[metmom]

My wife and I got into Dave Ramsey a while back. The one thing we did that I thought didn’t make sense until he explained it - and we did it - was pay off the small debts first, even if they had a low interest rate. And it really does work because it attacks the psychological aspects of this thing.

The key to making that work is to apply those payments to the next biggest debt bill.

When that is paid off, then use the two payments you no longer have but are used to paying and apply if to the third bill.

That way, you pay off the larger ones even faster because you have more cash to pay them off with.

It's a kind of snowball effect.

[sanjuanbob]

We kind of did that on a home mortgage about 25 years ago. We put the principle payment of current month on top off our payment. It was easy for the first 4-5 years and started to become a big house payment. We backed it down to an extra $300 I think, and paid it off way early. Probably should have bought stocks or gold though.

[cuban leaf]

Exactly. But here’s the interesting part: That first loan we paid off was our zero interest car loan. It seemed stupid, but the psychological effect was quite real.

One payment down and applied to the rest. And that made a big difference even though it cost us more than just paying down the higher interest stuff earlier. It’s like going on a diet and watching pounds drop.