In the context of getting out of debt: Is anyone a Dave Ramsey listener here? I've been an avid listener for a few years now. I recommend his podcast to everyone -- not only for the financial advice, but also for the cultural education about what America really is.
my mother listens to him a lot, so i've heard him quite a lot. his advice is good, of course, but i find it interesting that every program is the same thing over and over, like its a reaffirmation mantra that people need to hear in order to successfully not spend the money they don't have, or how to deal with it when they forget they're not supposed to.
I like his debt snowball approach. I don't have a debt problem (and plan to never have, but crises happen). The way I understand it, you pay off your smallest debt by whatever means necessary, make minimum payments on everything else. Then you take what you were paying on that debt, and apply it to the next. Over time you are eliminating debt and applying all the money you spent on the eliminated debt towards the next debt. So you start paying off faster as you go. At least that's how I think the plan works.
The fastest way to pay off debt is to pay off the highest interest rate debt first, then the next highest interest rate debt, then the next highest interest rate debt, etc.
The debt snowball approach isn't the fastest approach, but the theory is that it has a strong psychological impact: By paying off your smallest debts first, you see forward progress more clearly, which motivates and energizes you to keep going.
Another good psychological trick is to have only one credit card. Then, when you get the bill each month, you can clearly see how much you've spent. The single big statement is scarier than having lots of little statements, and leads people to spend less money unnecessarily.
