Dear Dave,

I'm trying hard to get control of my money and get out of debt, but I had a situation come up the other day, and I really don't know what to do. I'm one of four brothers, and our parents' 50th wedding anniversary is early next month. My two oldest brothers got together and made plans for a party without consulting the rest of us. They want everyone to chip in $1,000 to help pay for things. I love my mom and dad, but the only savings I have is $1,000 in my beginner emergency fund. Will you tell me how to address this situation?

Ronald

I'm going to be blunt here, OK? Since you weren't asked about any of this ahead of time, and had no say in anything, fair would be for you and your brother who weren't consulted to pay zero. Zilch.

Planning something that expensive without consulting everyone involved well ahead of time – and expecting them to lay out $1,000 without warning – is way out of line. And don't let your older brothers lay a guilt trip on you, either. This has nothing to do with how much you love your parents, being greedy or anything like that. It has everything to do with consideration and communication, or in this case, a lack of these on their part.

If I were you, I'd let your oldest brothers know exactly what your financial situation is like right now. Explain what you're doing and why you're doing it, then let them know in a nice, but firm, tone you'll give them whatever you can scrape up, but you won't be chipping in anything close to $1,000. Oh, and I'd tell them next time they hatch up a big, expensive plan like this, to check with all their brothers way ahead of time.

Best of luck, Ronald. I'm sorry you have to deal with this.

Dave

Dear Dave,

We sold our rental property recently. When we bought it, we thought it would be a good source of passive income. But owning it wasn't passive at all. It got to the point where the work and hassle became too much. We have $240,000 from the sale, and we're debt-free except for our home. We owe $140,000 on our house, and could pay it off instantly, but part of me wants to invest the proceeds from the sale of the rental property. Is it better to become completely debt-free at this point, or should we invest it so we can have even more money for retirement?

Anthony

Dear Anthony,

You mean you had to actively manage your rental property? Listen, anyone who tells you real estate is passive income is full of crap. It's a natural extension of the garbage people spout about how it's OK to go into debt to buy real estate, because the renter is making your payments. No, it's your payment. And when the renter doesn't pay, or it sits empty, guess what? You have to pay it.

If you want passive income, buy an S&P 500 index fund. Set it and forget it. You won't have to fix a leaky roof, replace worn out appliances or try to collect from deadbeat tenants. Real estate is a great way to invest, if you do it the right way. I love it. It's anything but passive, though.

Let me ask you this about your situation. If you had a paid-for house, would you borrow $140,000 against it to invest? Of course not. It's pretty much the same thing, and that would be dumb. Pay off your home, brother. Just pay it off. You'll be debt-free, and you'll still have six figures to invest.

I love that you're thinking about the future, Anthony. And I know the compound interest you're visualizing down the road is really tempting. Your compound interest calculator will tell you some amazing things, but what it's leaving out is risk. It also can't tell you about the carefree way you'll walk, and how it'll feel like a huge weight has been lifted off your shoulders when you don't have a house payment. You'll be able to live life on your terms, and all the decisions you make will come from a completely different point of view – one that isn't burdened by the weight of bankers hovering around, waiting for you to give them what's theirs.

The borrower is always a slave to the lender. Think about it. Only one implication of slavery is mathematical. All the rest are spiritual, physical, relational, emotional and mental. Being debt-free changes your life from the inside out. Not only does it make your life better, but it allows you to give with incredibly generosity, and be an agent for positive change in the lives of others.

Pay off the house!

Dave

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Dear Dave,

My husband and I have been very blessed financially over the course of our lives. We make a little over $200,000 a year combined, and we currently have a net worth of around $4 million. But what do you do when you're not motivated by that kind of thing anymore? How do you find and live out God's purpose for your life, when you've already had a better life than you ever expected?

Amanda

Dear Amanda,

I can't tell you what your calling is, but I can say this. There's a lot of fulfillment and joy to be found when you're doing something that serves the people and things in your life that matter most.

If you've studied psychology a bit, you may remember something called Maslow's Hierarchy of Needs. Basically, it says once your physiological and safety needs have been met, you begin to feel the need to find other things to motivate you. It sounds like you're both hardworking, performance-driven people. I am, too. And people like us get our relaxation, and even fulfillment, away from work in different ways than most people.

If I were in your shoes, I'd start trying to think about ways you can serve other people or causes you care about. Maybe there were dreams you had a long time ago, and you put them aside for your career. What really speaks to you right now, at this stage of your life? For you, if you have kids in the house, it might mean becoming a stay-at-home mom and really pouring yourself into them. It might mean starting an animal shelter, or providing meals for people who are homebound. Everyone has dreams, and everyone's dreams are different.

