Pay debt first or contribute to employer matched 401K?

Good morning cash money millionaires!

I hope everyone had a fantastic Labor Day. I know I did. A paid day off, eating good food, drinking beer, and screwing around all day is way better than working.

I’m putting a top of discussion out there that I’d love to hear your opinions on. I am an avid Dave Ramsey follower. However, there are some ideas that he promotes that I do not fully subscribe to (I still love his work and fully support it). One of them is…

Do not invest or save for retirement until all your debts are paid off.

I mean, I totally get what he’s saying. Focus on one thing at a time. There’s a psychological benefit to truly focusing on one thing (debt reduction) and attacking it with everything you have.

However…

My 9-5 job offers an employer match 5% to our 401K. I CAN’T PASS THAT UP.

My thought process is…it’s going to take me a number of years until I am debt free. (How long exactly? That would be a great blog post!) It seems to me that all the money I’m contributing (and the money being matched) will benefit me much more in the long run. This is a marathon, not a sprint ($147,000 in debt-see my home page!). If I was, say, $30,000 in debt it seems like it would make more sense to put retirement/investing on hold while I clean up that mess.

If anything, contributing 5% (per bi-weekly paycheck) forces me to:

  1. Budget like I never had the money in the first place
  2. Hustle more to make up for the money that I don’t see
  3. Start saving at a reasonably young age (30…yikes)

Again, I get it. In a “perfect” Dave Ramsey world I not contribute anything and throw all available funds directly at the debt. However, since it is such a long road to being debt free it seems foolish to pass up on free money and let it grow over time. It’s not like I’m missing it! It’s only about $100 per paycheck!

Those are my thoughts. How do you feel? Am I being foolish? Do you support this strategy? Let’s hear it!

Thanks everyone and have a super Tuesday!

One thought on “Pay debt first or contribute to employer matched 401K?

  1. Pingback: Pay debt first or contribute to employer matched 401K? | Student Loan Soldier

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