Should I prioritize paying off my smallest debt first or the one with the highest interest?<\/p>\n
When you\u2019re staring down a mountain of debt<\/a>, it\u2019s only natural to want to get to flat land as quickly as possible. You figure, why not throw everything you have financially at the debt with the highest interest rate? Then all you have to do is ride the ensuing avalanche down to the ground of financial security<\/a>.<\/p>\n<\/p>\n It sure sounds good. <\/p>\n For You: 4 Secrets of the Truly Wealthy, According To Dave Ramsey<\/a><\/p>\n Learn More: 3 Advanced Investing Moves Experts Use to Minimize Taxes and Help Boost Returns<\/a> <\/p>\n But for Dave Ramsey<\/a>, bestselling author and trusted financial advisor to millions, that attitude could be a trap \u2014 and a reason you\u2019re staying in debt longer than necessary. <\/p>\n According to Ramsey, the smartest way out isn\u2019t the one that saves the most on interest. It\u2019s the one that builds momentum fast enough to keep you going. And that\u2019s the Debt Snowball Method<\/a> \u2014 not the avalanche.<\/p>\n On the surface, the debt snowball method runs counter to most conventional finance advice, which argues that you should pay off the debt with the highest interest rate first, regardless of balance. That way, more of your payments go toward the principal, and you pay less in interest over time. From a strictly mathematical standpoint, it is the most efficient approach.<\/p>\n But Ramsey argues that this isn\u2019t a math problem \u2014 it\u2019s a behavior problem. And for most people, leading with logic instead of motivation is what gets them stuck.<\/p>\n \u201cYou should always start with the smallest debt first, regardless of the interest rate,\u201d Ramsey told GOBankingRates. \u201cThe Debt Snowball Method works because personal finance is 80% behavior<\/a> and only 20% head knowledge.\u201d<\/p>\n Read Next: I Made $10,000 Using One of Dave Ramsey\u2019s Best Passive Income Ideas<\/a><\/p>\n The snowball method flips the conventional logic on its head. You list your debts from smallest balance to largest, and make only the minimum payments on all but the very smallest one. That\u2019s the one you attack first, aggressively paying it off. Once it\u2019s paid off, you roll the money that was going towards it into the next smallest debt, building momentum as you go.<\/p>\n As each smaller debt disappears, you gain confidence, motivation \u2014 and a larger payment to put toward the next debt. That emotional traction is what Ramsey says most people are missing.<\/p>\n Ramsey stands by the snowball method because he understands that, for better or worse, emotions and ingrained behaviors influence how people handle money. And people need to feel wins early and often to stay motivated, especially when they\u2019re overwhelmed by debt. <\/p>\n Story Continues <\/p>\n \u201cKnocking out that first debt gives you a quick win and builds momentum,\u201d Ramsey said. \u201cOnce you see progress, you\u2019re fired up to keep going. If math was the only issue, most people wouldn\u2019t be in debt to begin with \u2014 it\u2019s about changing habits and attacking debt<\/a> with intensity.\u201d<\/p>\n That\u2019s why he cautions against getting too caught up in interest rates. While avalanche math might save you money in the long term, the long term is hard to stick with if you don\u2019t see progress.<\/p>\n \u201cThe snowball method works because it gives you hope,\u201d he said. \u201cWhen you pay off a small debt, you feel like you can actually win \u2014 and hope is what keeps you in the game. That early success creates emotional fuel.\u201d<\/p>\n According to Ramsey, the avalanche method<\/a>, though logical, doesn\u2019t work for most people because it takes too long to feel rewarding. That lack of progress kills people\u2019s motivation.<\/p>\n \u201cThat\u2019s the problem with the avalanche \u2014 it\u2019s slow, and slow kills motivation,\u201d he said. \u201cIt is NOT actually mathematically correct if you incorporate \u2018probability of completion\u2019 in your math formula.\u201d<\/p>\n The way he sees it, the snowball method resolves one of his core issues with the avalanche method, which he considers a slow-burning motivation-killer. The most efficient plan on paper doesn\u2019t matter if you don\u2019t finish it. And most people don\u2019t. <\/p>\n \u201cHardly anyone finishes the avalanche, and millions have completed the Debt Snowball,\u201d he said. \u201cYou fix a behavior-based problem with a behavior-based solution. Paying off debt<\/a> is about momentum, not math.\u201d<\/p>\n While the avalanche method might save more money on interest<\/a>, it often fails where it matters most: keeping people motivated. That\u2019s why Ramsey stands by the snowball approach.<\/p>\n \u201cI always recommend the Debt Snowball Method because most people need those small victories to stay engaged,\u201d he said. \u201cIf you try to lead with math instead of motivation, you risk burning out before you see real progress.\u201d<\/p>\n This article is part of GOBankingRates\u2019 Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Got a question of your own? You could win $500 just for asking \u2014 learn more at GOBankingRates.com<\/a>.<\/p>\n Laura Bogart<\/a> contributed to the reporting for this article.<\/p>\n More From GoBankingRates<\/p>\n This article originally appeared on GOBankingRates.com<\/a>: Still Paying Off Debt the \u2018Smart\u2019 Way? Dave Ramsey Says That\u2019s Exactly Why You\u2019re Stuck<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Should I prioritize paying off my smallest debt first or the one with the highest interest? 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