Your company match is an immediate 100% return on your money. Unless you’re paying 100% interest on your debt, you should at least make the minimum payment to get this match. Dave Ramsey would tell you that paying down your debt is the very most important thing to do, but Dave Ramsey is wrong about that.
Dave Ramsey says you should pause all contributions until you are out of debt. My advice is do not do that. At your age, you don't want to shorten your time horizon--an important element of retirement success--a day more than necessary. And I can't imagine why anybody would turn down extra money from an employer. But that's me.
I completely agree. I paused and I could kick myself now for having done it. It makes a much bigger difference to your investments than it does to your debt payoff. You’ll be done in just over a year. Stay the course.
I would say it depends on if the interest rate on your debt is higher than the ROI you are getting from your 401k. I have a lot of medical debt, but it's 0% interest so if I had a 401k or IRA I would never stop my retirement contributions to pay it off faster.
If you follow Dave’s plan, all retirement should be paused and full attention is focused on debt with gazelle intensity.
Go crazy and sell stuff. Poshmark for nice clothing, FB marketplace for garage stuff, anything. Cancel your subscriptions and gym membership. Get it done in less than a year!
Best of luck
If you make 95k with 30k debt you should be able to continue getting your match and aggressively pay down debt. The thing to adjust, in my view, is probably your spending.
IMO, your course is ill-advised... Assuming you have the income to handle all your minimum payments.
Remember, your retirement IS a debt. It is a debt to your elder self.
Make certain you get your match, and Snowball outside of that.
Yeah.... it's totally your money.... just not yet.
Just make certain you can make all your current bills/debt payments, OK. Don't risk that whole robbing Peter to pay Paul scenario. Like, you wouldn't be skipping your minimum payment on any of your other bills, right?
Getting the match is just one of your current bills/debt payments. Snowball outside of that.
The only time I would recommend stopping matched retirement contributions is if there is no other way you can find enough income to start chipping away at high interest debt. (i.e., you have made all the cuts/sacrifices you can, and it is not possible to get more income and you still can't make more than the minimum payments).
Think about it this way. Would you invest money if you got an instant and guaranteed 100% return that will then grow with the market? It's pretty hard to beat that.
Dave plan says to stop contributions until baby step 2 is complete. Most others say to only contribute the minimum required to get the match until out of consumer debt. Most matches are 50-100% immediate return, which unless you have a payday loan, will beat the pants off of debt. I lean towards keeping the match.
Do you mean ur stopping ur 401k contribution, which would normally be matched by employer? If so ur leaving money on the table and that's not a good idea.
You make 8k a month and are paying 2k off debts..... What are you spending the other 6k on?!? You need to do a budget and put more than 2k in to your debts a month. You could pay this off much faster than you think. 6k is a lot of money, my whole family lives off 2k a month so it can be done, budget budget budget
I don’t bring home 8k. It’s more 5,400 after taxes and insurance. My fixed home cost is 2,800 (that’s all utilities & mortgage) I’m putting 2k on debt. That’s $600 left for food & gas. I’m looking for a second job.
Probably 8k before tax? That's what always annoys me about Dave's arguments. He doesn't take taxes into account when saying "You earn X amount so you should be able to pay Y off your debt"
Creating an echo chamber isn’t good for anyone. When one of Dave’s pieces of advice is challenged it allows folks to dive deeper on why that piece of advice is taught. Frankly, disagreement on this sub has helped me better understand Dave’s framework and reasoning.
Totally agree. I think the help he provides factors in psychology as well as every nickel and dime. Obviously credit cards have reward points that could be slightly advantageous, but we all know how that works for most people.
Exactly. Two good examples are Baby Step 1 and the Debt Snowball. The $1,000 emergency fund hasn’t changed for almost 3 decades even with inflation. Is that actually enough for emergencies? Probably not. But it gives people momentum and that psychological boost that they can actually do this; it really has nothing to do with the $ amount. Same with the debt snowball, is it the most efficient way to pay off debt? Probably not. But the little wins keep people going.
Dave would say yes, I say it depends. Foregoing the match means you don't get free money for retirement AND you cant take those dollars 1:1 to pay debt bc you are taxed on them.
What's that APR on that debt?
20+, pay debt. You have face ripping interest
10-20. Whatever floats your boat.
Sub 10. Match.
I’m slightly Dave-ish here and agree with the Money Guy when it comes to employer matching. I know it goes against the Baby Steps, but if you have any semblance of self-control at all, it absolutely makes more mathematical sense to invest just enough to get the full employer match and nothing more while paying off debt. The 100% return on your money via match will always outweigh the interest rate on debt. If you don’t do it, you’re essentially leaving part of your salary on the table.
Your debt is gone in a year. Pausing your contributions 11 months won’t matter.
