Dave Gets a Lump In His Throat

Nathan and his wife are on Baby Step 2. However, Nathan isn't comfortable with stopping his 401(k) contributions. Dave explains why making this a part of the Baby Steps is a good idea.

QUESTION: Nathan in Ohio and his wife are on Baby Step 2. However, Nathan isn’t comfortable with stopping his 401(k) contributions. Dave explains why making this a part of the Baby Steps is a good idea.

ANSWER: You’re like me. You’re kind of a math nerd. You understand the compound interest tables, and so that sounded like blasphemy to you when you read it. That would’ve been my reaction, too, because that’s how I started. But what I have figured out now in 20 years of financial counseling is that personal finance is about 80% behavior. It’s only about 20% math. There is a power that focus—extreme levels of intense focus—gives you that supersedes math on the short term. I would not suggest you lose your match and not put money in your 401(k) for 10 years. But for 10 months or 14 months while you focus exclusively on debt, there is something that happens in your spirit and your emotions and your relationship when you just say you’re going to put the blinders on and all you’re focusing on is pounding this debt. And you’re going to pound it extra hard because you’re mad that you’re out of your 401(k) right now. There’s something that happens there that is alive and not mathematically quantifiable but on the short term, being out of debt causes you to become wealthy on the long term.

If you’re looking at two years or less to get out of debt in Baby Step 2, yeah, I’d stop the 401(k). I’ve been doing this a long time, and I still get a lump in my throat when I say to do that. But it’s really what Sharon and I did, and it’s really worked for a lot of people. It’s that power of focus thing. You’re permanently searing into the relationship in your household and into the two of you a whole new way of looking at things.