Paying off debt vs. down payment on a home

Dear Dave,

My husband and I are in our 50s, and we have just $12,000 to pay off before we’re debt-free. We’ve paid off almost $70,000 in debt in the last two years. We would like to buy a house soon, but we know we also need an emergency fund. It would take us almost a year to build up an emergency fund, so should we make adjustments to the Baby Steps since we’re getting older?

Dawn

Dear Dawn,

No! It shouldn’t take you two a year to build up an emergency fund considering the rate at which you’ve been paying off debt. You need a fully funded emergency fund or three to six months of expenses set aside before you start saving for a down payment on a home.

You’ve been making great progress, and you obviously have a good income to be able to pay off debt that quickly. Maybe in your case you could lean a little more toward the three-month side with your emergency fund before you start saving for a house. Then, after you’re all moved in, you could revisit the emergency fund and beef it up to six months.

Just stay on course and stick with the plan, Dawn. Fifty isn’t old. You two have plenty of time to get your finances in order, find a great home, and look forward to many great years ahead!

—Dave

*Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.