Developing the Core Financial Habits Series
A Quick Review.
Before we dig into debt, let’s ground ourselves in where we are in this journey.
In Core Habit #1, you learned how to create margin by spending less than you earn. That margin is the breathing room in your financial life. It is the space between what you make and what you spend. Without it, you are always sprinting, never settling into formation, and always reacting to the next crisis instead of directing the play.
In Core Habit #2, we took that margin and put it to work by investing the difference. You set up automatic contributions so that your money went straight into long-term accounts; your 401k, TSP, IRA, or taxable brokerage, before you had a chance to spend it. You were no longer just earning money. You were putting it on the field to play for you.
But now we come to a habit that can undermine everything you have built so far. Even if you save and invest, you will never win the match if you keep getting pulled off the field. That is what debt does. Bad debt is the financial equivalent of being shown a red card. You are still in the game, but you are now playing with fewer players, more pressure, and less flexibility. The field feels bigger. Every mistake costs more. And you spend more time trying not to lose instead of focusing on how to win.
Good Debt vs. Bad Debt — Not All Fouls Are Equal
Just like in soccer, not every foul gets you a red card. Some are yellow cards. Some are tactical moves that momentarily slow the play but ultimately protect your team. The same is true with debt.
Good debt is debt that helps you go forward in the long run. A reasonable mortgage, for example, gives you a stable place to live while allowing you to build equity over time. Student loans can make sense when they fund an education that increases your income for the rest of your life. A carefully planned small business loan can be the start of something that creates income beyond your own effort. These choices do not feel great in the moment, they may even look like you are passing the ball backward, but they are done with intention and purpose.
Bad debt is different. Bad debt is what happens when you swipe a high-interest credit card to buy things that lose value the moment you take them home. It is financing a car that is more than you need, or taking out a loan for a vacation, furniture, or lifestyle upgrade that you cannot truly afford. There is no return on this kind of debt. It does not increase your income or your future options. It simply forces you to work tomorrow to pay for yesterday. That is the red card. You are now playing with fewer players on the field, and the referee is not bringing anyone back until the debt is gone.
Why High-Interest Debt Is the Enemy of Freedom
If you have ever watched a team go a player down, you know how the entire game changes. The remaining players run harder, drop deeper, defend longer, and attack with hesitation. Every decision is cautious. Every movement is reactive. High-interest debt does the exact same thing to your financial life.
The biggest issue is not the amount of debt you have. It is the interest working against you. A credit card at 18 or 25 percent interest does not care how hard you work. It grows quietly and relentlessly whether you sleep or stress over it. You might be investing money elsewhere at 7 or 8 percent return, but if you are carrying debt at double or triple that rate, the math is against you. You are running with one leg tied down.
Debt limits your freedom long before it empties your bank account. It traps your future income. It makes your next paycheck feel smaller before it even arrives. You start organizing your life around payments instead of purpose. Your goals become “survive and get through this month” instead of “grow, build, and move forward.” You are still in the game, but every pass, every decision, and every minute is under pressure.
How to Fight Back — Debt Snowball and Debt Avalanche
Once you are handed a red card, you need a plan to survive and recover. The same is true with debt. You cannot ignore it. You need a strategy to get your full team back on the field.
One approach is called the Debt Snowball. Think of it as building confidence one small win at a time. You list your debts from smallest balance to largest, and you attack the smallest one first while paying minimums on the rest. The moment you pay off the first debt, you take what you were paying and roll it into the next. The wins come quickly, and that progress fuels you to keep going.
The other approach is called the Debt Avalanche. Instead of focusing on the smallest balance, you target the debt with the highest interest rate first. You still pay the minimum on everything else, but you put every extra dollar toward the most expensive debt. This strategy saves you more money in interest and pays off debt faster mathematically, but it might take longer to get your first victory.
Which one is better? The one you will actually stick with. If you need emotional wins to build momentum, start with the Snowball. If hearing that you saved thousands in interest charges motivates you more, go with the Avalanche. You can even blend the two: start with Snowball for motivation, then switch to Avalanche for efficiency. The real victory is not choosing the perfect strategy. It is choosing one and staying consistent.
Why Discipline on Defense Wins Championships
It is easy to get excited about investing. Offense is fun. Scoring goals and watching your money grow feels good. But smart teams know that defense is what wins seasons, not just matches. Avoiding and eliminating bad debt is financial defense. It keeps you in control of the pace. It gives you options. It preserves your energy so you can attack when the moment is right.
When you avoid new debt, you are refusing to give away another player. When you pay off existing debt, you are getting people back on the field. Suddenly, you have eleven players again. Your money can go where you want it to go; toward investments, your Freedom Fund, your family, your mission instead of toward interest payments.
And once your team is fully back in formation, the game feels different. You stop playing scared. You stop defending the whole match. You have the energy to score again.
Summary
Core Habit #3 is simple in theory but hard in practice, and that is why it is so important. Debt is not just numbers on a page. It is a red card. It makes the match harder, longer, and more stressful. Some debt can help you move forward if used wisely. Most debt does the opposite and should be avoided whenever possible. Paying it off requires a plan, whether it is Snowball, Avalanche, or something in between and the discipline to stick with it. When you eliminate debt, you bring your whole team back onto the field. You protect your freedom, your savings rate, and your future.
Next Up: Core Habit #4 — Give It Time to Grow
You now have margin. You are investing it. You are protecting it by staying out of debt or fighting your way out of it. The final core habit is the one that ties everything together: Time.
Core Habit #4 is about patience. It is about giving your investments the seasons they need to grow. It is about staying calm during losses, staying humble during wins, and refusing to leave the field early. This is where financial independence is truly built; not in weeks or months, but in years and decades.
That is where we are headed next.