Dave Ramsey says: Debt is like a ball and chain

Dear Dave,

I’ve never had a credit card in my life. I do have a $600 monthly car payment right now, and it’s my only debt. I owe $10,000 on the vehicle. Currently, I have a six-month emergency fund saved, plus $25,000 in a regular savings account. I’m in sales, so my pay often fluctuates from month to month. Should I pay off the car from savings, or hang on to that money just in case things at my job take a downturn?

Mike

Debt is like a ball and chain around your neck

Dear Mike,

I’m proud of you for never caving in to the temptation of credit cards. That sets you apart from the vast majority of folks in America today. But I’m not letting you off the hook on the car payments.

I don’t care what anyone else says, debt is never a good thing. And it’s absolutely the last thing you want in your life when your job compensation structure is unpredictable. Now, it sounds to me like you’re in pretty good shape financially, except for the car payments. It may be the only debt you have, but it’s still like a ball and chain around your neck when it comes to your money.

I want you to take a moment, and think about all the great things you could do if you didn’t have that monthly payment flying out the door. I mean, an extra $600 in your pocket every month would be pretty cool, right? If I were in your shoes, I’d take $10,000 out of savings today, and pay off that car. You’d be completely debt-free in a heartbeat, plus you could rebuild your savings in no time with the money you’ll free up. On top of all that, you’d still have your emergency fund of six months of expenses sitting there untouched.

Debt always equals risk, Mike. Always. Write a check today, man, and pay off that car. You’ll be surprised at how much lighter and more comfortable you feel with no debt — or the potential consequences of debt — weighing you down!

— Dave

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