1.2 min readPublished On: March 31, 2020

Dave Says: Pay debt before saving in 401(k)


It’s only temporary

Dear Dave,

Should I still contribute up to the match to my 401(k) at work, like you recommend, if I’m in the process of trying to get out of debt?


Dear Russ,

Some people disagree with this stance, but my answer is no. I understand how important it is to take the match in a situation like that, but one of the things I’ve learned over the years is that personal finance is 80 percent behavior and only 20 percent head knowledge. In the short term, the power of focusing on changing your behavior and working hard to pay off debt will supersede the mathematics involved where your company match is concerned. In other words, if you stop saving temporarily, for just a year or so—and wipe out all your consumer debt—you’ll gain a tremendous amount of financial power. And this will be more beneficial to you than one or two years of your company match.

I’d never tell anyone to stop investing, or taking advantage of a company match, for several years. However, if you put it on hold for just a little while and clean up your debt mess and then go back to investing for retirement, you’ll reap many more rewards down the road. You’ll permanently change your financial behavior and you’ll be able to invest even more for retirement and other things.

Good question, Russ!



About the Author: Dave Ramsey


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