Dave Ramsey says to give up employer 401K match to pay down debt

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
sk2101
Posts: 494
Joined: Sun Jun 02, 2013 4:54 pm

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by sk2101 »

willthrill81 wrote: Wed Jun 26, 2019 9:27 am
anon_investor wrote: Wed Jun 26, 2019 9:17 am Yes, if you have some crazy interest payday loan of like 200%, but that's about it!
I still didn't think that interest rates >30% were legal anywhere in the U.S.
I suggest you watch the documentary "Payday" in the series Dirty Money in Netflix. Very eye opening what those guys get away with. They end up being shut down, but the other day I heard of another company that has pretty much the same modus operandi, also in KS that is still going:

1,300% interest!!

They do it by associating with an Indian tribe so that they have sovereignty and don't need to comply with any laws.

https://www.npr.org/templates/transcrip ... =245041673
lepa71
Posts: 343
Joined: Sat Mar 05, 2016 5:12 pm

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by lepa71 »

GlennK wrote: Wed Jun 26, 2019 9:15 am Yes, if you borrowed from a loan shark.

Seriously, I cannot think of any reason where paying off the loan from a bank or credit card could beat the 50%/100% match you mentioned.
How about your credit card debt is 40K at 26%? Not saying that anybody in this forum would have that but that should be judged on a case by case basis.
mptfan
Posts: 6355
Joined: Mon Mar 05, 2007 9:58 am

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by mptfan »

willthrill81 wrote: Wed Jun 26, 2019 9:27 am
anon_investor wrote: Wed Jun 26, 2019 9:17 am Yes, if you have some crazy interest payday loan of like 200%, but that's about it!
I still didn't think that interest rates >30% were legal anywhere in the U.S.
Interest rates above 30% are very legal. That is because some states have no limit on how much interest can be charged to consumers, so credit card companies set up office in one of those states and do not have to worry about usury laws in any of the other states. Nevada, South Dakota and Delaware do not have usury laws, in other words, there are no limits on how much interest credit card companies can charge if they set up shop in those states, so guess which states are the most popular with credit card issuers?

https://www.creditcards.com/credit-card ... s-1282.php
Last edited by mptfan on Wed Jun 26, 2019 4:11 pm, edited 3 times in total.
peek
Posts: 36
Joined: Tue Jul 12, 2016 10:28 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by peek »

Cody6136 wrote: Wed Jun 26, 2019 3:31 pm
Stinky wrote: Wed Jun 26, 2019 10:46 am By directing funds temporarily to paying down debt rather than 401(k), Ramsey tries to get folks excited about their financial future.

Hopefully, many of the Dave Ramsey crowd will grow up to be Bogleheads some day.

I did. I needed to hear Dave's message about 20 years ago and it worked. Many of the people on this board enjoy looking down on the less sophisticated Lumpen Proletariat but the truth is, Bogleheads are made not born.
We too started with his advice when we were running without a budget, credit card debt and no plan for the future. I credit him with changing our entire outlook on money and making our lives better. I do still listen to his show but often find myself yelling at the radio when he gives the advice to stop 401k contributions (which is something we never did when following his plan, nor did we cut up all our credit cards). That said between staying in debt and staying clueless or losing a year or so of 401k match, I'd still recommend following Dave's plan every time.
DesertDiva
Posts: 1001
Joined: Thu Mar 01, 2018 12:49 pm
Location: In the desert

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by DesertDiva »

Cody6136 wrote: Wed Jun 26, 2019 3:31 pm
Stinky wrote: Wed Jun 26, 2019 10:46 am By directing funds temporarily to paying down debt rather than 401(k), Ramsey tries to get folks excited about their financial future.

Hopefully, many of the Dave Ramsey crowd will grow up to be Bogleheads some day.

I did. I needed to hear Dave's message about 20 years ago and it worked. Many of the people on this board enjoy looking down on the less sophisticated Lumpen Proletariat but the truth is, Bogleheads are made not born.
Many people on this board don't have any issue with his methods (e.g., Baby Steps), but will draw the line when it comes to his investing advice--that's when they would flip over to Boglehead Principles and avoid his ELPs. This has already been discussed in great detail in other threads.

