Adjust Text Size

Dave Ramsey is Bad at Math

Written by Nickel - 692 Comments

See also: Dave Ramsey is Good at Psychology

If you’re familiar with Dave Ramsey, then you’ve no doubt heard of his ‘snowball’ approach to paying down your debt. In short, Ramsey suggests that you make minimum payments on all but the debt with the lowest balance. Once the low-balance debt is paid off, you add the dollars that had been going there to what you’ve been paying against the next lowest debt. And so on. The idea is to pick up steam in paying down your debts by knocking them out one by one, and piling up the payments that would have gone to each of the paid off debts in order to knock out the next one. Sounds enticing, but is it a good idea?

To my mind, what you should really be doing is paying down the debts with the highest interest rate, regardless of balance. It just makes intuitive sense to pay off the most costly debts first. Once the debt with the highest interest rate is paid off, add those dollars to what you’ve been paying on the debt with the next highest interest rate, and so on. So who’s right?

I was actually inspired to look into this in greater detail by a recent post over at the Wealthy Blogger (Update: That site, and thus the post, have gone missing). In that post, Mike introduces yet another approach. As outlined in The Automatic Millionaire, this approach is based on the ratio of the outstanding balance to the minimum amount due. Divide the latter into the former, and concentrate your payments on the debt with the lowest resulting value. Once that’s paid, add the dollars that had been going there to what you’ve been paying on the debt with the next lowest ratio. Lather, rinse, repeat. Again, sounds like it might be a good idea. So let’s look deeper.

Consider a family with the following debts:

Visa ($7,500 @ 13%, minimum payment = $150/month)
MasterCard ($10,000 @ 19%, minimum payment = $250/month)
Car Loan ($5,000 @ 8%, minimum payment = $275/month)

Note that I essentially picked these values out of thin air.

Now, let’s first consider what happens when you make only the minimum payments month after month:

Visa:
Months to pay in full: 72
Total amount paid: $10,685.54
Total interest paid: $3,185.54

MasterCard:
Months to pay in full: 63
Total amount paid: $15,544.23
Total interest paid: $5,544.23

Car Loan:
Months to pay in full: 20
Total amount paid: $5,310.14
Total interest paid: $310.14

So it would take a grand total of 72 months and $31,539.91 to pay off the initial $22,500 in debt. Not too good.

Now let’s assume our hypothetical couple can actually afford to pay $1,000 per month toward their debts, rather than just making the minimum payments. What’s the best way to allocate these dollars? According to Ramsey, they should attack the car loan first, since it has the lowest balance. In other words, they’ll be paying $150/month toward their Visa bill, $250/month toward their MasterCard, and the balance ($600/month) toward the car loan. Using this approach, the car loan gets paid as follows:

Car Loan:
Months to pay in full: 9
Total amount paid: $5,126.70
Total interest paid: $126.70

At that point, the next highest balance is the Visa, so they add the $600/month from the car loan to the $150/month they already been paying, and they finish off the Visa.

Visa:
Months to pay in full: 19
Total amount paid: $8,477.38
Total interest paid: $977.38

And from this point on, the entire $1,000 gets poured into the MasterCard until it’s gone.

MasterCard:
Months to pay in full: 27
Total amount paid: $13,013.74
Total interest paid: $3,013.74

So it’s all done in 27 months at a cost of $26,617.82. That’s a net savings of 45 months and $4,922.09 in interest payments. Not too shabby. But could they do better?

Let’s look at what would happen if they hit the highest interest rate first. In this case, they’d attack the MasterCard, Visa, and car loan, in that order. The result? The MasterCard ends up as follows:

MasterCard:
Months to pay in full: 20
Total amount paid: $11,572.27
Total interest paid: $1,572.27

Coincidentally, due to the lower initial balance, the car loan ends up getting paid off during that same month, even thought they’ve only been paying the minimum amount each month.

Car Loan:
Months to pay in full: 20
Total amount paid: $5,310.14
Total interest paid: $310.14

So now the whole ball of wax gets applied to the Visa, wiping it out as follows.

