Why Paying High Interest Debts First Doesn't Work

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[eatnplaytoday]

I paid off my high interest student loan debts first. I hate seeing all the interest build up. Been debt free since October.

[PilotPerkins]

This is so true. After I paid off two of my small debts, I got fired up to use most of my income to pay toward getting rid of all my debt. I even sold my couch, true story. Everything must go.

[Ryan_DeWitt]

It does work if you are disciplined. Running the numbers proves it. Same as eating less works on a diet. It is just that most peoples discipline sucks.

[jamiechang]

I finally understand the reasonings behind the snowball. It's a habit solution! Love this explanation

[raiden]

I think there is another good reason to pay off smaller debts first. Each debt paid off reduces your fixed expenses. The lower your fixed expenses the less risk you will default in the event of economic hardship

[MrWoodyman]

A few days ago I finally paid off my once maxed out credit cards. I did just as Dave advises the lady here. Paid off the smaller credit first and then doubled my payments for the larger one. In total 8 1/2 thousand euros paid off. Once the smaller one was paid off I felt so good. Now I feel AWESOME!!!

[williamnettleton]

One thing that mathematically helps too, is that all the smaller balances once paid off rolls over to add to your snowball. So those cards with hard payments become easier as you pay off the small ones super quick. That's what we saw with me and my wife's debt. This plan works, she needs to do it and trust someone who sees clearer than her.

[dfnt]

The issue with debt avalanche (high interest first) is that the people who have large amounts of high interest loans need immediate gratification. They’re in that debt mess because of that need for instant gratification where they see something they want then they buy it using debt rather than saving for it. So you have to design payment plans that offer the fastest gratification which is debt snowball

[---crnw]

A side point: If you have debt with a ridiculously high interest rate, move that debt to a lower interest rate debt. For example, if you have 10, 000 in credit card debt at 20%, look into a local bank or credit union for a personal loan. See if you can get something at 6 or 7% with a fixed repayment plan (not revolving credit). Pay off the credit card and close the account. *DO NOT OPEN A NEW CREDIT CARD WITH AN INTRODUCTORY RATE!*

[justinpaul]

I'm glad Dave clarifies this advice is about psychology and not about math because I was about to stop listening to him if he was going to argue it mathematically.

[bigpicturethinking]

Mathematically it makes sense. Psychologically Dave’s method makes sense. If this person was able to do what made mathematical sense she wouldn’t even be making this call. The call speaks for itself

[jacquelenebetancourt]

Paid off my credit cards and yesterday paid off my van early! Feeling good. Trying to pay off my $6k student loan before I graduate in 2 yrs. I have 3 kiddos, go to school full time and work.

[naturalchik]

When she said she makes over 6 figures I was done. Girl get off this man's phone line.

[Harperrr.]

I wish i learnt most of these principles about seven years ago. A lot of people have been trapped strongly in the matrix-- Go to school, get a job, and then slave your whole life. Many miss out on life-changing information that could have great effect on their finances. I played with the stock market sometime in 2020, and I was surprised at how well it turned out. I want to put in $90k more into the market. I heard people are making really great returns despite the downturn. Any recommendations?

[CaseyBurnsInvesting]

Amen. Paying high interest debts makes sense mathematically but getting in the debt in the first place was an emotional non math based decision.

The baby steps are designed to work for the masses.

[mytubeeeee]

Dave’s right.. been paying the smallest debt first and I have paid off 3 cc’s already and have 1 left. Knocking off the other 3 one by one felt so great each time.

[MusicloverX]

I paid off my highest interest loans first. It was like ripping off a band aid right away. And to be honest it motivated me more after I got done with the most expensive loan. Got me thinking, “Wow, they will all be easier from here on out!” I would of been so depressed and not as motivated if I went with the snowball method. It worked for me. Paid off my student loans in four and a half years.

[georgievvladimir]

1:52 "If you do the math you will never have the credit card debt" good point.

[tnmingle]

The every dollar app was a gain changer for me and we have been plowing through our debt. Just keeping the budget has given us a pay raise! Assign every dollar!

[joannebogias]

I paid off the smaller amount first, once paid, applied the amount used to pay down on the next debt. For me, eliminating multiple smaller debts was the easiest way to eliminate all my debts. I set up in a spreadsheet to track.