Tax Reform and how it affects you

God told man to sell their home

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Dave Ramsey Show November 2017

Starting a food truck business

Should you try to be more attractive ?

You need an umbrella, its going to rain

Dont Look Back

Painter with 3 months downtime

Question: My husband opened his own commercial painting business in May. He knows he will have about three months in the year where he’s making little to no income. We’ve gotten $1,000 set aside for our Baby Step 1 beginner’s emergency fund, but because of that down period he would like to skip paying off all our debt except for the house, which is Baby Step 2, and move to Baby Step 3 and put an emergency fund aside. I can understand his thinking, but I wanted your thoughts on the idea. 

Dave: Baby Step 3 is not a fill-in-the-gap measure for income you already know won’t be there. Baby Step 3 is an emergency fund of three to six months of expenses, and the scenario he’s talking about is not an emergency. He knows it’s coming, so it is not an emergency.

I think he needs to re-work his business model. This guy needs something to do during those three months so he doesn’t drop off to no income. Also, if you’re going to set some money aside for a down time, that would not be Baby Step 3. It would be a line in the budget where you’re setting some money aside, because you know a problem’s coming. 

If something happens around the same time every year it becomes predicable, and it’s not an emergency. So it’s not really a matter of the order of the Baby Steps. You budget for this down time, or even smarter, figure out a plan for his time during these months, based on his skill set, that will earn some money.  

Is taking a loan to pay off credit card debt a good or bad idea ?

Dear Dave: I make $48,000 a year, and I have $35,000 in credit card debt. I owe $25,000 on my home, and I was thinking about taking out a loan against my house to pay off the credit cards. Is this a good idea? — Mike

Dear Mike: I would never advise anything like this, unless it’s to avoid bankruptcy. Here’s the problem with that kind of plan. Most people who do that kind of thing don’t change their financial habits. In fact, they end up with a new mortgage and new credit card debt somewhere down the line.

You need to start building a track record of paying off debt. Cut up the credit cards, slash your spending, and start living on a tight, written, monthly budget. Prove to yourself that you’re not going to take out a mortgage and turn around and run up a bunch of new credit cards.

I want to see you not take on any new debt and reduce that $35,000 credit card bill dramatically over the next six months. If you can knock out half of it in a year, you can take care of the other half in another year or less. Then, you wouldn’t need a second mortgage!

Should one invest in Solar Panels for home ?

Dear Dave: I’m debt-free except for my home, and I’m considering having solar panels installed on the roof of the house. It would cost about $27,000. I have $80,000 in savings, but the company doing the installation will finance it all for just one percent interest. It’s almost like free money. My electric bills average around $310 a month, and I thought this would be a good way to save money in the long run. What do you think? — Michael

Dear Michael: If you have to finance the project, my answer is no. My guess is the break-even analysis you’re trying to give me is the sales pitch your solar panel company gave you. That’s how they sell solar panels, but it doesn’t justify going into debt.

You told me you have around $80,000 in savings right now. Why not just write a check? Let me ask you a question. What if you could borrow $10 million at one percent interest and put it in the stock market? Would you do that? Of course, not. It would be way too risky, right? Basically, we’re talking about the same kind of thing. I made you feel the risk by scaling things up in my scenario. You’re not feeling the risk right now because we’re talking about $27,000 instead of millions.

This move wouldn’t bankrupt you, but wealthy people don’t do the kind of thing you’re talking about. Either pull the money out of your savings account and buy the panels, or don’t buy them at all!

Whole Life Insurance can be bad if you borrow against it

Dear Dave: I have a whole life insurance policy with zero cash value due to loans I took out per the advice of my agent. I finally realized this wasn’t a smart move, as I now owe premiums plus interest every year. Am I still on the hook for the policy loans if I forfeit the policy to buy term insurance? — Tanner

Dear Tanner: No, you are not. Get your term insurance in place first, then when you cancel the policy; your cash value will offset your loans.

They won’t lend you more than your cash value. It’s seldom that they will lend you 100 percent of cash value, so you might actually have a cash value that is above your loan amount. If they have lent you the full amount of your cash value, it’ll be an exact break even, and just canceling the policy means you cancel the interest and cancel the premiums.

It was bad advice to buy the policy, and even dumber advice to clean the whole thing out and sit there paying interest to borrow your own money and pay a premium to keep the loan open.