His advice to get out of (and stay out of) debt is solid. The suggestion to give up an employer 401(k) match to help pay down debt... :shock:
UpperNwGuy
Posts: 4567
Joined: Sun Oct 08, 2017 7:16 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by UpperNwGuy »

Dave Ramsey is just plain wrong when you run the numbers. However, Dave Ramsey is all about the psychology of the situation, and he sometimes recommends courses of action that are wrong numerically but work from a psychological perspective. When my daughter was in a similar situation, I gave her the opposite advice as Dave Ramsey.
RobLyons
Posts: 851
Joined: Tue Oct 31, 2017 12:55 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by RobLyons »

What if no employer match, and debt is at 5%.. Stop contributions until paid off?
And Roth contributions?
"Great parenting sets the foundation for a better world"
Cody6136
Posts: 263
Joined: Tue Apr 16, 2019 10:54 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Cody6136 »

DesertDiva wrote: Wed Jun 26, 2019 4:16 pm
Cody6136 wrote: Wed Jun 26, 2019 3:31 pm
Stinky wrote: Wed Jun 26, 2019 10:46 am By directing funds temporarily to paying down debt rather than 401(k), Ramsey tries to get folks excited about their financial future.

Hopefully, many of the Dave Ramsey crowd will grow up to be Bogleheads some day.

I did. I needed to hear Dave's message about 20 years ago and it worked. Many of the people on this board enjoy looking down on the less sophisticated Lumpen Proletariat but the truth is, Bogleheads are made not born.
Many people on this board don't have any issue with his methods (e.g., Baby Steps), but will draw the line when it comes to his investing advice--that's when they would flip over to Boglehead Principles and avoid his ELPs. This has already been discussed in great detail in other threads.

His advice to get out of (and stay out of) debt is solid. The suggestion to give up an employer 401(k) match to help pay down debt... :shock:
I'm going to check out those other threads. for enjoyment. thanks!
tesuzuki2002
Posts: 1156
Joined: Fri Dec 11, 2015 12:40 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by tesuzuki2002 »

jrbdmb wrote: Wed Jun 26, 2019 9:11 am Dave Ramsey now says to give up the employer 401K match to pay down debt:

https://finance.yahoo.com/news/employer ... 14543.html

Rather than just start another Dave Ramsey flame-fest, are there really any circumstances where one should skip the 50% or 100% match on their 401K contribution to get their debt paid down a bit earlier?
DR stance on this is to change behavior. MOST people can't comprehend why someone would do this.. to miss out on money.. It's about missing out on that money and getting the urge to slam that debt so one can get to saving for retirement and getting that match. Missing out on a company match for a year or 2 in reality is not a big deal...

The point is to make it hurt and to pay off the debt asap and not drag out debt repayments for 5 years of more... for going the match temporarily will accelerate the debt pay off.
Cody6136
Posts: 263
Joined: Tue Apr 16, 2019 10:54 am

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by Cody6136 »

mptfan wrote: Wed Jun 26, 2019 4:06 pm
willthrill81 wrote: Wed Jun 26, 2019 9:27 am
anon_investor wrote: Wed Jun 26, 2019 9:17 am Yes, if you have some crazy interest payday loan of like 200%, but that's about it!
I still didn't think that interest rates >30% were legal anywhere in the U.S.
Interest rates above 30% are very legal. That is because some states have no limit on how much interest can be charged to consumers, so credit card companies set up office in one of those states and do not have to worry about usury laws in any of the other states. Nevada, South Dakota and Delaware do not have usury laws, in other words, there are no limits on how much interest credit card companies can charge if they set up shop in those states, so guess which states are the most popular with credit card issuers?

https://www.creditcards.com/credit-card ... s-1282.php
This is news to me and shocking. I thought I was beyond being shocked. But I was wrong.
MathWizard
Posts: 4527
Joined: Tue Jul 26, 2011 1:35 pm

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by MathWizard »

willthrill81 wrote: Wed Jun 26, 2019 9:27 am
anon_investor wrote: Wed Jun 26, 2019 9:17 am Yes, if you have some crazy interest payday loan of like 200%, but that's about it!
I still didn't think that interest rates >30% were legal anywhere in the U.S.
Payday loans use "fees" to exceed such rates.

