By Priya

May 17, 2021


Show notes

🎙 Popular advice will tell you to pay off your debt first before you start investing. But following that advice means that you could be leaving tens of thousands of dollars on the table when it comes time to retire. It’s important to set a solid financial foundation before you start investing. You need to learn how to manage the money you already have before you start making more. But that doesn’t mean you need to follow outdated and unhelpful (and often expensive) advice. But then, what comes first? 🤔

This episode discusses topics like:

  • What your #1 financial priority needs to be regardless of the current state of your finances;
  • Why you need to start investing before you become debt free and why the popular advice about this from Dave Ramsey is so wrong; and
  • How to start investing when you still have debt, and how to become totally debt free.

Links from this episode:


Hey there, friends! And welcome back to Girl on FIRE, the financial independence podcast for independent women. 

My name is Priya, I’m a Chartered Accountant, an analyst and the creator of Paper Money Co. 

I’m also a fierce financial feminist and the host of this podcast. I believe that a woman who is in control of her money, is in control of her life.

This week we’re talking about one of the most common questions when it comes to financial success. It’s the chicken and egg question. 

Which comes first? Saving money, paying off debt or investing? Now, this is probably going to be a much shorter episode than normal but this is still a super important question. 

And although Girl on FIRE is ultimately about investing and building wealth, you can’t have any of that without a solid financial foundation. And I just can’t emphasise that enough.

Investing doesn’t come around until you know how to manage money, get the basics right and budget like a pro. 

That’s why we start with things like budgeting and like saving money. They might not be fun and sexy, but they’re so damn necessary. 

Now, a lot of people get tripped up following advice from the likes of Dave Ramsey saying that you shouldn’t be investing until you’ve paid off all your debt. 

Actually, according to Dave Ramsey, you shouldn’t be doing much of anything until you’ve paid off your debt.

He seems to treat people with debt like they’re somehow beneath him, like it’s a flaw on their character or that they’re unworthy, and that’s not what Girl on FIRE is about.

But before we get started, I want to remind you to head to my website — — to sign up and receive your free copy of my Investing Starter Guide.

It’s totally free, you just need to enter in your email address and I’ll send it straight to your inbox. And then I want you to start working through it. 

It gives you a plan to follow, step-by-step instructions to get ready to start investing and building real wealth.

If you’re really serious about learning to master your money, then it’s the perfect guide for you, and I’d hate for you to miss out on it. 

As always, Girl on FIRE is about learning, so whip out your favourite notebook or journal and get ready to take some notes. 

If you’ve forgotten how to use a pen in this digital age we live in, you can always find the transcript on my website —

And one quick side note — this episode is 110% sponsored by coffee because I’m tired AF.

Okay, let’s dive in and answer the big question.

Common advice about saving, debt & retirement from Dave Ramsey

So, to kick things off, I want to address the common advice that’s out there about saving, debt and investing.

And, no surprises, the commonly touted advice comes from none other than my old pal Dave Ramsey. 

I’ve said this before, but I’ll say it again. A lot of the financial advice you see out in the internet wilderness is stuff that was said by ‘gurus’ like Dave Ramsey and is then just repeated over and over and over again.

There are a lot of parrots out there in those internet streets. And it’s really important that you remember that when you’re out there Googling things or scrolling social media.

I’m not one of those financial experts who’s going to sit here telling you what to do, telling you how to live your life or how to spend your money.

And Girls on FIRE are independent thinkers. You have a big beautiful brain, and you need to use it.

Just because you see something on the internet 10 different times, doesn’t mean it’s correct. Or that it’s the best advice for you.

I’m always encouraging my Girls on FIRE to think for yourself. Ask questions about the advice you hear before you start following it. 

Not just with your money, but with everything in life. Because no one — no one — will prioritise your best interests like you do. 

Also, just because something comes from a financial expert, doesn’t always mean it’s the best advice. 

Having a bunch of letters after your name doesn’t necessarily stop you from giving problematic and sometimes harmful advice.

And we’ll talk about some bad advice a little later on in this episode. In fact, one day, I might do a whole episode talking about bad advice. 

Dave Ramsey’s Baby Steps

But when it comes to whether you should save, pay off debt or invest first, the most common answer will come from Dave Ramsey’s advice and the Baby Steps he’s so famous for. 

Most people on the internet, whether they’re real financial experts or they just like spreading Dave Ramsey’s gospel will tell you this: 

Save up $1,000 for a starter emergency fund while you’re in debt. Then, pay off your debt and once you’re debt free, increase your emergency fund to 3-6 months of living expenses. And then start investing.

