Comments on: The Hell With You Dave Ramsey! I’m Paying My Highest Interest Debt First!

By: Flower

Flower — Mon, 13 Apr 2009 20:18:57 +0000

The point is – pay the lowest debt first (the one you can get of fastest)regardless of interest rate, then, rather than spending the “freed up” amount, add it to the next lowest debt. Continue to roll each former payment into your next debt and you’ll be out of debt years sooner. You haven’t had the use of that money anyway so you won’t miss it. Example: if you’re paying a total of $2,000 in debt payments today, then use that entire $2,000 to pay off your debts until you are entirely debt free. Should take 3-5 years to get out credit card debt and another couple of years to get rid of your 30-year mortgage (if you have one). Now invest your $2,000 in mutual funds and you’ll be wealthy in the same amount of time it would have taken to pay off that 30-year mortage.

By: Martin

Martin — Sat, 11 Apr 2009 12:45:38 +0000

You just have to be honest with yourself about what motivates you. If you know that you can be a robot over the many months or years that it will take to pay off your debts, then by all means, do the most mathematically advantageous method by paying the highest interest rate debts first.

Of course, the majority of people who got into significant amounts of credit card debt did so because of their behavior. Even though they understood how math worked, they still went into debt. So the key for most people is motivation and behavior modification, not math.

Quick reward is important to keep up the psychological advantage. For me, it helped a lot that I had one less bill to pay. One less bill is one less check to write (or one less online payment to make). The less checks you *have to* write each month, the more it feels like you are in control.

My mortgage has always been the highest interest rate debt that I have, because any credit card balance I had was on a low interest balance transfer rate. But I went with the Dave Ramsey method and paid the credit cards first. If you miss a payment on your credit cards, the rate will go up to 30% or higher even though it may currently be at a lower rate. With credit cards, every payment reduces your monthly expenses by about 2% of the payment as soon as you make it. With a mortgage, you have to pay the whole thing off before it has any effect on your cash flow.

I tend to think Dave is right for about 90% of people who carry significant balances on their credit cards. Assess your own psychology and behavior patterns, your own debt load, your own income, and make your own decision.

By: Which debt should you pay off first | Beyond Paycheck to Paycheck

Which debt should you pay off first | Beyond Paycheck to Paycheck — Wed, 08 Apr 2009 11:38:25 +0000

[...] two articles whose titles alone, I confess, got me to click on their stories. The first title, The Hell With You Dave Ramsey! I’m Paying My Highest Interest Debt First! was no less shocking then Number One Frugality Tip: Don’t Be a [...]

By: Beyond Paycheck to Paycheck

Beyond Paycheck to Paycheck — Mon, 06 Apr 2009 13:58:52 +0000

Reasonable people can disagree.

For what it’s worth, I’m with you. I buy the importance of momentum and think seeing your success is an important part of continuing to achieve it. Still, I always teach people the right habits right away. I don’t believe that “beginners” should start with the wrong habits solely for motivation/momentum sake.

The truth is, financially speaking, there is a right answer and that is to pay down your highest interest debt first. But, like a previous commenter said, this isn’t strictly finance.

People who go out of their way to listen to folks dispensing PF advice are already somewhat motivated. They are beginning to exit the denial stage. I say “Tell them the best way to do something.”

By: ABCs of Investing

ABCs of Investing — Mon, 06 Apr 2009 03:10:25 +0000

[...] Credit Tool Box tells Dave Ramsey to go to hell. [...]