Short answer: Not always. It depends on the type of debt, your financial situation, and your long-term goals.
When Paying Off Debt First Makes Sense:
- High-interest debt (like credit cards or payday loans) should always be a priority.
- Paying off debt reduces risk and provides peace of mind.
- For some people, being debt-free is a huge emotional win that’s worth pursuing even if the math says otherwise.
But It’s Not Always So Simple:
- Not all debt is bad. Low-interest debt like certain mortgages, student loans, or lines of credit can be manageable while still allowing you to invest.
- Investing early allows you to benefit from compound growth. The sooner you start, the more time your money has to work for you.
- Some investments (like RRSPs and TFSAs) offer tax benefits that can improve your overall net worth even while carrying certain debts.
- A hybrid approach, paying down debt steadily while investing. Often builds more long-term wealth than focusing on just one.
It’s About Balance
The real key is knowing:
- What type of debt you have.
- Your interest rates vs. potential investment returns.
- Your risk tolerance and financial goals.
That’s where personalized financial advice makes the difference. The best plan often involves paying down debt strategically while still investing for your future. Not just choosing one path or the other.
Want to talk through the right balance for you? Contact us to set up an appointment.
