Better to pay off debt or invest?

Better to pay off debt or invest?

You may be in a situation where you have some spare cash and you’re now wondering whether it’s better to pay off debt or invest. It’s a tricky one and you are definitely not alone in this!

There is no definitive answer to this. Rather, you need to find a balance and you can look at my logic when deciding to pay off my home loan rather than invest. There are so many factors that come into play that the best solution is to read, read and read some more! And of course do some calculations.

Learn as much as you can about this (it’s really quite simple) and then analyse your own situation and decide accordingly. You may want to consult a financial advisor, but be sure to understand the reasons they give and don’t be afraid to argue or question the motives. This is your money and your future, don’t simply pass the decision making across to some random guy.

Factors to take into consideration

  • Your age
  • Current amount of debt
  • Payment terms & interest
  • Your cashflow
  • Tax implications (can be complicated to work out)
  • What’s more important to you (being debt free or having investments)? What will make you sleep better?
  • Your gut feeling

The common sense approach

Debt is expensive as the interest charged is almost always more than interest earned. So it makes sense to pay off debt.

However, having an emergency fund available to help your cash flow in “crazy” months is also vital. Without it, you may end up in more debt.

So it’s a balancing act between paying off your most expensive debt, building an emergency fund, and tackling other debts.

Some reading on whether it’s better to pay off debt or invest

I’ve compiled a list of articles to get you started on learning more about whether it’s better to pay off debt or invest. Some are from my blog and some from other sources.

Is It Better to Save Money or to Invest?

So is it better to save money or pay off debt? There’s no definitive right or wrong answer as to whether you should save money whilst still having short-term debt (credit cards, store cards, personal loans, vehicle finance, etc). There are however some considerations and things to think about. Read full article.

Paying off Debt vs. Investing Further: An Overview 

People who find themselves with extra cash often face a dilemma. Should they use the windfall to pay off—or at least, substantially pay down—that pile of debt they’ve accumulated, or it is more advantageous to put the money to work in investments that will build a nest egg? Both options are important. Read full article.

Pay off Bond Rather than Invest

I received an interesting email from one of the readers of this blog. His suggestion was for me to do a blog post discussing paying extra into your Bond each month, versus Investing the money instead.

This is a dilemma which I myself have faced before, and one that has been doing it’s rounds on the internet. It was also a topic which I have had on my “ToDo” list, but the email I received increased it’s priority somewhat. Read full post.

Why I’m Paying my Home Loan Off Early Instead of Investing

I was wondering today whether my strategy of paying off my home loan early instead of investing is indeed the best. There are so many things to consider and I sometimes relook at my reasoning to see if it is still sound. I’m actually feeling a little uncertain now but here is my thought process and considerations and it would be great to hear your views in the comments section. Read on.

Help! Where’s my Money Gone

Not sure where your money has disappeared not how much debt you have? That’s no problem. Start here with this workbook. Help! Where’s my money gone?


As you see there is really no single answer to this as it depends on your own situation. For me I’ve decided that it is best to pay my home loan off first and currently I’m putting every spare cent I can into my bond. Something which is tricky though is when friends or family question me about my motives and then try to advice me otherwise. It’s strange how so many people have an opinion about what I should do with my own money.

My advice: Once you made your decision and set your goals; stay strong! Don’t be swayed by peoples opinions or uninformed advice. And don’t get upset… life is too short.

Do you have any great articles or resources on this? Please add to the comments below as I would love to build up a larger collection.

Please share your thoughts