One way to reach financial freedom is to completely pay off all debts, except the mortgage. Dave Ramsey’s strategy to accomplish this financial goal is detailed in his Baby Step 2: The Debt Snowball.
In the debt snowball method, Dave Ramsey advocates paying off the debts one by one starting from smallest to largest. His method ignores the debt’s interest rates, which bother many rational savers including me. But this method really works for the general public and here is why.
In Sun Tzu’s Art of War, when you are doing battle, seek a quick victory. A protracted battle will blunt weapons and dampen ardor. By tackling the smallest balance first, you can quickly eliminate that debt to claim a small victory. In turn, it motivates the general public to achieve the ultimate personal finance goal of paying off all debts. [Read more…]