First the Baby Or the Debt?

Robert and his wife want to start a family as soon as possible. They want to be out of debt first though, and owe $8,000 on a Tahoe. Should they pay that off and build their emergency fund first?

QUESTION: Robert in North Carolina and his wife want to start a family as soon as possible. They want to be out of debt first though, and owe $8,000 on a Tahoe. Should they pay that off and build their emergency fund first?

ANSWER: I would not wait to have a child until you have an emergency fund. You’ve done a good job of controlling your money, you’ve got goals, and you know what you’re doing. I would pay aggressively down on the car and when the doctor confirms that she is pregnant, then I would push pause on your total money makeover. If the Tahoe is not yet paid off at that point, then I would build up a huge pile of savings while she’s pregnant.

Let’s pretend you paid the car down to $4,000 before she gets pregnant. Then you pay regular payments on the car for nine months while she is pregnant and she has the baby. During that time, you pile up $10,000. If she has no problems and everyone’s fine, when she and the baby come home from the hospital healthy, you write a check that day and restart your total money makeover and finish paying off the car out of that savings.

You really lose no ground in your get-out-of-debt plan because it’s just being redirected temporarily in case you needed some cash. But who knows? It might be eight months before she becomes pregnant, and if that’s the case, the Tahoe is paid off and you’ve got a great plan then.

If she is confirmed by the doctor to be pregnant prior to the Tahoe being paid off, I would push pause on your get-out-of-debt plan and pile up cash until the baby comes and is healthy.

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