Visa:
Months to pay in full: 26
Total amount paid: $9,093.73
Total interest paid: $1,593.73

So they’re out of debt in 26 months at a total cost of $25,976.14. That’s a month sooner, and they’ve saved an additional $641.68.

What about the approach advocated in The Automatic Millionaire? In this case, the car loan has the lowest initial ratio (and it turns out that it remains lower until it’s paid in full). Thus, as with Ramsey’s approach, our hypothetical couple starts out hitting the car loan the hardest, at $600/month.

Car Loan:
Months to pay in full: 9
Total amount paid: $5,126.70
Total interest paid: $126.70

At that point, the MasterCard has the lowest ratio (and it remains lower than the Visa until it’s paid off). So they switch to paying $850/month on their MasterCard and continue paying the minimum on their Visa.

MasterCard:
Months to pay in full: 21
Total amount paid: $12,052.55
Total interest paid: $2,052.55

And now it’s time to kill off the Visa.

Visa:
Months to pay in full: 27
Total amount paid: $9,114.65
Total interest paid: $1,614.65

Thus, in this case, the more convoluted, ratio-based approach takes the same length of time as Ramsey’s approach, although the remaining payments in that final month are slightly lower, bringing the total to $26,293.90. This is a savings over Ramsey’s approach of $323.92, owing to the fact that the vagaries of the numbers that I picked to start with resulted in the high-interest MasterCard getting attacked before the Visa.

The bottom line…

Snowball: 27 months; $26,617.82
High interest first: 26 months; $25,976.14
Automatic: 27 months; $26,293.90

If you work through the math, the best you can hope to do (in this specific case, as well as in any other) is to attack the highest interest rates first. In some cases, Ramsey’s approach will equal this approach (if lowest balances are on highest rate debts then the two approaches are the same), but it will never exceed it. Similarly, the approach advocated in The Automatic Millionaire will, in some cases, equal the performance of the high-rate approach – but only if the ratios work out such that the highest rate debts get paid first. But, like the ‘debt snowball,’ this approach will never beat the high-rate strategy.

With regard to Ramsey’s approach vs. the Automatic approach, the relative performance for any given scenario will depend on the numbers. In some cases, Ramsey’s approach will do better, in others it won’t.

I should note here that, although the numerical differences in this particular example aren’t that huge, they can work out to be pretty sizable depending on the amount of debt involved and the structuring of the interest rates.

This isn’t to say that an approach such as Ramsey’s isn’t worthwhile. For example, under Ramsey’s scheme, the first debt gets knocked out very quickly, and some people may need that psychological boost to keep at it. In contrast, it took twenty months to knock out the first debt under the high-rate scenario, although two debts (MasterCard and car loan) ended up getting knocked out that same month.

But for people with sufficient self-control, you can do better by paying off debts from highest to lowest interest rate. Then again, maybe people with self control don’t get into debt in the first place…

Published on May 9th, 2005
Modified on June 23rd, 2011 - 692 Comments
Filed under: Credit Cards,Debt Reduction

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Related articles...

Was this article useful? Please sign up to receive our content via e-mail:

You will receive only the daily updates, and can unsubscribe at anytime.

Comments (scroll down to add your own):

  1. WOW!! fess up, you are Donald Trump…Right?
    what in the world are you doing in the middle of the day wasteing your precious time commenting on Dave Ramsey’s technique while you could be out on your boat fishing? You could be counting your blessings too! You are looking at this site because you too are in debt and need a way out… otherwise with you’re success you would not be wasting your time on us low lives trying to make it.
    I have to smile at people like you! you can say whatever you like.. but you are here reading for a reason. It’s not to help with better ideas because you obviously don’t have any.

    Comment by Anonymous — Jun 9th 2011 @ 2:07 pm
  2. Cat Got Your Tongue?
    give me a break!!!!!!!!!!!!!!

    Comment by Anonymous — Jun 9th 2011 @ 2:14 pm
  3. I don’t waste my money on boats, but thanks for the suggestion. They don’t do it for me. Have you ever heard of a lunch break?