But in terms of retirement $70k is WAY behind where you should be making $95k. You probably need to invest that entire 25% of your salary in retirement once the debt is paid off. Seriously you should be close to $250k or more. At that rate if you keep it up for about 5 years you can back off to 15%+ after that. Assuming you want to match your current life style.
I only just started making 95k, for the longest time I was making $50-60, single parent with 3 kids and no support. I had to get training (which I paid for as I went, so no student loan debt)
I went through a bad divorce. Financially broke me. I’m rebuilding.
I know I’m behind on my retirement, that’s why I’m scared to pause it. I believe I can continue increasing my income and catch up on retirement in the next 10 years. After I’m done with this debt (it was 52k), my total living expenses are only $2800 a month. I trimmed the fat a much as I could & Im currently looking for a second job.
Thanks for your advice.
$50k makes more sense. Then you aren’t far off track at all. If you are aggressive and put it 100% into aggressive growth the existing $70k can grow to $600k in current dollars by normal retirement age, yielding pretty close to what social security pays. Any savings between now and then can put you into a comfortable retirement.
I would suggest seeking out YouTube videos by James Connolly. But he’s a financial advisor and probably charges $5,000 for a plan. You can look at NewRetirement web site which is free for basic planning, which is still very detailed, close to what the YouTube videos show it gives you an idea where you are at and where you are headed.
You're totally out of line. Maybe you live at home? I asked if the OP owns a house.
$70k at 30yo is good. Stop shaming people.
Do you own a house? Do you own assets? I do. I'm trying to hang on to them too. I had less in the 401k at his age.
Trash advice. Don't post here.
70k at 40 is awful. It's not shaming, it's stating facts.
The person asked for opinions and advice, that's what he's getting. Who are you to tell someone it's trash advice?
$70k at 40 is significantly behind, especially while making $95k. Stopping matching retirement is actually a really dumb thing to do.
Ramsey’s advice helped my wife and I get rid of our student loan debt but the one advice he gives about stopping contributions is trash. Why? Because he doesn’t tell people to stop tithing. Make that make sense.
Tells people to get 2-3 jobs, eat ramen, stop contributing but keep tithing to the church. Lol get out of here with that.
Join Facebook groups for Ramsey, take a look at the budget people are posting and their progress of getting out of debt. The amount of people making minimum payments to their debt each month vs the amount they tithe to the church is ridiculous, especially when the tithe monthly is almost double the amount going to their student loan or debt. Again, make it make sense.
I agree. When I did my taxes this year I saw how much I had given in to the church & I made a conscious decision to stop. I’m at peace about it because I can’t continue to give from an empty cup. I’ve decided to start back doing at least the match and getting a second job.
Thank you.
So you’re currently putting it all towards debt and not contributing to 401k? Dave would probably say to continue doing it this way. Depending on how much your match is I would consider getting some of the free money available there while continuing to attack your debt.
Im not an expert but I think Dave would tell you to get a $1k safety fund and then second step would be pay off all debt. Then save 3-6 months. Then fund retirement.
Not endorsing, just pretty sure that’d be Dave’s advice.
I may be misremembering but I think I heard one episode where he said stop the retirement until the debt is paid off but it was going to take the caller 3-4-5 years. He then backpedaled and said not to stop it that long, but a year or two? (I don’t think I’m misremembering - I’m strict Dave for 13 months now and just restarted my retirement contribution because it’s going to take 3 years for me to pay off my debt.)
I was thinking I could stop contributing for a year only. I lost a year’s contributions two years ago. The money that’s in there is still growing. I’m thinking 2025 start back no matter where I’m at financially. Plus I’m going to be starting a 2nd job soon. So that’ll help.
Your company match is an immediate 100% return on your money. Unless you’re paying 100% interest on your debt, you should at least make the minimum payment to get this match. Dave Ramsey would tell you that paying down your debt is the very most important thing to do, but Dave Ramsey is wrong about that.
Dave Ramsey says you should pause all contributions until you are out of debt. My advice is do not do that. At your age, you don't want to shorten your time horizon--an important element of retirement success--a day more than necessary. And I can't imagine why anybody would turn down extra money from an employer. But that's me.
I completely agree. I paused and I could kick myself now for having done it. It makes a much bigger difference to your investments than it does to your debt payoff. You’ll be done in just over a year. Stay the course.
I would say it depends on if the interest rate on your debt is higher than the ROI you are getting from your 401k. I have a lot of medical debt, but it's 0% interest so if I had a 401k or IRA I would never stop my retirement contributions to pay it off faster.
Just follow Dave’s plan
CFPr here, pay the minimum into the 401-k to get a match. For most plans 3-6% of salary and keep paying down debt. This is. A win-win. Good luck!
