I’ve been studying Dave Ramsey’s financial principles for years, and one question keeps coming up from people trying to follow his Baby Steps: “Why should I use my savings to pay off debt when having that money makes me feel secure?” It’s a psychological struggle many of us face when they pay off debt, and after reviewing a recent caller’s dilemma on The Ramsey Show, I want to break down why this feeling of security might actually be holding you back.
The caller, Jared, had saved $16,000 but also carried debt. He understood mathematically that his debt was costing him more than his savings were earning, yet he couldn’t shake the feeling that keeping his savings provided a safety net he wasn’t ready to give up.
The False Security of Savings While in Debt
What Jared is experiencing is what Dave calls “the illusion of security.” When you have money in the bank while simultaneously carrying debt, you’re not actually secure—you’re just postponing inevitable financial pain. This false sense of safety might comfort you today, but over a 20-year period, you remain financially vulnerable because you’re still broke and in debt.
Think about it this way: If your car engine suddenly needs a $5,000 repair and you’ve only got $1,000 in your emergency fund (following Baby Step 1), you might feel exposed. But what many don’t realize is that carrying debt creates an even greater vulnerability.
As Dave pointed out from his own painful experience:
I have been foreclosed on. I have been sued. I have had people take money out of my account after they sued me and won. We were scared several times that they were going to repo our car that night.
These traumatic financial experiences taught Dave firsthand that debt doesn’t just represent numbers on a statement—it represents real risk to your security, peace of mind, and future.
The Psychology Behind Financial Decision-Making
Our financial decisions are often driven more by emotion than logic. For natural savers like Jared, the emotional comfort of having money in the bank can override the mathematical reality that high-interest debt is actively draining their wealth.
Here’s why Dave’s approach makes sense psychologically and mathematically:
- When you’re in debt, your financial future is partially controlled by others
- Creditors can take legal action against you if your situation worsens
- The interest you’re paying on debt typically far exceeds what your savings earn
- Being debt-free provides a deeper, more authentic security than having savings while in debt
The Baby Steps approach addresses this by allowing you to keep a small $1,000 emergency fund while tackling debt aggressively. This strikes a balance between having some safety cushion and making meaningful progress toward true financial freedom.
Beyond Math: The Spiritual Dimension of Money Management
Another caller asked about tithing—whether giving to a declining church was necessary or if donations to other Christian organizations could count instead. Dave’s response revealed an important principle that applies beyond just religious giving: our money decisions reflect our values and trust.
Dave noted that if you can’t trust an organization with your money, you probably shouldn’t trust them with other important aspects of your life either. This same principle applies to debt: if you’re unwilling to tackle it head-on, you’re placing trust in a system designed to keep you financially dependent.
True financial security comes from freedom, not from having money in an account while debt collectors hold power over your future. The temporary discomfort of depleting savings to eliminate debt leads to genuine long-term security that no emergency fund alongside debt can provide.
Taking the Leap Toward Real Financial Security
If you’re holding onto savings while carrying debt, I encourage you to reconsider what security really means. Ask yourself: “Am I truly secure with debt hanging over my head, or am I just comfortable with a familiar discomfort?”
Following Dave’s Baby Steps means temporarily reducing your emergency fund to $1,000, listing your debts from smallest to largest, and attacking them in that order. Once you’re debt-free, you’ll rebuild your emergency fund to 3-6 months of expenses—creating genuine security that isn’t undermined by obligations to creditors.
The path to financial peace isn’t always comfortable, but it’s worth it. True security isn’t about having money in the bank today—it’s about building a foundation where your financial future belongs entirely to you, not to creditors who can take that security away at any moment.
Frequently Asked Questions
Q: Why does Dave Ramsey recommend paying off debt before building substantial savings?
Dave recommends this approach because debt represents a significant risk to your financial wellbeing. While having savings alongside debt might feel secure, it’s actually less secure than being debt-free with a smaller emergency fund. The interest you pay on debt typically far exceeds what your savings earn, making debt elimination the mathematically superior choice.
Q: How much should I keep in my emergency fund while paying off debt?
According to Dave Ramsey’s Baby Step 1, you should maintain a $1,000 starter emergency fund while working through your debt payoff plan. This provides a small buffer against minor emergencies without significantly slowing your debt payoff progress. Once all non-mortgage debt is eliminated, you’ll build this up to 3-6 months of expenses.
Q: What’s the best way to overcome the emotional attachment to savings when trying to pay off debt?
To overcome the emotional attachment to savings, focus on the freedom and security that being debt-free will bring. Remind yourself that debt represents risk and vulnerability, not just numbers on a statement. Consider the stress and limitations debt creates in your life, and visualize how different life will be when your income is completely yours, with no obligations to creditors.
Q: Does following Dave Ramsey’s Baby Steps mean I can never have savings until all my debt is paid off?
Not exactly. Dave’s plan allows for a $1,000 emergency fund during debt payoff (Baby Step 1). This provides some cushion against minor emergencies while you focus intensely on eliminating debt. The approach is designed to balance the need for some financial safety with the importance of getting out of debt quickly to build true long-term security.