    Comment by Anonymous — Jun 9th 2011 @ 2:15 pm
  4. A critical responce is never helpful in my opinion.. if someone has a comment they should try to offer a solution as well. It’s hard to believe that someone so successful spends their time looking up DR online.
    Also, in an effort to be supportive of people needing guidance COMMON SENSE has to play a roll. People like the previous commenter forgets that one must use common sense to prevail through a tough finaical delima.
    No doubt there are cheaper ways to get to the same conclusion, but this way is certainly offered as an option… People are free to decide which way will work best for their own situation.
    Being negative and boasting about how rich you have become is not a bit helpful for some who are looking for new ideas. In conclusion, success is not measured by how much you have anyway. What kind of life must one have, if they are happy and secure and still want spend their valuable time being ugly and negative to others. No wife or kids I suspect, or their days would be filled with family and contemptment.
    At lunch, I would eat 🙂

    Comment by Anonymous — Jun 10th 2011 @ 1:05 pm
  5. Sorry! in the family portion of my responce I meant to say “content”… not comtempt…
    I am so very happy you are rich and want you to concentrate on your own happiness and bathe in your money.. 🙂 really I do

    Comment by Anonymous — Jun 10th 2011 @ 2:29 pm
  6. Wow, who is being critical now. Where did I say I only wanted to concentrate on my own happiness or that I roll around in $100 bills? I think you are digging a little deeper into something that doesn’t really matter. All I said was I was debt free and that being out of debt allows me to save money and not be concerned about gas/food prices, yet you spun that into me being Donald Trump, having a boat and you thinking I have no family and I don’t manage to eat lunch and surf the web at the same time? I guess it is pointless to discuss how much money we donate to charity or does that cause you to go on another rant? Common sense went out the door in the 90’s when people had to have it now and forgot to learn to save for things. Maybe people read/follow Dave Ramsey to learn how to get common sense back.

    Comment by Anonymous — Jun 10th 2011 @ 2:45 pm
  7. The author is correct about paying off debts with high interest rates firs, but herein lies the problem with that concept… most people are very short sighted and have to be accomplishing goals immediately, or will not follow through with them. So the idea behind Dave Ramsey’s approach is completley on a psychological level, not neccisarily common sense.

    Me personally, I would pick the high interest rate loans first, as the author stated. But again, a lot of people are very short sighted and need to feel that monthly accomplishment to stay on top.

    In short, I agree with the author of this post and Dave Ramsey. As far as which technique is best, it is subjective. It all depends on the individual.

    Comment by Anonymous — Jun 25th 2011 @ 9:30 pm
  8. I agree! do what works best for you… nine times out of ten, people will do what they think will end the torment.
    🙂
    I really don’t understand the oposision to dave ramsey’s plan,,, if you have proven that you know better it would be nice to share with the ones who have not.
    In any case, if one is so successful, what in the world would someone spend time here? a dead giveaway that the success is not what is noted.

    Comment by Anonymous — Jun 25th 2011 @ 9:41 pm
  9. I was a Dave Ramsey Endorsed Local Provider (ELP) for 6 years. I felt sleazy being involved with this organization, because they put on a ‘Christian’ front, yet demand big bucks each month from ELPs in return for dave’s “endorsement”. Wouldn’t be so bad if they disclosed the cash for endorsement deal, but instead they give the impression ELPs are ‘chosen’ based on merit. It’s nothing more than a slick, profitable marketing scheme & also gets dave out of having to answer an intelligent question on the air. He just throws out the ‘you should call your ELP’ (cha-ching!) on that one… Approx 40% of my monthly fee went directly to some staff person with whom the only contact I had was a perky voicemail every 90 days..

    Comment by Anonymous — Jul 11th 2011 @ 6:07 pm
  10. Dave never claims to be a Financial Expert, thus he always give generic answers on what to invest in regarding mutual funds. He has never pimped a specific company, unlike Clark Howard, who pimps USAA and Vanguard. Two great companies, but still, Dave delegates to his ELPs who can give more in depth answers than 2 minutes on the phone. What does being Christian and making money have to be a bad thing? Do you think Christians shouldn’t be millionaires? You obviously chose to get out of being an ELP.