I recommend 10 to 12 times your income on a 15- or 20-year level term policy. During that 15 or 20 years, of course, you should be getting out of debt and building wealth so that you have a big pile of money and no need for life insurance. — Dave

Pay off student debt while working towards self employment

Dear Dave: I have student loans in deferment from earning a degree in hospitality management. My career goal is to own a mobile food vending company, so I’m putting most of the money I make from eBay and ride-hailing services — around $1,000 a month — aside in savings for that. Should I forego my business idea for the time being, and knock out the student loan debt instead? — Nicholas

Dear Nicholas: You should put this business idea on hold for now, unless you can start it for less than $1,000. The first thing you need to do is go out, and get a real job. I know you have this dream of being self-employed, but right now you’re not doing so well as an entrepreneur.

With a hospitality degree, you can make $30,000 to $50,000 a year within the industry, clean up your mess, and build out the eBay thing on the side. Just think about how quickly you could save up money for a jump into the food truck or mobile food business, then.

Pay your way through it, Nicholas. Don’t sit around scraping by on the kind of money you’re making now and call that winning. You have a real economic engine at your fingertips, because you have the knowledge from the degree you earned. And it’s a valuable degree. If you go in there and bust it, you can escalate yourself upward through that industry in a hurry.

While you’re doing that, you can clean up all your student loans and save up money for your food truck. Boom — you’re self-employed and you learned a lot of stuff you can use in your new business. Go make some real money, then follow your dream, man. — Dave

Finding investors for an apartment building

Dear Dave,
I want to build an 18-unit apartment complex, but I don’t have enough cash to do it on my own. My net worth is around $400,000, and I have $100,000 I can put toward this project. It is estimated to cost $1.2 million. Would lining up investors, who will take a percentage of the profits, be the same thing as acquiring debt?
-- Jay

Dear Jay,
It wouldn’t be the same as taking on debt because if there are no profits, the investors get nothing. It’s more like taking on partners and what you would call an equity position -- meaning they’re owners in the business. They may have only limited rights as owners, but essentially you’re taking on partners.

There’s a method that was used in the old days that’s still available today called syndicating a piece of real estate. You would set yourself up as the general partner and set the investors up as limited partners. They would be limited in their input, because the general partner runs the show. They can be given the lion’s share of the tax write-off, and the depreciation schedule. Traditionally in those models, the general partner takes less of the depreciation schedule but gets a fee for running things and has a position of ownership.

There’s a restriction under Blue Sky Laws on the number of limited partnership units allowed before it becomes a situation where you’re selling stock. Check with your state and current securities laws to be sure of the exact number to avoid any impropriety. You can do a limited partnership or syndicate a piece of real estate, but they can both be very messy and time consuming for the money you get out of it.

Honestly, I don’t think it’s a good method for you to buy an apartment complex at this stage of your investing life. It’s more like a way for you to get into the business of running a bunch of limited partners with a ton of paperwork and bookkeeping thrown in. It doesn’t sound like a lot of fun to me.

If I were in your shoes, I’d use the $100,000 in cash to buy a money-making property -- maybe a nice rental house. Then, save your money, invest and buy another one. And again, save the money, invest and buy another one, over and over again. It’s a gradual process, but I don’t teach or advise people to go into partnerships or borrow money.

via www.hutchnews.com/business/20170725/dave-ramsey-bad-method-at-this-stage

Payment plan VS Paying it off immediately

DEAR DAVE: My wife just had our first child. Now, we now have about $3,000 in medical bills not covered by insurance. We've got $8,000 in our emergency fund, and I make between $25,000 and $30,000 a year. Should we try setting up a payment plan with the hospital, or is dipping into our savings a better idea?
— Matt

DEAR MATT: I'd write a check today and knock out that hospital bill. This falls under the heading of “emergency” in my mind, so pay the bill and jump back into rebuilding your emergency fund.

You've done a really good job of saving on your income, but let's see what we can do about making better money in the future. Extra practical training in your field, or more education in the classroom, could increase your income quickly. Your emergency fund needs to be a little bigger, as well, and it'll be a lot easier to make this happen if you're making more money.

I'm sure you're a hardworking guy, but it's going to be tough for even a small family to make it on what you're bringing home now. The unexpected can become a common occurrence when there's a little one in the picture.

Should you help a family member who was in a bankruptcy ?

