Hannah is about to get a raise at work that will add $200 to her monthly paycheck. She wants to buy a new car to replace the four-year-old car she is driving. She has $1,000 in her emergency fund and a credit card balance of $650. If she trades in her car and buys a new one, her current payment will only increase by $75. She is leaning toward doing this because she would still have $125 extra per month. What would Dave say?

Accepted Solution

Dave Ramsey would say Hannah should pay off her credit card balance, put some percentage of her income into a retirement account, and save her additional funds for as long as it takes to purchase a suitable car outright (with no payment).