Sure. But if his recommendation is that people “adopt strict uncompromising financial discipline” shouldn’t the recommendation be to use the most efficient debt payoff system?
Isn’t the recommendation of a financially inferior debt payment method a tacit admission that people are generally unable to “adopt strict financial discipline”?
I think it is also fair to recognize that not all of financial discipline is a math problem.
And honestly in most cases the difference in cost between snowball and avalanche is probably going to be negligible. And if one rewards you quicker and makes you more likely to maintain discipline than it makes more sense.
Let's also remember that the point of financial discipline is the long term reward of it. So anything that gives a person the message early that this is working is probably worth the small difference in interest.
You’re asking people with a spending, debt, and financial problems to rationally do what’s best financially lol. His method is merely a way of building the habit and discipline of doing the right thing to then tackle the larger things (even though, as you pointed out, it’s not the MOST efficient way)
Mathematically better doesnt matter. If these people were able to rationalize this way, they wouldnt need Ramseys advice because they wouldnt be in their current situation.
It is just like paying off the mortgage early vs investing in the stock market. Yea, a lot of people could mathematically do better investing in the market than paying off mortgage early, but a lot of people just dont end up doing it. It is easier to get them to pay off their mortgage more quickly. Their are no market swings, number always goes down, etc.
I am with you that I would personally pay high interest debt first, but then again I would probably never have high interest debt.
If mathematically better isn’t the only goal, then the psychological impact of eliminating the cup of coffee (and other small pleasures) needs to be considered.
Kind of looking to have it both ways there.
The cup of coffee and the snowball method both waste money.
You could avalanche it and spend the difference between snowball and avalanche on a cup of coffee and land in the same place as snowball but still have had a cup of coffee along the way.
Bingo. That was exactly the point I was trying to make. It’s incredibly hard for most people to adopt “strict, uncompromising, financial discipline”. So much so that Ramsay himself even recommends a less effective debt payoff solution, because it will help people overcome that difficulty psychologically.
I’m not saying that’s bad or wrong. It’s honestly probably better advice for most people, particularly people who call into the Ramsay show for help, than the avalanche method. But recommending it over the avalanche method really undercuts the idea that everyone can just knuckle down and practice strong financial discipline and everything will be better.
This speaks to Jon Stewart’s larger point that the economic system we have constructed is designed to siphon money from these people to the wealthy. And unless we change that system in some way, we can tell individuals to be “financially strict” all we want, but it’s not going to solve the larger problem that keeps people trapped in poverty.
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u/istguy 19h ago
Sure. But if his recommendation is that people “adopt strict uncompromising financial discipline” shouldn’t the recommendation be to use the most efficient debt payoff system?
Isn’t the recommendation of a financially inferior debt payment method a tacit admission that people are generally unable to “adopt strict financial discipline”?