Now, why do people say this? Honestly, a lot of the time it’s because that’s what Dave Ramsey teaches people to do in his Baby Steps. 

So, if you’re not familiar with them, Dave Ramsey has 7 baby steps to take control of your money. 

The idea is that you have to fully complete each step before you move on to the next one. And the first 4 Baby Steps are: 

  1. Save up $1,000 for a starter emergency fund.
  2. Pay off all debt except for your mortgage using a debt snowball.
  3. Save 3-6 months of expenses in a fully funded emergency fund.
  4. Invest 15% of your household income in retirement.

Sounds familiar, right? Now, it’s no surprise to my regular listeners that I don’t like Dave Ramsey. I think he teaches a lot of problematic stuff. 

And one of those things, is the first 4 Baby Steps - the idea that you need a starter emergency fund of $1,000 before you pay off your debt. 

And then that you must pay off your debt before you save any more for your emergency fund or do any investing. 

Dave Ramsey Baby Step 2: Pay off all debt (except for the house) using the debt snowball

But, it is a little more complicated than that, so I want to take a second to draw your attention to a few key things he says about paying off debt, which is Baby Step 2.

Now, before you come at me, I’ll have you know that I went back and re-read sections of his book to make sure I wasn’t telling you porkies.

In a nutshell, he says that everything in your existence should be focused on paying off debt and for most people, they should become debt free, except for the house, within about 18 months. 

But here’s where I take issue with his advice. This is a quote from his book, “The Total Money Makeover”.

He says: “If you are going to be gazelle-intense and do everything in your power to become debt-free very quickly, then stop your retirement plan contributions, even if your company matches them.”

So, to add a little more context, in his book he says that the average person who focuses on nothing but debt payoff will be debt free, except for their home in 18 months. 

And during that time, you’re supposed to stop your retirement contributions, even if your employer is offering you a match.

He does say that in the rare and extreme cases where your debt payoff is expected to take longer than 18 months, you can continue making retirement contributions. 

Why you shouldn’t stop your retirement contributions until you’re debt free

Now, the reason I have a problem with that is this: we know that when it comes to investing and growing your money, time in the market is crucial.

Think of investing like baking a cake. I know I think about cake a lot on this show, but humour me on this one.

Your cake is sitting in the oven and the temperature is just right. But if you take it out too early, if it doesn’t bake for long enough, it’s still going to be batter.

Your cake will be undercooked. And, similarly, if your investments don’t have time to compound in the market, they’ll be undercooked, too. And you won’t be generating a lot of wealth.

Now, in the grand scheme of things, stopping your contributions for 18 months might not seem like a big deal. 

But let’s say you contribute $250 per month into your retirement. And your employer matches that 100%. That’s $500 a month going into your retirement.

And over 18 months, that comes to $9,000. Now, with a return of 7% after inflation, you’ll increase your wealth by $460 over those 18 months.

So, at the end of 18 months, you’ve contributed a total of $9,000 and that’s grown to $9,460.

That’s not a lot but it’s still something. Here’s where it gets’ interesting. Those $9,000 over the course of the next 35 years will grow to $103,000.

So, by stopping your retirement contributions for those 18 months, you’re shooting yourself in the foot in the long run when it comes to retirement.

Now, the good news is that this will only really be an issue for my listeners in the US. 

And Dave Ramsey was writing for a US audience, but a lot of his advice has been followed around the world, including in Australia. 

But in Australia, thanks to our current superannuation system, you can’t stop your retirement contributions. 

We, sadly, don’t get an employer match, but the government forces  you to put money in your retirement when you get paid. So, you don’t have the option to shoot yourself in the foot.

You can still enjoy life while paying off debt

Another way that Dave Ramsey’s advice can be problematic here is that he tells you to devote your life to paying off your debt.

He really seems to think it’s some kind of character or personality flaw that you even have debt in the first place.

And he looks down on you, he really does. He really hates debt and he thinks your life should be on hold until it’s gone.

I’m going to read you some things he’s recently Tweeted and you’ll see what I mean.

He said: “Adults devise a plan and follow it. Children do what feels good. Lack of emotional maturity will make you broke”.

That’s a very simplistic way of looking at the psychology of how we spend and save money. 

He’s telling us that we’re immature because we have emotions that manifest themselves in our spending. We’re immature for being human.

Here’s another one: “Debt is not a math problem. It’s a behaviour problem.”

