Dear Dave: Pay Off My Debt Or Keep My Savings?

Dear Dave,

My only debt right now is a car payment. I still owe $12,000 on the vehicle, and currently I have $25,000 in savings. I’m in a very stable line of work, but my income can vary somewhat from month to month. Should I hang on to my savings, or pay off the car? 

Erik

Dear Erik,

Debt is a bad thing to have in your life, especially when your income can vary from paycheck to paycheck. You’re in good shape, except for the car note, though. It’s like a ball and chain around your neck. 

You’d still have $13,000 left if you paid off the car. And with the money you’d free up, you could rebuild your savings in no time. Pay off the car, dude!

—Dave