Especially egregious is that these abound around military bases.
DesertDiva
Posts: 1001
Joined: Thu Mar 01, 2018 12:49 pm
Location: In the desert

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by DesertDiva »

Cody6136 wrote: Wed Jun 26, 2019 4:39 pm
DesertDiva wrote: Wed Jun 26, 2019 4:16 pm
Cody6136 wrote: Wed Jun 26, 2019 3:31 pm
Stinky wrote: Wed Jun 26, 2019 10:46 am By directing funds temporarily to paying down debt rather than 401(k), Ramsey tries to get folks excited about their financial future.

Hopefully, many of the Dave Ramsey crowd will grow up to be Bogleheads some day.

I did. I needed to hear Dave's message about 20 years ago and it worked. Many of the people on this board enjoy looking down on the less sophisticated Lumpen Proletariat but the truth is, Bogleheads are made not born.
Many people on this board don't have any issue with his methods (e.g., Baby Steps), but will draw the line when it comes to his investing advice--that's when they would flip over to Boglehead Principles and avoid his ELPs. This has already been discussed in great detail in other threads.

His advice to get out of (and stay out of) debt is solid. The suggestion to give up an employer 401(k) match to help pay down debt... :shock:
I'm going to check out those other threads. for enjoyment. thanks!
Check it out when you have plenty of time to spare :happy
tesuzuki2002
Posts: 1156
Joined: Fri Dec 11, 2015 12:40 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by tesuzuki2002 »

UpperNwGuy wrote: Wed Jun 26, 2019 4:24 pm Dave Ramsey is just plain wrong when you run the numbers. However, Dave Ramsey is all about the psychology of the situation, and he sometimes recommends courses of action that are wrong numerically but work from a psychological perspective. When my daughter was in a similar situation, I gave her the opposite advice as Dave Ramsey.
I'm a big fan of Dave Ramsey..... but I am also a engineer and thus working with numbers is my job.. you could never convince me to not get a full match or stretch out interest free loans and so forth... but I can handle my spending and don't get out of control...

I've been completely debt free for 3 years and have by most people's standards enough to retire today... and I'm turning 38 this year...

most people can't handle their own behavior when it comes to money so they need to be given very strict rules to live by.
tesuzuki2002
Posts: 1156
Joined: Fri Dec 11, 2015 12:40 pm

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by tesuzuki2002 »

MathWizard wrote: Wed Jun 26, 2019 4:44 pm
willthrill81 wrote: Wed Jun 26, 2019 9:27 am
anon_investor wrote: Wed Jun 26, 2019 9:17 am Yes, if you have some crazy interest payday loan of like 200%, but that's about it!
I still didn't think that interest rates >30% were legal anywhere in the U.S.
Payday loans use "fees" to exceed such rates.

Especially egregious is that these abound around military bases.
Good to see there was some recourse to this shell game that was created and the use of the indian culture to try to create a loophole for extorting money from poor people...

https://www.nbcnews.com/news/us-news/1- ... er-n943311

The netflix special Dirty money did a highlight on this practice as well.
https://www.netflix.com/title/80118100
Katietsu
Posts: 4313
Joined: Sun Sep 22, 2013 1:48 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Katietsu »

Duplicate
Last edited by Katietsu on Wed Jun 26, 2019 5:01 pm, edited 1 time in total.
KyleAAA
Posts: 8699
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by KyleAAA »

Mathematically, probably out. Realistically, maybe, if the debt really stresses you out. It's not worth having slightly more money if you are under constant pressure.
User avatar
ruralavalon
Posts: 20142
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by ruralavalon »

mptfan wrote: Wed Jun 26, 2019 1:18 pm
quantAndHold wrote: Wed Jun 26, 2019 12:48 pm I don’t know where these people are that have 100% matching. In 30 years and 8 jobs, I never had more than 75% match. Most common was 50%, but it’s been as low as 25% a couple of times.
I don't know how common it is, but I know people, including myself, that get a 100% match. Also, for those employers that offer a SIMPLE IRA plan and choose to match employee contributions, they are required to match employee contributions, dollar for dollar (100%), up to 3%.

https://www.irs.gov/retirement-plans/si ... tributions
And there are people who get no employer match.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
boglenomics
Posts: 50
Joined: Fri Jan 18, 2019 5:37 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by boglenomics »

Between him, watching Jack Bogle interviews, and a perspective of my own parents severe financial mismanagement I have learned quite a few lessons.