It sounds like you've been thinking about this for a while, so here's my advice to you. Take a day, or even a weekend, all to yourself. Get away from everything and everyone – any and all outside distractions – and think about your future self. Bring along things to eat and drink, a bunch of notepads, pencils and a Bible. Then, before you do anything else, take a deep breath, relax and pray.

From that point on, be completely honest with God and with yourself. Open up your heart and mind to things you care about and all the possibilities. You have to have a goal that's worthy in mind, and that's the one thing that's missing. But a time of thoughtful prayer – and yes, even daydreaming – may just put you closer to an answer than you've ever been before.

Congratulations on your success, Amanda. You and your husband truly have been blessed. But now, it may be the time to become a blessing to others!

Dave

Dear Dave,

I'm in college full-time right now, and my parents have been generous enough to pay for some of my school expenses. In addition, they let me live at home while I complete my degree. I work some nights and most weekends so I can go to school debt-free, but I'm trying to figure out how to move out on my own and continue working, while remaining a full-time student and attending career-related campus events. The cost of living is high in our area, so I'm having trouble figuring out how to make it all work. Do you have some advice?

Will

Dear Will,

You sound like a very driven and mature young man. Congratulations on everything you've been able to accomplish so far. I'm glad you're working hard in school with an eye toward the future. First off, out of the three considerations you mentioned – school, work, and cost of living—I think you need to decide which is your No. 1 priority. If I were in your shoes, school would come first.

Now, to go to school without borrowing money, you're going to have to keep working. But finishing school on time, while attending some of the extracurricular events that will move you toward your career, might preempt work. You'll have to work enough to pay for things, but if you can finish school and hit your academic and graduation goals while staying at home just a little bit longer, that sounds like a winner to me. It's a pretty nice deal your parents are offering, but I can understand your desire to be out on your own, too.

I want you to be out on your own as soon as you can, as well. But if you do that right now, you're going to have extra bills and be forced to work even more. That's going to throw your entire school process out of whack. Guess what your No. 1 priority was in that scenario? Right, moving out. If it's the tail that's wagging the dog, it has become the No. 1 priority. If it's disrupting work, and thereby disrupting your academics, then in my mind you've put your focus on the wrong thing.

Your No. 1 goal should be finishing school on time, while attending as many connected events as possible. Meanwhile, keep working enough so that you're able to continue doing all this debt-free. If that means you're staying at home a little bit longer to pull it off, I'd do it!

Dave

Dear Dave,

My wife and I have three young daughters. Is there a Baby Step for weddings? We didn't see one in your plan, but I was wondering if it was included in any of the other Baby Steps.

Cedric

Dear Cedric,

This is a really good question. I'm glad you're thinking about the future and planning accordingly.

I don't have a specific Baby Step for weddings. If I did, it would probably come after Baby Step 5, which is setting aside a college, or trade-school, fund for your kids. Maybe you could look at it as Baby Step 5b. Once you have retirement, education savings and extra house payments underway, you could start putting aside a little something for weddings.

Don't get me wrong, weddings are special. You absolutely should mark these kinds of milestones with a celebration. But a wedding is only a one-day event. And to be blunt, a good education is more important than a fancy wedding. This idea may not make me popular with some folks, but it's the truth.

Maybe this is the dad in me coming out, but if I had to choose between paying for more education and paying for big weddings, I'm going to pay for school every time. Besides, there's no correlation whatsoever between the size and/or cost of a wedding, and the happiness and success of the marriage.

Good luck, Cedric!

Dave

How many banks?

Dear Dave,

My husband and I have our emergency fund account in the same bank as our checking and savings accounts. Do you think we should move the emergency fund to a different bank? A friend suggested doing this, but I wasn't clear on why he thought this.

Shari

Dear Shari,

Honestly, I wouldn't worry about it too much if I were you. The only exception to that might be if you had loans you owed to that same bank.

Some commercial loan documents give banks the right to take money out of your accounts – without your permission – to pay the loan. This isn't a common practice, and it usually doesn't happen unless someone gets way behind on a loan. If you had a car loan with a particular bank, for instance, I wouldn't keep a lot of money in that bank.

But in your situation, Shari, I think everything's fine.

Dave

Dear Dave,

My husband and I are following your plan, and we're on Baby Step 2. We just learned that the person who has done our taxes for the last three years made mistakes on all our returns. They were really nice and did our taxes for free, but now we owe back taxes in the amount of $18,000. Since we're still paying off debt, the only savings we have is the $1,000 in our beginner emergency fund. Should we take out a personal loan to take care of this, or set up payments with the IRS?

