Most of you are probably at least vaguely aware of Dave Ramsey.  He’s a former real estate mogul who went belly up, only to re-emerge as a financial success story.  These days he spends the bulk of his time teaching others to beat down debt and to put their financial houses in order.

Ramsey, who has bestsellers under his belt along with a nationally-syndicated radio show and television program on the Fox Business Network, is famed for his “baby steps” approach to personal financial repair.  One of those steps is what Dave calls the “debt snowball”.

The debt snowball is a system folks can use to knock out their non-mortgage debts in an organized fashion.  Basically, it works likes this:  You list out all of your debts and put them in order, smallest to largest.  You pay the minimum on all of those obligations with the exception of the smallest debt.  After culling some spare cash from your budget (Dave’s big on belt-tightening), you apply that excess to the smallest debt.

Soon, the smallest debt will be completely paid off.  After that happens, you take all of the money you were putting toward that bottom-listed debt to the next item on your list.  When you have that one cleared, you continue to let the snowball roll, applying that now-enlarged sum to the next debt.

Before you know it, you’re making bigger and bigger payments on your remaining debts.  Eventually, you’ll be able to phone in to one of Ramsey’s shows and can scream “I’m debt free” for everyone to hear.

That’s the Dave Ramsey debt snowball.

There’s a problem with it, however, in a purely mathematical sense.  And, since personal finance is tied tightly to good math, it makes sense to point out the flaw and look at it carefully.

Ramsey wants you to pay down debts based on their size–small to big.  In a true calculator-smart way, you should be paying down debts based on their associated interest rates.  Why bother paying a $100 debt that isn’t accruing interest while your big ol’ $10,000 credit card bill is humming right along at 14%?

If you run the numbers, the answer to that question is, “you shouldn’t”.  You should be paying debts down focusing on interest rates first and foremost.  In the long run, that’s the best way to escape a debt load as inexpensively as possible.

So, it’s safe to say that Dave Ramsey is a bad practitioner of mathematics.  When you run the numbers, it’s crystal clear that he’s just plain wrong.

Nonetheless, the debt snowball is probably the most effective method for killing off debt.  This is one of those cases where the numbers fail to tell the complete story.

Ramsey’s genius isn’t in his addition and subtraction skills.  He’s helped countless people out of financial disasters because he understands the intangibles.

Here’s the deal:  We’re all smart enough to pull out a calculator and to come up with a workable budget and a way to pay off our debts.  That isn’t anything close to rocket science.  It’s actually easier than 7th grade science class.  Nonetheless, many of us who know much, much better end up in dire financial straits.  Why?  because handling money isn’t purely a matter of playing by the numbers.  There’s a psychological element at play and it’s hard to overestimate its significance.

That is the genius of the Dave Ramsey debt snowball.  It creates quick results.  Those quick results produce real motivation.  They provide rapid evidence of progress.  They keep people on the right track and given them a reason not to backslide as they try to solve their money problems.

Look, I’m not a cheerleader for Dave.  I like a great deal of what he has to say and appreciate his perspective on a variety of issues.  I don’t care for his tendency to insert his own religious perspectives into his discussions of money (although I understand why he does it).  I think he advocates levels of austerity that probably short-circuit many efforts to make financial progress, too.  Overall, though, he’s brilliant when it comes to helping people to pull themselves out of debt.

The Dave Ramsey debt snowball is a perfect example of what he does best.  He takes a tricky situation, simplifies it and offers a clear and concise way of tackling it that will produce motivating and inspiring results.  Ramsey’s understanding that money management and psychology are intertwined makes him a great resource for those who are struggling to gain some level of power over their out-of-control finances.  His math might be lousy, but the results can be impressive.