DEAR DAVE: My dad wants me to buy a house on a 30-year loan for him and my mom in my name, and let them make the payments. I'm 24 years old and have a good credit score and a nice apartment, but my job depends largely on how the oil industry is doing. My dad filed bankruptcy nine years ago, and he's already $150,000 in debt again, so he's never been very responsible with money. I think this would spell big trouble for me, but I'm sure he will be mad if I say no. What are your thoughts?
— Emmanuel

DEAR EMMANUEL: Yeah, I think doing something like this would spell big trouble for you. If your dad is irresponsible with money — especially to the point of having to file bankruptcy — what makes you think he'll make these house payments on time?

I know this would be an uncomfortable conversation to have with your dad, but you need to brace yourself and just do it. Be respectful and explain exactly why you won't do this. Think about it, Emmanuel. When he doesn't pay the bill on time, it's going to screw up your credit score. And when you get ready to buy a house, guess what? You're going to have trouble qualifying because you already own a house. Most people don't make enough money to qualify to buy two homes.

Basically, your dad is asking you to not buy a house so they can have one. I can't tell you how to make your dad OK with saying no to this, but I can tell you that your answer should be no. Let him and your mom know that you love them both, but this is something you just can't do.

What to do when a debt collector contacts you

Dear Dave,
I got a call from a debt collector regarding $2,000 I owe in medical bills. I’m trying to get my finances in order and pay this off, but I’m afraid they’ll follow through on their threat to garnish my wages. Can you give me some advice?
Mike

Dear Mike,
First, I want you to take a deep breath and calm down. Debt collectors like to play on your emotions because they think you’ll give in and do something you can’t really afford to do. Most of them don’t care about you or your situation as long as they get some money.

They won’t garnish your wages because they can’t. They would have to go through the formal, legal procedure of first suing you and then winning the case. They broke federal law by saying they would garnish your wages but hadn’t sued you. If I were in your shoes, I’d be filing a complaint against these bozos with the Federal Trade Commission.

Don’t react with fear and panic in the face of debt collector threats. Talk to them and explain your situation. See if you can work out a compromise. If they get nasty or break federal law again, let them know you’ll be filing another complaint with the FTC. You’d be surprised how reasonable these people can be when faced with the possibility of government intervention.

In the meantime, do everything you can to scrape up as much cash as possible. Have a big garage sale and sell everything in your attic or basement you don’t need. Then, when you get this mess cleaned up, pay off the rest of your debts — if you have any — and start living on a written.

Dont borrow money for expensive Weddings

Dear Dave,

My wife and I make good money, and our daughter's college education is pretty much paid for through pre-paid tuition and scholarships. We just started your plan to get out of debt and take better control of our finances. When we get to Baby Step 5, which is saving for college, can we substitute that with saving for a wedding? — Bob

Dear Bob,

That would be fine. I'm glad you're thinking ahead. It's always a good idea to save toward a wedding if you have the financial resources to do so, because weddings are real and they're coming.

The average wedding in America today runs around $35,000. Of course, you don't have to pay anywhere near that amount to make it a beautiful occasion. Your household income, debt, savings and other factors will all play into how much you can afford.

Just remember to pay cash for the wedding, Bob. If you have to go into debt to make it happen, then you're talking about too much money. It's as simple as that. Crunch the numbers with your wife, and see what you two can handle.

And remember, there's absolutely no correlation between the cost of a wedding and the success of the relationship! — Dave

Keep a fully funded emergency fund

Dear Dave,My husband and I are in our 50s, and we have just $12,000 to pay off before we're debt-free. We've paid off almost $70,000 in debt in the last two years. We would like to buy a house soon, but we know we also need an emergency fund. It would take us almost a year to build up an emergency fund, so should we make adjustments to the Baby Steps since we're getting older? — Dawn


Dear Dawn,

No! It shouldn't take you two a year to build up an emergency fund considering the rate at which you've been paying off debt. You need a fully funded emergency fund or three to six months of expenses set aside before you start saving for a down payment on a home.

You've been making great progress, and you obviously have a good income to be able to pay off debt that quickly. Maybe in your case you could lean a little more toward the three-month side with your emergency fund before you start saving for a house. Then, after you're all moved in, you could revisit the emergency fund and beef it up to six months.

Just stay on course and stick with the plan, Dawn. Fifty isn't old. You two have plenty of time to get your finances in order, find a great home, and look forward to many great years ahead! — Dave

Skipping to the altar

Work hard and struggle for the future payoff

Remember, you don't have experience right now and that you're going to need to work like crazy, learn everything you can and make yourself a valuable team member.

