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!