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Debt Avalanche Setup

Organize debt repayment by interest rate to prioritize the highest-cost debt first.

Outcome

What Debt Avalanche Setup gets you.

By the end of this upgrade you will have every debt sorted from highest to lowest APR with a specific extra-payment amount directed to the highest-rate debt each month.

What you need
  • Completed debt inventory with balances, APRs, and minimum payments
  • Current monthly income and expense totals
  • Bank account or app to automate payments
Step by step

Run the upgrade.

  1. 01

    Verify balances and APRs are current

    Confirm every balance, APR, and minimum payment on your debt list is up to date by checking the latest statement for each account.

  2. 02

    Sort debts highest APR to lowest

    Reorder your debt list purely by interest rate, from the highest APR at the top to the lowest at the bottom, ignoring balance size.

  3. 03

    Protect minimum payments on every debt

    Confirm the minimum payment for every debt is scheduled or automated so no account risks a late fee or penalty rate while you focus extra payments.

  4. 04

    Determine extra monthly payoff capacity

    Subtract total monthly expenses and all minimum debt payments from monthly income to find how much extra you can put toward debt.

    Extra payoff capacity = monthly income - all fixed expenses - sum of all minimum payments

  5. 05

    Direct all extra payment to the top debt

    Apply the full extra amount to the highest-APR debt on your list each month, beyond its minimum, while paying only minimums elsewhere.

  6. 06

    Roll the payment forward when a debt is paid off

    Once the top debt reaches zero, move its former minimum plus the extra payment amount to the next-highest-APR debt.

  7. 07

    Set a monthly review cadence

    Pick a recurring date each month to confirm payments posted correctly and recheck the sorted order in case a rate changed.

Done when
  • All debts are sorted highest to lowest APR
  • Every debt has an automated or scheduled minimum payment
  • A specific extra payment amount is calculated and applied to the top debt
  • A process exists for rolling payments to the next debt once one is paid off
Keep it working

Monthly

  • Confirm the extra payment posted to the correct (highest-APR) debt
  • Re-sort the list if any APR changes
  • Recalculate extra payoff capacity after income or expense changes
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