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>He tells you if you have any mortgage to not contribute to your retirement account until your mortgage is paid off, even if your company matches 100%. That is

>He tells you if you have any mortgage to not contribute to your retirement account until your mortgage is paid off, even if your company matches 100%. That is entirely incorrect. [1] Baby step #4 is to invest 15% of your household income for retirement. Baby step #6 is to pay off your home early. He does tell you to temporarily stop investing so you can pay more towards you debt. This is sub-optimal. His goal is to get you entirely focused on one thing at a time and go after it with everything you have. [1] https://www.ramseysolutions.com/dave-ramsey-7-baby-steps https://www.ramseysolutions.com/dave-ramsey-7-baby-steps

cma 5y ago
Ok, I forgot he excludes mortgage and chose that as an example as the longest term, lowest interest debt with least depreciation. It's still worth going into almost any other debt to get a large match, often even expensive credit card debt (you may have to skip matching some years when you take a net withdrawal to keep it optimal). Paying off an existing car loan before taking a 100% matching contribution is almost always crazy.
- xupybd 5y ago
  It is if you have no emotions involved. The people he is trying to help are the kind that struggle to avoid debt due to lack of self control. His method is about creating emotional feedback that keeps people going.
- DavidPeiffer 5y ago
  I agree the method he presents isn't mathematically optimal. We're also on a forum with many engineers and highly analytical people, which isn't his target audience. To use one of his quotes, "if you cared about being mathematically optimal, you wouldn't be in this mess to begin with!" His target audience is people who are living paycheck to paycheck, routinely taking loans to support a lifestyle they can't afford, and don't see how their spending habits are death by a thousand papercuts to their aspiration of being financially stable. To be clear, I'm not a Dave Ramsey worshiper. I strongly disagree with some of his workplace policies and hope he gets taken to the cleaners with some of the lawsuits currently going through the system. I have listened to his show many times, but don't follow all his advice. I'm not paying my superbly low interest rate mortgage down faster than required. I can't think of anyone responsible for getting more consumer debt eliminated than Dave Ramsey, and that should be commended. The vast majority of people would be far better off following his plan than continuing on their current trajectory. He recently declared war on the time share industry, and I hope he makes waves by throwing his resources behind it. https://youtu.be/o6VNi5hJpiU https://youtu.be/o6VNi5hJpiU
- mgkimsal 5y ago
  That whole "get the match from an employer at all costs!" is, imo, silly in its own right for many many many folks. I did that at one point for a bit, then... realized later that if you're fired or quit... that money isn't really there anyway. Most of the time (ime), there's a multi-year vesting schedule, and you don't have control over how long you'll be at a company. IF you're already getting the full value, perhaps, but I've never worked anywhere long enough to get that. I got $x 'matching', but only 25% of that was vested in the first 20 months (after 2 years, it would have been 50% IIRC) but... only that 25% was available to 'rollover' when I left the company.
  - deleted 5y ago
    [deleted]
  - cma 5y ago
    Some vest right away. Even when they are 25% per year you can often take an immediate 401K loan from half of your part of the contribution and pay the car loan and still probably have it work out more optimally (even if you then have to turn that into a withdrawal with penalty). If you can play something like magic the gathering and do basic estimates odds of things happening and payoffs/penalties, you can do better than taking blanket advice from Ramsey. It's not do it at all costs. Work out the basic numbers. It doesn't always make sense at extreme interest rates, but he tells you to do it as blanket advice even if the debt is low interest student loans and the employer contribution vests right away. I've heard people call in with questions like this I think with student loans. He tells them to basically throw away $5000 to save $250.
    - mgkimsal 5y ago
      one of his standard lines is "if you play with snakes you'll get bitten". what you've described is, of course, technically doable. many of his listeners may be in jobs that are less stable, and finding another job may take time. 'blanket advice' when you're talking to tens of thousands of people probably needs to be as basic and as applicable across the board as possible. I do think there's a psychological impact of "grind through it and stick with a plan" that will help create better habits and avoid future debt problems for many folks. Playing a lot of 'move money around' moves gives people the idea that they can always do that, and that's not always the case. I've never been employed anywhere (nor have I met anyone) who has 'day-1' 401k vesting. Good on you if you have that, but it's nearly always been 3-4 years every place I've been (or my colleagues have been).

