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Dave Says, “Get Out of Debt Even Faster”

March 24, 2011 By Leave a Comment

Dear Dave,

I’m 26, single, and I’ve been working your Total Money Makeover plan to pay off my debt. Right now, I have just $25,000 left to pay off, including my car. Recently, I was offered a chance to move to Singapore for the next six months as part of my job. I won’t have any real expenses while I’m there, but I’m worried about the effect it might have on me getting out of debt. How can I make all of this balance out?

Jared

Dear Jared,

Why does there have to be a balance here? In my mind, this whole situation is a fantastic catalyst for helping you get out of debt even faster than before.

Think about it. You’re single, and you’ve got no strings attached. This is a wonderful opportunity to travel and make more money and save more money than ever before! You’ll be able to accelerate your financial plan and have a great cultural experience, too!

Now, I’m not up for this idea if you’re going over there just to hang out and goof off. But if you’re committed to the plan and to getting out of debt, then this is something you absolutely must do. You could even go ahead and sell the car now. You’ll be rid of insurance payments, buying tags, and all that stuff. Plus, it’ll just sit there losing value while you’re gone, anyway.

I’m not hearing anything negative in this entire situation. Go for it, Jared!

—Dave

Dear Dave,

I called a creditor recently to settle an old debt. They offered a settlement, but said it was their policy not to put settlement offers in writing. Should I accept the deal?

Joseph

Dear Joseph,

No way! If you don’t have anything in writing, then you have no proof that they extended the offer or agreed to a specific amount. The only one who will have “proof” of anything in this scenario is the creditor, and that’s just asking for trouble.

My suggestion for handling this ridiculous situation goes something like this. Explain to them that you seem to have reached an impasse, because you have a policy of never accepting settlements and handing out money unless the settlements are in writing. No writing, no money! It’s not a hard concept to understand, and it’s fair to both parties.

—Dave

Dear Dave,

I’d like to move to Las Vegas when I retire in about 10 years. I’ve saved up quite a bit of money, and could pay cash for a property now. Should I go ahead and buy, and maybe rent it out for a while, or wait until I actually retire?

Bruce

Dear Bruce,

If you can pay cash now and still have plenty of savings left over, then there’s no reason not to go ahead and buy. The housing bubble has burst out there, and you’ll be able to find some real bargains in and around Vegas.

I’m not big on being a long-distance landlord, but I’d be tempted to do it in a situation like this. Keep in mind that you’ll probably have to renovate the place if you rent it out for several years. It’s just the nature of things in the rental world, so make sure you figure that into your cash plan—and your emotional plan, too!

—Dave

* For more financial help, please visit daveramsey.com.

 

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Dave Says, “Strive for Balance”

March 17, 2011 By Leave a Comment

Dear Dave,

I recently graduated from college, and I think I’d like to get into the real estate business as an agent. I don’t have much real world experience, so what can I do to learn and become a great real estate agent?

Ryan

Dear Ryan,

Congratulations on finishing college! It sounds like you’re ready to hit the ground running.

I think the first thing anyone in your situation should do right now is get a first-hand look at the day-to-day life of a really good real estate agent. Find out what someone who sells 100 houses a year does on a daily basis, how they got to where they are, and how long it took them to get to that level in terms of skills, referrals, knowledge, and recognition in the marketplace.

You might consider driving to a nearby city—one that’s far enough away so that competition won’t be a factor—and finding a superstar agent. Tell them your situation, and ask if you could ride around with them for a day or two and pick their brain. Basically, I’m talking about interviewing them and finding out how you can be them when you grow up. Believe me, you’ll learn tons about the technology and marketing sides of things, too.

Real estate is probably the perfect example of The Pareto Principle. It states that 80 percent of the people make 20 percent of the money, and 20 percent of the people make 80 percent of the money. Learning as much as you can as quickly as you can is a great first step to making sure that you’re in that top 20 percent!

—Dave

Dear Dave,

I own a small company, and lots of times I feel like I’m devoting too much time to the business and not spending enough time with my family day to day. How do you find a balance between home and work?

