Paying Off Debt: Annoying Debts First?

There are several different schools of thought about what order that you should employ when paying off debt. Some say to attack the high interest debt first. Others say that you should get rid of the smallest debt first. Depending on your style of personal finances, and what motivates, either of these methods can work for you. But there is another method for deciding what to pay off first that I read about at Poorer Than You: How annoying the debt is.

Debt annoyance theory

This theory of paying off debt has you look at what debts are bothering you the most. Do you hate that you are indebted to a family member? Do you worry that a friendship is in jeopardy because you owe someone money? Are you angry that a credit card issuer is changing terms, so you want to be shot of that creditor?

There are many reasons that a debt may be weighing on your mind. If you have a debt that is affecting your peace of mind beyond what other debts are doing to your well-being, perhaps that is the debt to pay off, before you tackle a different obligation with a higher interest rate or lower balance.

In the end, you have to do what is best for your situation, and your emotional state. If that means taking an approach that might be logical for reasons other than the numbers, so be it. That’s why it’s called personal finance.

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