    Comment by Anonymous — Jul 11th 2011 @ 7:32 pm
  11. Actually Dave does clam to be a financial expert, which is why he\\\’s written all those books on Finance. He does NOT ENDORSE any funds, but tell the buyer the general guidlines of how to pick fund (so that you will lean something). And Personal Finance is Personal…picking funds is based on individual needs…and your right in dept answer take longer than 2 minutes

    Comment by Anonymous — Jul 11th 2011 @ 11:00 pm
  12. OK, I will clarify when I say “expert”, Dave doesn’t have a bunch of letters behind his name like CFP, CFA, CPA. Dave has a ton of knowlege, but he admits he is not a tax expert or an attorney when complicated questions come up. That was my main point.

    Comment by Anonymous — Jul 12th 2011 @ 9:42 am
  13. The smallest loan first approach worked for us. By the end of 2 months we paid off our first loan. We were ecstatic. By the end of 6 months we paid off 3 more loans. By the end of a year we had paid off 6 loans. We tried paying off the largest interest loan first, but it was so large it would take us over a year to pay off. We would fall into our old routine after a few months and be in the same financial situation.

    We paid off $15000 of debt listening to Ramsey. We struggled for four years prior to get debt free with no success. Since becoming debt free we have saved $15000 in savings. Talk about a big change in a four year period. The highest interest loan first approach would have only saved us $600 in interest and paid off in 23 months instead of the 24 months that it did take us. The psychology approach definitely helped us.

    Comment by Anonymous — Aug 22nd 2011 @ 3:52 pm
  14. Personally I don’t see the point of this post, because if your read the book, or listened to the show you have already heard Dave address. He agrees with the math issue, but people are driven more by felling than intellect, which is why we ended up in debt to start with. So the debt snowball is a way to feed the feeling, and change the behavior so that you can gain some momentum, in paying off debt. You are more likely to sick to a plan you see working than one you don’t. If you don’t like Dave’s plan you can always stick to your own.

    Comment by Anonymous — Aug 22nd 2011 @ 4:05 pm
  15. You obviously haven’t tried the plan nor read the book completely. If you had, you would know that Dave Ramsey doesn’t take this approach as the fastest, most money saving approach. He has people tackle the smallest debt first because it is an accomplishment, “quick wins”. Paying off those smaller debts are quicker and easier than the bigger ones and it fires people up and they are more likely to continue on to the next and bigger debt.

    Comment by Anonymous — Sep 2nd 2011 @ 1:42 pm
  16. Can we be constructive here? The approach taken really has to fit the person and if the they need a quick payoff so be it. I like the lower total payout. What would be nice is for someone to develop a site that you could enter your loan information in to help determine the best approach for you. Howard Dayton has some of this and that is the only place I have found it. There are as many ways to attach this as there are to get into it. Dave offers a way out. Many need to build that hope. once you have it look at all the possible ways. balance transfers can be a good thing if used correctly. Plan Plan and get advise. I am using the highest interest direction until I find my next better step. You have to maintain a watch.

    Comment by Anonymous — Sep 17th 2011 @ 4:00 pm
  17. I don’t think you “picked these values out of thin air” at all. I believe it was intentional to put the highest debt with the highest interest rate to prove a point.

    However, mathematically, of course what you’re saying makes sense. But the “snowball” method isn’t math, it’s psychology. And it’s psychology that usually gets people into debt in the first place. If they could do math, they wouldn’t be where they are. The tackling and resolving of a small debt appeals to their mind, they can then move onto the bigger ones. This obviously isn’t the approach other financial advisors, those with self-control, and accounting whiz-kids should take.

    Comment by Anonymous — Dec 20th 2011 @ 1:44 pm
  18. It’s amazing how much emotion and anger Dave Ramsey’s name causes. Yes, his “math” is often not the quickest way out of debt. And yes his method ignores math by definition. But I’d rather spend a few extra bucks on a method that works best for me to get out of debt than to line everything up by interest rate and drop the ball halfway into it. His way is the only way for some people – not everyone. Poor Dave 🙂

    Comment by Anonymous — Dec 26th 2011 @ 10:41 pm
  19. Dave Ramsey isn’t bad at math. He states repeatedly in his books and materials that the QUICKEST way to pay down a debt is to attack the one with the highest interest rate first. This will often pay off the debt a month or two faster.

