Should I Pay Off All My Debt Before Investing?

“It depends.” If you’re carrying high-interest balances, think credit cards around 20–30% APR; pay those first. That interest is a guaranteed drain that usually beats what you can realistically earn in markets. After the expensive debt is under control, most people can (and should) do both: keep paying debt down while getting money invested.

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“If we have 20–30% APR on credit cards, absolutely start paying that stuff off first. Get the higher-APR balances done first, then snowball down to things like student loans. If we ‘assume 10–12%’ for investments in an example, that’s just math; don’t ignore double-digit APR on a card.” Luke Rudolph, Stoic Wealth Advisors

Why high-interest debt comes before investing

In 2025, the average rate on credit-card accounts that carry a balance has hovered in the low-20s. Every extra dollar you put against a 21% APR balance is like earning a risk-free 21% “return”, hard for any diversified portfolio to match consistently, especially in the short run. Even with recent policy rate moves, card APRs remain elevated by historical standards.

“Should I Pay Off Debt or Invest First?” Here’s how to decide

Ask one simple question: Is the interest rate on my debt higher than a realistic return on my investments? If yes, prioritize that debt. If no (or only slightly higher), you can often split dollars between extra payments and investing, especially if you’re getting an employer match.

Many large providers use a practical rule of thumb: once you’ve captured any employer match and handled credit-card debt, consider paying down debts with rates around 6%+ before directing extra dollars to investments. It’s not a law; just a helpful line in the sand.

Avalanche vs. snowball: which payoff method wins?

Two classic strategies work well because they’re simple and repeatable:

Highest-interest-first (avalanche): you attack the most expensive balance first; this usually saves the most money in interest.
Smallest-balance-first (snowball): you target quick wins to build momentum; this can be more motivating for some people.

The Consumer Financial Protection Bureau explains both and notes that the highest-interest method minimizes total interest paid. Pick the one you’ll stick with, and don’t let a 20%+ card linger.

When it makes sense to pay debt and invest at the same time

Once the truly expensive debt is gone, a blended approach usually makes sense. Two moves tend to come first:

Capture your employer match in a 401(k)/403(b)/457(b); it’s essentially part of your compensation.
Keep a starter emergency fund so one surprise bill doesn’t send you back to high-APR cards. Then, compare remaining loan rates to realistic investment returns and split dollars accordingly.

“Should I pay off all my debt before I start investing? The answer is, it depends. If we have 20%–30% APR on credit cards, absolutely start paying that stuff off first. Get the bigger high-APR credit done first, and then we can kind of snowball down to student loans. If our investments are ‘getting 10–12%’ in a scenario… get the higher APR cards done first.” - Luke Rudolph, Stoic Wealth Advisors

A simple order of operations

List your debts with APRs. Circle anything ~15–20%+; that’s priority one. (Credit-card APRs have been in that neighborhood for many households.)
Pick a payoff method you’ll follow (avalanche saves the most; snowball motivates).
Grab the employer match while you pay down balances; reassess as rates fall.

Paying Off Debt vs. Investing: What Comes First? (Examples)

$5,000 on a credit card at 27% APR. Every extra $100 you send knocks out ~$27/year in future interest. Very few investments reliably beat that, so you attack this first, then restart/increase investing once it’s gone.
No card debt; car loan at 5.5%. Contribute enough to get your full match, make on-time car payments (add a little extra if comfortable), and set a modest automatic investment. Revisit the split each quarter.

Work with Stoic Wealth Advisors

Want help ranking debts, capturing your employer match, and setting an automatic, low-stress investing plan? We’ll tailor the approach to your paycheck and schedule. Call (928) 224-3160 or visit StoicWealthAdvisors.com to get started.

Frequently asked questions

Is 10–12% a realistic investment target?

That range is often used in examples to show the math, not as a promise. Long-run stock returns have averaged near 10% nominal across decades, with big ups and downs. That’s why double-digit APR debt usually wins the decision to “pay first.” (We’ll model returns conservatively for your plan.)

Will falling interest rates change this advice?

Lower policy rates can help new loan rates drift down, but card APRs often stay high. Re-run the math each year; if a debt’s rate falls below your expected after-tax return, blending payoff and investing can be sensible.

Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. Investing involves risk, including loss of principal. Past performance is no guarantee of future results.