If you’ve completed Milestone One (Protect Against the Unexpected) and Milestone Two (Don’t Leave Free Money on the Table), you’ve already laid a strong foundation. Now it’s time to remove one of the biggest obstacles standing between you and financial freedom.

Milestone Three of Apriem’s 10 Smart Money Milestones is: Debt Reduction with Intention

This milestone is about clarity, discipline, and momentum—knowing which debt to prioritize, why it matters, and how eliminating it accelerates everything that comes next.

The order of these milestones is intentional.

– Milestone One ensures emergencies don’t push you deeper into debt

– Milestone Two captures effective, high-impact returns through employer matches

– Milestone Three removes financial drag that quietly erodes progress

Only after protection is in place and free money is captured does it make sense to aggressively tackle high-interest debt.

Not all debt is created equal. Milestone Three is not about eliminating all debt—it’s about identifying and crushing high-interest debt.

To do that, we first establish a line in the sand.

The 6% Rule of Thumb:

At Apriem, we generally view 6% as a reasonable dividing line between low-interest and high-interest debt:

• Above ~6% → Likely worth paying off aggressively

• Below ~6% → May be reasonable to pay minimums while focusing on other goals

This threshold isn’t rigid—it’s a starting point.

The logic is rooted in math and risk.

When you pay off a debt, you’re effectively earning a an effective return equal to the interest rate on that debt.

• Paying off a 7% loan = a 7% return

• Paying off a 20% credit card = a 20% return

Very few investments can reliably match those returns—especially after taxes and volatility.

That’s why, beyond employer matches, high-interest debt usually deserves priority over investing.

The 6% benchmark can—and should—be customized.

For example:

• Younger investors may justify a slightly higher hurdle because they can tolerate more market risk and volatility

• Those closer to retirement may prefer a lower hurdle, prioritizing certainty and cash-flow stability

Your ideal threshold depends on:

• Age

• Risk tolerance

• Cash flow

• Overall financial plan

The key is being intentional, not reactive.

This is one of the most common questions—and the answer usually comes back to risk.

Once you’ve captured the employer match (Milestone Two), investing additional dollars while carrying high-interest debt means:

• Taking market risk

• While guaranteed losses (interest) continue in the background

Crushing high-interest debt reduces risk, increases flexibility, and creates a stronger foundation for future investing.

When it comes to actually paying off debt, there are two widely used approaches. We’re fairly agnostic—because the “best” method is the one you’ll stick with.

1. The Debt Avalanche Method (Math-Driven)

• Focus on the highest interest rate first, regardless of balance

• Minimizes total interest paid over time

Example:

• $10,000 at 23%

• $100 at 19%

Even though the $100 balance feels easier to knock out, the avalanche method says to attack the 23% debt first, because it’s costing you more every month.

2. The Debt Snowball Method (Behavior-Driven)

• Focus on the smallest balance first, regardless of interest rate

• Builds momentum through quick wins

Example:

• $100 debt

• $1,000 debt

• $5,000 debt

You pay off the $100 first, then roll that payment into the next balance. The emotional wins help many people stay consistent.

High-interest debt doesn’t just drain money—it drains energy.

Carrying it often creates:

• Chronic stress

• Reduced confidence

• A feeling of being stuck

Now imagine the opposite.

Picture having that high-interest debt gone.
No balances quietly compounding against you.
No minimum payments controlling your cash flow.

That sense of relief and control is why Milestone Three is often a major emotional turning point.

To crush high-interest debt:

1. List all debts

   • Balances, interest rates, minimum payments

2. Identify which debts exceed your hurdle rate

   • ~6% as a starting point

3. Choose a payoff method

   • Avalanche or snowball

4. Apply extra cash consistently

   • Raises, bonuses, freed-up payments

5. Avoid adding new high-interest debt

   • Protects your progress

Once your high-interest debt is eliminated, Milestone Three is complete. Need help figuring out what to pay off first? Or curious what the next step is towards financial freedom? I’m one click away!