Dave Ramsey Fans

[TNKBELL]

We are going through FPU and WE. LOVE. IT.

We are on baby step 2 and we are feeling a little gazelle-ish and wanting to get rid of our last credit card ASAP!

Looking over the budget, we should be able to pay it off in 12 months. We will have to use our tax refund next year to finish it off. One thing that Dave recommends is to stop 401K contributions while doing this. If we stop our contributions which are currently 5% + 5% matched we will lose money. Also, we wouldn't be able to pay it off any sooner than 12 months even if we did that, so my thinking is to NOT stop the contributions. What do you think??
Thanks in advance for your wisdom!!

 

[holycow]

I would NOT stop the contributions. That is silly to me. It is free money!

Just keep on track with the payments each month and before you know it you will be out of debt.

Patience!

 

[Bkk40in2011]

I thought about the same thing on our 401K. We also get matching so its free money. I think it makes a difference how your taxing works out. Ours wouldn't save us a considerable amount either paycheck wise if we didn't contribute because of the tax breaks it offers and the match.

Did you say you ran the numbers just up to the match? IE if they match up to 5% you are only contributing 5%? Maybe just don't contribute anymore than the match amount until you are past the baby steps.

Good luck!

 

[rnorwo1]

Definitely DO NOT stop contributing!! Not only would you lose the free money, but it doesn't sound like you'd gain very much in doing so and would lose that year in investment potential. I think he advises that you stop after the match only, but either way, it does not make much sense in your situation, or so it seems.

We've never had credit card debt so I didn't take his classes, but we do live by his principles (cash only) and we do the rice and beans stuff when we're saving for something in particular or have an emergency. Most of his advice is pretty solid, but he advises alot based on psychological benefit rather than what makes sense in a strictly financial sense. So you're right to question some of his methods. In fact, a recent Suze Orman show bashed his philosophies (didn't name him but was clearly talking about him) on how to pay debt down. I work in mental health so I absolutely know the need to consider psychological factors, but if you can do the methods that make sense financially, rather than relying on the feel-good methods, definitely go that route!

 

[DawnM]

I am a HUGE fan of debt free living and DH and I currently only have a mortgage and have our emergency fund fully funded.

HOWEVER, we would NEVER stop paying into a retirement fund to do any of it....especially if it is company matched.

Agreeing with everyone who said do NOT stop paying your 401K.

Dawn

 

[windycitymom]

I'm a big DR fan too, but I would not stop a company sponsored 401k match - that's free money. Keep on funding it.

FWIW, Dave Ramsy is not just for those who have credit card debt. It is for anyone (especially couples) who want to be on the same-page financially and to understand the best way to spend/save your money. You can still be "leaking" money even if you don't have cc debt. Even frugal people can benefit from his teachings. It can help you be more frugal or as DR says, "gazelle-like." I have never heard of anyone who has taken FPU and not liked it. In fact, once you take it, you can take the class again anytime you want for free. It was the best $99 I spent in a long time!! The fee is for the kit, so your spouse or SO can attend for free.

All engaged couples should take this class!!!!

 

[kiddo76]

We are going through FPU and WE. LOVE. IT.

We are on baby step 2 and we are feeling a little gazelle-ish and wanting to get rid of our last credit card ASAP!

Looking over the budget, we should be able to pay it off in 12 months. We will have to use our tax refund next year to finish it off. One thing that Dave recommends is to stop 401K contributions while doing this. If we stop our contributions which are currently 5% + 5% matched we will lose money. Also, we wouldn't be able to pay it off any sooner than 12 months even if we did that, so my thinking is to NOT stop the contributions. What do you think??
Thanks in advance for your wisdom!!

Not a Dave Ramsey fan, but can you adjust your withholding so you get less taken out each week? Instead of waiting to get that money refunded back to you next year, you could apply that money now to your credit card debt.

 

[Carlyzmom]

HUGE Dave fan here! I know he says that, but I think I have heard him say to keep paying as much as they will match. So, I'd do that.

Good luck! You can do it! I promise, once you start making good decisions, GREAT things will continue to happen for you! It just works that way!

 

[ICF]

Stopping the contribution is stupid and makes no sense........

 

[TNKBELL]

I thought about the same thing on our 401K. We also get matching so its free money. I think it makes a difference how your taxing works out. Ours wouldn't save us a considerable amount either paycheck wise if we didn't contribute because of the tax breaks it offers and the match.

Did you say you ran the numbers just up to the match? IE if they match up to 5% you are only contributing 5%? Maybe just don't contribute anymore than the match amount until you are past the baby steps.
Thanks!!! We are only contributing up to the match. I feel very reassured, I just wanted to make sure I wasn't missing something!

Good luck!

Not a Dave Ramsey fan, but can you adjust your withholding so you get less taken out each week? Instead of waiting to get that money refunded back to you next year, you could apply that money now to your credit card debt.

We actually don't have anything taken out of the check for Federal..0...having so many kiddos makes that possible. Otherwise, that's a great suggestion.

 

[Jeff_G]

I've heard Dave both ways on this, a lot depends on how much debt and how long you are going to take to pay it off. If you said it was going to take 5 years or more to pay it off and you could cut it down to one or two by stopping the matching he would tell you to stop. Since you have run the numbers and seen that it won’t cut much off the time I would continue the matching.