The Online Investing AI Blog

The holidays are approaching and the credit cards tingle and jingle in the wallets and pocketbooks like bells on bobtails ring.

But they don’t make the season necessarily bright. Debt reduction will probably be a resolution for more than one Online Investing AI blog reader, I thought I would bring you a way to manage those debts. After all, you want to be making gains of 30 percent on your investments, not losing 28 percent to your debtor.

This is actually Dave Ramsey’s method. (I just came across it… it’s probably been out there for years.)

Basically, you use extra cash to focus on your smallest debt amount-wise. Conventional wisdom tells you to pay off the debt with the highest interest amount. But, Dave points out that conventional wisdom is rarely in synch with conventional behavior. As Dave puts it:

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.

In other words, once you pay off one bill, you’re motivated to apply that extra money to your next debt. While you’re doing this, just pay the minimum on the other accounts. After you paid off the first debt, take the original amount you were paying plus the amount you’re already socking on the payment… and the momentum builds even more.

Still a little timid? Or frigid to change? Here’s some inspiration: one blogger reports on her own success story with the method.

Related posts:

1. How Technology Can Improve Your Debt Score
2. How Your Thoughts Affect Debt
3. The Debt/Investment Curve
4. Challenging Conventional Wisdom with What Ifs
5. Weekly Wisdom: Winter Wealth Secrets and Tips

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