Laura

Dear Laura,

Take out a personal loan. Period.

Let this sink in for a minute. How often does Dave Ramsey tell people to borrow money? Almost never. Why am I doing it now, in this situation? Because the IRS is the worst creditor on the planet. They have almost unlimited power, which they use and abuse, and they have ridiculously high penalties and interest rates. With a personal loan from a local bank or credit union, you'll at least have more input and flexibility in deciding the terms of the agreement.

Now, I don't know about you, but if the person doing my taxes screwed things up to the tune of $18,000, I'd find someone else in a heartbeat. I understand you want to work with someone nice, and free is usually a great price. But in this case, free was not so free after all.

Just go to your local bank or credit union, explain the situation and see what you can work out. I always recommend small banks or credit unions over any of the mega banks. Places like Bank of America and Fifth Third just have no soul or empathy whatsoever. And the customer service at a credit union or small bank is a hundred times better than what you'll find at a big bank. Sure, they're still bankers, but there's a human element in there. You're not just a number to them like you are to the mega banks.

I hate debt, Laura, and I'm sorry you guys are in this situation. But 100% of the time, I'd rather have personal loan debt than IRS debt. In my mind, it's the lesser of two evils.

Dave

Dear Dave,

A few years ago, I had a real problem with credit card debt. Since then, I've gotten much better at handling my money, and I'm making about $80,000 a year. Two weeks ago, I received a letter about a credit card I had in 2020. The amount owed is $7,688. The letter doesn't say I'm being sued, but it says I have to appear before a judge in two months for a pretrial conference. I live in Florida, and I've never heard of anything like this. I only have $1,000 in savings.

Damari

Dear Damari,

I'm glad to hear you're handling your finances better now than you did in the past. But at this point, you're learning that old debts don't necessarily die, aren't you? Ignoring debts isn't a good plan, because many times they come back to life like a zombie and come looking for you.

I'm not an expert on Florida law, but a pretrial conference in a case like this – over a $7,688 credit card bill – is highly unusual. I've been helping people with money problems for 30 years, and I've never heard of anything like this. It could be some kind of new tactic the collections attorney is using to try to intimidate you.

If I were in your shoes, I'd call the attorney who's suing you and try to negotiate a payment plan or settlement. Do you have anything you can sell? Because I've got a feeling if you can come up with $3,000 or so and offer it as payment in full, they'll take it. I don't mean to be unkind, but these guys figure you're a deadbeat because you've got a 5-year-old debt hanging over your head and haven't tried to pay it. They'll take almost anything they can get at this point.

In general, when you go to court over a situation like this, you're going to lose. You have a legal debt, and you haven't paid it. It's that simple. So, if you don't have anything to sell to make some money that way, you need to get busy working an extra job or two. I'm talking about doing Door Dash or something – in the morning before work or in the evening after work. Kiss those weekends goodbye too. Just go nuts for a few weeks, and make a bunch of extra money fast.

It won't be easy, and you're going to be dog-tired for a while. But you can scrape together $3,000–4,000 before June easily if you'll just put your head down and make it happen. Then, offer it up to the attorney. Demand a written release, with the debt declared settled and paid in full, and chances are, this thing will be off your back!

Dave

Dear Dave,

I have a roommate, and we've shared the same two-bedroom apartment for about three years. During that time, we've always had an agreement that we would split the bills 50-50. But for the last several months, he's been very late paying his half of the bills. There have even been a few times when he didn't pay his part at all, and I had to cover the entire bill. We both work good jobs, so money isn't an issue. He says he's broke, but when I ask him where all his money goes, he just shrugs and acts like he doesn't know. We're good friends, so I don't want to be cruel. How can I approach him about the situation?

Mikhail

No matter whether you're talking about friendships or business dealings, to be unclear is to be unkind. Believe me, I understand you don't want to be mean to a friend. But situations like this should always be addressed directly and quickly, before things get out of hand.

You said you were good friends, and not just roommates, right? My advice is to suggest a night where you both just hang out at the apartment. Offer to pay for dinner to be delivered, and just relax and watch a movie or a game together. Before the night's over, tell him there's something you've been wanting to talk to him about, and begin an understanding – but firm – conversation about the last few months and the situation with the bills. Let him know he's a good friend, and you enjoy his company, but the roommate agreement isn't working out because he's not living up to his agreement to pay half the bills. Give him every chance to give a reasonable explanation for things, but make sure he understands that you two aren't going to be able to be roommates much longer unless he starts paying on time.

