Everyone I work with wants to talk about investing… for good reason! Investing seems so sexy and sophisticated and exciting, right? Your money’s out there making more money for you while you sleep and eat and binge-watch something that has Pedro Pascal in it. How amazing is that? 

And yet…

Before you start investing for retirement, pay off your high-interest debt.  

Yes, I know that getting started on investing early is REALLY important. “Time in the markets is more important than timing the markets.” I love investing. It’s fantastic and I want everyone to do it.

But when you invest before you have paid off your debt, you’re putting money where you can’t reach it without borrowing from your future self at best, and paying taxes and penalties at worst. If you find yourself forced to pull money out of a down market to make your payments, you will realize (i.e., lock in) those losses. And if that money is in a retirement account, you’ll have to pay taxes and penalties. Future You loses out big-time because you weren’t sufficiently insulated against risk. 

A big part of my mission is to help you prepare to weather life’s downturns and make the most of the upswings. I can’t in good conscience tell you that it’s a good idea to invest for retirement when you’ve still got high-interest, high-risk debt — especially if it’s credit cards. And if you’re needing to float ordinary expenses on credit cards just to make it through the month, you should definitely not be putting any money where you can’t reach it.

Apart from that, I am personally an easily distracted little goldfish who craves rewards and visible progress. I like going HAM on one goal at a time whenever possible, and I’m not alone.

Most of us do better focusing on one thing at a time instead of trying to do a whole bunch of things gradually – it’s just easier to stay focused because you’re seeing progress instead of spreading yourself too thin. 

If you still have high-interest debt and you are mentally ready to get very serious about paying it off, waiting to invest can help you stay motivated. The debt will go away faster with the would-be-retirement-cash piled on it. If you are really excited about investing, your enthusiasm will fuel you to get over that obstacle even faster. And when you have eliminated those payments, you will have resources to catch up with because you will have control of all your money instead of paying interest on debt. 

That being said: if you’ve ALREADY been investing in retirement accounts, leave that money alone! Don’t ever early-withdraw or borrow against a 401(k) or other retirement account unless it’s to avoid a foreclosure or bankruptcy (and sometimes not even then). The risk and penalties are significant — like, 10% on top of your tax rate significant. Just pump the brakes for now and make all the changes you can before you put that on the table.

Focus on paying off debt, friends. You will sleep better and wake up richer. This part is a grind, but it gets better. And then you’re ready for what comes next.