Dear Dave,We've got our starter emergency fund in place, and we've paid off the last of our debt. Currently, we rent an apartment but my wife really wants us to buy a house now. She also wants us to use a 30-year, 100 percent financing plan, and says this wouldn't cost any more than we're paying in rent. I disagree with her idea, and she's upset with me. How can I make her see this is a bad plan?
— Alan
Dear Alan,
I think she probably knows deep down this isn't a good plan. She's found something she really likes, and she's mad because you're not going along with the idea. It's called “house fever.”When you buy a home with nothing down and little to no money in the bank, you're inviting Murphy and his cousins — Broke, Desperate and Stupid — to move in with you.
In other words, you'll find yourselves in a mess because you didn't have the maturity and wisdom to wait until you had your fully funded emergency fund of three to six months of expenses in place, plus a 20 percent down payment saved up for a house.
The idea that you save money because your house payment is the same, or even a little less than your rent, is a myth. It costs more to own a home, period. As a homeowner, you're exposed to all kinds of things you never have to worry about as a renter.We all have times when we get excited by something we want and do things we shouldn't. I've done it, and I'll bet you have, too. But in situations like this, you've got to sit down and talk things out. I'm not sure how to get your wife to realize this or act more mature, but I do know that people who charge into things of this magnitude without thinking are the very ones who end up in my office for financial counseling or filing bankruptcy!
— Dave
From http://www.heraldnet.com/article/20141116/BIZ04/141119507/Wifes-house-fever%26%238217-threatens-familys-finances
DEAR DAVE: We had our first child a few months ago and some of the bills have gone to collections. We’ve paid what we could, but we each make only about $15,000 a year. Now, we’re getting calls and letters from collectors wanting our checking account information and electronic access. When we won’t give it to them, they accuse us of not following the terms and conditions of the agreements. They say we’ll be penalized if we don’t comply. What should we do?
— Stephanie
DEAR STEPHANIE: You’re doing the right thing by not giving them your account information and electronic access. The stuff they’re saying is just collector talk, and they’re full of crap.
The next time you talk to one of them, just let them know you have every intention of paying what’s owed. But the bill is going to be paid by you. There’s nothing in an this kind of agreement that gives them the right to your account numbers or electronic access. These people can stop lying and act right, or they can go jump in the lake.
The biggest issue here is your income. If I’m your husband, I’m going to find an extra job delivering pizzas a few nights a week for the time being. He could make an additional $1,000 a month for the next 10 months, and that problem would be solved.
Instead of working 40 to 45 hours a week, try working 60 to 80 for just a little while.
Still, you both need to examine your career track for the future. Look into different types of training and education with the attitude of doubling or even tripling your income in the next five years. I want you both to develop long-term plans to increase your income, and a short-term plan to get out from under this debt in a hurry.
