Debt account aversion is the fancy psychologist Ph D term for Ramsey’s snowball method – we want to close as many One of the tests that the team conducted, though, showed students the total amount of interest that was being run up by each credit card. I turned red and immediately whipped out the backup card, the USAA card, to pay for whatever wasteful thing I was buying. It took a much more seminal moment many years down the road before I had the “this is friggin’ insane! That was the flashback I had when I read the last caveat on the findings of the study by Ariely’s team – that they did not measure subsequent purchasing behavior once a debt was eliminated.
The credit card equivalent, according to Dave Ramsey, is to pay off the smallest debt first so that you can have a win, gain momentum, and feel good about what you’re doing.
It’s a psychological trick, since, after all, if you acted in the way that you knew you should, you wouldn’t have been in debt in the first place. Ramsey, if you believe all of the callers to his show who scream “I’M DEBT FREEEEEEEEEEE!!!!!!
If nerds ruled the world, we’d only pay down the highest interest rate debt until it was at zero, and then move on to the next highest interest rate, and so forth.
There continues to be a debate about whether or not the “snowball method” of paying down debt by paying off the smallest debt first as espoused by Dave Ramsey is practically superior to the mathematical approach of paying off the highest interest rate debt set forth by mathematics.
However, Monkey Brain intervenes in our lives and complains that it seems until we can pay down that first one and sits in the back seat jumping up and down yelling “are we there yet?