Will there be struggle? Oh yes. Guaranteed. There really isn't a yellow brick road. You need that struggle in order to succeed. Embrace it. It's part of the journey!

Live like a college student

I tell young people who call our radio show that you're already used to living like a broke college kid, so keep living like one until you start making grown-up money. That way you can clean up any debt you might have, build up your emergency fund and start saving for the things you want and need down the road like a better car and a down payment on a house.

Should you hire a family member at your business

Having a small business doesn’t give relatives a free pass to employment. As entrepreneurs, you have the right and responsibility to do what’s best for your company. And you don’t have to hire anyone -- even a relative -- who’s not a good fit.

There are situations where hiring a family member can actually be a plus. If a relative is qualified and the kind of person who understands they’ll have to bust it every single day and perform at a level equal to or above your other team members, that can be a special and productive thing. A relative who is a problem child, however, can be a nightmare in both your professional and personal lives.

Ask yourself a few questions: Would you hire this person if they weren’t part of the family? Would you hire this person because they would make a good team member? If the answers are no, then you don’t hire them -- period.

Be kind about the situation, because there may be some bruised feelings. But the bottom line is you have to do what’s best for your business, your immediate family, and your team.

Dont let your basic living expenses get too high

Dear Dave,

I read where you recommend having your house payment or rent at an amount that’s 25 percent or less of your monthly take-home pay. Does this figure include property taxes and insurance too?


Dear Mark,

Yes, it does. I’m trying to keep you from being “house poor.” Did you know you can qualify for a house payment, with taxes and insurance, that’s close to half of your take-home pay? That’s ridiculous. When you don’t have room in your budget to do anything else that matters because your house payment is so large, that’s what we call house poor.

When your income minus your basic living expenses equals almost nothing, it means your basic living expenses are way too high. Being in this kind of situation keeps you from saving for really important stuff like investing, retirement, and college for your kids. I’m trying to position you where you can get the house and everything paid off so you can become wealthy. Remember, your most powerful wealth building tool is your income.

When we talk about driving a crappy car, not going out to eat, or not going on vacation -- those are temporarythings. It’s all about living like no one else, so that later you can live and give like no one else.

-- Dave

You dont have to be a math genius to understand Personal Finance

Personal finance isn’t all about math. Personal finance is only about 20 percent math. The other 80 percent is behavior.

We list debts in the debt snowball in order of the smallest to the largest balance, putting as much as possible toward the smallest while paying the minimum payments on the others. The reason, as I mentioned earlier, is behavior modification. It helps you see yourself making a dent in your debts.

It’s easier to change bad habits when you see quick results from your efforts to eliminate negative behaviors. Paying off the smallest debts first, instead of the debts with the highest interest rates, will give you quick wins that will help keep you motivated. It provides proof that you can succeed and become debt-free.

Why putting money in pensions may not be wise

I wouldn’t put money into a pension. For one thing, when you die after putting money into a pension, in most cases it dies with you. 

Number two, when you put money into a pension, you’re going to get about a 6 percent rate of return in the current environment — maybe even as low as 5 percent. You’re not making much on it while you’re alive, so I don’t advise putting money in pensions. We let employers put money in pensions, if they want to. That’s a nice benefit, but I wouldn’t add to it.

Dont skip Baby Step 3 - Emergency Fund

Dear Dave,
My husband and I heard about your plan, but we're not sure what to do next. We have between $400,000 and $500,000 in a 401(k) for retirement, but we don't have any other savings. We're both in our forties, and the only debt we have is our house, so what should we do about Baby Steps 4 and 6? — Mary

Dear Mary,

Overall, you two have done a great job with your money. Let's go over the Baby Steps you mentioned. Baby Step 4 is putting 15 percent of your income into Roth IRAs and pre-tax retirement plans. Baby Step 6 is paying off your home early.

The thing that worries me is you've completely skipped Baby Step 3, which is having three to six months of expenses in an emergency fund. This is money set aside strictly for emergencies. The problem right now is if you have a real emergency, you may have to cash out your 401(k). If you do that, you're going to be penalized 10 percent, plus your tax rate. That's a real kick in the teeth just because you didn't do things in the right order.

My advice is to temporarily stop your 401(k) contributions until you get a fully funded emergency fund in place. By temporarily, I mean six to eight months at most. That way, you'll be covered when life happens without having make a big dent in your retirement savings! 