Pat

Dear Pat,

You know, I get asked this question a lot. Truth be told, the idea of everything being in balance on a daily basis is a myth. No one can perfectly juggle all that life has to offer—the spiritual, emotional, financial, home, work, and physical—every single day. It’s just not possible. Still, you need to make sure you strive for balance over the scope of time.

I started running a few years ago, and I’m out of balance if I’m training for a marathon, because I spend more time training. The same is true with work. There are times when you have to work hard, and occasionally this can bleed over into other things. I think the answer lies in really being into whatever you’re doing. Listen and participate in conversations with your kids instead of watching television. Take your spouse out on dates, and turn off the cell phone. When you’re with your family you should really be with them. Then, when you have to work, chances are they won’t be mad at you.

Honestly, we waste so much time and then we complain that we’re out of balance. Ebb and flow takes place in every aspect of our lives. So, I think we should all stop wasting the time we have!

—Dave

* Dave may be coming to your town soon. For more information, please visit daveramsey.com/live/home.

 

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Dave Says, “Get Out of Debt and Stay Out of Debt”

March 10, 2011 By 1 Comment

Dear Dave,

My wife and I just relocated for my new job. Right now we’re renting an apartment, and we should make about $15,000 on the sale of our old house. Should we use the money from the sale of our house to pay off all our debt, or go ahead and use it as a down payment on a new home now?

Brian

Dear Brian,

Traditionally, lots of people would tell you to use the money now to help save up for a down payment. The problem is that I’m not traditional at all.

I love real estate, and I want you guys to own your own home again. But even more than that, I want to see you two get out of debt and stay out of debt!

I know this wouldn’t be a popular plan with some folks, but if you’ve got no debt – along with a decent, inexpensive place to hang your hat for a couple of years – you’ll be able to save money like crazy for a fat down payment. It will also give you time to become familiar with the area and find a place you both really like.

When you lose the debt, Brian, you gain control of your largest wealth-building tool – your income. That’s when the fun begins!

—Dave

Dear Dave,

I’m one of five sisters, and our parents’ fiftieth wedding anniversary is just around the corner. My two oldest sisters made plans for a party without consulting the rest of us. Now, they want everyone to chip in $1,000 to help pay for things. I’m trying hard to get out of debt, and I just don’t have that kind of money right now. How can I be fair about this?

Anonymous

Dear Anonymous,

A $5,000 party is pretty big stuff. Since you weren’t asked about this ahead of time, and had no say in anything, fair would be for you not to pay a dime! That kind of planning without consulting the people involved and helping pay for the event is way out of line.

Don’t let your big sisters lay a guilt trip on you, either. This has nothing to do with how much you love your parents. It has everything to do with communication and consideration, or in this case, a lack of these things on their part.

Just let them know, in a firm but loving way, what your situation is right now. Tell them you’d be happy to chip in what you can, but it won’t be anything close to $1,000.

And tell them next time to check with their little sisters before hatching up an expensive plan like this!

—Dave

* For more financial help, please visit daveramsey.com.

 

 

 

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Dave Says, “There’s No Higher Calling Than Motherhood”

March 3, 2011 By Leave a Comment

Dear Dave,

I listen to you often and enjoy your radio show, but why don’t you ever ask women to go to work? When a family is broke, and the woman is at home raising one child who is already in the fifth grade, why can’t the wife get a “second job?”

George

Dear George,

I think far too many ladies, in the name of paying for stuff they don’t need, have left the household and the children for the workplace. Many of them didn’t even want to do this; they just felt obligated to do it by people like you. There are a lot of ladies who have sacrificed their ability to be full-time moms on the altar of the car payment.

Now, sometimes ladies have to go to work. There’s a time and a place for that kind of thing. But if there’s any way I can financially and budget-wise figure out how mom can be waiting at home with a big hug and a plate full of cookies when that fifth grader walks in the house – and if that’s what she wants to do – then you’re going to find me fighting for her opportunity to do that. There’s no higher calling on the planet than motherhood. We’ve lost that in our culture, and we’re suffering dearly for it.

