re: Dave Ramsey's advice to pay off a car loan, rather than invest

quote:

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I would think seeing the total balance drop faster would be more motivating.

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That's it. You are thinking like a person who makes rational financial decisions and never gets into a debt spiral in the first place.

The people who need help getting out of debt don't think like you, they don't make rational financial decisions.

Let's say they have $16,000 spread out across 7 cards. The lowest card balance is $500.

First month, they pay $500 extra.

Seeing a total balance go from $16,000 to $15,500 isn't going to move the needle for them. In fact, it's so little, in the grand scheme of things, it might actually just cause them to say F it, this will never end.

Now, imagine looking at a single card balance go in one month, from $500 to $0, total cards with balances go from 7 to 6, seeing a statement the next month that says "current balance: $0.00". For people that are having emotional / psychological problems with money, who are depressed, etc, this is a huge win and might be the motivation they need to tackle the next card balance.

Remember, these people don't understand time balance of money, they don't understand saving for the future, compound interest, etc.

The DR method meets people where they are, not where we think they should be. It doesn't require any new financial educational concepts. It doesn't require a new way of looking at debt and interest expense, because Dave hates debt and doesn't want people to have any at all.

You will always be 100 percent correct with the math here, but your lack of awareness of the psychological issues of others is pretty interesting.

I've often said that this MT board residents are in the top 5-10% nationally when it comes to financial sense. But the way things play in your mind aren't the same way they play in the average American's mind.

Dave's method isn't for you and me, it's for the Average American who is an idiot at finances, and is too depressed to learn anything.