— Dave

Clothing budget for kids can be a valuable learning tool

Q. My daughter is 15, and she’s had jobs around the house and been on commission and the envelope system for years. She’s very good about saving and not spending on silly things. We recently opened a checking account for her, and I was wondering what bills you think we should assign for her to pay on her own?

A. This sounds a lot like we did with our kids. She’s obviously bright and motivated, so the first thing you do is explain to her the seriousness and responsibility associated with a checking account. The next step is for her to balance the checkbook with you looking over her shoulder. Do this with her for several months, while you keep one on the account, too. After that, I want her to do it alone and show you her work. Her balance should match yours and the one at the bank.

As soon as she demonstrates competency and you feel comfortable that she can handle things, I want you to start putting her clothing budget in the account. You know, the weirdest thing happened with our girls at this stage. They suddenly started shopping at less expensive stores. It’s amazing when they see that the dollars associated with these purchases can run out. My bet is you’ll see some changes in her value choices.

Just take it step-by-step, a little at a time. The more they exhibit competence, wisdom, and confidence, the more you can release them.

Be good and put family first

Q. My wife and I argue a lot about finances. We’re trying to get more control over our money, and she has been listening to you. That’s helped a lot. She’s also a lot more frugal than I am, and our biggest point of contention right now is how we handle our spending money. Whenever I work overtime at my job, I feel like I should be able to put the overtime pay toward my spending money. What are your thoughts on this?

A. No way, dude! You don’t work overtime for your little-boy wants. You work overtime and rake in that extra cash, for the good of your family. That’s the manly thing to do.

Now, that’s not to say you both can’t have a little spending money. It also doesn’t mean that you can’t treat yourself once in a while if you’re working your tail off. I mean, if I’m working 70 to 80 hours a week I may give myself a little inexpensive treat in the midst of all that. So, my spending money budget should reflect that. But it shouldn’t reflect a sense that I get to play more because I work extra, while the rest of the family suffers.

Sorry, man. I think you knew what I was going to say. Step up, be good to your family first and then your good times will come. If you haven’t learned it already, you’ll soon discover that those good times are best ones!

via djournal

Baby Step 6 is paying off home early

Dear Dave,
My husband and I heard about your plan, but we're not sure what to do next. We have between $400,000 and $500,000 in a 401(k) for retirement, but we don't have any other savings. We're both in our 40s, and the only debt we have is our house, so what should we do about Baby Steps 4 and 6?
— Mary

Dear Mary,
Overall, you two have done a great job with your money. Let's go over the Baby Steps you mentioned. Baby Step 4 is putting 15 percent of your income into Roth IRAs and pre-tax retirement plans. Baby Step 6 is paying off your home early.

The thing that worries me is you've completely skipped Baby Step 3, which is having 3 to 6 months of expenses in an emergency fund. This is money set aside strictly for emergencies. The problem right now is if you have a real emergency, you may have to cash out your 401(k). If you do that, you're going to be penalized 10 percent, plus your tax rate. That's a real kick in the teeth just because you didn't do things in the right order.

My advice is to temporarily stop your 401(k) contributions until you get a fully funded emergency fund in place. By temporarily, I mean 6 to 8 months at most. That way, you'll be covered when life happens without having make a big dent in your retirement savings.
—Dave

Debts and relationships between couples

One of my relatives just graduated from college with $20,000 in student loan debt. Her boyfriend graduated, too, and he has over $100,000 in student loan debt. They want to get married, so she's looking for a job. He wants to go to graduate school, and take out more loans to remain a full-time student. The idea of even more debt hanging over their heads really bothers her. Do you have any advice?
— Denise

Dear Denise,
You don't throw away a great, potentially lifelong, relationship just because of debt. Things like laziness, dishonesty, and irresponsible behavior are deal breakers, though. Those are flaws that usually don't go away.

I'm glad she's looking for a job, but her boyfriend needs to be working, too. There's no excuse for either of them being full-time students with more than $120,000 in combined student loan debt hanging over their heads. Lots of people hold down real jobs, save money, and further their educations on a part-time basis.

If she were my niece, I would encourage her to have an open and honest discussion with her boyfriend about their future, and how he plans on paying for graduate school. She also needs to be very real about her feelings in this situation. If, after that, he still wants to just borrow more money and not work outside of school, then she might have a difficult decision ahead.