I’m no Neanderthal jerk. I don’t say every mother has to be at home or they’re a bad person. But these days we’ve got very few people who defend full-time, in-the-home motherhood. The inference you’re making is that she’s not helping, or worse, lazy. Why don’t you go take over her job for a week? I think you’ll find out in a hurry there’s not a lazy bone in her body!

—Dave

Dear Dave,

I’m 24-years old, and just got married two months ago. We make $80,000 a year, have our emergency fund and no debt, plus we’ve saved up for a 15 percent down payment on a house. I know you suggest 20 percent, but is 15 percent okay?

Tony

Dear Tony,

I don’t have a lot of issues with 15 percent instead of 20 percent. You’ll probably end up having to pay private mortgage insurance, but it sounds like you guys are in good enough shape financially to handle things.

However, I generally recommend that couples wait until they’ve been married at least a year before buying a home. Buying a house is huge decision. That’s why I think it’s smart to wait and get to know each other even better before making a decision of this magnitude. Plus, you need to figure out just how close you want to live to your mother-in-law!

Seriously, take your time and don’t rush things. There will still be great deals on the market in a year or so, and you’ll be able to save more money, too!

—Dave

* For more financial help, please visit daveramsey.com.

 

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Dave Says, “No Reason to Set Up Account for Idiot Dad”

February 24, 2011 By Leave a Comment

Dear Dave,

I’m single, and I make about $70,000 a year. I’ve been able to set aside a nice bit of money in savings, and I’m paying off my student loans and car payment. One student loan is $4,000, the other is $30,000, and my car note is $21,000. Since I’m on the right track now, should I save up some for my dad’s retirement? He’s getting older, and he’s horrible with money.

Colby

Dear Colby,

Right now, you need to be getting out of debt, saving, and building wealth for you. As you do this you can choose to use some of your money to help family, friends, or your community, if you want. But just because you’re headed in the right direction, and being responsible with your money, is no reason to set up a “my dad’s an idiot with money” account.

In your situation, you need to be working the debt snowball. List your debts—and it’ll be easy since there are only three of them—from smallest to largest. For you, this means you’ll make minimum payments on the car and the big student loan while you attack the $4,000 loan with a vengeance. Scrape together every penny you can to throw at that thing, and once it’s paid off, take the money you were putting toward it, plus any other you can scrounge up, and knock that car out.

It may take you a couple of years of rolling up your sleeves and really attacking these things, but you can do it!

—Dave

Dear Dave,

I’m 58, my kids are all out on their own, and I rent a great little apartment. It’s a perfect setup for me, because I travel quite a bit. However, I’ve had several people tell me I should really look into buying a house. I’ve saved about $450,000, I make $90,000 a year, and my rent is $1,100 a month. So, I guess I’m looking for validation. Is it okay for me to continue being a renter?

Alan

Dear Alan,

I think it depends a lot on the ratio of rent to wealth. By this, I mean if the rent isn’t much compared to the size of your income and nest egg, then I’d say keep the apartment. It’s not doing you any real financial damage, plus you still have the ability to invest in things other than a personal residence.

Now, if you’re not doing any other investing because your income is being eaten up by rent, then apartment living starts to become a bad idea pretty fast. But the only real downside, long term, is that market rents will go up eventually. If they rise faster than your income, then you could lose control of that part of your life. Or what if the current owners sell the building, and the new management jacks up the rent? Then, you’d need to look into buying something so you could regain control of all that.

Still, if I’m in your situation, with your lifestyle and having piles of cash saved up, I’d stay put. It sounds to me like you’ve got a pretty sweet situation, Alan. But if things get sassy instead of sweet, you’ll be forced to revisit this issue.

—Dave

* To see where Dave is appearing live this spring, please visit http://www.daveramsey.com/category/events.

