Building Up for Baby
Clint and his wife are expecting their first child. They owe $11,000 in student loans and $11,000 on cars. Should they stop their debt snowball now to pile up more money in anticipation of the baby?
QUESTION: Clint in Iowa and his wife are expecting their first child in February. They owe $11,000 in student loans and $11,000 on cars. They make $106,000 a year, and their mortgage is $160,000. They have $8,000 in their checking account and a traditional insurance plan. Should they stop their debt snowball now to pile up more money in anticipation of the baby?
ANSWER: Yes, you should. Pile up as much cash as you can until the baby comes. When the baby comes and he or she is all right and Mommy is all right and they come home from the hospital, then you can bring it back down and throw it at the debt if you haven’t used it.
But it’s always nice to have a really big cushion because if there is a bump at the hospital, you don’t have any financial questions while you’re going through the bump. It’s nice to have an umbrella just in case there’s any rain, and if there’s no rain, you can get rid of the umbrella.