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
Tuesday, June 24, 2014
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/
Monday, May 12, 2014
Cash out 401K to pay debt good idea or bad ?
Q. I’m 23, transitioning jobs, and I make $32,000 a year. I have $11,000 in a 401(k), and about $15,000 in debt. Should I cash out the 401(k) to pay down my debt?
A. I don’t think so. When you take money out of a 401(k) they charge you a 10 percent penalty, plus your tax rate. Your tax rate is about 20 percent, so that means you’re going to take a 30 percent hit. While I love dumping debt, your idea would be kind of like saying, “I want to borrow $11,000 at 30 percent interest to pay off my debt.” That doesn’t make a lot of sense, does it?
I never tell folks to cash out a 401(k) or IRA to pay off debt, unless it’s the only way to avoid foreclosure or bankruptcy. You’re not facing either one of those situations, so my answer is no.
A. I don’t think so. When you take money out of a 401(k) they charge you a 10 percent penalty, plus your tax rate. Your tax rate is about 20 percent, so that means you’re going to take a 30 percent hit. While I love dumping debt, your idea would be kind of like saying, “I want to borrow $11,000 at 30 percent interest to pay off my debt.” That doesn’t make a lot of sense, does it?
I never tell folks to cash out a 401(k) or IRA to pay off debt, unless it’s the only way to avoid foreclosure or bankruptcy. You’re not facing either one of those situations, so my answer is no.
Wednesday, May 7, 2014
Dont spend more than you can afford on a car
Dear Dave,
I think I made a big mistake when I bought my car. I’m having a hard time affording the $500 a month payments because I only make minimum wage at my job and work 35 hours a week. My boyfriend, who was supposed to help me pay for it, has moved out and left me. I owe $20,000 on the car, but I know it’s still worth about $19,000. What can I do?
— Rachel
Dear Rachel,
Sell the car. You went car crazy and bought a vehicle that was way out of your league.
Right now, your entire financial world is wrapped up in paying for this thing. And depending on a boyfriend to help make the payments was a big mistake, too. When he left, so did the financial support.
At this point, all you need is enough to cover the hole you dug. Go to your local bank or credit union and try to get a very small loan from them — about $3,000. I hate debt, but you really don’t have a lot of options here. Then, if the car will sell for $19,000, get it sold and use $1,000 to cover the difference.
After that, take the remaining money and buy yourself a little beater. I’m talking about basic, ugly transportation. The next step is to pick up a part-time job on the side and work like crazy for a few months to get that loan paid back as quickly as possible. Don’t ever do this kind of thing again, Rachel.
— Dave
I think I made a big mistake when I bought my car. I’m having a hard time affording the $500 a month payments because I only make minimum wage at my job and work 35 hours a week. My boyfriend, who was supposed to help me pay for it, has moved out and left me. I owe $20,000 on the car, but I know it’s still worth about $19,000. What can I do?
— Rachel
Dear Rachel,
Sell the car. You went car crazy and bought a vehicle that was way out of your league.
Right now, your entire financial world is wrapped up in paying for this thing. And depending on a boyfriend to help make the payments was a big mistake, too. When he left, so did the financial support.
At this point, all you need is enough to cover the hole you dug. Go to your local bank or credit union and try to get a very small loan from them — about $3,000. I hate debt, but you really don’t have a lot of options here. Then, if the car will sell for $19,000, get it sold and use $1,000 to cover the difference.
After that, take the remaining money and buy yourself a little beater. I’m talking about basic, ugly transportation. The next step is to pick up a part-time job on the side and work like crazy for a few months to get that loan paid back as quickly as possible. Don’t ever do this kind of thing again, Rachel.
— Dave
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