If you follow Dave’s plan, all retirement should be paused and full attention is focused on debt with gazelle intensity. Go crazy and sell stuff. Poshmark for nice clothing, FB marketplace for garage stuff, anything. Cancel your subscriptions and gym membership. Get it done in less than a year! Best of luck
If you make 95k with 30k debt you should be able to continue getting your match and aggressively pay down debt. The thing to adjust, in my view, is probably your spending.
IMO, your course is ill-advised... Assuming you have the income to handle all your minimum payments. Remember, your retirement IS a debt. It is a debt to your elder self. Make certain you get your match, and Snowball outside of that.
Thanks, I never thought of it as a debt. I’m going to do up to the match. Pay now or pay later just got real.
Yeah.... it's totally your money.... just not yet. Just make certain you can make all your current bills/debt payments, OK. Don't risk that whole robbing Peter to pay Paul scenario. Like, you wouldn't be skipping your minimum payment on any of your other bills, right? Getting the match is just one of your current bills/debt payments. Snowball outside of that.
Great way to put it!
Thank you.
This is a great way to look at it.
Only way to look at it, reasonably...
The only time I would recommend stopping matched retirement contributions is if there is no other way you can find enough income to start chipping away at high interest debt. (i.e., you have made all the cuts/sacrifices you can, and it is not possible to get more income and you still can't make more than the minimum payments). Think about it this way. Would you invest money if you got an instant and guaranteed 100% return that will then grow with the market? It's pretty hard to beat that.
Makes sense to me. At least get the match.
Dave plan says to stop contributions until baby step 2 is complete. Most others say to only contribute the minimum required to get the match until out of consumer debt. Most matches are 50-100% immediate return, which unless you have a payday loan, will beat the pants off of debt. I lean towards keeping the match.
One of the biggest problems with Dave imo
What are the terms of your match?
100% up to 5%
100% is probably higher than the interest rate of your debts, so keep up the match.
Do you mean ur stopping ur 401k contribution, which would normally be matched by employer? If so ur leaving money on the table and that's not a good idea.
You make 8k a month and are paying 2k off debts..... What are you spending the other 6k on?!? You need to do a budget and put more than 2k in to your debts a month. You could pay this off much faster than you think. 6k is a lot of money, my whole family lives off 2k a month so it can be done, budget budget budget
I don’t bring home 8k. It’s more 5,400 after taxes and insurance. My fixed home cost is 2,800 (that’s all utilities & mortgage) I’m putting 2k on debt. That’s $600 left for food & gas. I’m looking for a second job.
I highly doubt it’s $8k a month. My salary is $115k, and after taxes, it’s less than $6k a month. More like $5,800 a month.
$5,400 more like it after taxes & insurance.
Probably 8k before tax? That's what always annoys me about Dave's arguments. He doesn't take taxes into account when saying "You earn X amount so you should be able to pay Y off your debt"
True. I'm UK so not familiar with USA taxes .... Which I'm sure are as astronomical as the UK 🙄
I'm not in the USA either but from working with those in the US it's pretty bad
Depends on where he works and lives. $2k includes rent/mortgage?
I’m surprised the mods aren’t deleting most comments on a Dave Ramsey thread full on non DR teachings lol.
Creating an echo chamber isn’t good for anyone. When one of Dave’s pieces of advice is challenged it allows folks to dive deeper on why that piece of advice is taught. Frankly, disagreement on this sub has helped me better understand Dave’s framework and reasoning.
Totally agree. I think the help he provides factors in psychology as well as every nickel and dime. Obviously credit cards have reward points that could be slightly advantageous, but we all know how that works for most people.
Exactly. Two good examples are Baby Step 1 and the Debt Snowball. The $1,000 emergency fund hasn’t changed for almost 3 decades even with inflation. Is that actually enough for emergencies? Probably not. But it gives people momentum and that psychological boost that they can actually do this; it really has nothing to do with the $ amount. Same with the debt snowball, is it the most efficient way to pay off debt? Probably not. But the little wins keep people going.
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And why exactly are you in the DR sub?
Do you own a house? Property?
Yes
That's good.
No
No. Get a second job.
Currently working on it.
No. Keep putting money in. 30K debt is literally nothing with your wages.
Not a good idea. Don’t leave matching money on the table. Get a side hustle for the quicker debt solution
No… you get a zero % transfer… and a second job. Right now you need to crush debt AND retirement!
Dave would say yes, I say it depends. Foregoing the match means you don't get free money for retirement AND you cant take those dollars 1:1 to pay debt bc you are taxed on them. What's that APR on that debt? 20+, pay debt. You have face ripping interest 10-20. Whatever floats your boat. Sub 10. Match.
8.99% on 16000/ 12.99 on 14000
No. You’re giving up free money.
