Over the past fifteen years, various debt professional gurus have risen and attempted to challenge the obvious that, if you have debt, you should attempt to pay off the highest interest rate obligations first.
Some of these professionals have focused on the amount of each debt obligation, and then argued that consumers should pay off each debt obligation with the lowest principal balance first and then address those obligations with higher interest rates.
I appreciate and applaud the nod towards behavior economics that that this advice incorporates. It recognizes that, if someone is receiving five different bill requests each month, it can be daunting to identify progress and therefore there may be a higher likelihood of declaring for bankruptcy or otherwise making one’s financial situation worse.
At least if someone uses available surplus to knock out the low-balance $3,000 debt, the month thereafter will only involve receiving invoices from four … Read the rest of this article!