Dave Says: Which comes first?

Dear Dave,

I just saved up my $1,000 beginner emergency fund, and I’m looking at paying off my car and credit card debt—a total of $3,400—by the end of January. Before I started your plan, I took out a $7,500 student loan to pay for my fall and spring semesters. I still have a year of school left, which will cost about $10,000. Should I save up the money for my final year before attacking my student loan debt, so I don’t have to take out another one, or go ahead and begin paying it off?

Emma

Dear Emma,

Well, it doesn’t make much sense to pay off the current student loan, then turn around and take out another one. Your first goal—after you get the credit cards and car paid off—should be saving cash to finish school. Once you’ve done that, start paying off the student loan.

Long story short, you’ve got to stop borrowing money. The idea of saving up to pay for things should be the default setting in your brain, Emma. Otherwise, you’re going to spend the rest of your life with car payments and other debt hanging around your neck. That’s not being responsible with your money, and it will keep you from saving for stuff that matters and becoming wealthy.

Stop. Borrowing. Money. I hope I haven’t been unclear.

—Dave