However, if he realizes how damaging additional debt could be to their relationship, and he's willing to work while continuing his education, I think their future together looks much brighter.
—Dave

Getting Long term care insurance for the elderly

Dear Dave: My mom is 73 years old, and she's dealing with depression and a few other mental issues. Is it too late for her to get long-term care insurance? — Julie

Dear Julie: It wouldn't be a big problem if she were healthy. But given her age, and the other struggles you mentioned, I'd check with a good insurance broker to see what's out there for her.

In the insurance world they call this "making a market." Will they be able to find a company that will write her in that situation? I can't give you an accurate answer off the top of my head because this is a difficult thing. It probably would depend on things such as the extent of her depression, how long it's been manifested and what it has done in her life.

That's one of the reasons I'm advising you to see an insurance broker. A broker doesn't represent just one company; they represent several companies. They can shop around in a given situation and find someone to write something you might not get written otherwise. They also can shop around for the best possible price, and you get the efficiencies of the marketplace working for you.

God bless you both, Julie.

Dave Ramsey on Freshbooks accounting program

Q. I’m looking for a good accounting program for small business. Do you have any suggestions?

A. The best one I’ve seen is called FreshBooks. I like it so much that we’re actually endorsing it on some of our podcasts and a few other places. It’s a cloud-based program for small business, and it’s a pretty simple accounting system.

Honestly, you don’t want anything super complicated for small-business accounting. You just need something that allows you to write out invoices and keep up with your expenses while categorizing them. It’s important you know what’s going on in your business – to be able to continually analyze what’s happening – and have the ability to look in your rearview mirror and see if anything’s coming up behind you.

Small business is losing money

My husband and I have four kids, and I make $50,000 a year. He runs a small business that has been floundering for a while now, so we’re basically living off my income. Part of that income is going into the business. Plus, we don’t have much in savings, and we’re behind on our house payments. Do you have any advice?

A. First of all, you and your husband have to get on the same page financially. Sit down together, and do a household budget and a profit-and-oss statement on the business. A P&L statement will tell you the money that comes in minus the money that goes out.

Here’s the thing. If you’re putting other money into a business account, that’s a clue that you’re not making money on the business. Put his rent, supplies and any other business expenses on the profit and loss list, and write out – step by step – what it will take for you to break even in the business each month. If you don’t at least break even, then it’s time for him to do something else for a living.

I’m an entrepreneur and a business owner. I get the allure and excitement that goes along with running your own business. But family and your financial responsibilities come first. You don’t need to put any money into the business account, except for the income he creates. And while you two are sorting this out, use your income to get current on your house payments and attack any other debt.

Buying a home near a utility tower

DEAR DAVE: My husband and I have been debt-free, except for our mortgage, for a few years now. Recently, we've been thinking about moving back to our home state to be closer to family. We've found a home we're interested in, but it has a large utility tower on the property not far from the house. Should we still consider this home?

— Denise

DEAR DENISE: The downsides are simple. One, you've got to look at the stupid thing every time you're sitting on your patio. Two, when you get ready to sell it, everyone who looks at the house is going to have the same concerns you have. It's not going to appreciate in value, and you're going to have trouble selling it when the time comes.

If you're willing to put up with those two things, you might get a steal of a deal on this place because no one else may want this house. And when I say a steal, I'm talking around 40 percent off the appraisal. To me personally, it would be enough of an eyesore that I probably wouldn't buy. Again, that's just a personal opinion.

Keep in mind that if you go through with this, when you get ready to sell it, you're going to lose out on any money you gained in the buy. Someone is going to do the same thing to you. I'm not completely killing the deal, but I definitely wouldn't buy it to live in. As a rental? Maybe, if I were going to keep it forever. Because people will always rent. But honestly, I wouldn't want to put up with the hassle in either scenario.

Debit card tip - Can use as a credit card if needed

You can run a debit card like it's a credit card, and they will accept it. The machines don't recognize the difference, whether you type in a credit card number or a debit card number.

Just select “credit” when it asks for payment method. It's just like when you step up to pay for something at the store, and they ask the old credit or debit question. You say credit, so you don't have to enter your PIN (personal identification number), and it all stays in the Visa system.

You're just using it wrong, and that's why you're having trouble. Just remember this in the future.

What to do if you are diagnosed with a disability

Q. I’m 37 years old, married with two great kids and I was just diagnosed with multiple sclerosis. I’m trying to plan for the future, and I was wondering if you have any suggestions for work at home or self-employment ideas for people with disabilities.

