How to use this quiz
Answer the 7 questions covering your highest debt interest rate, expected investment return, debt type, emergency fund, risk tolerance, tax-deductibility of interest, and time horizon. The core calculation compares your debt rate to your expected investment return — that spread is the single biggest factor in the recommendation. Answer the rate and return questions carefully; rounding or guessing on either can flip the result. Note the tax-deductibility question, which effectively lowers your true borrowing cost for debt like mortgages.
What your result means
"Pay off debt first" means your debt rate exceeds your expected investment return by a meaningful margin — paying it down is mathematically equivalent to earning a guaranteed return equal to the debt rate. "Split between both" means the spread is narrow; the practical play is to capture any employer 401(k) match first, then split the rest. "Prioritize investing" means your debt is low-rate enough that compounding investment returns should outpace the interest cost over your time horizon. The tax adjustment effectively reduces the debt rate by roughly 1.5 percentage points when the interest is deductible.
When to trust it
The recommendation hinges on the rate-and-return spread you entered, and both inputs are estimates. Investment returns are uncertain — a 7-10% average masks individual years of -20% and +30%. The guide also can't see cash-flow constraints, employer match details, or upcoming expenses that may shift priorities. For high-rate debt above 15% (payday loans, some retail cards), pay it off regardless of the math — few investments reliably beat that. A fee-only financial advisor can pressure-test your specific numbers.
Frequently Asked Questions
What interest rate makes investing better than paying off debt?
The practical threshold is your expected after-tax investment return — historically 6-8% for a diversified portfolio. Debt meaningfully above that (roughly 8%+): pay it off first; the 'guaranteed return' of eliminating interest beats uncertain market returns. Debt meaningfully below (roughly under 5%): investing the extra cash usually wins over long horizons. Between 5% and 8% is judgment territory — split strategies work fine there, and peace of mind counts as a real factor.
Should I invest while I still have student loans?
Usually yes, with one condition: capture any employer 401(k) match first — it's an immediate 50-100% return no loan payoff can match. Federal student loans at 4-6% typically sit below expected market returns, so investing alongside the standard payment is mathematically sound. Private loans above 8% behave more like credit-card debt: prioritize paying them down. Also keep federal benefits (income-driven repayment, forgiveness) in mind before accelerating those balances.
Should I always pay off debt before investing?
No — that instinct costs money in two common cases: skipping an employer match to attack low-rate debt, and keeping cash at near-zero interest while carrying a 3% mortgage. Debt payoff is best treated as one investment option with a guaranteed return equal to the loan's rate. Compare that rate to your realistic alternatives instead of following a blanket rule.