Debt snowball

Dave Ramsey makes the debt snowball the centre of The Total Money Makeover. List your debts from smallest balance to largest, ignoring the rate except where two balances are close. Pay minimums on all of them, and throw everything else at the smallest. When it is gone, its payment plus the extra joins the next one, so the payment grows as it rolls, like a snowball. Mathematically, paying the highest rate first (the avalanche) costs less interest, and Ramsey admits it. His argument is behavioural: most people who fail at debt fail because they quit, and closing a whole account in the first weeks gives a win you can feel. Research on consumer debt has found that people who focus on closing accounts tend to stick with repayment, which supports the idea, though the right choice depends on the rates involved. Where one debt carries a punishing rate, such as an overdraft or a high-rate card, it can make sense to put that first.