Episode•June 20, 2023•11 min

What Should You Do First: Pay Off Debt OR Invest? | Ep. 239

Are you stuck in a dilemma about whether to pay off your debt or invest for the future? Here's a helpful discussion on balancing between paying off high-interest debt and investing. We cover topics like understanding your personal goals, and values, finding ways to make more money, and how to set small goals – all with the aim of helping you make informed financial decisions! Don't miss this valuable opportunity - join us as we discuss the options for paying off debt vs investing and take steps towards achieving financial success. Every Tuesday, Tiffany answers one of your submitted questions. To submit a question for an upcoming episode, visit here: https://www.moneytalkwitht.com/asktiffany To book a consultation with Tiffany to find out if she can help you, visit https://academy.moneytalkwitht.com/15-minute-consultation Additional Resources Visit Our Website Methods to Tackle Debt Debt Payoff Planning with Brady Benware and Chris Schuermeyer This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Prioritize high-interest consumer debt over investing when rates exceed 20-30%
Paying off 25% credit card debt gives a guaranteed 25% return vs. unpredictable market returns
No investment consistently beats credit card interest rates
Six out of ten times, pay off debt first when forced to choose
2
You can (and should) do both debt payoff and investing simultaneously
Start small: $25/month or $50 per paycheck is acceptable
Time horizon matters for investing - the longer you're in, the better
Make more money through side hustles if needed to fund both goals
3
Align financial decisions with your personal values and goals
If debt causes stress and loss of sleep, prioritize paying it off
If you're comfortable carrying debt, prioritize investing
Your timeline is the only one that matters - don't compare to others
4
Low-interest debt (student loans 3-5%, mortgages) may warrant prioritizing investing
Market returns may exceed low-interest debt rates
Consider your risk tolerance and time horizon
Personal values still override general rules
5
Income issues often trump spending issues when tackling debt
Some people are already at bare minimum spending
Focus on increasing income through career negotiation or side hustles
Money is abundant - find where your skills can generate more

Intro

Tiffany answers a listener question about whether to pay off debt or invest first, providing practical guidance on balancing both goals based on personal values and financial situations.
Tiffany is a money nerd, financial coach, and host of the Money Talk with Tiff podcast who helps people with debt payoff, investing, and increasing income.

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– The Debt vs. Investing Dilemma

Tiffany introduces the common question: should you pay off debt or invest first? She clarifies she's referring to consumer debt like credit cards, not mortgages or car loans.

When you are investing, you want to look at your time horizon. The longer you can be in, the better it is for you.
– Tiffany

– The Math Behind Prioritizing Debt

Credit card interest rates of 20-30% mean paying them off provides a guaranteed return that no market investment can match.

If you pay off your credit card at 25%, you are getting a 25% return on your investment because you don't have to pay that interest back.
– Tiffany

– When to Prioritize Investing Instead

Low-interest debt like student loans (3-5%) or mortgages may warrant prioritizing investing since market returns could exceed these rates.

The decision ultimately depends on your personal comfort level with debt and what causes you stress.

– Making Both Possible: Small Steps and Income Growth

Tiffany shares that she personally invests $25/month while paying off debt, proving you don't have to choose one or the other.

If things are important to you, you make the time, space, and ability to get them done.
– Tiffany

She emphasizes that sometimes the issue isn't spending but income, and finding ways to earn more through side hustles or career advancement.

– Your Timeline, Your Rules

Don't compare yourself to others or feel pressured to invest certain amounts. Start where you are with what you have.

You are the only person that matters in your financial situation. Don't feel pressured to do what everybody else does.
– Tiffany

Resources

Topics

debt payoffinvestingpersonal financecredit card debtfinancial goalsside hustlesincome growthbudgetingstudent loansfinancial values