Dave Ramsey says: Make your money safe and easily accessible – How to get out of debt quickly

One reader asks Dave Ramsey about an emergency fund strategy, while another is curious about getting out of debt. Here's his advice for both.

BY DAVE RAMSEY

Jan 28, 2025, 2:00 PM

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Dear Dave,

I stopped contributing to my 401(k) temporarily to help us build an emergency fund a little faster. Things are going slowly, though, and I’m getting worried. My wife and I are both 46, have no debt except our home and we have a combined household income of $100,000 a year. We have $20,000 in a single stock, and I was wondering if we should cash out that stock and use the money for our emergency fund.

Doug

Should you cash out a stock to support your emergency fund?

Dear Doug,

That’s exactly what I’d do. I’d cash out that stock as soon as possible, and put the cash in a simple money market account with check writing privileges and no penalties for early withdrawals.
Basically, your emergency fund is in stock right now, and that’s a bad place to keep it.

You never know when life will throw unexpected expenses your way, or when the stock market will go down. You always want your emergency fund to be safe and easily accessible. Remember, your emergency fund is insurance—not an investment.

After that, make sure you keep pushing forward and jump back into Baby Step 4. That means start pouring money into your 401(k) again.

Great question, Doug!

— Dave

Need help getting out of debt?

Dear Dave,

I want to start handling my money better and speed up the process of getting out of debt. Should I lower the amount I’m contributing to my 401(k) so I can pay off my car and house faster?

Austin

Tips to help you start getting out of debt

Dear Austin,

I can tell you’re excited about the idea of getting out of debt. And that’s a good thing! But I don’t want you to get ahead of yourself when it comes to gaining control of your finances.

Here’s my Baby Steps plan. The first thing you should do is set aside a beginner emergency fund of $1,000. That’s Baby Step 1.

Next comes Baby Step 2, which means paying off all your debt, except for your house. This would include your car.

During this time, you should temporarily stop any kind of investing and retirement contributions, so you can attack your debt with a vengeance.

Once your mortgage is the only debt you have, it’s on to Baby Step 3. This means you start saving money to grow your beginner emergency fund into a fully-funded emergency fund of three to six months of expenses.

After that, it’s on to Baby Step 4, which is investing 15 percent of your pre-tax income for retirement. In your case, that would mean re-starting contributions to your 401(k).

The rest of the plan goes like this. Baby Step 5 is putting money into your kids’ college funds, if you have kids.

Baby Step 6 is focusing on paying off the house early, and then comes the real fun. Baby Step 7 is where you build wealth and give like crazy.

It may take a little time in some cases, but there are millions of people out there who will tell you this—following the Baby Steps works!

— Dave