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Question: Chris in Arizona and his wife are at odds. She wants to pay off the truck first and Chris wants to start with the smallest debt. She thinks paying off the truck will free up more money to attack the other debts. Dave sees how she wants to pay on something with a big interest rate, but in doing so she is overlooking something important to the debt payoff process.
Answer: Her plan isn't working, so you need to try a plan other than you guys' plan. Truthfully, I have a tendency to do what she's doing. My tendency is to be the nerd boy with the calculator. I look at the interest rates and the payment rates and those things. The mistake she's making is the same mistake a lot of people make in the world of finance, and that's thinking that personal finance is about math. It's not. It's about behaviors.
As smart as she is, you guys have been in debt for 18 years. It's not about being smart or intellect. It's about the behaviors of controlling your spending. Right now, you need to control your spending so much to get extra money to throw at the debt. I think that's what matters here.
The beauty of paying off the smallest debt first is that you get to feel traction and you start to believe that your sacrifice is going to pay off. When you knock off that little one, it gives you a little confidence. When you knock off two or three of the debts, you get excited. The more you knock off, the more pumped you get.
After that, here's what happens. The more pumped you get and the more you believe, the deeper you sacrifice because now you believe it's going to work. The deeper you sacrifice, the faster you get out of debt. The faster you do that, the more you have control over your income. If you don't have any payments, you can become wealthy, which is the whole reason for this discussion.
Try it my way for six months, because you tried it her way for 18 years. I admit to her and to you that it's counterintuitive to math nerds. Math is not the problem. We need to have some traction, and we need to have a sense of hope that creates passion, that creates deeper sacrifice, that creates a faster win.
That is why the debt snowball, which is listing your debts smallest to largest, works.