Dear Dave,
Iím 38 years old, and Iíve got $12,000 in student loans still hanging over my head. Itís the only debt I have. I make $30,000 a year, and Iíve managed to save $12,000, but Iím also driving a junky, old car that will have to be replaced soon. Should I split the money Iíve saved and buy a $6,000 car while paying off $6,000 of the student loan?
ó Phil

Dear Phil,
If Iím in your shoes, I want that student loan out of my life as quickly as possible. At the same time, I donít want you living life without some money in the bank.

If youíve followed me for very long, you know I teach the Baby Steps when it comes to getting out of debt and saving money. Baby Step 1 is to save a beginner emergency fund of $1,000. Baby Step 2 is to pay off all debt, except for your home, using the debt snowball method. The third Baby Step is to build a fully funded emergency fund of 3 to 6 months of expenses.

You donít have quite enough on hand for your idea and to have something left over. I recommend paying off $11,000 of the school loan now and then finishing it up as you go. It wonít take much more time. Limp along in the beater for a little while longer and then, when you have no student loan debt, finish your emergency fund and start a car fund.

I talk to a lot of people your age who still have student loan debt. But you have the opportunity to punch its lights out in a hurry. If you pour on the coals, you should be able to save money and get a better car in just a few months.
óDave

The teacher was wrong

Dear Dave,
My daughter is in her first year of college. Recently, her math instructor walked students through the process of getting a credit card and building credit. Weíve always followed your plan and taught her to do the same. When she asked the instructor if no credit score was as good as a high credit score, the instructor said no. He told the class the only way to buy a home without a high credit rating is by having a huge amount of assets or savings. I think I know your answer, but how do I explain this to an 18-year-old?
ó Allison

Dear Allison,
Well, the first thing you explain is that college instructors ó even tenured college professors ó can be absolutely wrong sometimes.

A few years ago my daughter took a personal finance class in college, and on the first day the instructor went on a rant saying Dave Ramsey is stupid. He didnít know I was her dad, but she went through the entire class and never said a word. When she called home and asked what she should do, we told her to take the class and give him the answers he wants on the tests. We reminded her that sheís just taking a class, and that doesnít mean she has to form her life opinions around what that guy thinks.

Sit down with your daughter and gently explain in this instance her instructor doesnít have a clue what heís talking about. Explain to her you can get a home loan even if you have no credit score. People do it all the time. There are places like Churchill Mortgage that would be happy to give her an example of this process. Itís called manual underwriting. All you have to do is make a reasonable down payment, have 2 years at the same job, and provide 2 years of tax returns.

Hope this helps, Allison.
ó Dave

ó 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 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.