cma 5y ago

Ok, I forgot he excludes mortgage and chose that as an example as the longest term, lowest interest debt with least depreciation. It's still worth going into almost any other debt to get a large match, often even expensive credit card debt (you may have to skip matching some years when you take a net withdrawal to keep it optimal). Paying off an existing car loan before taking a 100% matching contribution is almost always crazy.

xupybd 5y ago
It is if you have no emotions involved. The people he is trying to help are the kind that struggle to avoid debt due to lack of self control. His method is about creating emotional feedback that keeps people going.
DavidPeiffer 5y ago
I agree the method he presents isn't mathematically optimal. We're also on a forum with many engineers and highly analytical people, which isn't his target audience. To use one of his quotes, "if you cared about being mathematically optimal, you wouldn't be in this mess to begin with!" His target audience is people who are living paycheck to paycheck, routinely taking loans to support a lifestyle they can't afford, and don't see how their spending habits are death by a thousand papercuts to their aspiration of being financially stable. To be clear, I'm not a Dave Ramsey worshiper. I strongly disagree with some of his workplace policies and hope he gets taken to the cleaners with some of the lawsuits currently going through the system. I have listened to his show many times, but don't follow all his advice. I'm not paying my superbly low interest rate mortgage down faster than required. I can't think of anyone responsible for getting more consumer debt eliminated than Dave Ramsey, and that should be commended. The vast majority of people would be far better off following his plan than continuing on their current trajectory. He recently declared war on the time share industry, and I hope he makes waves by throwing his resources behind it. https://youtu.be/o6VNi5hJpiU https://youtu.be/o6VNi5hJpiU
mgkimsal 5y ago
That whole "get the match from an employer at all costs!" is, imo, silly in its own right for many many many folks. I did that at one point for a bit, then... realized later that if you're fired or quit... that money isn't really there anyway. Most of the time (ime), there's a multi-year vesting schedule, and you don't have control over how long you'll be at a company. IF you're already getting the full value, perhaps, but I've never worked anywhere long enough to get that. I got $x 'matching', but only 25% of that was vested in the first 20 months (after 2 years, it would have been 50% IIRC) but... only that 25% was available to 'rollover' when I left the company.
- deleted 5y ago
  [deleted]
- cma 5y ago
  Some vest right away. Even when they are 25% per year you can often take an immediate 401K loan from half of your part of the contribution and pay the car loan and still probably have it work out more optimally (even if you then have to turn that into a withdrawal with penalty). If you can play something like magic the gathering and do basic estimates odds of things happening and payoffs/penalties, you can do better than taking blanket advice from Ramsey. It's not do it at all costs. Work out the basic numbers. It doesn't always make sense at extreme interest rates, but he tells you to do it as blanket advice even if the debt is low interest student loans and the employer contribution vests right away. I've heard people call in with questions like this I think with student loans. He tells them to basically throw away $5000 to save $250.
  - mgkimsal 5y ago
    one of his standard lines is "if you play with snakes you'll get bitten". what you've described is, of course, technically doable. many of his listeners may be in jobs that are less stable, and finding another job may take time. 'blanket advice' when you're talking to tens of thousands of people probably needs to be as basic and as applicable across the board as possible. I do think there's a psychological impact of "grind through it and stick with a plan" that will help create better habits and avoid future debt problems for many folks. Playing a lot of 'move money around' moves gives people the idea that they can always do that, and that's not always the case. I've never been employed anywhere (nor have I met anyone) who has 'day-1' 401k vesting. Good on you if you have that, but it's nearly always been 3-4 years every place I've been (or my colleagues have been).