# Case: Sam's way out of debt > A credit card and two installment plans, one fixed budget: compare paying the costliest debt first with paying the smallest first, and write the plan. - Course: [Personal Finance: Budget, Safety Cushion, Debt and Investing](https://productovi.com/courses/personal-finance.md) - Module: What does this debt really cost? - Lesson 12/32, ~29 min - Source: https://productovi.com/courses/personal-finance/way-out-of-debt-case ## Three debts, one budget **Alex Tutor:** Sam's family has agreed on a debt budget, and you're helping them use it well. **Sam:** Here is everything we owe on 5 November. And we have agreed on a number: 6,000 a month for debts, all of them together. That is the 4,630 we already pay plus 1,370 from trimming dinners out and clothes again. **Dataset (CSV):** [Sam's debts on 5 November 2026](https://productovi.com/datasets/personal-finance/way-out-of-debt-case/sam-debts-november.csv) Balances in UAH. The card charges 3.2% a month; the installments charge no interest. - `debt`: Debt - `balance_uah`: Owed today, UAH - `monthly_rate_pct`: Interest a month, % - `monthly_payment_uah`: Required payment this month, UAH - `payments_left`: Installment payments left - `terms`: Terms **Alex Tutor:** Good: a fixed budget is the engine of any way out. Now the order. Only one of these debts charges interest. The laptop's cost was paid in its higher price long ago; paying it early saves nothing. **Sam:** Still, it is the card that keeps me up at night. The other two just tick down by themselves. **Sofia:** Before any order: how much is there in total? > **Exercise:** Use Sam's debts table. How much does the family owe **in total** on 5 November? ## Two ways to choose the order **Alex Tutor:** Both methods pay every required payment first. The difference is where the rest goes. The **debt avalanche** sends it to the debt with the highest rate. The **debt snowball** sends it to the smallest balance, for a quick win. **Alex Tutor:** And in both, when a debt is gone, its payment rolls into the next one. The 6,000 stays 6,000 until everything is paid. **Sam:** Paying off the washing machine in two months would feel great. One less line on the fridge. **Sofia:** For the avalanche the order is obvious here: one debt at 3.2% a month, two at zero. > **Exercise:** With the **avalanche** method, where does the money left after the required payments go first in Sam's case? ## The two plans, month by month **Alex Tutor:** Here are both plans with the same 6,000 a month. Each month the card adds 3.2% interest first, then the payments go out. **Dataset (CSV):** [Avalanche and snowball with 6,000 UAH a month](https://productovi.com/datasets/personal-finance/way-out-of-debt-case/sam-debt-payoff-plans.csv) November 2026 until debt-free. Balances after the month's payments, UAH. - `month`: Month - `method`: avalanche or snowball - `card_interest_uah`: Interest added to the card that month - `paid_uah`: Paid to all debts that month - `card_uah`: Card balance after payment - `laptop_uah`: Laptop installment left - `washer_uah`: Washing machine installment left **Sofia:** In the snowball rows the card sits at 52,800 for three months. It only gets the interest while the extra goes to the zero-percent debts. **Sam:** But both end in December 2027. Same date. **Alex Tutor:** Same date, a different bill. Add up the interest column for each method and compare. > **Exercise:** Use the plans table. Add up the card interest for each method. How much **more interest** does the snowball pay than the avalanche? ## When the order matters **Sam:** Under 400 UAH. Honestly, I expected a bigger difference. **Alex Tutor:** It is small here because the "small" debts are small and interest-free. With two or three costly debts at different rates, the avalanche saves much more. The snowball's quick win is only a month sooner here too: December instead of January. **Sofia:** And the date depends on the 6,000, not on the order. **Alex Tutor:** Exactly. The size of the payment decides when; the order decides how much interest on the way. If a method keeps you going, its small extra cost can be worth paying. Just know the price. > **Exercise:** **True or false:** with Sam's debts and 6,000 UAH a month, the snowball makes the family debt-free sooner than the avalanche. ## Saving or paying the card? **Sam:** We still move 1,000 a month to the cushion. The card costs 45.9% a year. Shouldn't that 1,000 go to the card too? **Alex Tutor:** On paper, yes: no savings account earns anything close. But with no cushion at all, the next broken fridge goes straight back on the card. Many people keep a small starter cushion and send everything else to the debt. **Sofia:** And the cheaper loan from the first lesson, at about 37% instead of 45.9%? **Alex Tutor:** It can cut the interest, but only if the card stays closed afterwards. Otherwise the family ends up with both. Check the current offers and your own situation; this is education, not personal advice. > **Exercise:** Sam asks: "Should we stop saving 1,000 a month and put it on the card instead?" The card charges 3.2% a month (about 45.9% a year), and the cushion holds about 2,000 UAH. Answer in 2–3 sentences, with numbers. ## Sam's plan **Sam:** OK. Write us the plan: which way, what happens each month, and what we do if something breaks in the middle. **Alex Tutor:** Numbers from the tables, a choice with its price, and the rules that keep the card from filling up again. **Sofia:** A short table again, then a few lines. **Alex Tutor:** Yes. Something both of them can follow for fourteen months. > **Exercise:** Write Sam's plan out of debt. > **Key ideas** > > - List every debt with its balance, rate and required payment: Sam owes **66,050 UAH**, and only the card (52,800 at 3.2% a month) charges interest. > - Both methods pay all required payments and roll a finished debt's payment into the next. The **avalanche** sends the extra to the highest rate, the **snowball** to the smallest balance. > - With 6,000 a month, both end in **December 2027**. Avalanche interest: 15,016.51; snowball: 15,409.07, **392.56** more for a washing machine cleared one month sooner. > - The payment size sets the date; the order sets the interest on the way. Prepaying a 0% installment buys nothing but a quick win. > - Keep a small starter cushion so surprises don't go back on the card; refinance only if the card stays closed. Check current terms: this is education, not personal advice. **Alex Tutor:** That is the module: the real price of credit, the card, "pay in parts", and a way out. Next module: Dana, and how to live on an income that never comes in the same size twice. - Previous lesson: [Buy now, pay later and payday loans](https://productovi.com/courses/personal-finance/installments-and-microloans.md) - Next lesson: [A year, not a month](https://productovi.com/courses/personal-finance/a-year-not-a-month.md) --- Productovi Learning. Free, no sign-up needed to read.