There is a lot I disagree with Dave on. His advice isn't for investing success. It's to help people handle debt and fix their perspective on money. If you're in debt to a crippling degree that it's destroying your life you need every penny to attack that debt and move on with some lessons learned.

I quickly graduated from Ramsey and have long ago learned those lessons. Now I have money, no debt, and I can invest. His advice is not meant for us. It's great for his target audience.
jibantik
Posts: 471
Joined: Fri Nov 24, 2017 1:05 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by jibantik »

The only time I have ever hear Ramsey say anything accurate is when he says he is doing better than he deserves. That couldn't be any closer to the truth.

It's amazing that a guy who doesn't understand the math between roth and traditional accounts has somehow become a financial guru.
User avatar
southerndoc
Posts: 1138
Joined: Wed Apr 22, 2009 7:07 pm
Location: Atlanta

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by southerndoc »

LongRoad wrote: Wed Jun 26, 2019 10:01 am I'll offer a (slightly) contrarian point. While I don't think this is good advice in general, and certainly not for the Boglehead agonizing over their 3.49% mortgage, it actually could be a consideration for people with very high interest debt that will be paid off over years.

Considering Dave Ramsey's target audience, compare
$1000 401k contribution + $500 match compounded over 5 years @8% ==> $2204
$1000 CC debt compounded over 5 years @24% ==> $2931

The match percentage isn't directly comparable to the interest rate because it is a one-time contribution.

Again, this would be laughable for most on this board, but there really are people out there in this situation.
Exactly. This is why he suggests it. I followed his advice straight out of residency. Wish I had followed it before going to medical school. I had credit cards with 29.99% interest rates. Interest rates are low by most standards and might rise in the future. 8% return on investment may be unrealistic in the coming years (Vanguard says to expect lower from what I've read).

I think the biggest thing was the debt snowball effect. When I had a lot of credit card debt coming out of residency, I knew what was higher interest and started the first few months concentrating on that. It was the debt snowball effect though that gave me more momentum to continue.

I have a lot of respect for Dave Ramsey. His methods may be questioned by many, but they work.
Tdubs
Posts: 1145
Joined: Tue Apr 24, 2018 7:50 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Tdubs »

Given Ramsey's emphasis on changing the easy-money behavior of his listeners, his advice makes sense.
User avatar
Stinky
Posts: 6404
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by Stinky »

LongRoad wrote: Wed Jun 26, 2019 10:01 am I'll offer a (slightly) contrarian point. While I don't think this is good advice in general, and certainly not for the Boglehead agonizing over their 3.49% mortgage, it actually could be a consideration for people with very high interest debt that will be paid off over years.

Considering Dave Ramsey's target audience, compare
$1000 401k contribution + $500 match compounded over 5 years @8% ==> $2204
$1000 CC debt compounded over 5 years @24% ==> $2931

The match percentage isn't directly comparable to the interest rate because it is a one-time contribution.

Again, this would be laughable for most on this board, but there really are people out there in this situation.
Excellent analysis and logic.

Not applicable to most folks on this Board. But applicable to more Americans than you might guess.
It's a GREAT day to be alive - Travis Tritt
Glockenspiel
Posts: 1135
Joined: Thu Feb 08, 2018 1:20 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Glockenspiel »

Dave Ramsey is essentially “personal finance for elementary school kids”, where Bogleheads is “personal finance for college graduates.” The education system is hideous and the vast majority of Americans don’t understand numbers.
Ferdinand2014
Posts: 1819
Joined: Mon Dec 17, 2018 6:49 pm

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by Ferdinand2014 »

Stinky wrote: Wed Jun 26, 2019 7:52 pm
LongRoad wrote: Wed Jun 26, 2019 10:01 am I'll offer a (slightly) contrarian point. While I don't think this is good advice in general, and certainly not for the Boglehead agonizing over their 3.49% mortgage, it actually could be a consideration for people with very high interest debt that will be paid off over years.

Considering Dave Ramsey's target audience, compare
$1000 401k contribution + $500 match compounded over 5 years @8% ==> $2204
$1000 CC debt compounded over 5 years @24% ==> $2931

The match percentage isn't directly comparable to the interest rate because it is a one-time contribution.