    However, the most EFFECTIVE way to pay off debts that he has discovered while working with PEOPLE is to attack the smallest debt first. Paying off a debt by sending that last check does something mentally for a person in debt; it gives them hope. Debt repayment can be a long process, and hope is required for many people so they don’t get bogged down and quit in the middle.

    Dave’s not bad at math. He’s good at PEOPLE. Did the author even read the book or take the course where Dave explained the difference between the two?

    Comment by Anonymous — Dec 29th 2011 @ 11:48 am
  20. This article is how I came across this blog actually.

    I think with all these plans, there is no one size fits all. There are elements of Dave’s plan that I live by and reading The Total Money Makeover literally changed my life, but it didn’t truly change it for the better until I realized I should take the parts I needed and leave the rest at the door. Adaptation was the key to success for me.

    Comment by Anonymous — Jan 27th 2012 @ 1:05 am
  21. That quote by Dave Ramsey saying if we were doing math, we wouldn’t be in debt is a ridiculous statement. Debt is a reality to getting somewhere in this world. I can do math fine, I still had to take out student loans because I couldnt afford them, I still had to get a car loan because I didnt have the money upfront, and I still accrued some CC debt because I dedicated my time to my studies in my senior year of undergrad school. Now, that quote may ring true for someone who can’t stop with conspicuous consumption, spending money hand over fist on things they don’t need. But I have *never* had a problem with my spending, always pay off my debts, well ahead of the terms on the loan, and prefer to do it the way that makes mathematically the most sense. I’m not going to pay off a student loan that has a (TAX-DEDUCTIBLE!) interest rate of 2.1% over a CC that has 17.99% interest rate. That’s just mismanaging your money if you ask me.

    Comment by Anonymous — Feb 14th 2012 @ 9:18 pm
  22. I agree with those that believe everyone has their own philosophy of what works well for themselves. Some are big on the math, others just want to be rid of the debt no matter the interest rate or tax deduction, knocking them out low balance first will work. What I like about Dave’s philosophy is the human side of it – most will do what feels good, not what’s rational. Paying low balances first and generating some quick successes does fire you up and helps ensure you’ll keep at it.
    Enjoyed this article Nickel.

    Comment by Anonymous — Apr 26th 2012 @ 10:31 pm
  23. hi dave read your book-thought it was great- got a question–i am 74 years old and good health, my wife is 68 and we have a debt at 4% on our house of $95,000 . it is worth about $250.000 and we also have a $100.000 rental house that is paid off. we have no other debt and we have about $150.000 cash that is not doing anything. we have about $3000 income and can live on less —do we take some of our cash and pay off the house, i worry about the economy and the value of the dollar —please advise thank you bud & myrtle roberts

    Comment by Anonymous — Jun 6th 2012 @ 1:44 pm
  24. Bud, do you plan on keeping the rental house? You could sell it and pay off your main house. I guess it depend on if the rental house is making you more than 4%, but you would get a 4% return on your $150K, by paying off your house. You would still have 60K that is earning no interest. I would pay off your house if it makes you feel better.

    Comment by Anonymous — Jun 6th 2012 @ 1:52 pm
  25. Nick, debt is not a reality. There are many people that buy cars with cash and have rented while saving money to buy a house or put a large downpayment on a house. The only thing you probably should go into debt for is a house, but that doesn’t mean you need to buy the biggest house you can afford. I would say you should have a payment that is more like 15% of your income and not 25%. That gives more room to save for emergencies.

    Comment by Anonymous — Jun 6th 2012 @ 1:55 pm
  26. This is moderately interesting, but because you picked arbitrary values on the loans, you can make this work any way you want.

    I think it would be more interesting to set each debt to $10K, vary the interest rates realistically (which you did), and THEN look at the differences.

    My two cents!

