Posted on 2/2/14
dave says2 300KENTUCKY (12/15/13) – This week Dave discusses 'intense focus' and 'savings and security.'

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
Dear Dave,
My wife and I make about $100,000 a year. We have $63,000 in the bank, and we owe $47,000 on our home. The house is worth about $250,000, and it’s our only debt. We’d like to go ahead and pay off the house, but we’re worried about depleting our savings to that extent. What would you do? — Matt

Dear Matt,
If I were in your situation, I’d cut a check and pay off the house. Keep in mind that by doing this we’re not saying you’ll keep your savings at that lower point. Once that mortgage payment is off your backs, you’ll be able to save more and save faster than ever!

That’s my advice. Pay off the house and become completely debt-free today. You’ll still have $16,000 dollars in the bank and a six-figure income. It won’t take you long to rebuild your savings all the way back to what you had before, if that’s what you both want. You could do it in just a few months.

I’m looking at this as an opportunity to achieve the kind of financial independence everyone wants but few actually have. Go for it, Matt!

Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at
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