Again, this would be laughable for most on this board, but there really are people out there in this situation.
Excellent analysis and logic.

Not applicable to most folks on this Board. But applicable to more Americans than you might guess.
Agree. Honestly many of the posts really just don't get the reality. Dave does. I know with authority at my place of work - a hospital - a large minority of the employees have either no or minimal contributions to the 403b. They couldn't tell you what a mutual fund was or the difference between a stock and a bond. They wouldn't know what or how to find the expense ratio or the difference between an active and passive fund. A substantial portion have 1 and some even 2 loans out against their 403b for things that most bogleheads would have paid cash without blinking an eye. The idea that forgoing 1 year of maybe a $1-2000 contribution with a 3% match is going to make or break their future is simply not grasping the reality. They live pay check to pay check, put vacations on credit cards, lease new SUV's and have zero budget. These are not stupid people. I am talking about RN's, Ultrasound and X-ray technicians, therapists, administrators, etc. Our society and educational system has partially caused this with complete lack of financial literacy education and even encouraging debt as normal and good. Changing the behavior and winning small battles to win the war of debt as fast as possible by throwing all you have at it works for many people. Bogleheads go crazy over 0.3% return difference of a money market fund or 3 basis point difference with the expense ratio of a mutual fund. We argue deep into the weeds about minutia. Look at this thread. Side discussions have popped up as to state laws regarding interest rates of pay day loans.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
User avatar
TxAg
Posts: 1716
Joined: Sat Oct 17, 2009 11:09 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by TxAg »

Hoosier CPA wrote: Wed Jun 26, 2019 3:06 pm
czr wrote: Wed Jun 26, 2019 2:34 pm Dave also recommends you continue your tithe while you are in debt so I don't think you take all his instructions at face value although he would be very upset if you didn't follow his baby steps verbatim.
What does tithing have to do with any of this?
Proof of more bad advice.
mptfan
Posts: 6355
Joined: Mon Mar 05, 2007 9:58 am

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by mptfan »

Cody6136 wrote: Wed Jun 26, 2019 4:42 pm
mptfan wrote: Wed Jun 26, 2019 4:06 pm
willthrill81 wrote: Wed Jun 26, 2019 9:27 am
anon_investor wrote: Wed Jun 26, 2019 9:17 am Yes, if you have some crazy interest payday loan of like 200%, but that's about it!
I still didn't think that interest rates >30% were legal anywhere in the U.S.
Interest rates above 30% are very legal. That is because some states have no limit on how much interest can be charged to consumers, so credit card companies set up office in one of those states and do not have to worry about usury laws in any of the other states. Nevada, South Dakota and Delaware do not have usury laws, in other words, there are no limits on how much interest credit card companies can charge if they set up shop in those states, so guess which states are the most popular with credit card issuers?

https://www.creditcards.com/credit-card ... s-1282.php
This is news to me and shocking. I thought I was beyond being shocked. But I was wrong.
Do not underestimate the power of corporate lobbying in the name of profit. The average person has no idea.
azanon
Posts: 2986
Joined: Mon Nov 07, 2011 10:34 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by azanon »

Taking advice from Dave Ramsey on debt is like taking advice from an alcoholic on alcohol. Given that, the only way one can win out giving up a 401k match is if the alternative is that you’ll end up self-destructing by maintaining and/or using debt because you also abuse debt like Dave admits that he did.

Me? I’ve responsibly used debt for almost 3 decades now.
Norsky19
Posts: 104
Joined: Fri Jun 19, 2015 3:25 am

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by Norsky19 »

wilshuer wrote: Wed Jun 26, 2019 9:21 am I believe he's said many times it isn't necessarily the math, but the attitude for the reason he states that. Gain the momentum to see debt balances decrease and encourage to continue the payoff process.
Math trumps emotion....unless we're talking about new math :shock:
Ivygirl
Posts: 346
Joined: Sun Apr 06, 2014 1:36 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Ivygirl »

TxAg wrote: Wed Jun 26, 2019 9:46 pm
Hoosier CPA wrote: Wed Jun 26, 2019 3:06 pm
czr wrote: Wed Jun 26, 2019 2:34 pm Dave also recommends you continue your tithe while you are in debt so I don't think you take all his instructions at face value although he would be very upset if you didn't follow his baby steps verbatim.
What does tithing have to do with any of this?
Proof of more bad advice.
It's the best advice possible. It's spot-on.

