![]() Once the debt with the highest interest rate is paid off, add those dollars to what you’ve been paying on the debt with the next highest interest rate, and so on. ![]() It just makes intuitive sense to pay off the most costly debts first. To my mind, what you should really be doing is paying down the debts with the highest interest rate, regardless of balance. The idea is to pick up steam in paying down your debts by knocking them out one by one and piling up the payments that would have gone to each of the paid off debts in order to knock out the next one. Once the low-balance debt is paid off, you add the dollars that had been going there to what you’ve been paying against the next lowest debt. Any additional money you have goes to that lowest balance debt. In short, Ramsey suggests that you make minimum payments on all but the debt with the lowest balance. If you’re familiar with Dave Ramsey, then you’ve no doubt heard of his ‘snowball’ approach to paying down your debt. See also: Dave Ramsey is Good at Psychology
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