Key factors to consider
Interest rate spread
Compare each debt's rate against a realistic after-tax expected return. High-interest debt almost always wins.
Guaranteed versus expected
Debt payoff is a guaranteed return. Market returns are an average across decades, not a promise for next year.
Free money first
An employer pension or 401(k) match generally beats both, and should usually be captured before either.
Emergency buffer
Throwing everything at debt with no cash cushion often means borrowing again at a worse rate.
Psychological return
Clearing a debt that keeps you awake can be worth more than a couple of percentage points.
Common mistakes
- Investing while carrying high-interest credit card balances.
- Leaving an employer match on the table.
- Draining the emergency fund to make one big payment.
- Ignoring tax-advantaged accounts entirely.
- Choosing one strategy when a split does most of both.
Questions to ask yourself
- 1.What's the interest rate on each debt, highest first?
- 2.Am I capturing my full employer match?
- 3.How many months of expenses do I have in cash?
- 4.Which choice would I be comfortable with if markets fell 30% next year?
- 5.Could I split contributions rather than choose?
Ready to decide?
ThatEcho turns this into your own workspace — goals, criteria, weighted options and a transparent recommendation you can question.