A disordered relationship with money is what caused the initial problem. The cure is to put things back in their proper places.

Money does not come first.
User avatar
TxAg
Posts: 1716
Joined: Sat Oct 17, 2009 11:09 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by TxAg »

Ivygirl wrote: Thu Jun 27, 2019 5:10 am
TxAg wrote: Wed Jun 26, 2019 9:46 pm
Hoosier CPA wrote: Wed Jun 26, 2019 3:06 pm
czr wrote: Wed Jun 26, 2019 2:34 pm Dave also recommends you continue your tithe while you are in debt so I don't think you take all his instructions at face value although he would be very upset if you didn't follow his baby steps verbatim.
What does tithing have to do with any of this?
Proof of more bad advice.
It's the best advice possible. It's spot-on.

A disordered relationship with money is what caused the initial problem. The cure is to put things back in their proper places.

Money does not come first.

If you can afford to tithe, then tithe if you're so inclined. If you're financially drowning, it's ok to redirect that money to your debts.
MDfan
Posts: 497
Joined: Tue Oct 18, 2016 7:32 am

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by MDfan »

willthrill81 wrote: Wed Jun 26, 2019 9:16 am Unless you're foregoing the match to prevent an immediate bankruptcy, no, it doesn't make sense to do so.
vineviz wrote: Wed Jun 26, 2019 9:16 am
jrbdmb wrote: Wed Jun 26, 2019 9:11 am Rather than just start another Dave Ramsey flame-fest, are there really any circumstances where one should skip the 50% or 100% match on their 401K contribution to get their debt paid down a bit earlier?
Yes. If your debt carries an interest rate over 50%, skipping an employer match would probably make sense.
Is such an interest rate legal anywhere in the U.S.?

If you have Netflix and want to find out about payday loans, watch this episode of Dirty Money.

https://www.kansascity.com/news/local/c ... 54579.html
Ivygirl
Posts: 346
Joined: Sun Apr 06, 2014 1:36 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Ivygirl »

I see references here to "free money." People really love "free," and they absolutely lose their minds when you add "money."

People who are in trouble with debt, a lot of times they got there by pursuing "free money." Credit card points and so-called rewards, 90 days same as cash, zero percent financing for one year, on sale, buy one get one free, dealer cash back, grocery store loyalty cards, student loans that will inevitably lead to a fabulous job and don't need to be paid back until you'll be making the big money - why there is so much free money in this world, it's like Christmas every day, isn't it? So good of all these nice people to give money away for free.

"Free" and "money" used together should not turn off one's brain. The only money that is really free in this world - free in the sense of true liberty - is the money you can fold over and put in your pocket.

Until a person has a sound foundation of no debt and savings for an emergency, "free money" is not. The 401(k) match is irrelevant, that's if you are even vested; at my workplace the match vests 20% per year so you don't even get it all until you have been there five years. Almost nobody stays five years. With no foundation of real money, at the first emergency or unemployment the 401(k) will have to be emptied anyway, paying penalty and tax. Not free.
User avatar
David Jay
Posts: 9988
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by David Jay »

Taylor Larimore wrote: Wed Jun 26, 2019 10:37 amHowever, I've learned to never say "never" on this forum where we have so many knowledgeable contributors smarter than I am."
I think “so many” is about 3 :D
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
gmc4h232
Posts: 439
Joined: Wed Jan 27, 2016 8:11 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by gmc4h232 »

