Pay Off The Student Loan With The Emergency Fund?
Judy just started the Baby Steps, and she has a fully funded emergency fund with enough to pay off her student loan. Her husband doesn't want to do it because she could lose her employment contract.
QUESTION: Judy in Phoenix just started the Baby Steps, and she has a fully funded emergency fund with enough to pay off her student loan. Her husband doesn’t want to do it because she could lose her employment contract. Dave would pay it off but with some guidelines.
ANSWER: You guys can take a little bit more time in Financial Peace University. You’ve only been in there two weeks, but very quickly you’re going to find out that the more you get stable and the more you’re on a budget and without the student loan debt, you’re going to save more to put the money back. You’re going to learn pretty quickly that I’m going to focus first and knock out all debts, then build an emergency fund. In this case, I don’t hear any reason to not pay off this student loan debt. It’s okay to take a few weeks and get him comfortable with the fact that this new budget thing we’re doing together and this whole new financial peace thing we’re doing together is going to actually work. Let him get some feeling that we’re going places we’ve never gone before in our lives before he wants to let that go, that’s okay. We don’t have to hit somebody with a baseball bat over this. But if I woke up in your shoes and was comfortable that both of you were on the same page with money, you’re doing the budget together, you’re committed to doing things better than you’ve ever done them before in your lives with money, then yes, I’m going to write a check and pay off that student loan immediately. That would fall right into Baby Step 2.