How do I compare paying off debt with investing?

Compare the interest you'd avoid with the growth the same money could earn. Example with hypothetical numbers: $300 a month extra for 5 years against debt at 18% avoids about $10,864 in interest, while investing it at an assumed 8% return adds about $4,043 in growth. Capture any employer match first.

When should I pay debt before investing?

When the debt rate is higher than the return you can reasonably expect, paying it down is the stronger guaranteed move. High-interest credit cards usually fall in that bucket.

What about my employer match?

Capture the full 401(k) match before extra debt payments. That match is separate from this comparison.

Pay Off Debt or Invest? Debt vs. Invest Calculator

Debt or invest

Paying debt wins

$10,864

$6,821 ahead

Extra money each month

Debt interest rate

Expected investment return

Years

Paying the debt wins

$10,864

Interest you'd avoid: $10,864. Investment growth on the same money: $4,043. Capture any employer match before extra debt payments.

Interest avoided (pay debt)Growth (invest)

Over 5 years, paying the debt saves about $10,864 in interest and investing grows about $4,043.

Save your results

The details behind your number

Side by side

Same $300 a month for 5 years, two ways to use it.

You put in: $18,000; Either path
Pay the debt: $10,864; Interest avoided at 18%
Invest it: $4,043; Growth at an assumed 8%
Debt path ahead by: $6,821

Where the break-even sits

Your debt costs 18% and you expect 8% from investing. Investing would need to earn more than 18% a year to beat paying the debt, which is 10 points above your assumption.

Break-even return: 18%; Equal to your debt rate
Your assumed return: 8%
Gap: 10 points; In favor of the debt

What if returns came in different?

Your debt rate stays put. Returns are assumptions, not promises.

Which path wins at different investment returns
Return	Investment growth	Winner	Wins by
4% return	$1,890	Pay debt	$8,975
6% return	$2,931	Pay debt	$7,933
8% returnYou	$4,043	Pay debt	$6,821
10% return	$5,231	Pay debt	$5,633
12% return	$6,501	Pay debt	$4,363
18% (same as debt)	$10,864	Tie	$0

What if your debt rate were different?

Your assumed 8% return stays put.

Which path wins at different debt rates
Debt rate	Interest avoided	Winner	Wins by
8% debt rate	$4,043	Tie	$0
13% debt rate	$7,168	Pay debt	$3,125
18% debt rateYou	$10,864	Pay debt	$6,821
23% debt rate	$15,245	Pay debt	$11,202

Year by year comparison

Debt or invest year by year
Year	Put in	Interest avoided	Investment growth	Ahead
Year 1	$3,600	$312	$135	Debt by $177
Year 2	$7,200	$1,390	$580	Debt by $810
Year 3	$10,800	$3,383	$1,361	Debt by $2,022
Year 4	$14,400	$6,470	$2,505	Debt by $3,965
Year 5	$18,000	$10,864	$4,043	Debt by $6,821

Your next step

Same numbers, different first step

Two people can get this exact result and need totally different first steps. Your Money Type tells you which one is yours.

Find my Money TypeFree, about 2 minutes

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How It Works

01
Enter the extra money you have each month.
02
Add your debt interest rate and an expected investment return.
03
Choose the years to see which path comes out ahead.

The 4 Money Types

The Math Is the Same. Your First Step Isn't.

Spenders, Savers, Scramblers, and Strategists each need a different first fix. The free quiz tells you which type you are, so you know what to do with this number.

Find My Money Type

Common questions

: Compare the interest you'd avoid with the growth the same money could earn. Example with hypothetical numbers: $300 a month extra for 5 years against debt at 18% avoids about $10,864 in interest, while investing it at an assumed 8% return adds about $4,043 in growth. Capture any employer match first.
: When the debt rate is higher than the return you can reasonably expect, paying it down is the stronger guaranteed move. High-interest credit cards usually fall in that bucket.
: Capture the full 401(k) match before extra debt payments. That match is separate from this comparison.

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