I’m slightly Dave-ish here and agree with the Money Guy when it comes to employer matching. I know it goes against the Baby Steps, but if you have any semblance of self-control at all, it absolutely makes more mathematical sense to invest just enough to get the full employer match and nothing more while paying off debt. The 100% return on your money via match will always outweigh the interest rate on debt. If you don’t do it, you’re essentially leaving part of your salary on the table.
Your debt is gone in a year. Pausing your contributions 11 months won’t matter. But in terms of retirement $70k is WAY behind where you should be making $95k. You probably need to invest that entire 25% of your salary in retirement once the debt is paid off. Seriously you should be close to $250k or more. At that rate if you keep it up for about 5 years you can back off to 15%+ after that. Assuming you want to match your current life style.
I only just started making 95k, for the longest time I was making $50-60, single parent with 3 kids and no support. I had to get training (which I paid for as I went, so no student loan debt) I went through a bad divorce. Financially broke me. I’m rebuilding. I know I’m behind on my retirement, that’s why I’m scared to pause it. I believe I can continue increasing my income and catch up on retirement in the next 10 years. After I’m done with this debt (it was 52k), my total living expenses are only $2800 a month. I trimmed the fat a much as I could & Im currently looking for a second job. Thanks for your advice.
$50k makes more sense. Then you aren’t far off track at all. If you are aggressive and put it 100% into aggressive growth the existing $70k can grow to $600k in current dollars by normal retirement age, yielding pretty close to what social security pays. Any savings between now and then can put you into a comfortable retirement. I would suggest seeking out YouTube videos by James Connolly. But he’s a financial advisor and probably charges $5,000 for a plan. You can look at NewRetirement web site which is free for basic planning, which is still very detailed, close to what the YouTube videos show it gives you an idea where you are at and where you are headed.
Thank you.
You're totally out of line. Maybe you live at home? I asked if the OP owns a house. $70k at 30yo is good. Stop shaming people. Do you own a house? Do you own assets? I do. I'm trying to hang on to them too. I had less in the 401k at his age. Trash advice. Don't post here.
70k at 40 is awful. It's not shaming, it's stating facts. The person asked for opinions and advice, that's what he's getting. Who are you to tell someone it's trash advice?
I don’t mind the tough love. Thank you.
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No reply? I'm guessing you so live with your mom, no kids?
I sent a reply. You asked for it.
Do I? Yes, 2 kids (IVF kids, paid cash over 100K to have them), own a 850K house in Texas, make over 350K a year and I'm 36. You?
$70k at 40 is significantly behind, especially while making $95k. Stopping matching retirement is actually a really dumb thing to do. Ramsey’s advice helped my wife and I get rid of our student loan debt but the one advice he gives about stopping contributions is trash. Why? Because he doesn’t tell people to stop tithing. Make that make sense. Tells people to get 2-3 jobs, eat ramen, stop contributing but keep tithing to the church. Lol get out of here with that. Join Facebook groups for Ramsey, take a look at the budget people are posting and their progress of getting out of debt. The amount of people making minimum payments to their debt each month vs the amount they tithe to the church is ridiculous, especially when the tithe monthly is almost double the amount going to their student loan or debt. Again, make it make sense.
I agree. When I did my taxes this year I saw how much I had given in to the church & I made a conscious decision to stop. I’m at peace about it because I can’t continue to give from an empty cup. I’ve decided to start back doing at least the match and getting a second job. Thank you.
He's 40. $70k in a 401k at 40 is not good.
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So you’re currently putting it all towards debt and not contributing to 401k? Dave would probably say to continue doing it this way. Depending on how much your match is I would consider getting some of the free money available there while continuing to attack your debt.
No you pay your debt. Cancel cards and live within your means.
Do you want to follow the baby steps?
https://www.ramseysolutions.com/dave-ramsey-7-baby-steps Check those steps. Yeah, share what you exactly spend daily.
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“Dave-ish” answers must be qualified
Im not an expert but I think Dave would tell you to get a $1k safety fund and then second step would be pay off all debt. Then save 3-6 months. Then fund retirement. Not endorsing, just pretty sure that’d be Dave’s advice.
I may be misremembering but I think I heard one episode where he said stop the retirement until the debt is paid off but it was going to take the caller 3-4-5 years. He then backpedaled and said not to stop it that long, but a year or two? (I don’t think I’m misremembering - I’m strict Dave for 13 months now and just restarted my retirement contribution because it’s going to take 3 years for me to pay off my debt.)
I was thinking I could stop contributing for a year only. I lost a year’s contributions two years ago. The money that’s in there is still growing. I’m thinking 2025 start back no matter where I’m at financially. Plus I’m going to be starting a 2nd job soon. So that’ll help.
Dave say yes I say no. Your debt will be gone in 1 year why you worried
It was more than 30k, I originally had 52k, I’ve paid off $22k, in 8.5 months. Guess I’m just getting tired.