No. 02 — Save
Get out of debt
A credit card at 24% APR is compound interest running in reverse — your balance doubles against you every three years. No portfolio reliably outruns that, which is why high-interest payoff is the first investment you'll ever make.
Sort your debt before you fight it
Not all debt is the same emergency. Sort every balance by interest rate into three bands:
| Band | Typical debts | What to do |
|---|---|---|
| High (>8%) | Credit cards, payday loans, most personal loans | Attack aggressively before investing beyond the employer match |
| Middle (4–8%) | Many auto and private student loans | Pay steadily; splitting extra money with investing is reasonable |
| Low (<4%) | Most mortgages, some federal student loans | Pay the schedule; invest the difference — the market's 7% average beats 3% debt |
One exception outranks everything: contribute enough to capture a 401(k) employer match even while paying off cards — a 50–100% instant return beats even 24% interest.
Avalanche vs. snowball: pick the one you'll finish
Avalanche — pay minimums everywhere, throw every spare dollar at the highest rate — is mathematically optimal and saves the most interest. Snowball — smallest balance first — costs a bit more but manufactures early wins, and studies of real borrowers show those wins keep people in the fight. The best method is the one that survives contact with your psychology. Either way, automate the extra payment on payday, exactly as described in budgeting.
Speed it up from both ends
Payoff speed = (income − spending) pointed at debt. A temporary side hustle with every dollar earmarked for the card, plus one or two of the big-three cuts from frugal living, routinely turns a five-year slog into eighteen months. Balance-transfer cards and consolidation loans can lower the rate — useful only if the spending that built the balance has actually stopped.
Staying out: the firewall
Most relapses aren't shopping sprees; they're surprises — the transmission, the root canal — landing on a card. A starter $1,000 buffer during payoff, grown into a full emergency fund after, breaks the cycle. Then the habit is already built: the money that killed the debt redirects, the very next month, into investing — and the machine from compound interest finally starts running in your direction.