Being understanding is key in a situation like this, Mikhail. You don't want to approach him with a bunch of accusations, but at the same time, you need to know what's going on. Maybe he needs help learning to budget money properly. You said both of you have good jobs, so that means his money has to be going somewhere. The problem is it sounds like it's not going to the right places.

When a friend is having a rough time, you should always do what you reasonably can do to help. But in this case, he's got obligations he needs – and agreed – to live up to. Do what you can, but in the end, he should understand it's time for him to get his act together.

Dave

Dear Dave,

My husband and I are in a bad situation, and we're thinking about taking my parents up on their offer to move in with them. We both work two jobs. I'm a medical transcriptionist with a small business on the side, and he's a warehouse clerk who is also trying to get a business off the ground. Combined, we bring home about $70,000 a year, plus we have $80,000 in debt between credit cards and a car loan. On top of all this, our rent went up 18% at the first of the year, and we can't afford the increase. Should we move in with my folks?

Melissa

Dear Melissa,

I'm not opposed to families jumping into a situation together to solve a problem. That includes grown children moving back home for a short period of time. Sometimes, when the right people are involved (and proper boundary expectations are established and agreed upon), it can work out well for everyone. I just want you to be very careful that you're not using a move like this to mask the real problem.

I'm going to shoot straight with you. The real problem isn't an 18% jump in rent. The real problem is what that rent increase revealed about you both – the fact that you have weak careers. You guys are like two hamsters in a wheel right now. Neither one of you is afraid of work. That much is obvious. And you're working four jobs between the two of you, so there's no lack of effort. But you're not gaining any traction. You're not making a lot of money, and the debt hanging over your heads isn't helping either.

Your parents are obviously goodhearted people, Melissa. If you do this, I want you, your husband and your folks to go into it with this mindset – your stay with them is a brief stopover on your way to prosperity. Don't go into this – any of you – with an attitude of the world is mean, rent went up, and we can't make it out there. This is a safety net, not a hammock. Use this time to begin addressing your financial issues, and take a long, hard look at your career and income situation. If you use this opportunity wisely, you can emerge in a better place with your money and with getting ahead in your careers.

God bless you all!

Dave

My mother died about a year and a half ago, and she left me and my younger sister $75,000 each. My sister is 16, and she plans on enlisting in the military after high school, then using the G.I. Bill to pay for college afterward. She won't receive the inheritance money until she's 18. What advice can I give her to ensure she makes good decisions with the money?

Davis

Dear Davis,

I'm truly sorry to hear about your mom. At the same time, I'm so proud of you for stepping up to help your little sister. You know, $75,000 sounds like a lot of money – especially to a teenager. But that kind of cash can disappear in a heartbeat if she's not careful. And then, all she'd have left where her inheritance is concerned is a lifetime of regret.

If she'll be smart with this money, and by that, I mean investing wisely and having a little bit of fun, she could end up a rich, little old lady one day. Not only that, but she can honor the memory of your mother and change her family tree forever. Her family will think differently, and be able to live differently, all because she had the maturity to not blow the money.

You said she'll get $75,000, right? Think about this. She could just have fun with $15,000 or so, and invest the rest in good, growth stock mutual funds. If the stock market continues to average what it has since its start, she'll be a multi-millionaire – and then some – by retirement. Even if I'm half-wrong on the math, the advice still stands. She'd have millions waiting for her. The point is that investing a big lump sum of money, and leaving it there for her golden years, is a great idea.

Now, I'm going to give you some homework, Davis. I want you to talk to a bunch of rich, old folks. Learn what they did to build wealth and hang onto it. Also, make sure the friends and family you both have around you are quality people – the kind who have your best interests at heart. Remember, the Bible says, "In the multitude of counsel there is safety."

Your sister is very lucky to have a big brother like you. Walk her through this advice. Be there for her. Look out for her. She needs you right now, and she'll need you in the years to come.

God bless you both!

Dave

Dear Dave,

My wife and I owe about $40,000 on our mortgage. My father-in-law, who is a very nice and generous man, said he wants to pay off the house for us, then let us pay him back over time. We've borrowed much smaller amounts of money from him in the past, and we were always able to repay it with no issues and no pressure. How do you feel about us taking him up on his offer?

Seth

Dear Seth,

I understand you and your wife have been fortunate in these kinds of situations over the years. And I know your father-in-law would probably be a lot easier to work with than a mortgage company when it comes to the size and frequency of payments. But I still think you're playing with fire if you take him up on the offer.

