Q: My husband and I are at a crossroads. We expect that the company I work for will pull out of our area and I'll be laid off. We've been saving diligently, putting money away every month to keep us afloat while I'm between jobs. Then we realized we have enough in our savings account to pay off all our debts (cars, campers, one credit card) except for our mortgage. Doing so would free up about $2,000 a month. Should we pay off everything and begin saving again or keep the money in the bank for the probable end of my employment?

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).

Please note: This is general information and is not intended to be legal advice. You should consult with your own financial advisor before making any major financial decisions, including investments or changes to your portfolio, and a qualified legal professional before executing any legal documents or taking any legal action. Harpo Productions, Inc., OWN: Oprah Winfrey Network, Discovery Communications LLC and their affiliated companies and entities are not responsible for any losses, damages or claims that may result from your financial or legal decisions.


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