Your Money: Making it through medical leave

Dave Ramsey: Don't raid 401(k) to offset medical leave when you have auto loan debt.
BY DAVE RAMSEY, For The Oklahoman Modified: April 20, 2013 at 10:45 pm •  Published: April 22, 2013
Advertisement
;

Dear Dave: I've been on medical leave from my job due to an injury. My doctor recently advised extending the leave another six months, but during this time I wouldn't be paid. My husband makes $75,000 a year, and we owe $40,000 on our cars. This includes a $30,000 note on one of them. Should we take money out of our 401(k) to make it through the additional time off?

Crystal

Dear Crystal: Absolutely not! You guys have dug a hole for yourselves, and borrowing from one place to fix another will only make that hole deeper. In cases like this you have to address the core issue. Your income has dropped significantly, so you need to cut your lifestyle to match your new income level.

My advice would be to sell the cars. There's no justification for $40,000 worth of vehicles in your garage when you're living on $75,000. It makes me think you don't have any savings, either, if you're talking about raiding your 401(k). Financially speaking, you have no room to breathe right now.

Serious situations call for serious actions. You've got to get your lifestyle down to a manageable level until you're able to work again. And even then, there's no reason to raise your lifestyle up to your income. Live on less than you make, Crystal. That's what enables you to save money and be prepared when Murphy comes knocking on your door.

Email questions for Dave Ramsey to davesays@daveramsey.com.



Trending Now


AROUND THE WEB

  1. 1
    Angels won't cap former OU pitcher Garrett Richards' innings
  2. 2
    McDonald's Allegedly Fires Mom Whose Daughter Played Outside While She Worked
  3. 3
    Verizon: We track you, you get free stuff
  4. 4
    Is this Apple's new iWatch?
  5. 5
    Survey: Users unhappy with Facebook
+ show more