Debt: The Wealth Killer—How to Squash It

by planwisely

By Erik Garcia, CFP®, BFA™, ChFC® & Xavier Angel, CFP®, ChFC®, CLTC

“Every time you borrow money, you’re robbing your future self. –”
Nathan W. Morris, Economics Expert

“The rich rule over the poor, and the borrower is slave to the lender.“
Proverbs 22:7

Debt is an obstacle to financial security and must be SQUASHED. Overspending, that is, spending more than you make, gets you into debt. You are basically spending money that you have not yet earned. Borrowing is costly, especially when its not used to buy or invest in asset that appreciates in value (i.e. house, business, etc).

The True Cost of Debt

Debt isn’t just about numbers—it’s about what it steals from you. Your future income, your opportunities, your peace of mind. Every dollar that goes to interest payments is a dollar that could have gone to investments, savings, or even just making life a little easier.

Let’s break it down with a simple example:

Imagine you carry a $5,000 balance on a credit card with a 20% interest rate. If you only make the minimum payment of $100 per month, it will take you almost 7 years to pay off the balance—and you’ll pay nearly $4,400 in interest on top of what you originally borrowed. That’s almost doubling the cost of whatever you purchased.

That’s why debt is an obstacle to building wealth. It’s money that works against you instead of for you. In my Six Pillars of Financial Security, my fourth pillar is Squashing Debt—because the sooner you eliminate it, the sooner you can put your money to better use.

So, how do you get rid of it? Let’s talk strategy.

The Two Main Strategies to Pay Off Debt: Snowball vs. Avalanche

1. The Debt Snowball Method: Building Momentum

The Debt Snowball Method is all about quick wins. Here’s how it works:

List your debts from smallest to largest, ignoring interest rates.
Make minimum payments on all but the smallest debt.
Throw every extra dollar at the smallest debt until it’s paid off.
Once that debt is gone, take its payment and apply it to the next smallest debt.
Repeat until all debts are gone.

Why does it work? It builds momentum and gives you quick wins, making it easier to stay motivated. Just like rolling a snowball down a hill, your payments grow, and the process speeds up over time.

Who should use it?

If you’re motivated by small victories and need momentum to stay focused.

If sticking to a plan has been a struggle in the past.

If your biggest hurdle isn’t math but sticking with the process.

2. The Debt Avalanche Method: Saving More on Interest

The Debt Avalanche Method is all about efficiency. Here’s how it works:

List your debts from highest interest rate to lowest, ignoring the balance amount.
Make minimum payments on all but the one with the highest interest.
Put every extra dollar toward the highest-interest debt.
Once it’s paid off, move to the next highest-interest debt.
Repeat until you’re debt-free.

Why does it work? You pay less in interest and get out of debt faster than with the Snowball Method.

Who should use it?

If you’re disciplined and can stick to a long-term strategy.

If you want to save the most money possible on interest.

If your highest-interest debt is significantly costing you.

Which Strategy is Better?

Mathematically, the Avalanche Method is more efficient. You’ll pay less in interest and get out of debt faster.

Psychologically, the Snowball Method keeps people engaged. Many people struggle with staying motivated, and seeing a small debt disappear quickly can be a powerful motivator.

The best method? The one you’ll actually stick to.

If you’re a numbers person who loves efficiency, go Avalanche. If you’re motivated by small wins, go Snowball. Either way, the goal is the same—to squash debt and take back control of your money.

The Unspoken Rule: No More New Debt

Here’s the catch—none of these strategies work if you keep adding new debt. Getting out of debt isn’t just about paying off what you owe; it’s about changing your mindset.

To stay out of debt for good:

Stop relying on credit to fund your lifestyle.

Build an emergency fund so unexpected expenses don’t send you back into debt.

Create a spending plan (a budget, but let’s call it a plan—it sounds less restrictive).

Avoid lifestyle creep—just because you make more doesn’t mean you have to spend more.

Debt is a trap, but the good news? You have the key.

Final Thoughts: Debt is a Wealth Killer—But You Can Fight Back

Whether you choose the Snowball Method for motivation or the Avalanche Method for efficiency, the key is to start.

The longer you carry debt, the more it costs you—not just in money, but in opportunities, peace of mind, and your ability to build real wealth.

So, pick your strategy, commit to it, and start SQUASHING your debt—one payment at a time.

And if you need a little inspiration? Just remember that even the biggest snowball starts with a single flake.