A few years back I had just made the mistake I promised myself I would never make again. I was offered the honor of getting not one but three new credit cards and as soon as I had them I maxed them out. I told myself it was ok because I did so in a misguided attempt to fund a website I was trying to build for a project I believed in. But I forgot that debt is debt and this kind of credit card debt came with big interest rates, which just added insult to injury.

Around that time I decided to start listening to Dave Ramsey on the radio. And while it was painful to hear all the stories that sounded just like the dumb mistake I had just made, I kept listening because I knew it was the medicine I needed to hear.

Then came a point and time that I felt the need to go against Mr. Ramsey’s advice and to start saving by putting some of each paycheck into my 401K. I started slow with a few percent of each paycheck and over the next two years slowly worked up to 10% by increasing it by 1% every few months.

Which brings me to my current status. I still have a lot of debt to pay off. That’s the bad news. The good news is I just reached the point where I had a balance in my 401K that was about the same as my yearly take home pay. Why do I bring this up? Well it is because it gets to the heart of what Mr. Ramsey spends a lot of time talking about, financial peace. I completely agree with Mr. Ramsey that it is important to pay off debt, and I am currently paying down my credit card debt. But at the same time I am still investing 10% of each paycheck into my 401K. Why am I do that? Why am I going against what Mr. Ramsey teaches? The simple reason is that I came to understand that, as important as it is to work to be debt free, I was not going to be able to sleep at night until I reached a point where I knew I had enough money put aside to live off of if I should lose my job.

Now I’m really about to piss Mr. Ramsey off (not that I want to), but I also did one other thing he says not to do. I took out a 401K loan. I will wait while Mr. Ramsey stops yelling at me for being stupid. Why you ask did I do something that dump? Simple. I gave it a lot of thought and just as I concluded that saving enough money to live on if I lose my job is more important than paying off debt, I also decided that having a portion of that savings on hand and available immediately and not have to submit a request to withdraw my 401K after I lose a job was very important. So, with that in mind, I took out a loan for what I felt was enough for me to live on for four to five months. Some of that money went towards paying down my credit card debt, but most of it is still sitting in my bank account. I kept the credit cards for now ( I think I hear Mr. Ramsey yelling at me again ), but put them in a box in my desk at home and will only take them out and use them if I find myself without a job and need to pay an unexpected big bill like a car repair or medical cost etc. Once I have two years of take home pay saved I plan to cut them up.

Why do I share all of this? Because after going through the stress of losing a job twice in the past ten years and having to go six months without a paycheck, I can speak from experience that the stress of knowing you don’t have enough cash on hand to cover living expenses if you lose your job is far more intense than the stress of knowing you still have debt to pay off. Knowing that I now have enough cash on hand to cover my living expenses for about five months and that I have more in my 401K that would get me through the rest of a year if worst came to worst has greatly reduced my stress. If I had followed Mr. Ramsey’s advice in the order he prescribes I would still have debt to pay off and would only have $1000 on hand. Considering my rent alone is $1100 a month, that means I would not even be able to keep my roof over my head much less keep the lights on and food in my stomach. So while I admire Mr. Ramsey and understand why he gives the advice he does, I would encourage you to be honest with yourself about what the true root cause of your money stress is at this moment. And I’m going to go out on a limb and guess you are a lot like me and have the more immediate concern of being able to cover your living expenses if you should experience a job loss. If so, allow yourself to make your goal this year to correct that and get that fixed. And next year you will be sleeping well at night and ready to wipe out that debt that Mr. Ramsey is right to tell you to get rid of once and for all. Best of luck. You can do it.