We’re completely debt-free with a fully funded emergency fund, and we have $350,000 sitting in the bank from a land sale a couple of months ago. My wife and I would like to buy a chicken farm with two houses and upgrade it to contract standards. This — plus the stock — would cost around $290,000. I would keep my regular job, and my wife would run the farm. An investor friend of mine said I should finance the entire business purchase. What do you think about this scenario?
— Darryl
Dear Darryl,
Either do the deal with cash or don’t do it at all. Your investor friend is full of crap, and there’s a good chance he doesn’t have nearly as much money as you do. He’s probably got more bad opinions than dollars.
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Now, the pro formas on the kind of thing you’re talking about are incredible. They can make a ton of money, but they’re a lot of work — I mean real, hard work. Some are more high-tech than others and that can mean a little less work, but someone’s got to be out there every day with their hands on this thing or you’re going to be in trouble. I don’t know the ideas you have for divvying up the work, but I’m afraid it would just be too much for one and a half people.
I don’t mind you doing the deal, as long as you pay cash for it. But if you’re looking to invest, there’s always real estate — it seems like you’ve done pretty good there — or maybe another small business idea. Whatever you do, you need to stop listening to your friend about borrowing money. You’re liable to turn what was a blessing into a curse if the two of you borrow money on a chicken farm.
— Dave
Monday, December 19, 2016
Monday, December 12, 2016
Dave Ramsey thoughts on Micro Investing apps
Honestly, I’m not a big fan of micro investing apps. As you probably know, the word “micro” means small. So why would you want to mess with something like that? Are you going to have a micro retirement? Do you want to be micro wealthy? I don’t. I want to be really wealthy with a big retirement and a big life full of outrageous giving.
It’s fine if you want to give micro investing apps a try. I’m not going to be mad at you or anything like that. But these things function kind of like deals where the marketers say you get 1 percent back. It’s like credit cards where silly people spend $100,000 in order to get $1,000 in brownie points.
You’ve got to do more than micro because micro means what it says — small. I guess you could argue that at least you’re doing something but if that’s your only plan, you should prepare to be pretty hungry during retirement.
When it comes to investing, why not go big? Go big, or go home!
It’s fine if you want to give micro investing apps a try. I’m not going to be mad at you or anything like that. But these things function kind of like deals where the marketers say you get 1 percent back. It’s like credit cards where silly people spend $100,000 in order to get $1,000 in brownie points.
You’ve got to do more than micro because micro means what it says — small. I guess you could argue that at least you’re doing something but if that’s your only plan, you should prepare to be pretty hungry during retirement.
When it comes to investing, why not go big? Go big, or go home!
Wednesday, December 7, 2016
Paying with Store credit card vs Cash
Q. My wife and I are building a home, and we found a great entertainment center we both love. It costs $6,000, and the dealer said he would give us 10 percent off if we take out a store credit card. We have the cash to buy the piece, but we were wondering if it would be a good idea to get the card and use it for the entertainment center and Christmas gifts, then pay it off immediately.
A. I hate to burst your bubble, but I’m pretty skeptical about this idea. I know it sounds good on the surface, but the problem is the vast majority of people don’t have the discipline to follow through on a plan like this. Another issue is a lot of places like this hit you with a fee when you pay off the card, the thing runs over, then you get another fee and so on.
I’d just call the manager out of his office and let him know that unless he discounts the entertainment center $600 I’m going to his competitor. No, there’s no way I’d take out a stupid credit card at this place whether I had the cash on hand or not.
You need to learn right now it’s a bad idea to play with snakes. Stop screwing around with debt products, OK? Everyone thinks they’re the exception to the rule or they’re somehow winning or getting rich by doing stuff like this, but it doesn’t work. They’re trying to hook you.
A. I hate to burst your bubble, but I’m pretty skeptical about this idea. I know it sounds good on the surface, but the problem is the vast majority of people don’t have the discipline to follow through on a plan like this. Another issue is a lot of places like this hit you with a fee when you pay off the card, the thing runs over, then you get another fee and so on.
I’d just call the manager out of his office and let him know that unless he discounts the entertainment center $600 I’m going to his competitor. No, there’s no way I’d take out a stupid credit card at this place whether I had the cash on hand or not.
You need to learn right now it’s a bad idea to play with snakes. Stop screwing around with debt products, OK? Everyone thinks they’re the exception to the rule or they’re somehow winning or getting rich by doing stuff like this, but it doesn’t work. They’re trying to hook you.
Monday, December 5, 2016
Educational Savings Accounts for kids future
Q. We have three preschool grandchildren, and they get tons of stuff for Christmas every year. We’re in really good shape financially and would like to do something for their future this year instead of giving a toy that might get thrown in the corner. Do you have any suggestions?
A. I’d do both. You don’t want to be those grandparents who only hand envelopes at Christmas to 4-year-olds. No, they need things to play with. They’re kids and they should be allowed to act like kids and be happy at Christmas. The good news is you can do both without spending an arm and a leg.
In addition to a few special toys, perhaps you could work with their parents to launch Educational Savings Accounts (ESAs) for them. This would get their college funds started, and it’s what we do. We use mutual funds in their ESAs, where each child is allowed to have up to $2,000 contributed in their name per year.
The beauty of the ESA with the mutual fund inside is that it’s growing completely tax-free. You have to name a custodian of the account until the child turns 18, and that could be you guys or their parents. Just make sure that together you don’t over fund the ESAs and cause yourselves tax problems.
A. I’d do both. You don’t want to be those grandparents who only hand envelopes at Christmas to 4-year-olds. No, they need things to play with. They’re kids and they should be allowed to act like kids and be happy at Christmas. The good news is you can do both without spending an arm and a leg.
In addition to a few special toys, perhaps you could work with their parents to launch Educational Savings Accounts (ESAs) for them. This would get their college funds started, and it’s what we do. We use mutual funds in their ESAs, where each child is allowed to have up to $2,000 contributed in their name per year.
The beauty of the ESA with the mutual fund inside is that it’s growing completely tax-free. You have to name a custodian of the account until the child turns 18, and that could be you guys or their parents. Just make sure that together you don’t over fund the ESAs and cause yourselves tax problems.
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