In some cases, yes, that’s true. It’s not a simple behaviour problem, though, there’s a lot of psychology behind it. But in some cases it is a mathematical problem.

Tell the single mother with two minimum wage jobs and elderly parents to look after that her debt isn’t a math problem.

Tell that to the 18 year old girl full of dreams and ambitions who’s going off to university.

Tell that to someone who can’t afford health insurance and gets sick. It’s an extremely privileged thing to say and it doesn’t help anybody.

And one more, my favourite: “If you’re working on paying off debt, the only time you should see the inside of a restaurant is if you’re working there.”

I’m just going to leave that one there and let it marinate and fester in your brain. 

But do you see what I mean — he hates debt so much that it clouds his humanity and he sees people who have debt as beneath him.

Now, I promise you that I didn’t tell you all of this just to go on some massive rant. There is method to my madness. 

I’m telling you this because I want you to see and understand where the popular advice of pay off debt before any investing comes from.

Because it is problematic and it can cost you tens of thousands, or hundreds of thousands of dollars over time. 

Now, let’s get to the fun part of the episode where I share my perspective on the save, debt or invest question. 

Should you save, pay off debt or invest first?

Before we move on, I want to ask my Girls on FIRE for a favour. If you’ve listened this far into the episode then you’re probably enjoying it, right?

So, here’s what I’d like you to do next. Pause this episode for a few seconds and head on over to Apple Podcasts. There’s a link right at the bottom of the show notes that’ll take you straight there. 

I want you to leave a rating and a review because that helps me provide better content and helps other Girls on FIRE in the internet wilderness come and find us.

It’s also a great way to support this show for free. And I’d also love to send you a little something to say thank you.

So, take a screenshot of your rating and review and email it to me at or share it on Instagram and tag me @papermoneyco

If you do that, I’ll send you a copy of my FIRE and investment calculator. Which, if I do say so myself, is pretty damn amazing.

It’s how I plan for my early retirement and my wealth. It shows me how my wealth is going to grow, when I can retire and how long my money will last.

And it also has a separate tab that takes Australia’s superannuation into account as well. 

And you can use it to analyse companies and different investment options when you’re picking stocks too. 

I’ve never actually seen anything like it before, so it’s pretty special. And I’m currently not offering that spreadsheet anywhere else except on Patreon. 

Not in my shop, not to my email list — it’s a ghost. So, this is kind of a money-can’t-buy type deal.

The only way to get your hot little hands on that spreadsheet is by leaving a rating and a review, taking a screenshot and tagging me in it.

So, go hit pause and do that right now. It’s okay, I’ll wait.

Okay, so jumping right in, here’s the PMC advice. 

Saving money before you start paying off debt

First, you need to start saving for two reasons. Number 1, you need to get that emergency fund going. We talked all about emergency funds in episode 6.

I’m not going to give you a figure that you need to save because I don’t live your life and I’m not that kind of financial expert. But I do tell you how to figure it out.

I’m also never going to tell you to save a starter emergency fund of $1,000. I think that’s BS disguised as advice.

I hate benchmarks, but I particularly hate that one — $1,000 won’t get you very far these days. It’s just not enough.

Now, I know that saving your emergency fund can be daunting. It can be thousands of dollars and it won’t happen overnight. 

But believe me when I say that one day, your emergency fund could be the one thing that keeps you sleeping inside instead of on the street.

There’s a reason that we say people who are homeless are down on their luck. Through no fault of your own, you could find yourself out of work and needing a way to pay the rent and buy food. 

That’s why you need that emergency fund. It’s your #1 financial priority after making sure you can feed yourself now. 

Your debt and investing won’t matter when you’re on the street and starving. So, your emergency fund comes first. 

Another reason I focus on saving first is because saving money is more than just your emergency fund. 

It’s your sinking funds. It’s saving up for large expenses like travelling or large bills like quarterly utilities.

A lot of the times, it feels like those big expenses sneak up on you when you’re not prepared. But by setting money aside for it in a sinking fund, you are prepared.

And without that money set aside, you’ll be forced to pay for those expenses on your credit card.

And it’s a lot harder to manage your debt when you’re constantly adding more to the pile.

Not only that, but saving money is a lifelong skill and a lifelong process. You’ll never be done with it. 

Even when you’re rolling in money, the only way you’re not going to spend it all and keep investing is if you learn the skill of saving some of it. 

So, the sooner you start learning those skills, the better.

So, saving comes first — your emergency fund and your sinking funds. 

