By JLP | February 15, 2007
I’m listening to the Dave Ramsey Show from yesterday. At about 1:06:38 (that’s hr:mm:s) into the program, Dave takes a call from a guy who wants to settle a disagreement with his wife. His wife wants to take their 401(k) contribution down to zero while they pay off their debts. Apparantly Dave suggests that people forgo putting money into their 401(k) while they are getting out of debt even if they receive a company match. WOW! The guy on the phone told Dave that he would be leaving $6,000 – $10,000 on the table if he took Dave’s advice.
I’m surprised that Dave would suggest this over the phone without getting a firm grasp of this couple’s situation. I mean shouldn’t he (Dave) find out this couple’s cash flow situation before he tells them to stop contributing to their 401(k)?
When the caller asked Dave about this, Dave said something to the effect that, “personal finance is 80% behavior and 20% head knowledge.” This sounds like one of those sayings that people say without really having any proof to back it up.
Now, I realize that I’m not a “GURU” like Dave Ramsey is, but here are my thoughts on this:
1. Prioritize your finances. Take a look at your cash flow and see what areas are most important. Contributing to a 401(k) should be one of the top prioritieS
2. If you have to cut costs, cut them by getting rid of unnecessary monthly expenses.
3. ONLY touch the 401(k) IF you have no other resources to pay off your debts.
I have to totally disagree with Dave on this one. What are your thoughts on this?