Want to Get Out of Debt? Study Finds Best Way to Do It

You're staring down a $600 credit card bill and $60,000 in student loan debt: Which do you tackle first? Conventional wisdom says whichever has the higher interest rate. A new study out of Texas A&M says ignore those rates—and start with that credit card bill. It all boils down to motivation: Successfully bring one balance down to zero, and that "small victory" could give you the steam you need to power through bigger balances, the researchers explain. How they arrived at their conclusion: Study participants were asked to retype 150 10-character strings in an Excel spreadsheet; they worked faster as they approached the end of columns and slowed down as they started a new column, suggesting they had a motivational surge when the end was in sight, Science Daily reports.

Further, when their task was broken down "into parts of unequal size," participants were least likely to complete tasks in ascending order, that is, smallest to largest. But subjects actually performed faster when the parts were ordered that way, Alexander L. Brown and Joanna N. Lahey write in the Journal of Marketing Research. The theory is also known as the debt-snowball method of debt reduction, popularized by finance expert Dave Ramsey. "The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior," he told the Huffington Post in 2014. The researchers do acknowledge there are some situations in which "the increase in motivation may not offset the additional interest accrued by not paying." (More debt stories.)