Should I pay off debt or invest my money?

It’s a common dilemma: pay off your debt or invest in your future? American household debt hit a record of $13.21 trillion in 2018. That huge number is spread out over 300 million people and includes mortgage debt. For every 10 people who have a credit card, 6 of them carry a balance of about $6,000 on average. The average student loan debt amount is at its highest ever at just over $35,000 per person. We, as a country, are people in debt—so much so that it’s just a matter of course for many.

It’s also a matter of age, income, ethnicity, family type, and education level. Demographics don’t command your debt, but understanding the statistics can clue you into your financial future. It can also motivate you to go against the grain and find financial independence.

One of the favorite, reliable pathways to wealth is investing. However, 43% of millennials aren’t investing their money in stocks, bonds, real estate or any of the other options available. That’s a problem because people who start investing at a young age have more time to generate returns. In fact, an alarming 21% of millennials have invested less than $500 in total over their lifetime. Overall, 54% of 25- to 34-year-olds have invested less than $5,000, and only a small percentage — 14% — have invested more than $50,000.

So, does it make sense to invest while you’re in debt?

The short answer: Maybe. As with most things of a financial nature, it’s highly individual. Overall, there is a rule of thumb to follow when deciding to pay down your debt or invest and it’s super simple.

Focus on the interest rate

The average maximum credit card rate is about 25%, and the average median card rate is about 21%.

When you pay off debt, you eliminate interest expense. During the time you make debt payments, you sacrifice interest income that you could have earned if you had invested the same amount. However, once you pay off the debt, you can begin to earn interest income on the money you would have spent each month on debt payments.

If the interest rate on your debt is lower than a conservative estimated return on your portfolio, focus on investing. If the interest rate on your debt is higher than that conservative return, focus on paying off the debt. To get an idea of the types of return you can expect, take a look at a few different investments and their averages.

If you are invested in a mutual fund that has a historically annualized return rate of 4%, and your student loan interest rate is 8%, you’ll probably want to focus on paying off your debt—the interest is accruing more quickly than your investment is likely to grow.

Likewise, if you expect a 10% return and your interest rate for your student loans is 4%. Then it makes more sense to invest.

Before you begin

Before you make the choice to invest or pay down your debt, it makes sense to have your financial basics covered. You need to be able to cover your basic expenses and have an emergency fund in place The appropriate amount you should set aside for your emergency fund is unique to your situation, but in general, $500 to $1,000 is a good start.

Where to start

Break out the good pen (you know the one), a clean notebook, your checkbook, a few stamps, and a handful of paperclips. Create a separate folder in your inbox for debt and loan-related emails. Sort any actual paper mail and emails and get rid of duplicates. Once you’ve got a handle on your actual debt and how much of it there is, you’re ready.

If anything jumped out at you as being particularly urgent—like an extremely overdue balance—make the time, make the call, make the arrangements. Most people will work with you as long as you’re honest and communicative.

Tally up your total debt due and sort it into categories: Credit, student loans, personal loans, etc. Make a plan to pay down what you can based on your budget. If there are things that are unable to be paid, seek out arrangements.

Companies like Summer can help you manage your student loan debt pairing innovative technology and policy expertise to serve student loan borrowers across the country.

Websites like provides a range of informative articles, tools, and free resources for reducing debt, consolidating student loans, and planning for retirement. They can direct you to a program that best helps you achieve debt relief, whether that be debt consolidation and management, student loan consolidation, or bankruptcy.

When you opt to consolidate your debts, a company pays them off, and then you pay the company back. The goal behind consolidation and refinancing is to lower your monthly payments by qualifying for a lower interest rate or by spreading out the payments over a longer period of time. Doing both of these things can save you money over the short term and in the long run.

When it’s time to invest

Investing platforms like Public can educate you in all matters of investing and when you’re ready to jump in you can buy in fee-free. Getting a handle on the basics can be a fun and rewarding experience, especially when you’re learning and sharing with friends using the social aspects of the app. The key for beginner investors is to define your objectives at the beginning, do the proper research into which tools and partners will best help you meet your goals, and put time into learning about the public markets and the companies that comprise them.

Online stock purchasing has democratized the market by eliminating the middle-men and reducing the irritation that used to exist in the investing process. With simpler, more intuitive products more people are becoming investors—and doing it with smaller amounts of money.

These platforms have also made it possible for investors to buy portions of a share, or “fractional investing.” Fractional investing is especially suitable to new investors because it lowers the barrier to entry for high-cost stocks such an Amazon, which trades at well over $1,000 per share. With fractional investing, investors of all financial backgrounds can own a piece of companies that might have previously been out of reach to the everyday investor.

Public is one brokerage that offers this type of investing. Through its feature called “slices,” Public users can buy into pieces of the companies they believe in instead of footing the bill for a full share.

How to do the quick math

There are plenty of online tools to helps you determine if paying off debt or investing the same amount is a better financial decision. The Student Loan Hero calculator can guide you toward allocating your funds in the most meaningful way possible.

The bottom line

There is no one-size-fits-all answer to the age-old debate on paying down debt vs. investing. Only an honest examination of your circumstances will reveal what the right answer for you is. Understanding your investment options is key and joining forces with friends to share what you learn can only help. Technology has pulled the curtain back on the stock market and made it more accessible to more people. Today, you can get started investing with as little as $100.

The above content is provided is paid for by Public and is for general informational purposes only. It is not intended to constitute investment advice or any other kind of professional advice and should not be relied upon as such. Before taking action based on any such information, we encourage you to consult with the appropriate professionals. We do not endorse any third parties referenced within the article. Market and economic views are subject to change without notice and may be untimely when presented here. Do not infer or assume that any securities, sectors or markets described in this article were or will be profitable. Past performance is no guarantee of future results. There is a possibility of loss. Historical or hypothetical performance results are presented for illustrative purposes only.