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Should I invest while I still have debt?

Take any employer retirement contribution first — that is a guaranteed return nothing else matches. After that, clear high-interest debt before investing, because repaying a twenty-two percent debt is a risk-free twenty-two percent return. Low-rate long-term debt like a mortgage is a genuine judgement call rather than an obvious one.

Repaying debt is an investment

This is the framing that makes the decision obvious, and it is not a metaphor.

Repay a debt charging 22% and you have improved your position by 22% a year on that money. Guaranteed. No market risk, no sequence risk, no fees, and in most countries no tax on the gain — because it is not a gain, it is an avoided cost.

Compare that to investing, where a long-run return is uncertain, uneven, and lower. Asked as “would you like a guaranteed 22% or an uncertain 7%”, nobody hesitates. It is only confusing because one option is labelled investing and feels like building, while the other is labelled repaying and feels like standing still.

The order

1. Any employer contribution. Where an employer adds money to a retirement account if you contribute, take enough to receive all of it. An immediate uplift on the money you put in beats any consumer debt rate. Skipping it to repay debt faster is the one clear mistake in this whole area.

2. High-interest debt. Everything spare, until it is gone. See how to tell whether a debt is expensive.

3. A buffer, then investing. With expensive debt gone and something behind you, invested money can be left alone — which is the entire condition for investing working.

Where it becomes a real judgement call

Low-rate long-term debt, mortgages especially. Here the arithmetic stops being decisive and reasonable people land differently.

The case for investing instead: over decades, a diversified portfolio has historically returned more than a low mortgage rate. Overpaying the mortgage means accepting a lower expected return in exchange for certainty.

The case for repaying: the return is guaranteed, and guaranteed matters. A paid-off home lowers the income you need to survive, which is worth more than a percentage point in a bad year. And “invest the difference” only works if you actually do — many people intending to invest the surplus simply spend it.

A reasonable middle: do both. Overpay modestly, invest the rest. Neither choice is wrong enough to agonise over.

The mistake in both directions

Investing while carrying credit card debt because investing feels productive. It is a guaranteed loss dressed up as ambition.

Refusing to invest anything until every debt is gone, including a thirty-year mortgage at a low rate. That can mean sitting out decades of compounding for the sake of a debt that is barely costing you — and time is the input you cannot buy back later.

The dividing line is the rate, not the existence of the debt.

A note on time

If the expensive debt will take a couple of years to clear, clear it. Two years out of the market is a modest cost against the certainty of removing a 22% drag.

If it will take fifteen years, that is a different situation — and the debt is probably large and low-rate, which means it belongs in the judgement-call category above, not the emergency one.