Who Gets to Pay?
Does Dave agree with Martha using her emergency fund for this reason?
QUESTION: Martha in Nashville says her company will pay the remainder of her $4,000 in student loans next year. She wants to know if she should write the check now to pay off the loan or wait until her company will pay it off. What option does Dave recommend?
Dave's ANSWER: I would write a check and deposit it into your emergency fund as an extra $4,000 in case something happens and you change your direction and that money is not available this time next year.
Become completely debt-free except the student loan. Then you pay the student loan off, but you pay it off to yourself. That means you leave the debt on the books, but you put an extra $4,000 into your emergency fund. That way, if something happened and you changed companies or changed direction, you could write a check that day and be debt-free.
But if you stay on the course you think you're on, then early next year you'll have the money to write the check and you'll have an extra $4,000 lying around.