⚕️Dylan Q&A: When to take on Debt?
This week we'll address a pressing question from Nicole, reader of my weekly newsletter, who's facing a hefty dental bill and weighing her financial options.
Nicole:
"I hadn't seen a dentist since way before the pandemic. I finally went yesterday, and it was bad. I need a special 'gum cleaning' for $1,600 and six fillings for $3,200. I have the money to cover the cost – barely – but I won’t have any savings left. I was trying to go on a trip at the end of the summer, and I know my kids will have back-to-school expenses next month. Should I just suck it up and use the cash?"
So, I want you to hold on to that cash AND get your teeth fixed.
First, see if you can work out a repayment plan with the dentist. Can you work out a plan to pay the bill over 12-18 months?
If that isn’t available, you can look into putting the medical costs on a new 0% interest credit card.
"But Dylan, you don't like credit cards. What gives?"
I don’t like credit cards because they make it too easy to spend money we don’t have. But I don’t think health issues should be put off. For that reason, taking a loan in the form of a 0% card will allow you to take care of your teeth now and pay for it over time without incurring any fees.
Here’s how to do this successfully:
Find a credit card with at least 12 months of 0% interest. Some offer up to 21 months.
Ensure you can make the monthly payment. So let's say $5,000/21 months is $238/month.
Only use it for medical needs. No fun trips to Idaho on the card. (Even if it's spud-picking season).
Unfortunately, carrying this debt will ding your credit score. Make sure you are able to pay off the monthly bill, and your debt decreases so your credit score goes back up each month.
You can, of course, use your savings for the dentist – I mean, that's why it's there. But then you're leaving yourself vulnerable to the next major expense.
We shouldn't be opening new credit cards with each new bill. It's great that you build up your savings, so let's try to build it up even more for the next enamel-related experience.