Hala Taha breaks debt payoff into three stages: start with smallest balances for quick wins, then tackle high-interest debts, then prioritize high-consequence debts that could trigger legal action or damage relationships. The key is combining interest rates with real-life impact, not just chasing the smallest number.
Debt is a big problem for people. And I know you give some advice in terms of how to pay down your debt, what not to do, what to do. What's your thoughts about that?
A common technique we talked about was, is based upon B.F. skinner's work is this concept of paying off your lowest debts first to form the neural wiring to continue a behavior. And that's absolutely a smart idea in the beginning. So if you have a lot of debt, sort your debt out by the amounts due. And if you can wipe out some early debts, that's a beautiful thing because you'll believe truly that you can wipe out debt. But if you continue that pattern, you may not be optimizing. And if you have very expensive debt, high interest rate debt that can crush you. There's another form of debt I've never heard anyone talk about. It's called consequence. What's the consequence to your life? Will a lawsuit come about? Will you lose a friend over this? So consider that start off with a couple early wins, but then very quickly. So sort out your debt by the highest interest rate and the highest consequence. When you have high consequence, high interest, tackle that. When you have high consequence, but lower interest, that still is extremely important and often it's disregarded. Actually do that next and then target the rest of the stuff.
