DEAR DAVE: My wife and I have $25,000 in credit card debt, $2,500 in medical bills and $89,000 each in student loan debt from when we each got our master’s degrees. We make about $100,000 combined. Our son is 6 years old, and we have $18,000 in a 529 plan for him. Should we use that money to pay off debt instead?
—Sean
DEAR SEAN: I wouldn’t do that, if I were you. You’ll get destroyed with penalties, because if you take money out of a 529 for anything other than college, you’ll be taxed at your current tax rate and hit with a 20 percent penalty. The other thing is, you’ll have this weird feeling that you took money away from your kid.
Technically, it’s your money. You put it there. But when you did, it was in your child’s name. Plus, that doesn’t really solve your problem. You’ve got a ridiculous amount of debt, and that little bit won’t move the needle very much. Having more money in your hands isn’t the big answer here. What you both need is a behavior change when it comes to money.
My advice is to leave the 529 alone. Stop adding to it for the time being. Put any retirement saving you’re currently doing on hold, too. You guys need to start living on a budget, working a debt snowball plan and looking for extra income. Even tutoring would bring in some additional cash. I’ve got a feeling, too, that those master’s degrees can provide you with more money than you’re currently making.
It can be done, Sean, but it’s going to take a lot of hard work and discipline. It may even take four or five years to get this mess cleaned up, but you can’t keep living without a plan.
—Dave
Wednesday, July 30, 2014
Friday, July 25, 2014
Dave Ramsey: Find mutual funds with 12percent returns
DEAR DAVE: Where can I find mutual funds with a 12 percent rate of return?
—Jason
DEAR JASON: There aren’t a lot of them, but they are out there. Currently, there are about 8,000 different mutual funds floating around. You have to get online and do some serious research, or talk with an investing professional with the heart of a teacher, but I own several mutual funds that have an average annual return in excess of 12 percent over the lifetime of the fund.
Now, do they make that every single year? Of course not. The figure I’m talking about is an average. I own one in particular that has done that for about 70 years. But the stock market in general has averaged just under 12 percent a year since its inception. So yes, with solid research and due diligence on the part of the investor, it is possible to get that as an average annual rate of return.
—Dave
—Jason
DEAR JASON: There aren’t a lot of them, but they are out there. Currently, there are about 8,000 different mutual funds floating around. You have to get online and do some serious research, or talk with an investing professional with the heart of a teacher, but I own several mutual funds that have an average annual return in excess of 12 percent over the lifetime of the fund.
Now, do they make that every single year? Of course not. The figure I’m talking about is an average. I own one in particular that has done that for about 70 years. But the stock market in general has averaged just under 12 percent a year since its inception. So yes, with solid research and due diligence on the part of the investor, it is possible to get that as an average annual rate of return.
—Dave
Tuesday, June 24, 2014
Keep Timeshare or ditch them
Dear Dave,
My mom passed away recently, and she left behind three timeshares. I inherited them, plus I’m the executor of the estate. They’re all paid for, except for the yearly maintenance fees, which total about $1,500. I don’t think I want them, but I’m not sure what to do. Do you have any advice?
Joe
Dear Joe,
I’m really sorry to hear about your mom. I know you’ve got a lot of emotions going on right now, and taking on the task of overseeing the estate is a serious responsibility.
There are two issues here. One, as the executor you have to decide what’s best for the estate. Number two, do any of the other heirs want these things? I wouldn’t want them, I can tell you that. I realize they’re basically free things—all you have to do is pay the maintenance fees—but by the time you do that, you probably could’ve gone somewhere else. For that kind of money, you can stay in some pretty nice spots and not have the ongoing liability.
Right now, the estate has the responsibility for the maintenance fees. I would call the timeshares and tell them the estate isn’t going to keep them, and that you’re going to deed them back to the companies. The way I look at it, you can have a lot of fun for $1,500 a year. You can go where you want, when you want. You’re not roped into a specific place and date. Part of the appeal of getting away is being able to go where you like at a time that’s right for you.
I understand there may be some sentimental value attached to these, Joe. But timeshares are a horrid, inconvenient product. My sentiment would be, “I’m out of here!”
—Dave
via http://finance.townhall.com/columnists/daveramsey/2014/06/11/dave-says-dont-get-tied-down--ditch-the-timeshare-n1850011
My mom passed away recently, and she left behind three timeshares. I inherited them, plus I’m the executor of the estate. They’re all paid for, except for the yearly maintenance fees, which total about $1,500. I don’t think I want them, but I’m not sure what to do. Do you have any advice?
Joe
Dear Joe,
I’m really sorry to hear about your mom. I know you’ve got a lot of emotions going on right now, and taking on the task of overseeing the estate is a serious responsibility.
