DEAR DAVE: My husband and I both work two jobs. Together we make about $53,000 a year, and we’re trying to get out of debt. We have $35,000 in debt, and most of that is on our truck. I’d like to go back to school and become an ultrasound technician, so we’ll have more money. Do you think this is a good idea?
— Sarah
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| Dave Ramsey |
DEAR SARAH: Getting more education is always a good idea. For starters, I’d begin doing some research to find out what ultrasound technicians in your area are earning. Then, look into the cost of training at a nearby school.
But I would only recommend starting school after you guys have done some work and cleaned up your finances.
You’ve got a bunch of debt hanging over your heads, and the truck you mentioned is a big part of the problem.
Sell the truck and move down to something very inexpensive to drive for a little while.
Then tear into the remainder of the debt and get it paid off as fast as you can. After that, save up a bunch of money so you can go to school debt-free.
I know that may seem like a long time before you can start school, but chances are you can get this done in less than two years.
And trust me, going to school debt-free will feel a whole lot better than having another bunch of payments buzzing around your heads for years to come.
VIA http://newsok.com/article/5371256
Dear Dave,We've got our starter emergency fund in place, and we've paid off the last of our debt. Currently, we rent an apartment but my wife really wants us to buy a house now. She also wants us to use a 30-year, 100 percent financing plan, and says this wouldn't cost any more than we're paying in rent. I disagree with her idea, and she's upset with me. How can I make her see this is a bad plan?
— Alan
Dear Alan,
I think she probably knows deep down this isn't a good plan. She's found something she really likes, and she's mad because you're not going along with the idea. It's called “house fever.”When you buy a home with nothing down and little to no money in the bank, you're inviting Murphy and his cousins — Broke, Desperate and Stupid — to move in with you.
In other words, you'll find yourselves in a mess because you didn't have the maturity and wisdom to wait until you had your fully funded emergency fund of three to six months of expenses in place, plus a 20 percent down payment saved up for a house.
The idea that you save money because your house payment is the same, or even a little less than your rent, is a myth. It costs more to own a home, period. As a homeowner, you're exposed to all kinds of things you never have to worry about as a renter.We all have times when we get excited by something we want and do things we shouldn't. I've done it, and I'll bet you have, too. But in situations like this, you've got to sit down and talk things out. I'm not sure how to get your wife to realize this or act more mature, but I do know that people who charge into things of this magnitude without thinking are the very ones who end up in my office for financial counseling or filing bankruptcy!
— Dave
From http://www.heraldnet.com/article/20141116/BIZ04/141119507/Wifes-house-fever%26%238217-threatens-familys-finances
DEAR DAVE: We had our first child a few months ago and some of the bills have gone to collections. We’ve paid what we could, but we each make only about $15,000 a year. Now, we’re getting calls and letters from collectors wanting our checking account information and electronic access. When we won’t give it to them, they accuse us of not following the terms and conditions of the agreements. They say we’ll be penalized if we don’t comply. What should we do?
— Stephanie
DEAR STEPHANIE: You’re doing the right thing by not giving them your account information and electronic access. The stuff they’re saying is just collector talk, and they’re full of crap.
The next time you talk to one of them, just let them know you have every intention of paying what’s owed. But the bill is going to be paid by you. There’s nothing in an this kind of agreement that gives them the right to your account numbers or electronic access. These people can stop lying and act right, or they can go jump in the lake.
The biggest issue here is your income. If I’m your husband, I’m going to find an extra job delivering pizzas a few nights a week for the time being. He could make an additional $1,000 a month for the next 10 months, and that problem would be solved.
Instead of working 40 to 45 hours a week, try working 60 to 80 for just a little while.
Still, you both need to examine your career track for the future. Look into different types of training and education with the attitude of doubling or even tripling your income in the next five years. I want you both to develop long-term plans to increase your income, and a short-term plan to get out from under this debt in a hurry.
My husband and I recently inherited my parents’ home. It’s in a small, rural town with little industry, and we’ve been told that the place would be worth $85,000 if it’s cleaned up, compared to $75,000 as-is. Should we spend about $10,000 to really clean it up, replace a few things and make it presentable to sell it faster?
— Terri
Dear Terri,
It’s really up to you guys, because both options — whether you’re sitting on the house or rehabbing it — are going to take time and emotional energy. From a real estate person’s perspective, houses always sell better when they’re shined up and looking nice. When prospective buyers walk in and see and smell new carpet and fresh paint, they don’t have to strain their imaginations looking past everything. When you force potential buyers to look past things, it usually ends up costing you money.
In most cases, if you spend $10,000, you gain more than what you put into the house. Honestly, I think one of the numbers you’ve given me is wrong — either the $85,000, the $75,000 or the $10,000 you think it will take to fix up the place. In other words, if you spend $10,000 on a project like this, you’ll usually gain $20,000 when you’re talking about stuff like a thorough cleaning, new carpet and flooring, fresh paint and basics like that. My guess is if the place is worth $85,000 fixed up, it’ll probably bring about $65,000 as-is.
If it’s me, I’m going to clean the place and fix it up. I’ve done hundreds, if not thousands, of these kinds of deals, and I can’t stand trying to sell something that’s dumpy, grungy and out of shape.
— Dave
Dear Dave,
If you have a mortgage that will be paid off in the next two or three years, should you pay extra toward the house or invest that money over and above the 15 percent you recommend putting toward retirement?
— Walt
Dear Walt,
I would pay extra on the house. You know, a magical thing happens when you pay down a house and sell it somewhere down the road. The money comes back. You didn’t lose it.
Honestly, you’re not doing a bad thing by putting it into retirement either. But you don’t know exactly what will happen over the next several years of your life or the life of your investments. You might think you know. You might even have a plan. But the truth is even the best plans don’t always work out the way we want.
And if that happens, it sure would be neat to own your home outright.
— Dave
