photo credit: SqueakyMarmot
I’ve heard a lot of discussion about Dave Ramsey’s Debt Snowball recently, and why his method is mathematically inferior to other methods of reducing debt. Ramsey says he realizes that sometimes his way isn’t the best mathematical way to get out of debt, but that it still IS, in his opinion, the best way to get out of debt. Below is a quick explanation from his radio show on July 7th about why the Debt Snowball works.
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I know this doesn’t do anything to end the debate, but it does help to explain Ramsey’s thinking behind the debt snowball. And you have to admit, his methods HAVE worked for a lot of people.
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Thanks for the clip Pete!
From everything I have seen I would choose the Dave Ramsey follower if you pitted two people with the exact same debt and income to get out of debt quicker than any other method. Obviously my opinion, but the snowball’s simplicity and focus on behavior change is great.
I know some people can’t connect with it and that’s fine, but that is why they call it personal finance not a one size fits all financial planning.
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Like Dave says, that’s why they call it finance. I’ve tried to get out of debt a variety of ways, but the snowball works best for our family because the motivation gained from slicing up a few paid off credit cards early in the process fuels us to keep going.
Ramsey’s plan is what is better psychologically. It gets you a victory over a debt quicker. Remember that his target audience included many, many people that are in financial trouble – they aren’t going to get better rates from the credit card companies, they aren’t smart with money (or they wouldn’t be in trouble) and they need to get the lift that a payoff provides. And Dave admits this on his show.
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I found that with snowballing I have a plan – and it’s easy to stick to. Each month I have been adding extra money that I come into (ebay sales, or freelance design work – income I cannot count on) into the payments also, so I’m a bit ahead of my plan.
It it weren’t for this plan, I’d still feel like a surfer continually being caught in the undertow. I’m happier and the debt is decreasing!
We are BIG Dave Ramsey fans! We no longer pull out the credit cards when purchasing. I use cash for everything or a debit card when necessary. We so keep one credit card on hand if needed – but we have not used it in months! Instead we use those cash envelopes suggested by Dave Ramsey. The “crunchycute” website has a lot to choose from. Get started – it will make a difference!