Ramit Sethi compares two debt payoff strategies: the avalanche method targets your highest interest rate first, saving the most money overall, while the snowball method pays smallest balances first for psychological wins. The avalanche wins on total interest paid.
You need to use numbers when you have tens of thousands of dollars in debt. Find the debt with the highest interest rate. That's going to be your target. Every extra dollar you have goes towards that debt while you pay only the minimums on everything else. I guarantee you are not currently paying the minimum on all your other debts and putting the extra money towards your high-interest debt. Once that first debt is gone, You take everything you were paying towards it and you roll it into the debt with the next highest rate. You're going to accelerate. You're going to keep going until it's all gone. This is called the avalanche method and it saves you the most money on your debt over time. Now there is another approach called the snowball method where you start with the smallest balance and you work your way up. And I find that to be very motivating. If your goal is to save the most in interest, avalanche is the most effective.