I assume your father-in-law is doing pretty well financially, since he can afford to make this offer. But the downside is just too risky. If I were him, I might offer to pay off the mortgage as a gift to my daughter and son-in-law. But a loan? No way. There are no strings attached to a gift that comes from the heart.

Don't get me wrong, Seth. I'm not bad-mouthing your father-in-law. What he's making is a very generous offer, and it's an incredibly nice thing to do. But in my mind, a very important consideration is being left out of the equation, and it's a spiritual issue. The borrower is always slave to the lender. Always. And sadly enough, nowhere is that more true than within a family.

Accepting this offer could bring instant discomfort into the relationship for you and your wife. This money situation is likely to hang over things like a dark cloud. Thanksgiving, Christmas and other special occasions will feel different – and kind of weird – when you're suddenly celebrating with your mortgage lender instead of just good, old dad.

Even if you come from a reasonable, stable family, and it sounds to me like your in-laws are very goodhearted folks, this debt will always be in the back of your mind. But if you're involved with a dysfunctional or controlling family, that tension is going to be right there – constantly.

I'd thank your father-in-law for his generosity and for the offer. But in my mind, it's just not worth the risk.

Dave

Dear Dave,

I'm worried about my younger brother, and I need some advice. He's divorced and has a son, and lately, it seems like he only wants to be a dad when it's convenient. On top of this, he's very irresponsible with money for someone in his 30s. Our mom and dad passed away several years ago, so I feel like this leaves me to be the big brother and parent at the same time. I'm not sure how to help him. Can you give me some advice, please?

Andy

Dear Andy,

You're a good and caring big brother to be concerned and want to help. And it's a tough situation for you, especially with your parents no longer in the picture.

When I help people on my show, I have the benefit of them calling in and actually wanting help. These folks care about what I think, and in most cases, they realize things aren't working for them. I don't just walk up to people and say, "You know, what you're doing is really stupid. Let me fix you." I think that's kind of the situation you're in right now. So, before anything else, I'd begin to pray for him. Ask God to bring people into his life who will have a positive impact on him.

One of the worst things about these situations is watching people you love do bad things to themselves and the people around them. Honestly, I don't know there's really a lot you can do without becoming the enemy to some degree. You can always try to hold him to a higher standard, and refuse to tolerate immature, irresponsible behavior when you're around him. You might even look for opportunities to use yourself as an example. I'm not talking about puffing out your chest and pretending to be perfect. I'm just saying maybe point out areas in your life where you made mistakes in the past and how you fixed the problems. But going out and trying to actively intervene in his life without permission, or shaming him in hopes it'll make him grow up and be a man, would probably do more harm than good.

Approach him in a gentle, caring way. Again, not like some know-it-all, but just let him know you care and you're there to help if he's having difficulties. Take him out to lunch once in a while, or invite him over, and let him know you're there for him if he needs to talk.

And remember what I said earlier about prayer? Bringing God into the equation is never a bad idea.

Dave

Dear Dave,

Our son will be graduating from high school in May, and then heading off to college in August. He will also be working during the summer to save up money for school. When classes begin, do you think he should continue working a part-time job, or would it be better for him to focus solely on his studies?

Dear Brenda

Dear Brenda,

There's really nothing wrong with either approach, especially during a kid's first semester in college. As a parent, though, I'd urge you not to fall into the trap of thinking his grades will go down if he holds a job while in school. Research actually shows that, on average, kids who work while in college carry higher grade point averages than those who don't.

The reasons for this differ, depending on who you ask, but I think a lot of it has to do with them having to learn to manage their time – and their lives – more effectively. Lots of kids could pay their way through school, and not have to worry about student loans, if they just used some of the time they spend watching television and on social activities at a job.

We never required our kids to work during the school year, but they were self-starters. And when they came home for the summer, there was no such thing as just lying around the house all day. They had jobs, and they made money. Of course, some of it went toward having a little fun during their time off. But we made sure they set some aside for the next school year, too.

Long story short, the philosophy of not wanting kids at college to work so they can spend all their time studying is well-meaning, but misguided. For the most part, kids who work while they're in school will make better grades and develop into more mature and well-rounded individuals.

I hope this helps, Brenda!

Dave

Dear Dave,

I'm trying to work my way out of debt, but it seems like something always happens to stall things or knock me backwards. I make $55,000 a year, I'm single, and I have $15,000 in debt, along with a mortgage payment of $1,224 a month. I've been trying to live on a budget, but I'm still not sure where all my money goes. Can you help?

Lindley

Dear Lindley,

I know living on a budget can be hard at first. And honestly, it usually takes folks who are new to doing it about three or four months of practice before they start getting it right and seeing the results.

