Should you pay off debt or start investing first?
The 7% default is a reference, not a recommendation.
The gap after 3 years of waiting
- Contributions not made
- $7,200
- Growth missed
- $29,885
The curves
- Start now — balance
- Start delayed — balance
- Money you put in
- Money it earned
Crossover
On the start-now line, growth overtakes your contributions in year 19. Your balance is $86,847, and more of it now comes from growth than from what you put in.
Five-year steps
| Year | Start now | Start delayed | ||||
|---|---|---|---|---|---|---|
| Balance | Contributed | Growth | Balance | Contributed | Growth | |
| 5 | $14,319 | $12,000 | $2,319 | $5,136 | $4,800 | $336 |
| 10 | $34,617 | $24,000 | $10,617 | $21,600 | $16,800 | $4,800 |
| 15 | $63,392 | $36,000 | $27,392 | $44,939 | $28,800 | $16,139 |
| 20 | $104,185 | $48,000 | $56,185 | $78,025 | $40,800 | $37,225 |
| 25 | $162,014 | $60,000 | $102,014 | $124,929 | $52,800 | $72,129 |
This is a real financial tradeoff, not just a delay you are talking yourself into, so it deserves a straight answer rather than a simple "just start investing."
High-interest debt, most commonly credit card debt, usually costs more in interest than a typical long-term investment is likely to earn. Paying that down first is usually the stronger move, and it is not the kind of delay this tool is built to argue against. Lower-interest debt, like some student loans or a mortgage, is a closer call. The interest rate on the debt and the return you might expect from investing are both uncertain, which is exactly why this is worth thinking through with real numbers instead of a rule of thumb.
One thing this tradeoff is not is all-or-nothing. Many people pay down debt and invest something small at the same time, rather than treating it as a strict either-or. Waiting until debt is fully gone before investing anything at all has its own cost, the same cost this whole tool is built to show.
Use the tool above to see what even a modest monthly contribution is worth over time, so you can weigh it honestly against your specific debt and its interest rate.
Returns are hypothetical, vary year to year, and are never guaranteed. This page is not financial advice, and it is especially not a recommendation about your specific debt. It is a way to see one side of the tradeoff clearly enough to make your own decision.