Should You Pay Off Debt or Invest? Create True Financial Strength

If the last few years have taught us anything, it’s this: the economy can shift fast.  Inflation, rising interest rates, job market uncertainty—none of us have a crystal ball. But  we can prepare. One of the smartest financial questions you can ask yourself is: 

"Should I pay off debt, or should I invest?" 

And while the math can offer clues, this decision is really about putting yourself in the  strongest possible financial position to weather whatever the future brings. 

First, Let’s Talk About Debt 

Not all debt is created equal. If you want stability, breathing room, and financial  confidence, you need to understand which kinds of debt help build your foundation— and which ones chip away at it. 

1. Consumer Debt Needs to Go 

Credit cards, personal loans, buy-now-pay-later apps—this kind of debt often comes  with double-digit interest rates and no asset behind it. It's just expensive baggage from  yesterday's spending. When the economy gets tight, this is the debt that becomes overwhelming fast. It  reduces flexibility and increases risk. If you carry credit card debt into a downturn, the  weight of interest and payment obligations can slow your ability to recover. The sooner you can eliminate consumer debt, the stronger your position will be.

‍2. Car Debt Should Be Short-Term 

Car loans feel manageable. But here’s the truth: cars go down in value, not up. They're  a depreciating asset, and every dollar you spend on interest is a dollar you don’t get  back. When you carry car debt into a financial storm, you're stuck paying full price for  something worth less every day. That's the opposite of leverage. The goal should be to  own your car outright—quickly. If your car payment is stretching your budget or making it hard to build savings, it's time  to reevaluate. In some cases, selling the car and switching to something more  affordable—even temporarily—can create the breathing room you need. 

3. Home Debt Can Be Strategic 

Unlike cars or credit cards, your mortgage is tied to an appreciating asset. Over time,  homes tend to gain value, and you need a place to live regardless of what the market  does.  Assuming your mortgage rate is reasonable and your payment fits comfortably in your  budget, this is the one kind of debt that doesn’t need to be rushed off your balance  sheet. 

Home debt is acceptable. Consumer and auto debt? Not so much. 

How Paying Off Credit Cards Frees Up Your Cash Flow 

Paying off high-interest credit cards isn’t just a smart financial decision—it’s a move that  gives you more breathing room every single month.  Let’s say you’re carrying $10,000 in credit card debt with an average interest rate of  20% APR. If your minimum payment is about 2.5% of the balance, you’re sending $250  a month just to maintain that debt. And if you’re only making minimum payments, most  of that money is going toward interest, not the principal. 

Now imagine wiping that debt clean. That’s $250 per month—$3,000 per year—back in  your hands. You could: 

• Build an emergency fund 

• Boost your retirement contributions 

• Pay cash for your next car 

• Simply breathe easier knowing you have less financial pressure 

Multiply that by a few cards and a car loan, and you can easily see how hundreds or  even thousands of dollars a month could be freed up. That’s not just about improving  your net worth—it’s about improving your day-to-day life. Eliminating consumer debt creates a snowball effect: the less you owe, the more you  can save. The more you save, the less reliant you are on debt in the future. It’s a cycle  of freedom.

The Real Goal: Financial Flexibility 

Why eliminate debt? 

Because when things get tough—and at some point, they will—you want options. Less debt means: 

• Lower monthly obligations 

• More freedom to pivot jobs, careers, or locations 

• More breathing room to help others or invest when opportunities arise Debt limits choices. Cash flow creates confidence. 

The fewer payments you have, the more likely you are to weather a job loss, recession,  or unexpected expense without going backward. 

Here’s a real story: One client came to me with nearly $30,000 in credit card and car  debt. She had a decent income, but every month felt like survival. We laid out a plan— she paid off the car first, then the credit cards. Within 18 months, her cash flow opened  up dramatically. When she faced a job loss a year later, she had enough margin to stay  afloat without dipping into retirement. Her words: “It wasn’t just about money. It was  about peace of mind.” 

What About Investing? 

Yes, investing is still important. Building wealth takes time and consistency. But you  don’t have to choose between being smart today and building for tomorrow. 

The One Non-Negotiable: Get the Employer Match 

If your employer offers a retirement match—grab it. Always. 

If they offer 100% match up to 4%, that’s a 100% return on your contribution. It’s free  money, and even when you’re focused on getting out of debt, this is one opportunity you  don’t want to miss. 

The Ultimate Goal: Save 15% of Your Income 

Whether it all goes into your 401(k), or a combination of IRAs, brokerage accounts, and  employer plans, aim to save 15% of your annual income toward retirement.

That number is based on long-term projections for financial independence. But if you're  still working on your debt, start small: 

• Contribute just enough to get the employer match. 

• As you pay off debts, increase your savings to 5%. 

• Then to 10%. 

• Eventually to 15% or more. 

Progress beats perfection. And building a habit of saving—even if it starts small— creates the discipline that sets up your future. 

The Ultimate Goal: Save 15% of Your Income 

Whether it all goes into your 401(k), or a combination of IRAs, brokerage accounts, and  employer plans, aim to save 15% of your annual income toward retirement. 

That number is based on long-term projections for financial independence. But if you're  still working on your debt, start small: 

• Contribute just enough to get the employer match. 

• As you pay off debts, increase your savings to 5%. 

• Then to 10%. 

• Eventually to 15% or more. 

To illustrate the power of consistent saving, consider this: 

If you invest $300 per month over 20 years, and earn an average annual return of 7%,  you’ll have saved just over $154,000.  Of that, only $72,000 is your actual contribution. The rest—more than $82,000—comes  from growth thanks to compounding interest.  That’s the magic of long-term investing. The earlier and more consistently you start, the  more powerful your momentum becomes.  Progress beats perfection. And building a habit of saving—even if it starts small— creates the discipline that sets up your future. 

Mistakes to Avoid

As you juggle debt and investing decisions, here are a few common pitfalls to steer clear of: 

• Skipping the employer match to pay off low-interest debt – Don’t sacrifice  free money. 

• Investing aggressively while carrying high-interest credit card debt – The  market might average 8%, but your debt is costing you 20%. 

• Stalling progress waiting for the "perfect time" – Financial planning favors  momentum over timing. 

Remember: You don’t have to have it all figured out today. You just have to keep taking  the next right step. 

Final Thoughts: Strength Over Speed 

You don’t need to be perfect. You just need to be intentional. When the economy is unpredictable, the best strategy is to: 

1. Eliminate consumer and car debt. 

2. Hold onto mortgage debt (if it fits your budget). 

3. Capture the full employer match in your retirement plan. 

4. Work toward saving 15% of your income over time. 

This approach builds breathing room. It protects your income and your peace of mind.  And most importantly, it sets you up for stability and opportunity—no matter what the  headlines say next. 

It’s not about timing the market or finding the perfect investment. It’s about building a life  that’s resilient to change. A life where fewer bills mean more freedom, where your  savings grow while your obligations shrink, and where the future feels less overwhelming and more in your control. 

So don’t stress about doing everything at once. Start where you are. Take the next step.  With consistency and clarity, you’ll be amazed at how much stronger your financial  position becomes. If you want help figuring out where to start, how to prioritize, or how to build a debt payoff and investing plan that fits your life—I’d love to help. Let’s get you in the strongest financial position possible.

Intermountain Wealth Management is a Registered Investment Adviser (RIA). The company manages several  fee-based portfolios comprised of various equity and fixed-income investments that may include exchange  traded funds (ETF’s), stocks and mutual funds. This is not a prospectus or an offer to sell any security. Please  read the prospectus of any investment before you invest. The information included here is intended for  education and information purposes only.

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