'Help! Should I save for retirement or pay off debt?'


Welcome to Asking for a Friend, Grow's new money advice column. Got a question for one of our money experts? Email us at

Dear Asking for a Friend,

I'm trying to decide whether to keep working toward paying off my $67,000 in debt or invest in my company's 401(k) plan. The plan I have access to will match up to 3.5% of my contributions each pay period.

On the one hand, a 401(k) plan is free money, and I don't want to say no to that. On the other, paying off debt is essential to my financial health and sense of peace. I'm currently using the avalanche method, where I pay the minimum on most of my accounts, and then I put the most money into the debt with the largest interest rate. Do you think it makes sense to ignore the opportunity for the company's contribution until I have paid off my debt, or is free money a great thing that a person should not ignore?


Weighing My Options

Dear Weighing My Options,

Free money is pretty tempting and, in this case, I do think it would be smart to take advantage of your company's 401(k) match, even as you're working your way through debt. You're fortunate to have this benefit, since it's not something all companies offer.

My hope is that you can do a little bit of both — invest for your future and tackle your debt at the same time. It's what I like to call a hybrid approach. And here are a few steps I'd suggest you take to manage it all.

1. Fulfill the match

Contribute 3.5% of each paycheck to your 401(k). This allows you to fully embrace your company's match and effectively invest 7% of your income. That's less than the recommended 10% to 15% of your income the financial expert industry (myself included) tends to recommend, but it's better than nothing and hopefully gives you the ability to continue paying down your debt.

My hope is that you can do a little bit of both — invest for your future and tackle your debt at the same time.
Farnoosh Torabi
Host of the podcast 'So Money'

And speaking of your debt:

2. Stick with the avalanche method

Kudos to you for using this payoff tactic. Putting a little bit more towards your highest interest debt is smart. This is technically your most expensive debt and better to get it out of the picture ASAP.

My one other tip would be to make all your payments automatic, just like the 401(k) contribution, to ensure you stay the course. I'm not sure how much extra you're adding to this balance each pay cycle, but if you find that you can continue the track that you've been on, even after contributing 3.5% to your 401(k), great!

What's the Difference Between a Debt Avalanche and a Debt Snowball


3. Shore up more cash

What are some expenses that you can pare down or forgo to then help you allocate more money towards debt?

If you feel you're already saving all that you can, think about how you might be able to bring in extra money through a side gig or additional revenue stream. You may be able to find easy jobs through sites like Upwork, Fiverr, and TaskRabbit and bring in an extra $100 or more per month.

And remember, your income will increase over time. Between raises, bonuses, windfalls, promotions, and other financial boosts, you'll have opportunities to turn the dial on both your debt repayment plan and savings.


Farnoosh Torabi is the host of the award-winning podcast "So Money" and the bestselling author of "When She Makes More." Follow her on Instagram @farnooshtorabi.

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