Foundations

Should you pay off the initial debt first?

Quidsmith Guides · Updated 2026-07-03 · 5 min read

You begin Quidsmith carrying a debt, and the very first question of the game is what to do about it. The short answer: clearing costly debt is one of the best "investments" available, because its return is guaranteed.

Paying off debt is a guaranteed return

Every pound of debt charging, say, 8% is costing you 8% a year for as long as it exists. Pay it off and you stop that cost dead. That is mathematically identical to earning 8% on your money, except it is risk-free and tax-free. No investment in the game offers 8% with certainty.

The ETF's ~7.5% long-run average looks comparable, but "average" hides crash years where it falls sharply. Debt does not have good and bad years. It charges the same rate whatever the market does. A guaranteed 8% beats a hoped-for 7.5%.

The one thing that comes first

There is a single exception to "clear the debt immediately": a small starter emergency fund. If you throw every last pound at the debt and then an unexpected event fires, you could be pushed to £0 and lose the run. Keep a thin buffer, clear the debt aggressively, then rebuild the buffer properly. Order matters:

1. A minimal cash buffer so a shock cannot end the game.
2. Attack the expensive debt until it is gone.
3. Rebuild a full emergency fund, then start investing.

When investing instead can make sense

Not all debt is created equal. The logic above is strongest for high interest rates. If a debt is cheap, below what your investments or even savings reliably earn, the maths tilts the other way and you might rationally invest while paying it down slowly. The mortgage is the classic example, covered in should you overpay your mortgage.