    Comment by Anonymous — Jun 18th 2012 @ 4:54 pm
  27. Yes, while I agree that there optimal scheme that will net the least amount of dollars to retire the debt, I think for average Americans in debt The Ramsey approach is probably best for two reason:
    1) They see results earlier and as you mentioned the psychological aspect of that is huge and is likely to keep them going in the right direction rather than getting discouraged and
    2) It is simple and easy to understand.

    Great information offered here. Thanks for your analysis.

    Comment by Anonymous — Jul 13th 2012 @ 2:51 pm
  28. WOW – it took me a really long time to read all these comments! Interesting perspectives. Hey – whatever works for you – just do it. Different strokes for different folks. All I can say is that I tried (for years) Nick’s approach – paying off my undergrad loans, wife’s law school, financing our kids’ college funds etc and we were just barely staying above all of it – and we made pretty good money. When our youngest graduated from college with several majors and having studied and travelled abroad and having obtained his private pilot’s license (sooooooooooo not cheap – which we also financed) we finally thought it was time for us to pay off our house and fully fund our retirement. Ramsey’s plan got us to do that. Don’t ask me why. We weren’t doing badly before then, but somehow those “baby” steps – even the ones we could skip – gave us a perspective we’d never really had before. And frankly, it was the first time we just truly went without any credit cards – I love that.

    So – do whatever works for you and best of luck. But for those of you who call Ramsey fans ignorant, lower class etc – you’re just deadass wrong about that.

    Comment by Anonymous — Nov 29th 2012 @ 10:11 pm
  29. dave gives his ‘listeners’ (koolaid drinking sheep) the impression that his insurance & investment “Endorsed Local Providers” are thoroughly vetted & screened to make sure they have ‘the heart of a teacher’. I was an insurance ELP for years & I can tell you there was only 1 criteria: Will you, the ELP, pay dave $1k/mo. in return for his ‘endorsement’?
    So all sorts of scam artists get to be ELPs, simply because they agree to pay dave big $$ in return for him selling out his naive listeners..
    If I run for office & pay you to vote for me, that’s a crime. If, as an insurance agent, I pay you to buy a policy from me, that’s fraud. If some company pays some other entity to endorse it’s products – & doesn’t disclose the payment – that’s sleazy.
    But if dave takes my $$ in return for ‘endorsing’ me, it’s all good?

    Comment by Anonymous — Feb 13th 2013 @ 4:39 pm
  30. When someone writes an article he/she retains the idea of a user in his/her brain that how a user can know
    it. So that’s why this post is perfect. Thanks!

    Comment by Anonymous — Apr 25th 2013 @ 5:46 am
  31. Hello, this weekend is nice for me, because this occasion i am reading this
    fantastic educational paragraph here at my
    home.

    Comment by Anonymous — Apr 25th 2013 @ 11:01 am
  32. Hi there fantastic blog! Does running a blog similar to this require a large amount of
    work? I’ve virtually no expertise in programming however I was hoping to start my own blog soon. Anyways, should you have any ideas or techniques for new blog owners please share. I understand this is off subject however I simply had to ask. Thanks!

    Comment by Anonymous — May 14th 2013 @ 11:16 pm
  33. Link exchange is nothing else but it is just placing
    the other person’s blog link on your page at proper place and other person will also do similar in support of you.

    Comment by Anonymous — Jun 1st 2013 @ 11:09 am
  34. Hi! I could have sworn I’ve visited this website before but after going through a few of the posts I realized it’s new to me.
    Nonetheless, I’m certainly happy I came across it and I’ll be bookmarking it and checking back frequently!

    Comment by Anonymous — Jun 1st 2013 @ 11:13 am
  35. May I simply say what a relief to find somebody who actually knows
    what they’re talking about on the net. You actually realize how to bring an issue to light and make it important. More and more people really need to read this and understand this side of the story. It’s surprising you aren’t more popular since you surely have the gift.

    Comment by Anonymous — Jul 7th 2013 @ 7:48 am
  36. This post has got me thinking, the analysis was excellent. Although I myself don’t have any debt a lot of people do ask me for advice, I’ll certainly be sending them this post. Thanks for sharing.

