Dave Ramsey reveals why he’s like paying off small debts first, even if the math suggests otherwise

When it comes to getting out of debt, Dave Ramsey is very clear on the right approach. The finance expert believes in a method called the Debt Snowball method. This method may not be the most mathematically sound, but Ramsey believes it is the best way to go if you want to be a success over the long run.

Here are some details on the debt snowball method, and on why Ramsey said to pay off small debts first. 

The debt snowball method focuses on getting quick wins

Ramsey’s preferred method of debt payoff involves starting with your smallest debt first, regardless of the interest rates on all of the debts that you have. He suggests you pay the minimum on all of your debts, then send as much extra money as you can to the debt with the lowest balance on your list. After that debt is paid off, you roll over all the extra money you were paying toward your smallest debt onto your next smallest debt. 

You’ll build momentum like a snowball growing in size with each rotation when you follow this approach, which he refers to as the Debt Snowball Method.  Unfortunately, it could mean that you end up putting off some of your most expensive debts at the highest interest rate until last if they happen to have large balances.

Despite the fact that the math says you should focus first on debts with higher rates, Ramsey thinks this approach is the best way to go because it allows you to score quick wins. When you get each entire debt paid off in full, you will be excited and motivated to keep going. By contrast, if you have a really large debt at a high rate, it could take you a very long time to pay it off and you may lose motivation during the process and give up entirely on your efforts. 

Should you follow Dave Ramsey’s advice and embrace the debt snowball method?

There is some psychology behind Ramsey’s strategy, and people who have a hard time managing their money may indeed be better off listening to the finance expert. After all, millions of people have gotten out of debt using his method, and while most people know what they should do to improve their finances actually doing it is a whole lot harder and not something everyone manages to pull off.  If you can get some debts zeroed out quickly and that makes you feel like you’re actually achieving something and inspires you to keep going, or even to accelerate your repayment efforts, you could end up in a better place.

At the same time, the snowball method really could save you a considerable amount of money in some circumstances. If you owe thousands on a credit card at a high interest rate or, worse, a payday loan, it would make very little sense to spend weeks or months first trying to pay off a small loan at a very low rate when you’re paying interest at a double-digit rate on the bigger debt  

If you can find other ways to stay motivated, like tracking your progress on a spreadsheet or even adopting quirky approaches like making a paper chain that represents your debt and taking links off it, then you’d absolutely be better starting with the highest-rate loans first.

Only you can decide if this will work for you, though, or if you’re better off following Ramsey’s proven approach that plays on the psychology of money to help you stay the course.  A financial advisor can also help you to evaluate your situation, understand the cost of this option, and decide what works for you. 

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