Getting Fired Up
Dave tells Mike that paying off debts isn't about high interest rate or high balance rate, it's about getting fired up!
QUESTION: Mike asks if he should pay off high interest rate or high balance rate first. Dave says neither, and details the debt snowball.
ANSWER: We have discovered after walking with millions of families is that personal finance is 80% behavior and 20% head knowledge. You need to get ticked off that you knuckle down and get on beans and rice to get out. You need to get mad at your debt. The problem with money is the person in the mirror. If you get him or her under control, you can win.
When you pay off the smallest debt, you get fired up because it creates an emotional momentum and a quick win. Then you take that payment and put it on the second payment. Then when it’s gone, you take the total of those two payments and put it on the third. The more debts you pay off, the more fired up you get and want to keep doing it. That’s the power of the debt snowball.