A. I’m really sorry to hear you’re facing this. You’re a smart, brave young woman to be looking ahead and making plans for the coming years.

I suggest you read a book by Dan Miller called “48 Days to Creative Income.” Dan is a friend of mine, and he also wrote a popular book titled “48 Days to the Work You Love.” The issue you’re talking about is very close to his heart, and I think his books will be a great help to you.

There’s also a book by Richard Bolles. It’s called “Job Hunting for the So-Called Handicapped or People Who Have Disabilities,” and it’s full of ideas to help you work around the issues you’ll be facing.

There are lots of people out there – well-known, highly successful folks – who have disabilities and still make good money and have rewarding lives using the principles found in these books. Another great piece of news is it sounds like you have a wonderful support system around you.

God bless you all. I’m praying for you.

Annuities vs 401K

Q. My husband was recently laid off, and he has $229,000 in a 401(k). He has been told that he should roll it into a hybrid annuity. Is this a good idea?

A. Absolutely not! It sounds to me like he’s been talking to an insurance agent instead of an investment adviser. There’s no reason to put a 401(k) into an annuity. Annuities are there to protect money, as it grows, from taxes. Well, guess what? The 401(k) is already protecting it from taxes.

I would roll it into a traditional IRA in a series of growth stock mutual funds. You’ll have half the fees, the adviser won’t make anywhere near the commission he’d make on an annuity and you’ll get much better results in the end.

Yeah, I definitely wouldn’t go the annuity route. I don’t have a single annuity, and I’ve got a lot of investments. One of the reasons so many “advisers” push annuities is because they wind up with bigger commissions. Annuities aren’t evil or anything, but they’re definitely not the proper product for you in this situation.

Get away from the guy who gave you this advice, and find a good financial adviEor – not an insurance guy – with the heart of a teacher. You need to talk to someone who’s interested in helping you two plan for your future, not theirs.

Helping your parents financially - yes or no

Dear Dave,

My dad has been really bad with money his entire life. Anytime he would get into trouble, my grandparents would always bail him out. This time he came to my wife and I, asking for $350 to get out of overdraft at the bank. We’re trying to live on a budget and get control of our finances, and $350 would make things kind of tight at the moment. What do you think we should do? — Jeremy

Dear Jeremy,

I understand feeling an obligation to help your dad. But there’s a lesson here that dad needs to learn, and it’s something that goes much deeper than the money or helping out a family member.

You have to do the right thing, no matter how dad reacts to this. Right now, the right thing is taking care of your family and not putting them in jeopardy. So my answer to dad would be no. Another thing that needs to happen is for the definition of “help” to change. When you say he’s been irresponsible with money his whole life, giving him $350 won’t help — and it will make you an enabler. Just handing him $350 will actually hurt him, and it will give him the idea he can continue being dumb with money and hit you up for cash anytime.

Like I said, I understand the pull of helping out a parent. So if you feel this is something you absolutely must do, I would advise making the $350 contingent on the fact that he begin and complete a financial counseling course. Be gentle when you talk to him, and let him know it hurts to see him struggling. But let him know, too, it’s his responsibility to work through his debts and take care of his own finances!

Fees to maintain an LLC are minimal

Dear Dave,
My wife and I are debt-free, plus she has a business giving music lessons. We formed an LLC last year when she had several students and was making over $3,000 a month, but that all changed when our first baby arrived. Now, she has only a few students, and they bring in around $700 per month. Should we dissolve the LLC? — Ben


Dear Ben,

First, congratulations on being debt-free and new parents. Happy New Year to you all!

In most states, the only upfront cost for an LLC is the money you pay for the initial setup. There may be a small fee for a business license and subsequent annual renewal, but that generally doesn’t add up to much. Then, there’s the money you pay for filing your tax return on the LLC once a year. Even if you live in a state where there are other fees to consider, as long as the cost of maintaining the LLC wasn’t killing you, I’d recommend keeping it in place. You went to the trouble of opening it, and you just might use it again someday. Even if your wife is staying home with the baby, she just might be able to take on more students again as time goes by.

Just be reasonable and use common sense. If you spend $3,000 to stay open, and you’re making $700, you’d dissolve it, right? But as long as you don’t have fees that are making you cringe, I’d probably leave it in place.