For starters, your house payment is a little heavy for someone making $55,000 a year. I generally recommend keeping your mortgage or rent payment at about 25% of your take-home pay. Sometimes you can slide by paying a little more, but in those cases, you'd really have to be on top of your finances. So, the biggest thing you can do right now is take control of your money, instead of letting it – or a lack of it – control you. And the best way to make all this happen is by consistently living on a realistic, written monthly budget.

Once you start doing this, you've taken your first big step toward having a real game plan for your money. At that point, the idea of trying to live on a budget ends, and the fact that you are living on a budget, and telling your money what to do – instead of a lack of it dictating what you can do – becomes more of a reality.

Remember the Star Wars movie "The Empire Strikes Back"? At one point during Luke's training, Yoda tells him, "Do, or do not. There is no try." In a larger sense, Yoda is urging Luke to focus and work harder, instead of continuing with half-hearted attempts and giving up easily. If you want to accomplish a difficult task, Lindley, you have to throw yourself into it completely. You must fully commit and stop making excuses. You have to focus, and fight to make it happen.

It's no fun waking up broke at the end of every pay period. We both know this. So, put your head down and get your mind in gear. Make. This. Happen.

You can do it!

Dave

Dear Dave,

My wife and I have been married for nine months, and we've been following your Baby Steps plan for three months. We have about $50,000 in debt, and I recently cashed out an old whole life policy that enabled us to pay off $22,000 of our debt. My wife still feels weird about us doing that, since the money paid off all the student loan debt she accumulated before we got married but none of the debt I brought to the marriage. I look at everything as ours, not mine and hers. What can I do about her sense of guilt and feeling indebted to me?

Anonymous

Dear Anonymous,

This isn't an uncommon thing in situations like yours. But more than feeling indebted to someone or experiencing a sense of guilt or shame, it's really a discussion about differing views of marriage.

You're never in debt to your spouse. You should be all in where your husband or wife is concerned. Remember the vows? For richer, for poorer. In sickness and in health. If she makes you chicken soup when you're sick, does she charge you for it? Of course not. When you get married, you agree to take on each other's burdens. Once you walk down the aisle with someone, you're choosing to serve each other. You're also choosing to take on each other's debt, each other's income, each other's assets and each other's crazy parents. Everything!

It all boils down to having a shared view of a proper marriage relationship. And the proper (and biblical) view is we own everything. There's no mine and yours anymore. Now, you can't make her feel – or not feel – a certain way. But you can ask her questions to understand where she's coming from and what blockers are keeping her from being totally together in this. Talk about it. Put your heads together and practice thinking about your marriage as a union.

It will take some encouragement from you and some getting used to on her part, but if you work together, it's a muscle you can grow and develop together!

Dave

Dear Dave,

I'm getting married this summer and about to become a step-mom. To be honest, I'm a little worried about the family dynamic. My fiancé's daughter from an earlier marriage seems a bit irresponsible. She's 23, has trouble holding a job and still lives at home. She seems to expect her dad to step in when she doesn't have money for her car payment. We both agree he has been too lenient with her in the past. He wants to change things, but neither of us believes suddenly pulling the rug out from under her is a good idea. Do you have any advice for handling this situation?

Susie

If you and her dad really want to show her you love her, you'll make sure she starts learning some character and discipline. It'll take a little time at this point, and it's very important that both of you are in agreement every step of the way.

Marriage counselors say you have a good chance of a successful marriage if you're in agreement on four things – religion, money, children and in-laws. I know you and your fiancé love each other, but I'd strongly suggest you two go through pre-marital counseling to make sure you're on the same page when it comes to handling this and other issues.

After that, I'd recommend letting her dad present any changes to her initially. Neither of you wants to create a scenario where you're viewed as a villain. Let her dad start the process by explaining that he feels he made a few mistakes in terms of teaching her personal responsibility when she was younger. Then, he can begin to lay out the first few expectations.

In my opinion, there's nothing wrong with requiring her to get a job within 30 days, if she doesn't already have one. If she needs to go job hunting, the process should be an everyday thing, because if she's unemployed, finding work needs to be her job – her full-time job. It would also be a good time to start teaching her about budgeting, saving and everything else that goes into handling money responsibly.

Phase two might consist of requiring her to help around the house doing chores, or whenever help is needed. After a couple of months of this, phase three might be where she is introduced to the practice of paying a very small amount in rent each month.

Do you see what I'm doing, Susie? By stepping up expectations gradually, you're building a foundation so she'll have the tools and knowledge – to where in the sixth or seventh month – she's able to move out and live like a fully functioning adult should.

