Dave Ramsey's Way

Hi Judy,

I too would suggest you get rid of the credit cards, if for no other reason than the one you stated yourself. Having them make them easier to use and what if one month something comes up and you can't pay them off. It starts a bad cycle.

Yes, many people do stop their 401K until they are debt free. I did and allowed the interest to accrue on the balance.

Now, I would only suggest this if you are really going at it to get out of debt, if you aren't you may as well continue to contribute. There should be a timeline where you expect to be able to contribute again. This may also depend on your age and the amount already in the account.

I hope this helps - if you have any other questions please feel free to email me ____@____.com.

His money management concepts really work, and I wish many more people used them!

I don't recall him saying that we ever should stop 401(k) contributions... you will be missing out on an important benefit from the company, one that is figured into your total compensation analysis. Matching: the company GIVES you money if you put some money in. The rules for matching differ company to company, but please please please consider budgeting for this benefit. It takes money out of your paycheck before taxes... some people don't realize that it's already coming out a little anyway via taxes, so why not put it toward your 401(k)?

Of course, some people can't pay their utilities and mortgage/rent, and in those cases, temporarily stopping contributions makes sense. There is no enrollment time to limit when you go in and out of contribution status or how much or little you contribute.

I have no debt except our house and we have four main credit cards. EVERY thing goes on the card basically, and we pay it off in full every month. For every $100 I spend I get anywhere from $1 to $5 back. That means that my money is worth more then someone who only uses cash. After spending $2500 on a new fridge last week, I will have $25 back to spend at Disney, someone who paid cash will have the same expense but not have the money back.

If you do spend more cause of the credit card, then don't use it for now. If you have ANY debt but the house then don't use the credit card till it's paid off.

Personally my dh and I find we spend more with cash then with credit cards.

As far as the 401 K part - you should never stop that if you are paying your regular bills. At least imo.

Hi J.!

My husband and I used Dave's method and it is amazing. I know most of it is common sense but it helped incredibly...I think knowing where your money goes is vital to getting out of debt. We followed most recommendations straight out of the book, but like you we have one credit card that we put everything on but it is totally paid off every month. We keep a spread sheet on the card just as if it was our checking account. We know how much we can spend and we do not let our credit card get over that amount. We make sure what we spend our money on fits into our budget and that it is necessary.
We also did not stop our 401k contribution all together but we did bring it down to the minimum matching amount until we were debt free. If you are getting closer to retirement the 401k contribution is more important...I THINK!

I hope you find yourself debt free soon! Good Luck!

J.