Friday, February 13, 2009

The snow ball effect - A better way of reducing debt

I was once a firm believer that the best way to reduce debt is to pay high interest debt first. In fact it make sense. As you pay high interest debt first the burden of the remaining debt become less heavy and the remaining debt become easier to pay. Until i fell on this article by Dave Ramsey.

This article made me think and I actually think that he has a point there. If you think about it, a small debt is easier to pay and once you have succeeded it gives you courage. It entails an easy financial effort that is easier to make than the effort and sacrifice needed to pay a large debt.

As you have finished paying the smallest debt, then paying the next debt will be less painful and it only require a small additional effort and financial sacrifices. It also would not disrupt your budget .

As a result you would gradually increase your efforts and financial sacrifices painlessly and pay the higher debts.

I do not know about you but i think this guy make sense. What about you? What do you think?

If you have tried the opposite method and it did not work try this one it might work.


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