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Dave Says, “The Borrower is Always a Slave to the Lender”

February 17, 2011 By 1 Comment

Dear Dave,

We have $21,000 in credit card debt, and ongoing medical expenses for our special-needs child. My husband works very hard, but only makes about $25,000 a year, and we’re living in a 30-year old trailer. My dad is willing to help us pay off some of the debt, and get us moved into a house, if we’ll get financial counseling. Is there a better way out of this situation?

Sheryl

Dear Sheryl,

If you’re going to have to make payments to your dad, in other words, if the money is going to be a loan, don’t do it. The borrower is always slave to the lender. If you really want to ruin family events, have debt to your parents. It twists you up inside, and it’ll be especially hard on your husband.

Now, if this is going to be a gift, and there are no expectations of re-payment being made, that’s a little different. But if you were my child and I wrote you a $21,000 check, I’d expect you to go into financial counseling and start saving money for your child’s future and for yours. That’s only reasonable. You guys obviously aren’t wasteful yuppies spending money right and left, but having a family and raising kids in the Dallas – Fort Worth area on $25,000 a year is tough – even  without the credit card bills you’re talking about.

Another thing I’d advise is that your husband get on a five-year game plan to improve his earning potential. Sit down with him, hold hands, and let him know he can be anything he wants to be. Then, help him decide what he wants to be in five years, what he wants to be making five years down the road, and the steps he’s going to take educationally or in terms of training to achieve that goal.

He’s a hard-working man, but today’s culture doesn’t reward hard work alone. You’ve got to engage the gray matter a little, and boost your brain power, too. You make more money when you plan to make more money!

—Dave

Dear Dave,

I have three stepchildren, the oldest of which is married and has a little baby. The only time we hear from him is when they want money. We don’t mind helping out once in a while, but his wife just seems lazy. She stays at home all the time, and doesn’t help bring in anything. What can we do to fix this?

Cindy

Dear Cindy,

When your relationship with someone is based on you giving them money, then you don’t have a relationship. But there may be other reasons they aren’t calling very much.

If you say things about his wife being lazy when you do talk, it probably makes them both angry. If this is the case, they may only call when they’re desperate enough to put up with your comments about her. Plus, taking care of a baby is one of the hardest full-time jobs around. The value or importance of what someone does isn’t always reflected in a paycheck.

But I don’t think you should be giving them money all the time, either. You could try gently giving advice, instead. Maybe they need to be on a budget, or perhaps they should be spending less.

Regardless, I’m always against perpetuating relationships that are based on handing out money!

—Dave

* Dave may be coming to your town this spring. For more information, please go to http://www.daveramsey.com/category/events?atid=davesays

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Dave Says, “The Girl Has Got Some Growing Up To Do”

February 10, 2011 By 1 Comment

Dear Dave,

I’m fairly responsible with finances, but my girlfriend is in a terrible financial situation with a lot of credit card debt, an expensive car payment, and a big, fancy apartment. Plus, she just quit her job because she didn’t like it anymore. Now, she’s thinking about filing bankruptcy and thinks us moving in together will help solve her problems. If she can’t handle her finances on her own, what’s going to happen if we get together? Can you help?

Dino

Dear Dino,

This is someone to keep dating, not marry right now or move in with, and see if she changes her spending habits. You’d have a very tough life being married to this woman, unless she makes some real attitude adjustments where her money is concerned.

I can’t say if she’s technically bankrupt, but she definitely needs to move into a cheaper apartment and sell the car for starters. Still, bankruptcy’s not going to solve anything if she’s got a heart problem. By this, I mean if she buys stuff to try and make her happy and lives beyond her means in the process.

Lots of people have the idea that they are what they drive, or they are where they live. Those are heart problems, and that’s the way I was many years ago until I had some sense knocked into me by going broke. Then, I realized I had to stop and make some changes.

