Carnival #2 was posted over at No Credit Needed. (You’ll be seeing a lot of Flashbacks from his carnivals — he’s done a lot of them!) One article from Five Cent Nickel in this carnival has gained a lot of traction: Dave Ramsey is Bad at Math. Actually, it’s the all-time most-talked-about article on the Five Cent Nickel blog.

Nickel’s beef with Ramsey’s method was that Ramsey advocates knocking out the debt with the smallest balance first with the intent of gaining psychological momentum that will encourage you to knock out the bigger ones. This, Nickel argues, usually ends up costing the borrower more interest than if the highest-rate debt were paid off first. (In fact, it never ends up costing less to pay the lowest balance first.)

If you run through the numbers (and Nickel did for a couple of cases) you can see that this is true. And logically, one would think, if you look at all of your consumer debts as one big debt, the highest-rate method brings “that one big debt” down the fastest.

But getting into consumer debt isn’t logical in the first place. (At least not to me.) So I would be hard-pressed to say that getting out of consumer debt is completely logical either. Lots of habits need to be changed, and the very way that people think about money needs to be changed as well. Knocking out a single credit card balance, even if it’s only $250, is an important and tangible measure of progress, even if that card carried an interest rate of 7.9% while all of the others are thousands of dollars with rates in the high teens or low twenties. This I can see as being much more encouraging than looking at “that one big debt” go down from $25,000 to $24,750. (To be fair, Nickel does see the value as well.)

Doing the math is important, but the math means nothing if you’re discouraged and don’t follow through. Watching the number of debts go down is encouraging in a big way, and both methods will kill the debt if there is follow-through.

• Debt Reduction Success Story: Debt Hater A five-digit credit card balance is a lot to carry. Staring at that figure can be a bit overwhelming, and even if you know that the debt has to be paid off, the goal of a zero balance seems so far off that it's difficult to focus on the steps......
• Flashback: Credit card condoms? Hey, whatever it takes! ~Dawn over at Frugal For Life hosted Carnival of Debt Reduction #9.  One post from Personal Finance Advice from that carnival I remember if for no other reason than the name: Credit card condoms The premise in creating a prophylactic to fit over your credit card is to make you......

• How Dave Ramsey Helped Me Pay Off My Debt Late last December I came across a post on Bargaineering about Dave Ramsey’s book, “The Total Money Makeover.” Prior to this, I had never heard of Dave or his somewhat controversial teachings (e.g., he recommends folks pay off their debts from smallest to largest, regardless of interest rates, he quotes......
• Are You Managing Your Debt Correctly? Although debt is a dirty word to many, the fact of the matter is that the vast majority of us are in debt in some way or another. No matter how hard we try, there are times when you simply need something and cannot afford to pay for it straight......