There are two issues here. One, as the executor you have to decide what’s best for the estate. Number two, do any of the other heirs want these things? I wouldn’t want them, I can tell you that. I realize they’re basically free things—all you have to do is pay the maintenance fees—but by the time you do that, you probably could’ve gone somewhere else. For that kind of money, you can stay in some pretty nice spots and not have the ongoing liability.
Right now, the estate has the responsibility for the maintenance fees. I would call the timeshares and tell them the estate isn’t going to keep them, and that you’re going to deed them back to the companies. The way I look at it, you can have a lot of fun for $1,500 a year. You can go where you want, when you want. You’re not roped into a specific place and date. Part of the appeal of getting away is being able to go where you like at a time that’s right for you.
I understand there may be some sentimental value attached to these, Joe. But timeshares are a horrid, inconvenient product. My sentiment would be, “I’m out of here!”
—Dave
via http://finance.townhall.com/columnists/daveramsey/2014/06/11/dave-says-dont-get-tied-down--ditch-the-timeshare-n1850011
Thursday, June 19, 2014
Dave Ramsey on buying new vs used
Dear Dave,
What things do you advise buying used versus buying brand new?
Amy
Dear Amy,
I’m afraid there’s not one good, across-the-board answer, because it all depends on where you are in your financial plan.
When it comes to cars, you should always buy good, used vehicles, unless you have a million dollars or more in the bank. New automobiles drop in value like a rock, so buy smart and let someone else take the hit in depreciation. You don’t become wealthy by investing in things that go the wrong way.
If you’re talking about clothing, and you’re broke or trying to get out of debt, there’s absolutely nothing wrong with shopping consignment stores — especially for kids. They wear things three times, and then they’ve outgrown them. “Experienced” clothing is a great buy for adults, too.
Of course there are other things, but here’s the deal. As your money situation improves, you’ll be able to buy more new things. The price of “new” will become a smaller and smaller percentage of your financial world.
But when you’re broke, deep in debt or don’t have a big income, the money you spend on anything is a big percentage. At times like this, a decent $50 washer or dryer in the classifieds can be the best deal on the planet!
— Dave
Via http://www.the-leader.com/article/20140618/News/140619619
What things do you advise buying used versus buying brand new?
Amy
Dear Amy,
I’m afraid there’s not one good, across-the-board answer, because it all depends on where you are in your financial plan.
When it comes to cars, you should always buy good, used vehicles, unless you have a million dollars or more in the bank. New automobiles drop in value like a rock, so buy smart and let someone else take the hit in depreciation. You don’t become wealthy by investing in things that go the wrong way.
If you’re talking about clothing, and you’re broke or trying to get out of debt, there’s absolutely nothing wrong with shopping consignment stores — especially for kids. They wear things three times, and then they’ve outgrown them. “Experienced” clothing is a great buy for adults, too.
Of course there are other things, but here’s the deal. As your money situation improves, you’ll be able to buy more new things. The price of “new” will become a smaller and smaller percentage of your financial world.
But when you’re broke, deep in debt or don’t have a big income, the money you spend on anything is a big percentage. At times like this, a decent $50 washer or dryer in the classifieds can be the best deal on the planet!
— Dave
Via http://www.the-leader.com/article/20140618/News/140619619
Wednesday, May 14, 2014
Debt Snowball from smallest to largest
Q. I owe the IRS $6,000 and currently I’m making monthly payments. Should I roll this debt into my debt snowball, and then really attack it when it gets to the top of the list?
A. My advice would be to put the IRS at the very top of your debt snowball. Usually, when it comes to paying off debt, I advise people to arrange their debt snowball from smallest to largest, then start with the smallest one and work their way up. This doesn’t always seem to make mathematical sense, but the truth is personal finance is 80 percent behavior and only 20 percent head knowledge. Paying off some small debts quickly energizes you and gives you motivation. It makes you feel like you can really do it. Besides, if you were such a math genius you wouldn’t have debt in the first place.
But the IRS is a different animal altogether. Their interest rates and penalties are ridiculously high. Plus, they have virtually unlimited power to collect. So put them at the top of the list, and get them paid off as fast as you can.
Article originally published at http://djournal.com/news/dave-ramsey-dont-cash-401k-pay-debt/
A. My advice would be to put the IRS at the very top of your debt snowball. Usually, when it comes to paying off debt, I advise people to arrange their debt snowball from smallest to largest, then start with the smallest one and work their way up. This doesn’t always seem to make mathematical sense, but the truth is personal finance is 80 percent behavior and only 20 percent head knowledge. Paying off some small debts quickly energizes you and gives you motivation. It makes you feel like you can really do it. Besides, if you were such a math genius you wouldn’t have debt in the first place.
But the IRS is a different animal altogether. Their interest rates and penalties are ridiculously high. Plus, they have virtually unlimited power to collect. So put them at the top of the list, and get them paid off as fast as you can.
Article originally published at http://djournal.com/news/dave-ramsey-dont-cash-401k-pay-debt/
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