Dave Says

Dave Says
America's trusted voice on money and business, Dave Ramsey is a personal money management expert and extremely popular national radio personality. His three New York Times best-selling books - Financial Peace, More Than Enough and The Total Money Makeover - have sold more than 6 million copies combined. His latest book is EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches.

Intense Focus


Intense Focus

Dear Dave,

What would you recommend for 401(k) contributions while getting out of debt?

Chaz

Dear Chaz,

I recommend putting a temporary stop to investing while you're getting out of debt. Lots of people are shocked by this advice, because they're afraid of missing out on the wonders of compound interest or their employer's match. But the key word here is "temporary."

Millions of people have followed and been successful with the program found in The Total Money Makeover. The first step, Baby Step 1, is to save $1,000 as a starter emergency fund. Baby Step 2 is pay off all of your debts, except for your house, from smallest to largest with the debt snowball plan.

During this time you're attacking your debt with incredible intensity and putting every penny you can scrape together toward knocking out debt.

The average person working my plan can pay off all their debt, excluding their home, in 18 to 24 months. Some folks can do it faster, and for some it takes a little bit longer. But during this time I want your financial focus to be squarely on getting out of debt. Once that's done, you'll find that you have a lot more control over your biggest wealth-building tool: your income.

Many times in life we try to accomplish too many things at once. One problem with this is often it diminishes our ability to focus. When you spend all your time nickel-and-diming everything, the result is that nothing gets done very well. You need to really move the needle and see results because personal finance is 80 percent behavior and only 20 percent head knowledge. It's not really a math issue because if you'd been doing the math all along, you wouldn't have a bunch of debt.

That's why, for a short period of time, I want you to concentrate, with laser intensity, on knocking out debt. Once that's out of the way, you can pour even more money into saving, investing and achieving financial peace!

- Dave


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Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. His newest best-seller, Smart Money Smart Kids, was written with his daughter Rachel Cruze, and recently debuted at #1. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
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