{"id":22072,"date":"2025-10-23T02:42:06","date_gmt":"2025-10-23T02:42:06","guid":{"rendered":"https:\/\/finderica.com\/?p=22072"},"modified":"2025-10-23T02:42:06","modified_gmt":"2025-10-23T02:42:06","slug":"should-you-invest-or-pay-off-debt-first","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=22072","title":{"rendered":"Should You Invest or Pay Off Debt First?"},"content":{"rendered":"
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Choosing between investing or payoff debt can be hard. While you may want to invest the money to grow your income, you also know that paying off debt faster will free up cashflow that you can use toward other financial goals.\u00a0\u00a0<\/p>\n

So, how do you choose? Below we dive into how you can make the best decision based on your priorities and risk tolerance.\u00a0\u00a0\u00a0<\/p>\n

Top Priorities\u00a0<\/h2>\n

Before investing extra cash or paying off debt, be sure you\u2019re meeting the minimum payments on your credit card and loans. Otherwise, you can hurt your credit score and rack up large fees.\u00a0\u00a0<\/p>\n

Another important step is to build up an emergency fund. That way you can weather crises as they come up, without hurting your progress towards debt-free living.\u00a0\u00a0<\/p>\n

Comparing Interest Rates\u00a0<\/h2>\n

The first step in deciding whether to start investing while in debt is to compare the interest rate of your debt to the expected returns of your investment. If your debt grows faster than your investments, it makes the most sense to pay off your debt quickly. Otherwise, you\u2019re going to lose money in the long run.\u00a0<\/p>\n

To figure out your interest rate, look at all the different debts you have (like car loans, student loans, or mortgage) and calculate the weighted average. Weighted averages are a lot like normal averages; the difference is that they consider how much each individual debt contributes to your total debt. \u00a0<\/p>\n

To calculate the weighted average, you can use an online calculator<\/a>. For the linked calculator, you would enter each debt\u2019s interest rate in the \u201cdata value\u201d column and the amount you owe for that debt in the \u201cweight\u201d column.\u00a0<\/p>\n

The 6% Rule\u00a0<\/h2>\n

Financial experts<\/a> often use what\u2019s called the \u201c6% rule\u201d as a quick way to decide whether to invest or pay down debt. Generally, if your debt\u2019s interest rate is below 6%, you\u2019ll likely come out ahead by investing instead. This threshold balances the goal of minimizing interest costs with the long-term potential of wealth growth.\u00a0<\/p>\n