When to Save and When to Pay off Debt
A: Pay off the credit card, but don't pay off the cars and campers. I firmly believe that in 2009 everyone needs to make it a priority to get out of credit card debt (see Preparing for a Possible Layoff ). Credit card companies are raising rates, slashing credit lines, and even canceling cards; the best way to insulate yourself from penalties is to have no balance. But you also need to keep enough money in your savings account to cover the mortgage payments if you cannot quickly find another job. If you deplete your savings to pay off the cars and campers, how will you be able to make the house payments if you are laid off?
That said, what you really need to consider is selling one or more of the cars if you can pocket enough to cover the loan balances on the vehicles. And those campers fall far short of being a necessity, so you might think about selling them, too. I know that getting rid of certain possessions is hard to contemplate, but hard times require sacrifices.
Suze Orman's most recent book is her 2009 Action Plan: Keeping Your Money Safe & Sound (Spiegel & Grau).