Pay off debt or invest?

I’m publishing a whole series of posts targeting Debt … it has very little to do with conventional financial wisdom on this critical subject. Here is the second post (I have another one coming up, soon) …


Gen-X Finance is polling his readers as to whether they would prefer to pay down debt or save:

If you have both debt and a need to save money, how do you prioritize? Some people will pay off debt at all costs before saving a penny. Others will be fine getting by with minimum payments while dumping as much money into savings or investments as possible. While others try to do a little bit of both. That’s why the poll today asks how you view this subject.

You should go ahead and answer the poll.

Now, this is such an important decision – perhaps one of the MOST important mindset changes that you need to make if you want to follow in my $7 million in 7years footsteps – that, for my new readers, I will point you again to my trademark Cash Cascade™ system (don’t worry, it’s simple and free) that replaces the Debt Snowball, the Debt Avalanche and most of the other other debt repayment systems that you may have previously tried.

Here’s why it works:

People make the mistake of thinking that there is GOOD DEBT (typically, investment debt) and BAD DEBT (typically, consumer debt) … but, this is only true BEFORE YOU TAKE ON THE DEBT.

Once you are in debt, then there is only CHEAP DEBT and EXPENSIVE DEBT. Put simply, pay down your expensive debt, until only the single digit ones (on an after tax basis) are left, THEN start investing.

This goes against the ‘pay down all debt’ theories, but works both logically and practically. Try it … and, let me know how it’s working for you?

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4 thoughts on “Pay off debt or invest?

  1. I’ve read and watched the Cash Cascade video. My only two debts are a mortgage and student loan @ 4.625% and 2.125% respectively. I have a good deal of cash saved up (a war chest as you call it). The problem is, if I didn’t do the easy thing, which would be to pay off debt, then what do I do with it? I know nothing of starting a business, or even what I’d do, if I wanted to go into business. I’ve never owned rental property, so not sure if that is the right route, and I already do plenty of retirement investing inside of 401k’s and Roth accounts, so not really interested in putting more money there. Any thoughts other than debt repayment?

  2. The Cash Cascade says to compare (on an after-tax basis, of course) what you can get from one ‘investment’ v another.

    No point building a ‘war chest’ if you don’t intend to go to war … if you can’t / don’t want to invest in anything other than CD’s which prob. pay around 2% (taxable) then it’s clear: pay off the debts!

    However, I recommend that you first start with understanding how much money you will have accumulated once debt-free and what the financial outlook is for you until you plan on retiring. If it all looks rosy … then stick with Plan A 🙂

  3. It’s not that I don’t want to invest in anything other than CD’s. As a matter of fact, I don’t own any CD’s. It’s that I don’t know how to get started using my war chest to invest in something that has the potential to earn 10%+ after tax. Like I said, I already invest a good bit in stocks and bonds through 401k’s and Roth accounts. Just not sure what or how to tap into the next segment of investing with my “war chest” money.

  4. @ Joe – OK that’s very different! Otherwise, I was going to ask you why you are reading this blog 😉

    For you, the answer lies in getting educated!

    Drop me a line at ajc [at] and I’ll give you a free year’s subscription to my membership site, if you promise to work through the WHOLE program AND complete every exercise (pace yourself to about 2 to 5 KLE’s a week … it’s not as easy as you think). 6 months to a year should be plenty of time.

    In the meantime, if it’s ‘only’ education that’s holding you back, you can ‘afford’ to sit on your thumbs for a while by NOT paying off the debt … just yet 😉

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