Glockenspiel wrote: Wed Jun 26, 2019 9:13 pm Dave Ramsey is essentially “personal finance for elementary school kids”, where Bogleheads is “personal finance for college graduates.” The education system is hideous and the vast majority of Americans don’t understand numbers.
So what constitutes personal finance for middle school and high school kids?
User avatar
ruralavalon
Posts: 20142
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by ruralavalon »

gmc4h232 wrote: Thu Jun 27, 2019 9:53 am
Glockenspiel wrote: Wed Jun 26, 2019 9:13 pm Dave Ramsey is essentially “personal finance for elementary school kids”, where Bogleheads is “personal finance for college graduates.” The education system is hideous and the vast majority of Americans don’t understand numbers.
So what constitutes personal finance for middle school and high school kids?
Suze Orman
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
User avatar
Stinky
Posts: 6404
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Stinky »

gmc4h232 wrote: Thu Jun 27, 2019 9:53 am
Glockenspiel wrote: Wed Jun 26, 2019 9:13 pm Dave Ramsey is essentially “personal finance for elementary school kids”, where Bogleheads is “personal finance for college graduates.” The education system is hideous and the vast majority of Americans don’t understand numbers.
So what constitutes personal finance for middle school and high school kids?
Bob Brinker.

Oh, wait, he's no longer on the radio. But the "Marketimer" newsletter lives on, I guess.
It's a GREAT day to be alive - Travis Tritt
Glockenspiel
Posts: 1135
Joined: Thu Feb 08, 2018 1:20 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Glockenspiel »

gmc4h232 wrote: Thu Jun 27, 2019 9:53 am
Glockenspiel wrote: Wed Jun 26, 2019 9:13 pm Dave Ramsey is essentially “personal finance for elementary school kids”, where Bogleheads is “personal finance for college graduates.” The education system is hideous and the vast majority of Americans don’t understand numbers.
So what constitutes personal finance for middle school and high school kids?
I don't think there is much of a middle ground. Maybe Suze Orman is middle school or early high school personal finance.. not sure. I don't really consume much financial news/media, with the exception of what I see on this board and what is discussed in political news.

Edited to note that I hadn't seen the other response listing Suze Orman as the middle school/high school finance teacher.
User avatar
White Coat Investor
Posts: 15044
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by White Coat Investor »

jrbdmb wrote: Wed Jun 26, 2019 9:11 am Dave Ramsey now says to give up the employer 401K match to pay down debt:

https://finance.yahoo.com/news/employer ... 14543.html

Rather than just start another Dave Ramsey flame-fest, are there really any circumstances where one should skip the 50% or 100% match on their 401K contribution to get their debt paid down a bit earlier?
I heard him qualify it this week, admitting "it isn't the mathematically correct thing to do, but it is the behaviorally correct thing because it focuses the person on the real problem- the debt."

He's probably right that people don't get into debt because they can't do math, they do it because they have bad behavior and fixing that first is what will allow them to build wealth. That said, I still tell people to get the match first as it is like leaving part of their salary on the table.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
User avatar
White Coat Investor
Posts: 15044
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by White Coat Investor »

TxAg wrote: Wed Jun 26, 2019 9:46 pm
Hoosier CPA wrote: Wed Jun 26, 2019 3:06 pm
czr wrote: Wed Jun 26, 2019 2:34 pm Dave also recommends you continue your tithe while you are in debt so I don't think you take all his instructions at face value although he would be very upset if you didn't follow his baby steps verbatim.
What does tithing have to do with any of this?
Proof of more bad advice.
In my experience, people who don't give to charity before they get rich usually don't give much to charity once they are rich. More money doesn't change you, it just makes you more of what you already are.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Farmboyslim83
Posts: 121
Joined: Sun Oct 07, 2012 12:06 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by Farmboyslim83 »

My company 6% match is paid on eligible income, and has nothing to do with the amount of my contributions. The minimum employee contribution rate is 1%. Theoretically, if I make 100k a year, I can contribute $1,000., and get a $6,000. match, provided I contribute every pay period. Every company manages their plan differently, but I work for a megacorp, and suspect a lot of plans are set up similarly. Read your plan documents. FYI, I am currently contributing 1%, and getting the full match, which is 6-7 times my contribution.
User avatar
747driver
Posts: 48
Joined: Sun Jan 15, 2017 2:15 am
Location: Dallas, TX
Contact:

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by 747driver »

Ivygirl wrote: Thu Jun 27, 2019 5:10 am A disordered relationship with money is what caused the initial problem. The cure is to put things back in their proper places.