Husband has two cars

Dear Dave,

My husband has two trucks, one of which is a work truck at his construction site. It's in really bad shape, and he wants to take $16,000 out of savings to buy another one. We only have $17,000 in the account. What should we do? — Caroline

Dear Caroline,
Your husband wants to drain your savings to buy a $16,000 vehicle and roll it up to a construction site? I think this guy has been watching too many macho-man truck commercials.

In the real world, some hard hat will run into it with a piece of heavy equipment or drop a load of bricks off center and put some big time damage on this truck before he puts 1,000 miles on it. He wants to buy way too much truck. This kind of decision will wreck your finances and spell bad news for the business, too.

You can buy a perfectly good work truck for $6,000 or $7,000, and that's what he needs to do. This truck is going to get destroyed, and trashing an inexpensive truck is a much better idea than trashing the family finances! — Dave

Wife has cancer, what should we do

Dear Dave,

My wife and I have been married for 12 years. Last month we found out she has terminal cancer and only six months to live. We've been fortunate enough to become fairly wealthy during our lives together, and she wants to buy me a boat. We always went fishing together, and her last wish is for me to have the boat I've always wanted. Even with this prognosis, I'll be okay financially when she's gone. Still, I can't stand the thought of this. It's just too painful. Do you have any advice? — Andrew

Dear Andrew,

Buddy, I am so very sorry. I hope you realize that you have the sweetest woman on earth for your wife. Even with all she's going through, her thoughts are of you and your happiness. That is one amazing lady.

The first thing I'd tell you both is to make sure your faith is intact. Hug her a lot, and keep talking to, praying with, and loving on each other. Be there for her all you can, and keep in mind that doctors can be wrong. It happens a lot, believe it or not, so don't give up hope.

If she brings up the boat again, just smile and let her know it's all about her right now. Remind her that she did the nicest thing possible many years ago when she agreed to spend the rest of her life with you. If she's really stubborn about this idea - something tells me she is, and in the very best way possible - promise her that whether you win or lose this fight you'll buy that boat someday and name it after her.

In other words, just tell her the truth and be real. If she goes home to be with the Lord, there might come a day down the road when the pain you'll feel has dulled just a little, and you find yourself sitting on that fishing boat that's named after her. That would be okay. I'm sure she would be smiling at you while you reeled in a big one. But you've got more important things to take care of right now - namely her.

God bless you both. 

Police pension plans contribution

Dear Dave: I work for the police department, and I’m required to contribute 9 percent of my paycheck toward my pension. I know you recommend putting 15 percent toward retirement, so I was wondering if I should put an additional 6 percent into this plan or go with something else. — Brian

Dear Brian: Your pension is probably pretty stable if you work for a police department, so if you feel good about your position and the returns you’re seeing, I’d be okay with you putting the extra 6 percent there – maybe even a little bit more.

If you’re feeling iffy about the pension, I’d recommend putting the remaining 6 percent in a Roth IRA invested in good growth stock mutual funds. Make sure these funds have strong track records of at least 10 years.

I’m glad to know you’re serious about saving, Brian. By planning for the future now, you can look forward to retiring with wealth and dignity! — Dave

Debit cards are superior to Credit Cards

Dear Dave: I’ve followed your plan for three years. I’m living totally debt-free except for my home, and I pay for everything with cash. It’s so freeing! I’d like to convince my family to stop using credit cards and follow your advice too. How can I do this? — Allen

Dear Allen: It does feel great, doesn’t it? Congratulations! I’m really proud that you’ve worked hard, been disciplined, and taken control of your money.

When it comes to your family, however, I’m not sure that words will do the trick. There’s an old saying, “Those convinced against their will are of the same opinion still.” Some people are just stuck in their ways and have been brainwashed into believing that credit cards and debt are an unavoidable part of life.

Trust me, I know what I’m talking about here. I’ve been fortunate enough to help millions of people change their lives, get out of debt and take control of the finances. But there are millions more who just won’t listen. They just keep going deeper and deeper into debt. As much as I want to help people, I had to accept the fact long ago that being stupid with money isn’t illegal.

You can make some irrefutable arguments against credit cards. You don’t need them to get a hotel room, rent a car or buy airline tickets. A debit card will do all of that without piling up debt. For an emergency fund, you can simply save up cash. It takes some discipline and hard work, but relying on credit when things go wrong is a trap.

If they won’t accept these points, try telling them your story. Don’t leave out the part about old habits being hard to break, but stress how great your life has been – both financially and emotionally – since you made the decision to control your money. Maybe a light will come on, and you can walk them through the process! — Dave