Paying off high interest debt before investing

Next, we have debt. Now, debt is a tricky one because it has a logical answer and an emotional answer. 

The logical answer is this. Pay off your high interest debt before you start investing.

And high interest debt is debt like credit card debt that charges an interest rate which is higher than the return you can make on the market, so about 7-10%.

So, for example, most credit cards charge you at least 20% interest. And if you’re making a 7-10% return on the market, you’re still paying more in interest than you’re earning.

There’s still more money going out than there is coming in. You’re essentially using up your entire return and then some to pay your interest. 

So, that’s why you need to pay off your high interest debt first. If you have student loans or medical debt at 3% or 5%, apart from your minimum monthly payments, that can wait.

You can pay those off slowly once you’ve already started investing. But the high interest debt needs to be eliminated before you start investing. 

Now, the exception here is when it comes to your retirement funds. So, as I said before, superannuation in Australia is mandatory once you’re working a certain amount of hours.

That money is getting put into your super whether you like it or not, and whether you still have high interest debt or not. 

But for my listeners in the US, if you employer is offering you a match for your 401(K) contributions — take it!

That money is part of your employment package so don’t leave it on the table. So, make whatever contribution you have to in order to get your match, even while you’re paying off high interest debt. 

So, that’s the logical answer of paying off your high interest debt before you start investing, unless you’re getting a match. 

Paying off emotional debt

But there’s also an emotional answer here. Some people just don’t like carrying any debt. It’s stressful and anxiety-inducing to owe someone money.

And if it’ll help you rest easy knowing that all your debts are paid, then by all means do that. But I urge you to weigh your options first.

Run the calculation to see what would happen to that money if you invested it instead of using it to pay off your debt.

I’m not going to judge you for whatever choice you make. It’s your life, your money and your choice. But I do strongly encourage you to make the most informed decision that you can.

That’s what I did when I paid off my debt. I mentioned before that I paid off my student debt of about $30,000 when I was in my early 20s. 

And I’ve also explained that student debt like that in Australia is technically interest free, but it’s indexed at inflation every year.

So, my debt was growing as I was paying it off, and eventually I would have become debt free.

But I hated having to owe anyone money. I hate having to owe anyone anything.

I don’t know why, maybe that’s just what happens when you come from a broken home. You’re a strange kind of independent. At least in my case, anyway.

But at the time, the government also offered a 5% discount if you paid off your loan upfront.

So, by paying it off early,  I was saving myself money in indexing down the road. And I know that because I ran the numbers and figured it out.

I honestly could have gone either way. A lot of people in Australia will tell you not to pay off your student debt in advance because it’s a lot cheaper than any other loan you can get. 

But I hated the feeling of owing someone something. So, I made the choice that was best for me at the time, and I paid it off. 

Okay, so at this point, your emergency fund and your short term savings are thriving and you’ve paid off at least your high interest debt. 

Investing after you’ve paid off high interest debt

This is the time when you start investing more intentionally. And by that, I mean not just claiming your employer matches or getting your mandatory super. 

I mean intentionally investing more in your tax advantaged retirement accounts. Or opening up a brokerage account and buying some ETFs which we talked about in episode 17.

Another thing to note is that this plan of saving, paying off high interest debt and investing — it doesn’t take into account buying a home.

And the reason for that is because we live in the 21st century. Home ownership isn’t the ultimate goal anymore. 

A lot of people choose not to buy a home because it doesn’t align with their goals or their values. And that’s perfectly okay. 

But if you did buy a home, you don’t need to pay off your mortgage before you start investing. 

If you purchase the right property under the right circumstances, your home will be an investment. 

It’ll be part of your net worth and your investment portfolio. And the same applies for any investment properties as well.

Next weeks’ episode

And that’s all I have for you Girls on FIRE today!

My challenge for you this week is to head to and get your copy of my Investing Starter Guide. 

You know why? Because it walks you through the steps of saving up an emergency fund and paying off debt before you’re ready to start investing. 

It walks you through how to action what you’ve learned in this episode, that’s why!

On next weeks’ episode we’re going to be talking about budget myths that are holding you back from living the life of your dreams.

I know that we’d all rather talk about investing and making bank but the truth is that you won’t get anywhere fast without a good budget. That’s why your shmoopie is so important!

It’s going to be a super interesting episode so you’re definitely not going to want to miss it.


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The advice shared on Girl on FIRE is general in nature and does not constitute financial advice. The information shared does not consider your individual circumstances. Girl on FIRE exists purely for educational purposes and should not be relied upon to make an investment or financial decision.

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