Should You Invest or Pay Off Debt First? Your September Decision Guide

Quick Recap: In our article “How to Bounce Back from Summer Holiday Spending,” we explored why September feels so financially challenging and introduced the foundation-building approach. Then we looked at “Why Post-Summer Holiday Money Stress is Completely Normal” to understand the psychology behind your financial anxiety. Now let’s tackle the practical question that’s probably keeping you up at night: should you invest or pay off debt first, and can you even start investing while you still owe money?

Imagine you’ve found yourself with an extra €200 this month after your summer holidays. But your overdraft balance is sitting at €600 from holiday expenses, you’ve been meaning to start investing properly, and your emergency fund needs attention. So where does that €200 go first?

What most people don’t realize is that you don’t always have to choose one or the other. There’s actually a practical way to figure out what makes sense for YOUR specific situation, and the answer might surprise you.

What We’re Actually Dealing With Here 📊

The Intrum European Consumer Payment Report 2024 found that nearly half of millennials have bought stuff they couldn’t really afford, and honestly, a lot of that’s been about experiences rather than things. They’re way more likely to go into debt for that weekend in Rome or festival tickets than for a fancy TV.

Most of the debt they’re juggling falls into these categories:

• Personal loans from your bank, usually somewhere between 3-8% depending on where you live and how good your credit is
• Overdrafts that range from totally free (if you’ve got a good relationship with your bank) to pretty expensive if you go over your limit
• Consumer credit for bigger purchases like a new smartphone or furniture for your flat
• Student loans if you studied somewhere that charges fees, though loads of us were lucky with free or cheap uni

How to Actually Decide Whether to Invest or Pay Off Debt First 🧮

Here’s a simple three-step process that considers your actual situation, not some theoretical perfect scenario:

Step 1: Check Your Foundation 

Before you decide how to split your money, make sure you’re not setting yourself up for more financial stress down the road. Do you have a solid foundation?

• Emergency funds: Even €500-1000 gives you breathing room so one unexpected expense doesn’t create more debt
• Job security: If your income feels uncertain right now, paying off debt might give you more peace of mind than investing
• Sleep-at-night factor: Some people just can’t relax with any debt hanging over them, and that’s totally valid regardless of what the math says

Step 2: Look at Your Interest Rates 

Write down all your debts and their interest rates. 

• Low-interest debt (0-4% per year)
• Medium-interest debt (4-8% per year)
• Moderately high-interest debt (8-10% per year)
• Very high-interest debt (10+% per year)

Step 3: Match Your Strategy to Your Rate 

Now you’ll apply different approaches based on what types of debt you’re dealing with. Common sense suggests tackling your highest interest rate debt first, regardless of balance size. By focusing on the highest interest rate debt first, you pay less overall interest over time and reduce the principal balance more quickly than if you focused on debts with lower interest rates.

For Very High-Interest Debt (10+%)

• Split: 90-95% debt payoff, 5-10% investing
• Why: This is basically an emergency. The guaranteed return from eliminating this debt beats almost any investment
• If you have multiple debts: Put everything toward this highest-rate debt first, pay minimums on everything else
• Reality check: Just keep a tiny amount going to investments to maintain the habit

For Moderately High-Interest Debt (8-10%)

• Split: 70-80% debt payoff, 20-30% investing
• Why: The math favors debt payoff, but keeping some investment momentum helps maintain the wealth-building habit
• If you have multiple debts: Focus extra payments on this rate tier after handling any very high-interest debt
• Focus: Attack this debt aggressively while still building for the future

For Medium-Interest Debt (4-8%)

• Split: 50% debt payoff, 50% investing
• Why: This gives you the best of both worlds without being too risky
• If you have multiple debts: Handle this after clearing higher-rate debt
• Flexibility: You can adjust this based on how you feel about having debt

For Low-Interest Debt (0-4%)

• Split: 30% debt payoff, 70% investing
• Why: Your money will probably grow faster invested than the tiny interest you’re paying
• If you have multiple debts: These can wait while you focus on higher-rate debt
• But: If being debt-free would make you sleep better, that’s worth something too

Important exception: If your employer matches pension contributions, always contribute enough to get the full match first, regardless of your debt situation. Free money beats everything.

Smart Moves That Actually Work 🎯

Once you’ve figured out your basic split, these strategies to invest or pay off debt can help you get the most out of your approach:

The Rollover Trick 

This is honestly the best strategy for turning debt payments into serious wealth building:

How it works:

• Months 1-6: You’re paying €180 monthly toward clearing that holiday debt
• Month 7: Debt’s gone, so you immediately redirect that €180: 
  • €130 goes to increased Beewise investments
  • €50 goes to a “fun fund” for your next adventure

Why it’s brilliant: You’re already used to that money being gone, so it doesn’t feel like a sacrifice when you start investing it instead.

The Snowball vs. Avalanche

If you’ve got multiple debts, you need to pick your strategy:

• Debt Avalanche: Pay minimums on everything, then attack the highest interest rate first. This saves the most money mathematically.
• Debt Snowball: Pay minimums on everything, then attack the smallest balance first. Research shows this can be way more motivating because you see quick wins.

For most of us dealing with moderate amounts at reasonable rates, the psychological boost from knocking out smaller debts often beats the math advantage of the avalanche method.

The Seasonal Approach

Instead of being super rigid about monthly amounts, consider adjusting seasonally:

• September-November: Focus more on debt while building good habits 
• December: Maybe ease up on debt payments to handle Christmas expenses 
• January-March: Get back to aggressive debt elimination or shift toward investing 
• April onwards: Use the rollover strategy to boost your investments

The Emergency Fund Rule

Never, ever touch your emergency fund to either invest or pay off debt faster if you can avoid it. Even if it seems logical on paper, having that safety net is worth way more than saving a bit on interest payments.

Making Beewise Work While You Sort Your Debt 📱

Starting Small While You Pay Things Off 

Even when debt is your main focus, keeping some investment momentum helps build the habits you’ll need later:

• Start with €20-30 monthly going to any Beewise goal while you tackle higher-priority debt. The habit matters more than the amount right now.
• Turn on those investment reminders so you don’t forget about wealth-building even when debt payments are taking most of your attention.
• Track both goals so you can see progress in debt elimination AND investment growth, keeping motivation high.

Planning Your Debt Freedom Strategy 

• Set up a “debt freedom celebration” goal for when your holiday debt is cleared. If you’re putting €200 toward debt now, plan to invest €250 once it’s gone.
• Use that rollover strategy: When you make your final debt payment, immediately bump up your investment contributions instead of letting that money disappear into general spending.

Make it automatic: Set up transfers so the month after you clear your debt, your Beewise contributions automatically increase.

The Bottom Line 💪

Here’s the thing about making the choice between whether you invest of pay off debt: it’s not really about following some perfect formula. It’s about creating an approach that works with your actual life and helps you build momentum toward long-term wealth.

What to remember:

• Interest rates matter: Low rates (0-4%) favor investing, medium rates (4-8%) suggest splitting, high rates (above 8%) need focus
• Start small but start: Even €20-30 monthly toward investments while paying off debt builds crucial habits
• Protect your emergency fund: Never raid your safety net to pay debt faster
• Plan the rollover: When debt’s gone, immediately redirect those payments to investments, not lifestyle inflation

The habits you build this September set you up for confidence that makes future holidays feel exciting instead of stressful. Whether you’re mostly focused on the action to invest or pay off debt, the key is making a deliberate choice that fits your situation.

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