Dave Ramsey: Roth over pension

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Dear Dave,

My wife and I are both 25-years-old, and we’re working on Baby Steps 4, 5 and 6. I have a 401(k) through my employer, and she has a pension. Currently, we’re falling short of the 15 percent of income you advise putting toward retirement. Should we get IRAs, or start stocking money away in her pension?

— John

Dear John,

So no, I wouldn’t do more with a pension where you add to it yourself, especially at such a young age.

—Dave

Why the smallest debt first?

Dear Dave,

I’m new to you and your plan. Why do you want people to pay off the debt with the smallest balance first, instead of the one with the highest interest rate?

— Courtney

Dear Courtney,

Simply put, because personal finance isn’t all about math. Personal finance is only about 20 percent math. The other 80 percent is behavior.

It’s easier to change bad habits when you see quick results from your efforts to eliminate negative behaviors. Paying off the smallest debts first, instead of the debts with the highest interest rates, will give you quick wins that will help keep you motivated. It provides proof that you can succeed and become debt-free.

— Dave