Debt Payoff vs. Investing Calculator
You have extra cash each month and two good uses for it. Path A throws it at your debt, then invests everything once the debt is gone. Path B invests it from day one while paying only minimums. Enter your numbers and see which leaves you wealthier — and the exact investment return needed for investing to win.
Your debts
How the comparison works
- Path A — kill the debt first: every minimum gets paid, the extra attacks the highest-APR debt (avalanche). The month the last debt clears, your entire old debt budget — minimums plus extra — starts flowing into investments.
- Path B — invest from day one: you pay only minimums on the debts and invest the extra amount every month for the full horizon.
- Net worth at the end is investments minus any remaining debt, so both paths are scored on the same scale.
- The breakeven return is found by re-running both paths across many return assumptions until investing ties debt payoff. It usually lands near your debts' weighted-average APR — because retiring debt is earning that APR, guaranteed.
- Risk is not modeled in your favor here: investing is simulated as a smooth return with no down years. Real markets are volatile, which only strengthens the case for the guaranteed return of debt payoff.
Frequently asked questions
Is paying off debt really a guaranteed return?
Yes, in the only sense that matters for planning: every dollar of debt you retire stops accruing interest at that debt's APR, permanently and with zero volatility. Paying down a 22% credit card is economically equivalent to earning a guaranteed, risk-free 22% on that dollar. No investment offers that combination.
What investment return should I assume?
A common planning anchor is roughly 10% nominal per year for a diversified US stock portfolio — its long-run historical average — or about 7% after inflation. Anything above 10% should be treated as optimistic. This calculator lets you set your own assumption and shows you the breakeven return, so you can judge whether your assumption needs to be heroic for investing to win.
What about my 401(k) employer match?
An employer match is usually a 50% or 100% instant return, which beats virtually any debt payoff. This calculator doesn't model matches — as a rule of thumb, contribute enough to capture the full match first, then use this tool to decide what to do with the next dollar.
How is the breakeven return calculated?
The calculator simulates both paths month by month across a range of investment returns and finds the exact return where investing the extra money produces the same net worth as using it to pay down debt. It lands near your debts' weighted-average APR, because paying debt down is economically the same as earning that APR risk-free.
Does this account for investment risk?
No — and that's the point of the framing. The debt-payoff path is modeled as certain; the investing path uses a single smooth assumed return with no down years. In reality, investments are volatile, which makes the certain return of debt payoff more attractive than a naive comparison suggests.
When does investing usually win?
When the debt is cheap — a 3–6% mortgage or student loan — and the investment horizon is long, markets have historically cleared that hurdle. When the debt is a 20%+ credit card, investing has to beat 20% every year just to break even, which is not a bet with good odds.