card B (mo 15) → Auto Loan (mo 21, final $14.33)
- Snowball: Card B (mo 6) → Card A (mo 15) → Auto Loan (mo 21, final $94.25)
**The trade-off**
- *Mathematical.* Avalanche routes the $270.00 surplus to the 26.99% line first, so every surplus dollar that month offsets the highest compounding. Over the full21 months that adds up to $79.92 less interest — roughly $3.81/month on average.
- *Psychological.* Snowball's first closed account lands in month 6 (Card B), Avalanche's in month 11 (Card A). Five months earlier "win". Both finish in 21 months because the $4,500 Auto Loan sits in last place on either route — it is the largest balance, so it inherits the full $550.00 in the final stretch.
**Execution mechanics — neutral, applies to whichever route you pick**
1. *Minimums keep flowing on every account.* Each creditor has a contractual minimum ($95 / $45 / $140). The Avalanche/Snowball math assumes every non-target debt receives its own minimum on schedule and100% of the $270.00 surplus hits the priority debt. Miss a minimum and the late fee plus possible penalty APR consume the surplus before it touches principal. The simulation does not work if a minimum is dropped.
2. *Paid-off cards and credit utilization.* Utilization = reported balances ÷ total credit limits across your cards. Closing a freshly-paid card shrinks the denominator; if the remaining cards still carry balances, the ratio goes up and the score can drop even though the debt went down. Keeping the paid-off card open with a $0 balance keeps the limit in the denominator. The on-time payment history already on the file is not deleted either way — closing the card does not erase it.
**Pick the route your household can run for 21 months without flinching.** Avalanche = $79.92 less interest. Snowball = first closed account five months sooner. Same finish line either way.
Source: this turn's `payoff.py` ok:true stdout; monthly compounding assumed — model, not a prediction.