So Cool, the incredible Neville, from Neville’s Financial Blog, was the first to post a comment. Awesome.
A quick rationale behind paying off debt by smallest to largest balance, and not largest to smallest interest rate. It is pretty simple…It gets you motivated. When you see that first small debt gone, and then you see that next debt gone, it motivates you to keep going. I know that the “math” side of the brain says, “pay off the higher percentage first.” And some people will be perfectly capable of getting out of debt this way. But tons and tons will just give up because they don’t see any “progress.” This is less about the “nerdy” part of paying off debt, and more about the “emotional” side of debt repayment. Seeing that first debt, no matter how small, get killed off, is awesome. It motivates you to keep going and going. It’s like getting in shape. If you say to yourself, “I am going to lose 50 pounds by next year,” then you are apt to lose focus, and fail. But, if you say, ” I am going to walk 1 mile today and eat less than x number of calories TODAY,” then you have the real chance of succeeding. I have found, in the last 2 years of focusing on debt reduction, that getting out of debt is far less about the “addition and subtraction” and much, much more about the emotional reaction the mind has to seeing a debt go bye, bye.
Thanks,
ncnblog