3711: It's Called 'Personal' Finance for a Reason (Or When it Makes Sense to Go Into Debt) by Kalen Bruce of Freedom Sprout on Personal Finance

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[00:00:54] This is Optimal Finance Daily. It's called Personal Finance for a Reason, or When It Makes Sense to Go Into Debt, by Kalen Bruce of freedomsprout.com. And I'm Justin Malek. I read articles and give some commentary to go along with them to give us both a little reminder about what's important every day of the year. So let's get right to it as we optimize your life.

[00:01:25] It's called Personal Finance for a Reason, or When It Makes Sense to Go Into Debt, by Kalen Bruce of freedomsprout.com. I love reading finance books. I read one book a week, and more than half of those are financial in nature. But if there's one thing I've learned through reading, it's that no book is going to solve your problems for you.

[00:01:50] There are many parts to every financial decision, and it's not always about the numbers. The art and the science. With money decisions, there is the art and the science, or the art and the math. Let's look at the most common example of this. The debt snowball is a debt reduction strategy, popularized by Dave Ramsey, where you sort your debt, starting with the smallest balance, first.

[00:02:18] Once the first debt is paid in full, you take the payment you were making on it, and carry it over to the next smallest balance. This process is repeated until you're debt-free. The idea is to create small wins by watching your debt melt. And it works best for people who have a plethora of different debts, for example, car loans, personal loans, credit cards, mortgages, and so on.

[00:02:44] We use the debt snowball to get rid of all our debt nearly 10 years ago. It works wonders because there's a psychological effect in place. It's motivating to see each debt fall off your list. I loved it every time we paid off another debt. The motivation stayed strong, and I picked up motivational momentum as we went. It is a snowball, after all. There's another method, the debt avalanche.

[00:03:12] This method makes more sense from a mathematics standpoint because it sorts your debts from your highest interest loan to your lowest. It may take longer to pay off your first debt, but you'll save money in the end by dumping those high interest loans first. The avalanche is the same as a snowball in all other aspects. Everything in finance is like that. There will be a way that makes sense on paper, but that may not make the most sense from an emotional perspective.

[00:03:42] Considering how many of our finance decisions are emotional, this is a real aspect of personal finance. Neither option is bad. The debt avalanche will save you more money, but the debt snowball will be more motivating. This translates to many people trying the avalanche method and failing because they lose their drive. If you don't follow the plan, it doesn't work. So if you're more likely to stick with the snowball,

[00:04:10] you'll save more money than you would if you tried the avalanche and gave up. That's where the art and the science comes in. The snowball is the art because you find a way that's motivating and emotionally appealing. The avalanche is the science because it's the more analytical approach. In most finance decisions, you'll have the art and the science. You have to choose. That's where opportunity cost comes in.

[00:04:40] Everything has an opportunity cost. Quote, By choosing to pay off debt in the first place, you're choosing to not spend your money on something else. You have to choose. That's the case for every finance decision.

[00:05:07] You'll always be forfeiting your right to spend your money on something by spending it on something else. And often this is, at least partially, an emotional decision. Here's a great example. When my wife decided to go to massage therapy school in another state, I wanted her to have a reliable vehicle. The van we had was old, the opposite of reliable. The thought of her driving the kids around in another state

[00:05:34] with the possibility of being stranded on the side of the road was unnerving to me. So, we had to make a choice. We didn't have the money to buy a more reliable vehicle at the time. We barely had an emergency fund. So, I decided to go above our cash budget and take out a loan. Here's the thing. I hate debt. And since we had paid off our vehicles, I never wanted a car payment again. But I knew I hated the thought of my family

[00:06:02] not having a reliable vehicle more than I hated debt. Long story short, we took out a loan. I negotiated for a sub-1% interest rate on a five-year loan and we paid it off in two years. My wife had a newer, more reliable vehicle and I was able to sleep at night. James Altucher says, quote, Being able to sleep at night is core to investing. End quote. It's core to finance in general.

[00:06:33] Frugality is a great thing, but it's not always the answer. Because finance decisions aren't always clear. Sometimes job benefits outweigh pay. Sometimes family life outweighs a promotion. Sometimes it makes sense to go into debt so you can sleep at night. While sometimes you need to get out of debt so you can sleep at night. Life is all about trade-offs.

[00:07:03] Quality versus quantity. Cheapest isn't always the best path. That's why there's no book or article that can solve all your money problems. And this is coming from an author and blogger. Personal finance is exactly that. Personal. Educating yourself is key to making the right decisions, but if you're looking to someone or something to give you the right decisions, you need to look to yourself. Read the book. Take the class. Attend the seminar.

[00:07:33] But at the end of the day, you have to make the decision that fits your situation, and you have to mold advice to your life. You just listened to the post titled, It's called Personal Finance for a Reason, or When It Makes Sense to Go Into Debt, by Caelan Bruce of freedomsprout.com. And I'll be right back with my commentary. I spend my day reading, recording, and keeping information organized.

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[00:09:20] upgrading your space is more affordable than ever at The Home Depot. Offer valid September 24th, 2026 through October 4th, 2026. Exclusions apply. For licenses, see HomeDepot.com slash license numbers. Thank you to Kalen. I like that he pushes back on something we can fall into on a show like this. We talk a lot about the numbers, the math, the optimal move, and the math matters. But the best plan in the world is worth nothing if you won't actually stick to it.

[00:09:50] And that snowball versus avalanche example is the perfect illustration. On paper, the avalanche wins every time. You pay less interest and you're done sooner. But if watching your biggest debt barely move for a year kills your motivation and you quit, then the quote-unquote worst plan you'll actually finish beats the better plan any day. And I don't think that's a bad thing. It's just being honest about how people actually think.

[00:10:20] I've noticed the same thing in my own life. The money habits that stuck weren't the mathematically perfect ones. They were the ones that felt good enough to keep doing. So when you're choosing between two money moves, don't only ask which one is optimal despite the name of this show. Also ask which one you'll actually follow through on for months or years. Because a plan you'll finish is almost always the better one.

[00:10:48] Whatever the spreadsheet says. Thank you to Kalen for this one. And thank you for being here. It really means a lot. Have a great rest of your day. And I'll see you tomorrow, where your optimal life awaits.