Good Debt vs. Bad Debt
Not all debt is equal:
- Lower-interest, asset-building — mortgage, student loans (sometimes), business loans
- Higher-interest, lifestyle — credit cards, payday loans, "buy now pay later" gone wrong
A 22% APR credit card balance is the financial equivalent of running on a treadmill backwards. You cannot reliably out-invest 22% interest. The S&P 500 averages ~10% per year — pay off the card first.
The Math That Hurts
$5,000 on a credit card at 22% APR, paying only the minimum, takes ~22 years to pay off and costs over $7,000 in interest.
That same $5,000 invested at 10% for 22 years grows to ~$41,000.
The difference: tens of thousands of dollars in lifetime wealth, gone to one decision.
Your Credit Score in 60 Seconds
Five factors:
- Payment history (35%) — pay on time, every time
- Credit utilization (30%) — keep balances low relative to limits
- Length of history (15%) — older accounts help
- Credit mix (10%) — different types of credit
- New credit (10%) — too many recent applications hurt
A 760+ score saves you tens of thousands on a mortgage over your lifetime.
The Debt Avalanche
If you have multiple debts, the math-optimal way to pay them off:
- Make minimum payments on everything
- Throw every extra dollar at the highest-interest debt first
- When it's gone, roll that payment into the next-highest
- Repeat
(The "snowball" method targets smallest balances first for psychological wins. Both work — pick what you'll stick with.)
When Should You Invest Instead of Pay Off Debt?
- >7% interest debt: Pay it off first
- 3-7%: Split — pay extra on debt and invest some
- <3% (low-rate mortgages, subsidized loans): Usually invest the difference
Investing while drowning in 24% credit card debt is like bailing water with a teacup. Patch the hole first.