Much attention has been given to Dave Ramsey’s method for reducing debt.  The gist is that you pay off the smallest debts first, then use this money toward the smallest remaining debt, until a snowball effect takes place, zooming you out of debt in no time.  This is a simplified version, but I’ll focus on this core idea today.

From a pure dollars and cents perspective, this doesn’t make logical sense.  You should instead pay off the debts that are at the highest interest rate – this will save you money in the long run.  If you have the discipline to pay off debts in this manner, it’s a no-brainer to do it this way.

So, then, why does Dave Ramsey have some many followers?  Because many people get frustrated with their inability to make a sizeable dent in their debt.  If they have $3500 car loan at 0.9% and a $15,000 credit card loan at 18.9%, they pay off the car loan because it’s a quick win.  For many people, emotion trumps logic.

Wouldn’t it be great if people were somehow able to inject emotion into the logical approach?  I’m going to introduce a method that I call The Ramsey Backflip.  The method attempts to take the strengths of the Ramsey approach (emotional victories) and inject it into the more financial advantageous method of paying off the high rate debts first.

The first step in the process is to name your debts.  Give the highest interest rate an unpleasant name (Merkleton McWarty, for example) and the lowest interest rate a more pleasant name (Princess).  Then, assign actual physical characteristics to the debts.  You might choose to personify the lowest interest rate debt after Scarlett Johansson (if you are a guy) or Tom Cruise (if you are female).  Likewise, choose negative characteristics for the highest interest rate debts – for example, you might pick Tom Cruise, if you are a guy.  (I’m kidding, Tom Cruise.  I’m sure you’re a great guy.  The rest of us are just jealous).

Now you should have a band of imaginary debt-friends.  OK, they aren’t real friends, because they are mooches.  It’s like the movie You, Me, and Dupree.  You invited the house guests, but you really need to show them the door – and fast.

If you have several house guests and need to kick one out, whom do you kick out?  The boring, ugly guy with bad breath.  Merkleton McWarty.  Find a nice big photo of Merkleton McWarty (or the person you use for the mental image of Merkleton) and waste some ink and paper by printing it out.  Every time you make a payment against Merkleton (that credit card debt of $15,000 at 18.9%), put a sticker on top of Merkleton’s ugly mug.  By the time you finish with Merkleton, he’s nothing but a page of stickers.

When the first debt is gone, repeat the process with the ugliest remaining houseguest.  As you work through the debts, the photos get progressively more attractive.  At the end, you’re left with Scarlett Johansson – the $3500 car loan at 0.9%.  When you get to that point in your debt repayment process, it might not even make sense to pay off the loan early – you may instead choose to invest in something that can beat the 0.9% rate.

Is this a bit immature?  Certainly.  However, I urge you to try to find your own path – a way that you can convince yourself, emotionally, that it is in your best interests to pay off those higher interest debts first.  Make it a game if you must.  Your wallet will thank you.