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.

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?

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.

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.

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.

The author should understand the intent of the Debt Snowball, before he/she tries to refute it.

If you actually listened to Dave Ramsey for a day or so, or picked up his book, you would realize that he says to pay off the smallest debts first because you will feel like you are actually getting somewhere and be encouraged to keep paying off debts. You actually got it at the end of your article where you said

“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.”

Dave Ramsey has never said, nor does he believe, that you will pay less money in interest charges by paying the smallest debts first. Your claim that he is bad at math is a deliberate lie.

Your defamation of Dave Ramsey as being “bad at math” was a cheap attempt to get views on your article. You are pathetic. YOU HAVE LOST A LOT OF CREDIBILITY WITH THIS NONSENSE.

I’m sure this only restating what’s been said before but, Dave’s audience is a group (myself included) that is not or at least WAS not very logical with money.

So trying to get a group of people that is illogical with money to do advanced math -as in: calculate compounding interest over multiple years – is a hard sale.

Trying to get the same group of people to do simple math – as in: which one of these balances is the smallest – is a much easier sale.

Completely goes along with his “baby steps” principle.

I’ve been away from this blog for a while but just subscribed today. Thanks.

Kirk

He’s reason for attacking the lowest balance first is because it doesn’t take long to knock it out and you get a warm, fuzzy sense of accomplishment. You gain momentum, you start seeing results, and you therefore are encouraged to knock out the next one.

If your highest balance is also the highest interest rate and you try to get that one done first, there’s a chance you become discouraged because it can take years before it is knocked out.

ps: Also I agree with NDCNOON on post#635..

The intent is to WIN.!!

The extra interest I’m paying isn’t enough to worry about. Now if I was paying intetest on 75K, I might worry. But paying off the low balance debt first then the high balance debt is working for me.

DR’s plan is working for me. Only been going for a short time but I have paid off 2 small CC bills that I would not have done before. Now those 2 payments combined with my other CC payment are going to knock out the 3rd card 7 months. Then auto payoffs will be next.

Slowly BUT surely I have working the plan & now I’m beginning to see the light at the end of the tunnel.

Dave’s approach assumes the $650 in extra interest is overshadowed by the lift of paying off 1/3 of your bills. I agree. It may cost a little more, but the intent is to get a win.

We have to feel as though we are always winning to stay motivated to keep doing something. Paying off the smaller debts will secure that feeling within a person/couple which will enable them to gain more motivation and momentum to finish their debt elimination plan.

Ramsey’s snowball approach gives people hope, which inspires them to continue, instead of giving up on the notion of getting out of debt – giving up is what most who focus on the mathematics do.

One person even threw it in the author’s face- “if you had read the book”, etc. Um, how are you going to cop that kind of attitude when you didn’t even read a 1,000 word article before commenting on it?

The article is about the cheapest way to pay off debt; the author concedes that Ramsey’s method is better for motivating people who need results. No need to say that in your comments, then.

I teach at an inner-city college, and my students are often easily discouraged and check out when things get tough. I tried something new this semester–front-loading the class with easy points that otherwise might have been distributed throughout the semester. It won’t make much difference in the end analysis, but when it comes to the quarter or midpoint of the semester and the student knows they’re struggling but sees that that early work is keeping them passing, well… something great happened–the student didn’t check out! That encouragement allowed the student to redouble his/her efforts, and I think I’m going to have the lowest failure rate of my tenure. Sometimes a little psychology goes a long way.

Your mortgage pmt on $138K is, I’m guessing, about $1100 per month and you are taking home probably 50K (from the 70K net) after taxes–really you guys have enough of money for basic expenses, probably 26k after housing expense, as long as you watch your expenses. You could probably even keep the fancy cars but if it were me I’d downsize on them. Money for my family is more important than money for really cool cars, and having cash on hand is more important than a bigger house. No reason you can’t stay in the condo will one child, or even two children who are close to the same age. They can share the bedroom.

Now if you can get a great deal and a great mortgage rate on a larger piece of real estate that might be another issue entirely.

As far as paying with highest vs. lowest rate and “snowballing”, I ran a program that calculated the highest interest rate vs. the lowest one, and for my case ($, the resulting difference was minor as far as total paid and there was only a couple of months difference for the final pay off.

In any case, get started on paying off your consumer debts — no matter the method! Debt IS slavery.