Sometimes, you just need a win.
If you are trying to get out of debt, a win could be all you need to begin momentum toward paying off all your debt.
KTTH host Dave Ramsey says that conventional wisdom tells us to pay off debt with the highest interest rate first. But this method may actually inhibit your debt pay-down plans.
“The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20 percent head knowledge and 80 percent behavior,” says Ramsey. “You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.
That’s right, prioritizing paying off your smallest most winnable debts could help you gain momentum to tackle the bigger debts. Paying above the minimum on all your debts only dilutes your payoff-power.
Here’s what you do: make a list of all your debts and figure out which ones you can pay off quickly. Tend to that $200 medical bill versus paying double your auto loan payment .
When you start knocking down those easy debts, you might find yourself more confident to ‘win’ those bigger ones.