God bless you all!

Dave

Dear Dave,

I'm a single mom, and I opened my own small business last year. The business isn't growing at all, and my mom and dad are helping me with the bills. On top of all this, I don't receive any child support payments from my ex-husband. But my biggest concern is our home. I bought it four years ago, and when I opened my business, I did it with a home equity loan. Do you have any advice?

Tammy

Dear Tammy,

You need to close up your business, at least temporarily, and go find some money-making work. I'm sorry to be so blunt, but you've got a really big mess on your hands.

Long story short, the money you make at another full-time job is likely to decide whether you can stay in your home. If you've got a mortgage, home equity loan and business debts hanging over your head, the chances of this are slim. You probably need to consider the idea moving into a small, affordable apartment for a while, too. If you do this, get your debts paid off and your finances back in order – which includes living on a budget and saving – you might be able to buy a house again in a few years.

I know the idea of giving up your home and business is hurtful, but sometimes when you have a serious illness, extensive surgery is needed to fix the problem. And right now, you've got a very serious financial illness.

I want you to understand how I'm looking at this, Tammy. The house alone is not the problem. You borrowed money to open a business, and that was your first mistake. You also have no savings, which is another mistake, and now your business isn't making a profit. See how all of it combined adds up into one big mess?

I love your spirit, and the fact that you want to be an entrepreneur. But you've got to get control of your money first. If you don't, this thing will eat you alive.

Dave

More harm than good

Dear Dave,

Our son has been married for about three years, and he and his wife are having financial problems. He wants to live on a budget and save money, while she hates the idea of budgeting and always wants to buy expensive things. They make enough to get by, but they're not rich. How should we handle it when he asks us for advice?

Stan

Dear Stan,

If he can't get her to realize these habits are hurting them and their financial future, and if it's an issue they're going to continually butt heads over, it would be smart for them to sit down with a good marriage counselor or pastor. Something like this needs to come from a neutral and objective third party.

Do you get what I'm saying here? The last thing he needs to do is go back to his wife spouting stuff like, "Well, my parents said …" Remember when you were first married, Stan? You didn't want your in-laws always hovering around putting in their two-cents worth, either, right?

I know you folks are concerned. It's only natural, because you love them and care about them. But if your daughter-in-law feels like her in-laws and her husband are ganging up on her, it could do way more harm than good!

Dave

Dear Dave,

Our 21-year-old son is in college, and we've always warned him to stay away from credit cards. Despite our warnings, we recently learned he got a store-branded credit card. The good news is he has stayed under the credit limit. The bad news is he has never made any payments on the purchases he made, and now he owes about $3,800. He's a good student, and my husband and I want to look at this as a young person's one-time mistake. Do you think we should pay off the card for him just this once?

Melinda

Dear Melinda,

Believe me, I understand you wanting to help him out. It means you've got a good heart, and you love your son. No parent likes seeing their child in a bad situation.

There's a reality here, though, I hope you won't overlook. It's his debt, not yours. He knew what he was doing when he signed up for that credit card. He knew what it meant, what was expected, and he's the one who should make good on the repayment. There's nothing unfair about that.

Now, you're right. This is a typical young person's mistake. And like a lot of mistakes our kids make, it's one that's bad and wonderful at the same time. It's bad because if he had just listened to you and his dad, he would've avoided the whole mess. It's wonderful, though, because it gives you two the opportunity to provide him with a real world, teachable moment.

At this point, my advice is for both of you to give him a great big hug, and lovingly explain where he went wrong and why it was a bad idea. If you want, you can even go a step further, and help him find a part-time job if he doesn't have one right now, so he can pay off his debt and get out of this mess. It'll take some planning and discipline on his part, but leave the payments to him. Hopefully, by the time he finishes working his tail off – and scrimping and saving to pay this debt – he will have learned a lesson he'll remember for the rest of his life.

Dave

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Dear Dave,

I switched to a debit card so that the money I spend comes directly from my checking account. But I still have a problem some months with overspending and buying things I shouldn't. Do you think I should stop using my debit card?

Debbie

Dear Debbie,

When I made the decision to get intentional with my money, I just used cash. It's hard to spend it when you don't have any on you. It's a tough thing, I know, but you have to make a conscious decision to start living differently. You've got to get mad at the things that steal your money a dollar or two at a time enough to take action.

Try looking at your life as a whole, not a moment in time. All the moments you're living right now will have either a positive or negative effect on your future. I decided I wanted the greater, long-term good, so I gave up on the short-term stuff.

