Medical Emergencies Come First
Dear Dave,
I recently experienced a medical emergency and unexpected hospital stay. I’m about halfway through Baby Step 2, and I’m paying off my debts using the debt snowball system. I have good insurance, but should I put Baby Step 2 on hold for now due to all the hospital bills?
Gerard
Dear Gerard,
That’s exactly what you should do. I’m sorry to hear about your health issues, but at the same time, I hope you’ll make sure you’re only pressing the pause button on Baby Step 2. I’m talking about temporarily stopping the debt snowball and making only minimum payments on all non-mortgage debt for now. Can you manage that?
Things like this can be expensive, but they’re part of life. At the same time, taking care of these kinds of issues doesn’t have to mean giving up on gaining control of your finances. Emergency issues, especially medical emergencies, come first. Then, go back and pick up where you left off when things are better, and finish knocking out your other debt by restarting your debt snowball. After that, I’ve got a feeling you’ll have the motivation to fully fund your emergency fund in Baby Step 3 all the way up to three to six months of expenses.
God bless you, friend. Keep your head up, and take good care of yourself while you’re recovering. You can do this!
— Dave
Pay it Off, Young Lady!
Dear Dave,
I’m 28, and I make around $75,000 a year. My only debt right now is a car payment. I still owe $15,000 on the vehicle, and currently I have $30,000 in savings and a 401(k) through my employer. I love my job, but my income can fluctuate from month to month. Do you think I should pay off the car, or hang on to all my savings?
Erin
Dear Erin,
Debt is a bad thing to have in your life, even with a good income. It’s an especially bad thing when your income can vary from paycheck to paycheck. It’s sounds like you’re in pretty good shape financially, except for that car note. It’s like an anchor weighing your finances down.
If you paid off the car, you’d still have $15,000 sitting in your savings account. And with your income, plus the money you’d free up by no longer having a car payment, you could rebuild your savings in a flash.
You know where I’m going with this, don’t you? Pay off that car, young lady!
— Dave
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