This Baby Step SHOULD Scare You!

Summary

Brian, a caller from Pittsburgh with about 12 years until retirement, said a friend and his son prompted him to review his finances. He had roughly $66,247 in debt, about $12,000 invested in individual stocks, and $11,000–$12,000 in cash savings. His household income was approximately $180,000–$190,000 per year. He asked whether to keep the stock investments as savings or sell them to pay down debt.

Dave Ramsey recommended following the Ramsey Baby Steps: temporarily stop investing, use non-retirement funds above a $1,000 starter emergency fund to pay off debt, and rebuild savings after the debt is gone. He described the smaller cash cushion as intentionally uncomfortable but temporary, and said Brian’s income should allow him to clear the debt quickly. The discussion also emphasized acting on the numbers rather than delaying out of pride or skepticism.

Framework and Recommendations

Baby Step 2: Pay Off Non-Mortgage Debt

• List debts from smallest to largest.
• Make minimum payments on all debts except the smallest. Put extra money toward that balance, then roll the payments into the next debt.
• Pause investing, including 401(k) contributions—even contributions that receive an employer match.
• Sell the individual-stock holdings and apply the proceeds to debt.
• Keep only $1,000 in cash for the starter emergency fund; put any excess cash toward debt.

Baby Step 3: Rebuild Savings

Once the debt is paid off, build an emergency fund covering three to six months of expenses.

After Baby Step 3

Restart 401(k) investing.

Key Figures and Timeline

• Debt: $66,247
• Individual stocks: About $12,000
• Cash savings: About $11,000–$12,000, with $1,000 retained as the starter emergency fund
• Household income: About $180,000–$190,000 annually
• Estimated amount applied to debt: Dave estimated that using roughly $23,000 from stocks and cash would leave about $43,000 in debt.
• Estimated payoff timeline: Dave urged Brian to put about $5,000 per month toward the remaining debt and estimated it could be paid off in roughly six months, around Christmas.

Brian’s original goal had been to become debt-free within two years and before turning 50. He said he had reduced his 401(k) contributions to the level needed to receive the employer match; Dave clarified that he recommended stopping contributions altogether while paying off the debt.

Assets and Instruments Mentioned

• Individual stocks; no tickers or companies were identified
• 401(k)
• Cash savings
• Debt, including non-mortgage debt; no specific debt types or interest rates were given

No market outlook, valuation metrics, or investment-performance figures were discussed. The subtitles contain no explicit “not financial advice” disclaimer.

Presenters and Sources

Dave Ramsey, an unnamed co-host in the subtitles, and caller Brian from Pittsburgh. Dave also offered Brian a copy of The Total Money Makeover.