ANYway,
Homo economicus might come out ahead with the debt avalanche, but most people stop at econ 101 and never get to the meat of behavioral economics, which is now graying a bit. Kahnemann in his book thinking fast and slow elucidated that people don't act optimally and that's why ramsey espouses the behavioral side as opposed to the logical side.
Does the debt avalanche have you making larger payments to the debt with higher interest or balance?
@Rasputin the Debt Avalanche (or Snowball or Dave Ramsey method) has you start paying by paying the smallest balance first, then the next smallest, and so on until all debts are paid. He argues two main points for advocating this method:
1. The amount of interest accrued by the highest interest payment is negligible because of the significantly higher likelihood of a person to stick with it until they are debt free.
2. The emotional impact of paying off a debt, cutting up a credit card, no longer owing a college debt payment, etc. is the boost most people need to persevere in paying off their debts; without it most families will give up before their debts are paid and go back to their old lifestyle.
Ultimately, I agree with him completely. For most people, the small additional interest paid is not going to make a meaningful impact on their future and the risk of families giving up before their debts are completely paid is worth the slightly increased cost.
A better way to think about the two methods against each other:
1. The higher-interest first method is the most financially responsible method and will, over the course of a person's life, ultimately save them the most money which they can then use to invest.
2. The smallest balance method is the most emotionally effective method and will, over the course of a person's life, more likely allow them to become debt free and save them considerably more interest than if they had tried the other method, given up, and then transitioned back to making minimum payments and living paycheck-to-paycheck.