Pay Off Debt or Invest? Calculator
Got extra money each month and a debt you’re paying off? This calculator plays out both choices month by month: put the extra toward the debt until it’s gone (then invest everything), or invest the extra now while the debt gets its normal payment. It compares your net worth at the end, includes any employer match, and shows the return investing would need to come out ahead.
How it works
- Pay debt first: your normal payment plus the extra go to the debt. Once it’s gone, the whole amount goes into investments.
- Invest the extra: the debt gets its normal payment and the extra is invested from month one. When the debt is paid off, its payment is invested too.
- Net worth = investments minus any debt left. Interest is added monthly and investments grow monthly at your expected return.
- Employer match is added on up to the extra amount each month. A month you don’t contribute is a match you lose for good.
A worked example
A $15,000 debt at 8% with a $350 monthly payment, and $300 a month extra. Paying the debt first clears it in 2 years 2 months; after 10 years your net worth is about $82,040. Investing the extra at an expected 7% ends at about $81,743. That’s a close call, $298 apart: investing only wins if you earn more than 8% a year, every year. Add a 50% employer match and investing wins easily, because the match beats any interest rate.
Before you decide
- Have a starter emergency fund first. See emergency fund vs. debt.
- Debt above about 10% is very hard to beat reliably. Read 401(k) or high-interest debt.
- Weighing a low-rate mortgage instead? See stock market or mortgage payoff.
These calculators are for education, not financial advice: we are not financial advisors, and your situation may differ. For big decisions, talk to a fee-only financial planner. Investment returns are not guaranteed and can be negative.
Frequently asked questions
Is it better to pay off debt or invest?
Compare the debt’s interest rate with the return you realistically expect. Paying off a debt earns a guaranteed return equal to its rate; investing earns an uncertain one. High-interest debt (credit cards, often 20%+) almost always wins. Low-rate debt (a 3% mortgage) often loses to long-term investing, if you can stomach the ups and downs.
What if my employer matches 401(k) contributions?
A match is an instant return, often 50% or 100% on what you put in, and you can’t claim a missed match later. That’s why most guides say to contribute at least enough to get the full match before paying extra on anything but very high-interest debt. Enter your match to see the effect.
What return should I use?
Use a cautious, after-fee figure. Stock-heavy portfolios have historically averaged more than bonds or cash over long periods, but any 10-year stretch can be much worse. The calculator shows the “return where it flips”, the return you would need for investing to win, so you can judge how likely that is.
Does this include taxes?
No. If you invest in a taxable account, use an after-tax return. Interest on some debts, such as some mortgages or student loans, can be tax-deductible, which lowers their real rate.
Is my information stored?
No. Everything is calculated in your browser, and nothing you type is saved on our server or sent anywhere. The share link keeps your numbers in the part of the web address after the # sign, which browsers do not send to the website.