    Comment by Anonymous — Jan 6th 2014 @ 7:31 am
  37. I’ve been doing the debt snowball for 18 months. I’ve paid off over 30k. I didn’t have 1000 to throw at my first of many debts. I did have 50 to 100 to throw at smaller debts. Your scenario does not take in consideration of many smaller debts that gives you the incentive to pay off the larger debts with gazelle like intensity. You need some quick wins to free up the cash to throw at higher interest payments first. If I only threw the 50 to 100 at my highest interest debt it would have taken me a while to build momentum. Soon after I paid off my first few debts that’s when all I had were higher interest rate loans. I had 20k in medical debts with several doctors, hospitals, and collection agencies. Now that I don’t get nickel and dimed to death with smaller payments on smaller amounts I can send 1000 do my higher interest debts. I will be debt free within a year from now.

    The fact is that which ever method you use is better than being in debt forever. Make a plan and stick to it. Maybe it is a hybrid of paying off smaller debt first to free up the extra funds then switch gears and work on paying off high interest rates. You may have to pay a little extra and a little longer but use that as a reminder, don’t go into debt any more.

    Comment by Anonymous — May 12th 2014 @ 8:52 pm
  38. Divide the latter into the former, and concentrate your payments on the debt with the lowest resulting value. Once thatâ??s paid, add the dollars that had been going there to what youâ??ve been paying on the debt with the next lowest ratio. Lather, rinse, repeat.

    Comment by Anonymous — Jun 27th 2014 @ 8:08 am
  39. I think debt snowballing is a great tool, but I think a debt consolidation followed by paying the same amount you were paying with all your credit card payments will get you debt free the soonest plus you’ll pay the least amount of interest. Paying down fixed debt is much more effective than revolving debt.

    Comment by Anonymous — Aug 6th 2014 @ 12:57 pm
  40. I believe you have an error in your almost 10 year old post.

    You said:
    “As outlined in The Automatic Millionaire, this approach is based on the ratio of the outstanding balance to the minimum amount due. Divide the latter into the former, and concentrate your payments on the debt with the lowest resulting value. Once that’s paid, add the dollars that had been going there to what you’ve been paying on the debt with the next lowest ratio.”

    And then later you said:
    “… the car loan has the lowest initial ratio (and it turns out that it remains lower until it’s paid in full).”

    But no matter how I divide (latter) $275 into (former) $5,000 I do not get the lowest ratio.

    Car: 275/5,000 = .055 (highest)
    Visa: 150/7,500 = .02 (lowest)
    MC: 250/10,000 = .025

    Is this ironic, that you have had a post up for 10 years titled “Dave Ramsey is Bad at Math” and you have math errors in it? My guess is you either mixed up the words former and latter or you meant to say “highest resulting value”.

    Please correct me if I’m wrong here.

    Comment by Anonymous — Jan 15th 2015 @ 1:09 pm
  41. Ten years after the fact, this article is still being read. (I just now read it). I have not read all the comments, so this might have been covered. Dave Ramsey is NOT bad at math. He tells people in the book, on the radio and everywhere else, the high interest way will save you a nominal amount of money. He is all about getting you out of debt – period. If you do not have a program that works for YOU, you will not become debt free. The snowball works because it keeps you engaged. Nice article. Thanks.

    Comment by Anonymous — Apr 2nd 2015 @ 11:27 am
  42. josh,
    you need to learn basic math before correcting others. although I don’t agree with this article and am a dave follower, your comments are incorrect. you said:

    “But no matter how I divide (latter) $275 into (former) $5,000 I do not get the lowest ratio.

    Car: 275/5,000 = .055 (highest)
    Visa: 150/7,500 = .02 (lowest)
    MC: 250/10,000 = .025”

    dividing the 275 into 5000 looks like this:
    5000/275 = 18.18 (with the others being 50 and 40)

    Comment by Anonymous — Jun 4th 2015 @ 9:52 am

Leave a comment

Disclaimer...
Because rates and offers from advertisers shown on this website change frequently, please visit referenced sites for current information. This website may be compensated by companies mentioned through advertising, affiliate programs or otherwise.