This doesn’t mean that she isn’t worthy of your love or she’s a terrible person, but it does mean that the girl has got some growing up to do. Money matters aside, you don’t quit your job without a plan unless you’re being sexually harassed or abused, or there’s some matter of principle at stake. Leaving one job for another is okay. But the idea of deciding you just don’t like something, and walking away from it when you’ve got a bunch of bills, is just plain irresponsible.

She’s probably not bankrupt, but there are some definite character issues that need to be addressed. Hopefully, you two can work through this together.

—Dave

Dear Dave,

My husband likes to borrow money on fix-up projects around the house. He says he knows how to manage money, and will pay the loans back quickly. The other day, he came to me for money to make the payment on the latest loan he took out. Then, he started fussing at me when I didn’t have the money to make the payment. It’s not the first time this sort of thing has happened. How can I make it stop?

Crystal

Dear Crystal,

This guy needs a swift kick in his rear end! He says he knows how to manage money, but he doesn’t know how to save up to re-wire the garage?

It sounds to me like you’ve got am overgrown teenager on your hands instead of a husband. It’s bad enough that he can’t take care of his own responsibilities, but then he turns around and fusses when you won’t do it for him. That’s ridiculous!

Marriage is all about unity. Once the rings go on those fingers it’s a we thing, not a me thing. Husbands and wives should work together to form a game plan that will help them win in life, and that includes finances.

I think you should take the money he’s asking for and use it to see a good marriage counselor. There are some real issues here that need attention. You guys need to deal with them, and create a real marriage, before this situation gets any worse!

—Dave

* For more information on how you can see Dave live, please visit http://www.daveramsey.com/category/events/?atid=gate.

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Dave Says, “A Picnic and a Frisbee Go a Long Way”

January 29, 2011 By Leave a Comment

Dear Dave,

I’m a recent college graduate, and I’m determined to follow your plan and get out of debt. My biggest problem is when it comes to dating. Things aren’t cheap today, so aside from not dating, how do you handle this area of your life when you’re trying to get your finances in order?

Roland

Dear Roland,

First of all, you definitely need to date people. I couldn’t have gone without dating, especially at your age. So, I’m not going to tell you to do something I couldn’t do.

There’s absolutely nothing wrong with dating inexpensively if you’re thoughtful. Just don’t be so cheap that you’re freakish about things. There are plenty of nice, stylish places that don’t cost an arm and a leg. A picnic and a Frisbee will go a long way on a pretty day! Your efforts to be a gentleman and make things happen in creative ways will be a lot more charming to any lady worth dating than throwing down an extra $100 at a snooty restaurant you can’t afford.

The other thing is to make dating part of your monthly budget. In your situation, it’s a legitimate expense, and you need to make it part of your financial game plan. Then, if you’re seeing someone on a regular basis, and the money in the “dating” envelope is getting low, you can explain to her that you’re working hard to manage your money properly so you’ll be wealthy one day.

This will make you even more attractive to the right kind of person, because it shows that you’re mature enough and responsible enough to be thinking toward and planning for the future!

—Dave

Dear Dave,

We currently pay to have our lawn mowed each week. This expense is figured into our monthly budget, but we’re not quite out of debt yet. My wife says this is a luxury at this point, and I should cut the grass myself until we’re out of debt. What do you think?

Ty

Dear Ty,

I think it depends a lot on your income. If you’re a surgeon making $350,000 a year, then making lawn care part of your monthly budget is probably pretty reasonable. Now, if you’re only making $26,000 a year, you probably need to get behind the mower and start pushing it yourself!

Is this a snobbish attitude? I don’t think so. It’s a simple matter of mathematics. What is your personal time worth in the marketplace, and should you be plying your trade out in the world rather than mowing the lawn?

Let’s say you’re an attorney who charges $400 an hour. In that case, you’re probably going to be better off out there lawyering—especially if you’re trying to get out of debt—than you would pushing a mower. But if you make $12 an hour, it’s a good idea for you to be cutting your own grass, isn’t it?

Whether or not something is a “luxury” depends on your own personal income and financial situation. That’s how I look at it.

—Dave

For more financial advice, please visit daveramsey.com.

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