Why it makes sense to pay off your debt first

So you’ve got a full-time job and can manage to save some money every month. You want to take those savings and invest them somewhere where they’ll get a high return – but wait, there’s this thing called debt that’s hanging onto you. Even if you’re comfortable with investing and are confident that any gains you receive from investing will outweigh the costs of keeping that debt, there’s still a lot to be said for getting rid of that debt once and for all.

There are essentially two ways of paying off debt (if you have multiple loans); start with the highest interest one, or start with the smallest one (the debt snowball method). Regardless of which one you choose, the fact is, you’re able to choose. After my company recently went through a “restructuring” where a quarter of all employees got laid off out of the blue, the importance of having financial security has really been a focus for me.

After all, that’s why we’re told to have emergency savings, in the case of unexpected events like being fired or an accident that prevents us from working. Thankfully, I still have my job, but I’m more focused than ever on having my student debt over and done with. I’m putting so much towards the last of my debt right now that investing is honestly an afterthought.

If you lost your job this month, would you still be able to continue paying off your debts? It’s a hard situation to think about, but it happens. Deferments exist for student debts, but other debts can’t be put on hold so easily. Most quick loan repayment options require taking out other loans at higher interest rates, with payday loans and credit cards.

While I have made some progress towards debt repayment, I think it’s far more motivational to read stories of people who have completely paid off considerable amounts of debt in a very short period of time. May these success stories give you the kick in the behind you need to make the extra push towards becoming debt-free.


  1. Trees Full of Money: Paid off $90K of consumer debt in 2 years.
  2. Dollar Diligence: Paid off $33K on student loans in 18 months.
  3. Distilled Dollar: A HuffPo story that breaks down how DD got out of 120K in student loans.
  4. Millennial Boss: Paid off $89K in 18 months.
  5. Conquering Credit: Paid off $43K of student loans in 8 months.

TLDR? Just because you have disposable income doesn’t mean you have to get rid of it. That’s how anyone gets out of debt quickly – by cutting down on the expenses that they don’t actually need. And what about me? I’m currently on schedule to pay off the last few thousand of my student debt by this summer, which is incredibly exciting.

New to all of this? It can be difficult to start. The biggest thing is to pay more than your minimum payment, and also to make sure your payments are big enough that they’re actually contributing to the principal of a loan, as opposed to just shaving away at the interest. From there, any additional payments you throw at your loan exponentially reduce the repayment length of your debt. There are many repayment calculators available across the web so you can see how much even an extra $50 or $100 per month can dramatically reduce your debt.

The next issue is to actually find funds to free up from your current spending that you can allocate towards loan payments. I guarantee that if you take a look at your spending, you’ll find that there are ways to live on less. Even for the frugally-minded, there’s always more money to be shaved off when it comes to grocery shopping, employer benefits, etc.

While this post has been focused primarily on expense reduction, the other big method of reducing debt is increasing income. I find that expense reduction is much easier (and more immediate of a result) than increasing income, which also isn’t an option for everyone. If you’ve never looked before, Glassdoor has a really nifty tool called Know Your Worth, which can give you a general sense of what you probably should be making, based on your experience/title/location/education/etc. This is a tool that is extremely helpful if you’re thinking about negotiating your salary or are in the process of applying for jobs. By increasing your income while keeping your expenses low, voila! There’s more money available to pay down debt.

I’d love to hear if anyone sees debt repayment differently – please let me know! I think a person’s level of risk aversion plays a big factor here, and I would definitely consider myself to be quite risk adverse when it comes to debts vs investments.


  1. Great post! I am totally with you – there is something to said for the mental and emotional wins of paying off debt rather than investing (even if investing is technically the financial win). That being said, I am still investing a little bit right now (just $75/month) to build the habit of saving/investing while still being able to throw most of my money at my debt. That’s so exciting you’ll be debt free this summer – yay!

    1. Author

      Thanks, Kate! I totally agree. I’m actually putting in a similar amount into investing monthly. The only thing better than paying off debt is paying it off and investing at the same time. 🙂

  2. I probably was a little bit reckless with my student and auto loan repayments. After grad school, I had about $8k in student debt. I had a pretty good job out of college, so I was essentially throwing all I had at the debt and paid it off in 6 months. I then bought a $13k used VW Jetta and took a loan of about $9k. I proceeded to pay that off in 3 months by draining my savings account… I guess I just hate debt! Now I’m building my cash account in case I want to buy another property or be protected if something bad were to happen to me, my job, or my house.

    1. Author

      That’s amazing, Erik! If I had the ability to pay off that much debt in such a short period of time, I 100% would. It sounds like you’re extremely effective with your finances, I’m pretty jealous! 🙂

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