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Dave Says: When Not to Worry about Paying Off Debt

Dave Says: When to Not Worry about Paying Off Debt

Dear Dave,

I’m a 26-year-old journalist making $26,000 annually, and the only debt I have is $31,000 in student loans. I’m following your plan, so I also have $1,000 in my starter emergency fund and am working side jobs to make extra money. Since my job field is volatile, I’ve lost and found a couple of jobs in the last few years and have an older car. Should I beef up my emergency fund in case I go through another job loss or I have problems with my vehicle?

Sarah

Dear Sarah,

In your case, I think you might want to increase your emergency fund to around $3,000. Usually, I’d rather people focus on knocking out debt once they have a beginner emergency fund in place, but it sounds like you’ve got extenuating circumstances in your life. Older cars, especially those with lots of miles, could need attention at any time. And you’re right about your job too. The newspaper world is pretty volatile and even downright insecure at times. This isn’t your fault, but I’m glad you’re looking ahead.

Just push the pause button on paying off debt for the moment, and build up your emergency fund a bit more. That will give you a little more wiggle room in case life decides to throw something unexpected at you. Then, go back to paying off debt before you increase your emergency fund to a full three to six months of expenses.

Having a little financial stability is a big thing for you right now, Sarah. It will help you feel a little more secure until the debt is gone. And once that happens, you’ll really be able to fly!

—Dave

* Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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