My husband and I are currently doing Dave's Total Money Makeover after reading his book.  We will be debt free in 12 more months, except for the mortgage payment.  We didn't have as much debt as most people who use Dave's plan - we financed a few things, a couple of credit cards and car payments etc.  We weren't getting collection calls or ready to lose our home, we each have 401k's that we still contribute to - we just thought we could do better with our finances.  We did our research and we like Dave Ramsey's plan.  We are both well educated people with good jobs and the simplicity of Dave's plan is what attracted us to it.  We are busy people and Dave's plan is very easy, we don't have to spend a great deal of time on it and we can go on with the rest of our lives.  

I have $1,000 left on a student load at 8% and $2500 left on a credit card at 14%.  I'm paying off the student loan first.  It's the "snowball" effect that people are missing.  By the time you free up the money you were spending for the small debts, you are taking a huge chunk out of the big debt.  With our situation, it made no difference if we paid off the big debts first or last - the big debts would have gotten paid off in the same amount of time anyway.  We would have started with lower payments on the big debts because our other funds were still tied up with the smaller debts and it would have taken us longer to get it paid off.  By freeing up the money in the small debt first, we applied more money to the big debts and they are getting paid off faster near the end.

Just do your research and see which method works best for you in your situation.

When I gegan the debt snowball I had two spreadsheets to see how long each method would take.  When I paid off things by order of thier interest rate it would have take about 3 years and 4 months.  When I do it Dave's way it is 3 years and 6 months.  However, I know that quick gratification got me into this mess, and it can get me out.  Rather then waiting 10 months to accomplish something, I can have something else done in two.  And then when it is time for that ten month debt payoff, it is only eight months because of the additional money i can then put towards it.  

Maybe some people who follow this snowball method are, in fact, good critical thinkers, but then they certainly aren't rational actors.  If you want help with the psychology of the situation, sit down and write out each of your debts on one piece of paper, exactly how much each one's minimum payment is, and total those minimum payments up.  That's where you start...the absolute minimum you MUST come up with each month.  Then determine how much extra you're going to commit to applying to your overall debt each month and write that number down as well.  Writing down has a way of making it a more tangible commitment psychologically.  Post this paper on a bulletin board or keep it somewhere else very conspicuous or handy, and then stick to it, applying ALL of the extra money to your highest rate debt.

The psychological victory will come each month when you've paid all your minimums AND have scraped together every penny or more of your committed extra payment.  You will also save MUCH more money in the process.  Simply, there is no sound financial argument for not targeting your highest interest rate first.  None.  If you need some extra mental salve in the process, then establishing these monthly quotas can do the trick, but choosing a route which costs you more money is counterproductive and irrational.

Stupidity shall rule the world, with Dave and his followers seated at the right hand.

I think that people need to handle their finances in the way that makes the most sense to them.  And if that means the "snowball effect" then so be it.  And if that doesn't make sense to anayltical thinker, so what?  It isn't your money they are spending.  Some people have so much debt it overwhelms them and it is easy to feel that it will never go away, no hope of situation improving.  But if they can be shown a way to get back on track, even if it could cost more, why not give them that ray of hope?  It's certainly better than taking 25 years to pay off a credit card, or switching to different cards for better rates so often your credit score is effected.  Besides this country's debt is the major factor in our soft economy right now, I think any way to pay off debt, especially sooner rather than later, is a wise idea.  

You may have to consider that the people that Dave Ramsey is really talking to are the equivilent of "Financial Alcoholics".  The simplicity of the plan as well as the quicker rewards would seem to be helpful to these kind of people.  You can bad mouth him all you want, and use examples of why pay of 5% interest rate when you have a 25% one, but he has help countless people.  And you can throw up extreme examples of almost any plan to make them look bad.  Is he for everyone? NO.  But give him some credit for helping those who needed it.

Dave's method lets you choose whether to pay off the highest interest debt or the smallest debt first!  It is entirely up to the user to set it up whichever way they want to in the software!  You can see a timeline and a total for both ways.

Kristy, you are corrrect in saying that Dave Ramsey is terrible at math. I have listened to him (for entertainment, as I am not in debt), and find some of his recommendations laughable. For some people, those who have little or no self-discipline, his advice may be useful. How is he? "Better than I deserve", he says. And he says it a  lot!

The point of the Dave Ramsey show is the same as the props used in dieting, exercising, etc:  Repetition will eventually focus your attention on your issue in a way that will get you to begin to tackle it.  The more you look for the condition, the more you evaluate your condition.

If you do not like your condition, don't look for it.  If you do not like Dave Ramsey, don't look for him.  Blissful Ignorance Is Blissful, Worrisome Awareness Is Worrisome.

Dave Ramsey is NOT a financial expert, and never claims to be.  He is simply someone who has been bankrupt and found/fought his way back.  He's sharing what he did and what worked for him.  Whether or not you follow his advice is up to you, but I think there are too many people who judge him too harshly when all he is doing is sharing his own experience.  Sure, he's making millions, but he's doing it because he has found a way to communicate his message to people in a highly marketable way.  People act as though he's expoiting people because he sells so many books, tickets to his shows, etc.  You can easily get most of his material free from the library.  Funny that many of the people who judge him most harshly are the ones who could benefit the most from what he shares.