Money does not come first.
White Coat Investor wrote: Thu Jun 27, 2019 1:04 pm In my experience, people who don't give to charity before they get rich usually don't give much to charity once they are rich. More money doesn't change you, it just makes you more of what you already are.
+1 to both of you. We are only stewards of the money that's been given to us for a little while anyway. If we can't be responsible to give back when we have little, we won't be responsible to give back when we have plenty.
A clear conscience is a great pillow.
WhyNotKnow
Posts: 44
Joined: Mon Jun 17, 2019 5:49 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by WhyNotKnow »

To me Dave Ramsey is a salesman, not a financial advisor.
He sells his books, seminars, classes, etc.
He has his shtick and he’s sticking to it because it’s made him a lot of money.
User avatar
willthrill81
Posts: 22596
Joined: Thu Jan 26, 2017 3:17 pm
Location: USA

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by willthrill81 »

White Coat Investor wrote: Thu Jun 27, 2019 1:04 pm
TxAg wrote: Wed Jun 26, 2019 9:46 pm
Hoosier CPA wrote: Wed Jun 26, 2019 3:06 pm
czr wrote: Wed Jun 26, 2019 2:34 pm Dave also recommends you continue your tithe while you are in debt so I don't think you take all his instructions at face value although he would be very upset if you didn't follow his baby steps verbatim.
What does tithing have to do with any of this?
Proof of more bad advice.
In my experience, people who don't give to charity before they get rich usually don't give much to charity once they are rich. More money doesn't change you, it just makes you more of what you already are.
:thumbsup

Especially considering that exceptionally few people actually view themselves as being "rich."
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
chisey
Posts: 277
Joined: Mon Apr 16, 2007 10:47 am

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by chisey »

White Coat Investor wrote: Thu Jun 27, 2019 1:04 pm In my experience, people who don't give to charity before they get rich usually don't give much to charity once they are rich. More money doesn't change you, it just makes you more of what you already are.
While that is likely true, it is arguable whether tithing has anything to do with charitable giving, taxes aside. I also think a very good argument can be made that no giving, tithing or otherwise, is advisable while one's financial house is a shambles.

This whole line of discussion threatens to get the thread locked, though.
an_asker
Posts: 2970
Joined: Thu Jun 27, 2013 2:15 pm

Re: Dave Ramsey now says to give up employer 401K match to pay down debt

Post by an_asker »

GlennK wrote: Wed Jun 26, 2019 9:15 am Yes, if you borrowed from a loan shark.

Seriously, I cannot think of any reason where paying off the loan from a bank or credit card could beat the 50%/100% match you mentioned.
Also yes if you are not disciplined enough to pay back the loan in time after putting the money in the 401(k).
User avatar
9-5 Suited
Posts: 640
Joined: Thu Jun 23, 2016 12:14 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by 9-5 Suited »

There are few things more predictable than the inevitable multi-page Dave threads with the same arguments!!

I know someone who once used a trick to get kids to eat green vegetables. They fed them green candy (like M&Ms) to create a mental association of green is good for a while, and then started weaving in broccoli and green beans.

Bogleheads: That's so dumb, if your goal is getting healthy why are you feeding a child candy?? It is clearly unhealthy!
Dave Followers: We're talking about human beings, and behavioral problems are sometimes solved with counter-intuitive, non-optimal solutions!

And round and round it goes :)
RobLyons
Posts: 851
Joined: Tue Oct 31, 2017 12:55 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by RobLyons »

Glockenspiel wrote: Wed Jun 26, 2019 9:13 pm Dave Ramsey is essentially “personal finance for elementary school kids”, where Bogleheads is “personal finance for college graduates.” The education system is hideous and the vast majority of Americans don’t understand numbers.


Excellently stated!
"Great parenting sets the foundation for a better world"
User avatar
DanMahowny
Posts: 994
Joined: Sun Aug 06, 2017 8:25 pm

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by DanMahowny »

My biggest gripe about Dave is that he is 100% convinced that NOBODY is capable of using credit cards to their advantage. IMPOSSIBLE.
Funding secured
User avatar
LadyGeek
Site Admin
Posts: 68607
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Dave Ramsey says to give up employer 401K match to pay down debt

Post by LadyGeek »

9-5 Suited wrote: Thu Jun 27, 2019 2:33 pm There are few things more predictable than the inevitable multi-page Dave threads with the same arguments!!
How about: This thread has run its course and is locked (derailed, no longer answering the OP's question).
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Locked