Unit 1 · Level 2 · Pay it off or invest it?
The order of operations
The pay-it-off or invest-it question gets much easier when you stop treating it as a single decision and start treating it as a queue. Each step exists because the step after it is worth less until the one before it is done. You work down the list with whatever is spare, and when a step is satisfied the money moves along to the next one.
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What you get asked
Put the standard order of operations for a spare euro into sequence
Minimums protect you from fees. The buffer stops the next surprise landing on a card. The match is free money. Then the expensive debt, then the full fund, then markets.
Why do minimum payments sit at the very top of the list, above everything else?
A missed payment can add a fee worth more than a month of interest and follow your credit file for years. Nothing further down the list is worth that.
A small starter buffer comes before attacking debt so the next surprise expense does not go straight back onto the ___.
Without a buffer, a broken boiler undoes three months of repayments in one afternoon. One month of costs set aside keeps the progress from unwinding.
You spend €1,800 a month. Your plan targets a full emergency fund of four months of spending. How large is that fund?
€1,800 × 4 = €7,200. Note that the target is built from your spending, not your income. What leaves the account is what you have to replace.
Your 22% card is cleared and the match is captured. Your buffer holds one month of costs. What is next in the queue?
The full fund comes before markets, because it is what stops a bad month forcing you to sell investments on a day you did not choose. Then you invest. 🐜
The rest of this unit
The one decision that decides where every spare euro goes, and it turns on a comparison most people never make.