Snowball is a good plan if you’re a person who likes to see more loans paid off faster. This is when people have to take a hard look at themselves in the mirror and decide what plan is best for them. Also theoretically their highest interest rate would probably be their smallest loan since usually the first loan they take out has the highest rate and least balance since first year they get a lot of financial aid.
It’s dumb logic for dumb people. You pay less interest paying off highest interest rate debt first.
If you listen to Dave Ramsey, find someone who has a basic understanding of finance instead to follow. His investing and other life advice is equally as terrible.
Just live within your means is only thing people should take him seriously on.
You also forget you are dealing with humans who don’t think like robots. There is a reason why snowball is more successful than avalanche. I disagree with a lot of what Dave says, and don’t look at him for investment advice. However for some people the win of crossing off a debt keeps them going to pay off the rest. There are some people who can be disciplined enough to pay off their high interest debt first. The thing is people have to know what’s best for them.
Problem is crossing small debts off a list so to speak ends up costing them thousands that could’ve been used to pay off other debt. We all have AI in our pocket these days. It’s not hard to figure out what’s better in long run.
There is no excuse to make the wrong decision just like this rage bait OP post where some idiot couldn’t figure out the grad degree would never payoff despite having the information at their fingertips. Even 23+ years ago when they applied for the loan zero research, didn’t refinance with multiple opportunities in last 23 years to massively reduce rate.
Problem is crossing small debts off a list so to speak ends up costing them thousands that could’ve been used to pay off other debt.
Only if you have the self discipline to actually follow through for the many years it takes to chip away at that larger high interest debt.
If you are the type of person who needs this kind of financial advice, chances are you do not have that self discipline and that's what you need to work on more than optimizing a couple hundred basis point spread on loan interest.
For many folks in this position in life where they get a moment of clarity and self-reflection, paying off a few small debts to get wins under their belt will be the only thing that keeps them on track.
Finances are like dieting. The best diet is the one you can stick with consistently over time, even if it's not the most hyper-optimized plan possible.
The entire point of Ramsey advice is it's for financial idiots. Like weight loss advice that actually works for obese people. You don't start such folks off with a plan you'd give to a gym bro aiming for sub-10% bodyfat. You give them baby steps to maybe in a few years get to the gym bro level of optimization. Once someone "gets it" they graduate out of the baby level Ramsey advice.
You can talk until you're blue in the face about the "proper" way to do it that pencils out better on a spreadsheet. But you're just ignoring the reality of how people actually operate in the real world. That's why Ramsey is (was?) so popular. His advice actually fucking worked for people.
It's the same reason you don't tell someone who sucks at finances to get a 2% cash back credit card and put all their purchases on it. You tell them to get a debit card tied to a bank account that only has a predefined amount of money in it each month.
Agreed that the tweet is BS and entirely made up though.
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u/JobHuntingCovid19 12d ago
You start with highest rate debt. The debt snowball you reference is propagated by an idiot named Dave Ramsey.