Why the Smallest Debt First?

Reader Question: I’m new to you and your plan. Why do you want people to pay off the debt with the smallest balance first, instead of the one with the highest interest rate?

Simply put, because personal finance isn’t all about math. Personal finance is only about 20 percent math. The other 80 percent is behavior.   We list debts in the debt snowball in order of the smallest to the largest balance, putting as much as possible toward the smallest while paying the minimum payments on the others.

The reason, as I mentioned earlier, is behavior modification. It helps you see yourself making a dent in your debts. It’s easier to change bad habits when you see quick results from your efforts to eliminate negative behaviors. Paying off the smallest debts first, instead of the debts with the highest interest rates, will give you quick wins that will help keep you motivated. It provides proof that you can succeed and become debt-free!

Dave Ramsey

Dave is the author of The New York Times best-selling book Financial Peace. He is also the host of the nationally syndicated The Dave Ramsey Show, and is a regular guest on television. All of his financial counseling is based on biblical truths. You can hear Dave from 9 a.m. to 11 a.m., weekdays online at www.daveramsey.com. Send your questions toaskdave@daveramsey.com. He resides with his wife Sharon and their three children, Denise, Rachel, and Daniel, in Nashville, Tennessee.

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