Dear Dave: With all the economic problems in the country today, what can college students do to avoid money problems in the future? — Eric
Dear Eric
There are always three or four things smart things you can do to protect yourself financially. One is to live on a budget. When you give every dollar you make a name, and write in down on paper, it helps you know what your money is doing instead of wondering where it went.
Two more good ideas are staying out of debt, and saving as much money as possible. Your money is your biggest wealth-building tool, and when you're saddled with debt, your money goes to creditors instead of into your pocket. Saving money is what prepares you for the good and bad things life throws at you — whether it's putting money aside to buy a car, a house or handling unexpected things that always happen.
Another thing is investing. I know you're young, but a little bit invested now could make you a millionaire when you're ready to retire. These are all simple things, Eric. But they'll make a huge difference in your financial situation now and in the years to come!
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DEAR DAVE: I live in Pennsylvania and I'm accepting a new job out of state. My wife and I will be in this new area for at least two years, and we're not sure if we should rent or buy a house.
— Ron
DEAR RON: Most of the time, as long as you're financially ready for such a big investment, buying a house is a good move. But if I'm in your situation and I'm not sure if it's a long-term thing, I'm going to rent until I see what the future holds.
It seldom makes a lot of sense to live in a place for two or three years and sell it, unless you get a ridiculously good buy at purchase and are able to sell for retail without any trouble. Even though the economy is finally, slowly turning around somewhat, I'm not sure that most properties in the current marketplace would go up enough in value in only two years to offset your cost of sale.
You're in a situation similar to lots of military families I help. Often, they'll be stationed somewhere for just two or three years. They'll buy something, they can't get it sold, and they end up with rental properties all over the country. Believe me, that wasn't their initial plan. Playing long-distance landlord is a pain in the rear!
Rent for now, Ron. Then, if you two decide you like the new job and new surroundings — and it turns out you're going to be there for a good, long while — start checking out the area for a nice home.
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Some people have a tendency to live in the moment, while others think more about the future.
Financially speaking, those who live in the moment tend to be spenders, while the other type tends to be savers. When you take these kinds of behaviors to unhealthy extents, you have extreme spenders or extreme savers. Either one can be an unhealthy thing.
Extreme spenders may need to slow down, grow up and learn the value of money by living on a budget, setting savings goals and working to meet these goals. Extreme savers often operate out of fear and uncertainty. In some cases, they may have an even worse spirit in their lives — greed. They have to learn that it's okay to have a little fun spending and to give generously.
When it comes down to it, there are only three uses for money: spending, saving and giving. You have to do some of all three in order to have a truly happy and healthy life.
DEAR DAVE: I'm trying to get out of debt. I make good money and do consulting for a living. I put about 4,000 miles a month on my car. It's a 2012 model, and I currently owe more on it than it's worth. I've considered selling it, but I'm concerned about reliability since I'm on the road so much. Do you have any advice?
— Chantel
DEAR CHANTEL: Rule of thumb No. 1 when it comes to your finances is you don't want too much of your financial picture tied up in things that are going down in value. Specifically, no one needs to have more than half of their annual income tied up in things that go down in value.
You're a road warrior, so whatever you drive, you're going to destroy. From a business perspective, you need a relatively low-mileage vehicle with good gas mileage that's reliable and safe. You also want something that's reasonably comfortable. Having said that, I would advise doing a lot of research and getting the least expensive car that meets all those criteria.
Since whatever you drive is going to be worth nothing in about 20 minutes, I'd start setting aside some cash every month as part of a monthly budget for a newer, better car. That way, when it comes time to put the old one down, you'll have a pile of cash to go along with your trade-in.
But even in your situation, Chantel, I would never advise buying a brand-new car or leasing a vehicle. From a financial standpoint, either of those moves would be just about the dumbest things you could do.
DEAR DAVE: My wife and I moved to Washington, D.C., about a year ago, and we'd like to put our old place in North Carolina that we've been renting on the market. We'll be asking around $140,000 for it, so do you think we should consider professionally staging the home?
— Ben
DEAR BEN: It would make a lot of sense if you were talking about a million-dollar house, but with a less expensive home like that I'd just make sure it's really clean and neat and nice — especially the front area with the sidewalk and bushes. We're talking curb appeal here. Make sure the front door, trim and porch area are all cleaned or painted, too. All this is like a first impression on a job interview.
There shouldn't be any bad smells in the house, and everything inside should be crisp and clean, as well. You can stage it yourself with a few pieces of nice furniture and such, if you have it available. And try this old Realtor's trick to make things a bit more homey: Put a few drops of vanilla extract on a burner of the stove while it's heated. It will make the whole house smell like you've been baking cookies.
But no, I wouldn't pay to stage a $140,000 house.
