The power of stopping your 401K while paying off debt

Well…

I did it. I stopped my contributions to my 401K. 401 Kati stopped her 401K contributions?! I know, I know… how can that be? Here’s the deal: Dave Ramsey teaches to stop your 401K contributions, all retirement contributions, until you are out of debt. He says this for a few reasons: your income is your most powerful wealth-building tool; the faster you are debt free, the faster you can build your wealth; and when you focus with laser intensity on your goals, you can achieve anything.

But I was not convinced. I didn’t start contributing until two years ago, because we were having a hard time making traction in our debt snowball at all until then, and I had convinced myself that since we’d be in debt so long, we should go ahead and start retirement.

Here’s the thing: We resigned ourselves to paying off our debt. The first six months that we actually started our snowball was the same time we were trying to get our careers off the ground: we had both worked one full-time job, each for about a year. Then we moved abroad so I could get my master’s and we could live in Paris – our dream. Boy, that was an expensive dream. Why didn’t we ooh and aah over the possibility of living somewhere, cheap, like Arkansas*?

*Arkansas is the 10th cheapest state in the Union, it turns out. For a refreshing article that provides the actual list without making you click through a slideshow for each ranking, go here. After you finish this post, of course. It gets good.

Ok, so fast forward: We’ve got a second baby, barely any jobs*, and a mountain of debt. We start paying it off, as much as we can,  and it takes us 5 months to pay off $2500. It’s glacially slow. But there it was: Our first Salle Mae loan, all grown up… and KICKED OUT OF THE HOUSE! WOHOO! Then we move on to the next loan, but it takes us a little longer: another 3 months to get our next loan down from $2500 to $1100. I believe we were cash flowing my thesis at the time. So eight months… and we have only paid off $3600.

*My bad, I had a full-time job at the state and my husband had not one, not two, but THREE part-time jobs: Starbucks in the morning, Apple in the daytime, and Melting Pot at night. 

Cute little Budget Line Items, aren’t they!?

What we did not realize was that a few of our loans were allowing us to delay repayment, but they were accruing interest, to the tune of $1900 – $2600 a MONTH. What we did know was that right as we went to pay off that second itty bitty loan, all of that unknown-to-us-at-the-time interest went off and get itself pregnant. I mean, CAPITALIZED! UGH! So in the course of one month we think we’ve paid off $3,700 in three-quarters of a year, and then we get a letter that said: Your debt is now $4K MORE than it was last month. !@!@#$%^&^%$#!$@%^&*(&%$#@!.

So yes, I pressed the hurry-up-and-save-two-dollars-a-month-for-retirement panic button.

Through oodles of hard work, we’ve more than tripled our income, and now we are punching debt in the throat, with a goal of  $4,000 dollar whammys every month.

But… it’s easy to soften our intensity. $4998.43 in January, $7051.18 in February?! That’s $12 GRAND-OLA!!! So why don’t we take a break and buy that $300 dishwasher I’ve been eyeing?

Well, I am going to Spring 2018 FCMT in Nashville next week (Coaching training taught by Dave Ramsey’s team – yeehaw!) and I could not bear the thought that I would get to meet my ultimate role model and I could not say I followed his advice 100%. That just seemed like an uncomfortable conversation, #amiright?!

And guess what? The fire for the dishwasher is a puny little flake of ash compared to the roaring, raging fire that is my intensity to get out of debt so I can start retirement contributions like a maniac.*

*3-6 months of expenses first, of course.

So that, ladies and gentlemen, is the power of stopping your 401K. It will light a flippin’ inferno under your rear. You will be so intense, other gazelles will look at you and say “Dang, just calm down a little, aight?!”

We are going on that trip to Nashville, so our budget will reflect less work. Our goal is $4K this month, then back to the $5K mark the following month. Are you GAZELLE INTENSE enough to stop your contributions?!

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