Debit cards are great tools. You can't spend money you don't have with them like you can with a credit card. But you've still got to budget very carefully for each month, and give a name and a job to every single penny of your income. Otherwise, you can still overspend.

Dave

Say no to extended warranties

Dear Dave,

Are home warranties a waste of money if you already have a fully funded emergency fund containing six months, or even more, of expenses set aside?

Jodie

Dear Jodie,

I don't do extended warranties, because they're not a good deal. In my mind, you're better off to self-insure against damage or things breaking down. That way, you can put what would have been profit and marketing dollars for the extended warranty company in your own pocket. I mean, think about it. If you buy something, but can't afford to fix it if something goes wrong, it's not really a smart move to buy it in the first place, is it?

I always recommend an emergency fund of three to six months of expenses to cover the unexpected things that life will throw at you. In most cases, this amount of cash – sitting in a good money market account with check writing privileges – will allow you easy access in the event of unexpected expenses or a financial emergency.

Dave

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Dear Dave,

My wife and I have always accepted the fact that we'd have a mountain of debt to pay off after the holidays. Having to deal with it all seemed more frustrating this year than ever before. Can you tell us how to make it through the next Thanksgiving and Christmas without having to pay off so much debt?

Brady

Dear Brady,

Giving is a wonderful thing if your intentions, and your finances, are in the right place. But generosity isn't meant to be stressful to you or your bank account. It's all too easy to try to justify overspending during the holiday season, because so many things you do are for family and friends. Still, you shouldn't let yourself become trapped by the shopping craze or overspending just because everyone else is doing it.

Give with the right intentions, and give with a financial plan in place ahead of time that doesn't include debt. Thanksgiving is always on the fourth Thursday of November, right? And Christmas always falls on Dec. 25. The holidays don't come as a surprise to anyone, so don't wait until November, then act shocked that it's all just around the corner. Jump on things right now, and start setting aside a little in your budget each month throughout the year for the holiday season.

Sit down with your wife, and decide together how much you can put aside each month for Thanksgiving and Christmas. Once you agree on an amount, make a list, check it twice and stick to it. It's easy to find something in the mall you just have to buy for someone. And that's where problems start. So, include amounts you're going to spend on each person, each charity, or each event. It's all just common sense. But it's up to you and your wife – together – to decide to live on a budget and give every single dollar a job.

You can do this, Brady. Make it happen!

Dave

Dear Dave,

We've all our debts paid off, except for our home, and our fully funded emergency fund of six months of expenses is in place. In talking to people, it seems there are lots of different opinions as to what constitutes an emergency. What guidelines do you suggest when deciding whether to use our emergency fund?

Ingrid

Dear Ingrid,

There are three things to ask yourself when you're tempted to dip into your emergency fund. One, is it unexpected? Things like Christmas, birthdays and even certain bills come around at the same time every year. If you're not already budgeting for these things, it's time to start. Otherwise, you might use your emergency fund for something that's just the result of poor planning.

Number two, is it absolutely necessary? Most of us think we know the difference between needs and wants, but sometimes the line gets a little blurry. If your car goes completely kaput, and you need transportation, use your emergency fund to buy something affordable and reliable you can pay cash for. But don't dip into your emergency fund just to upgrade your good car for one with a million bells and whistles. That's a want, not a need.

And three, is it urgent? Sometimes, you have act like a grown-up. Every idea that pops into your mind isn't unexpected, necessary or urgent. You can live that way if you want, but the result will be a quickly depleted emergency fund. Then, what're you going to do when a real emergency comes along?

Practice the art of patience. Avoid impulse buys. Urgent things include stuff like a broken air conditioner in the middle of summer, a busted transmission or sudden, unexpected medical expenses. A big sale at Wal-Mart? No. Concert tickets? Definitely not. That great new pair of shoes you just saw in a store window? Give me a break!

Your emergency fund is about long-term security, not instant gratification. Don't use it on a whim. But don't be afraid to use it when you really need to!

Dave

Dear Dave,

My wife and I have started teaching our 5-year-old son about money. Do you feel we should step in and fix things when he makes mistakes, or let him experience the consequences of his actions? It's so hard on my wife, especially, to see him disappointed when he makes a mistake and his plans don't work out.

Lane

Dear Lane,

I know this might sound mean to some folks, but sometimes a good financial disappointment when you're young is the best thing that can happen to you. They're hard to watch happen, or to experience, but often they'll teach life-long lessons. No decent parent wants to see their child sad or hurt, but reality is a pretty good teacher when it comes to learning how the world really works.

One of the jobs of a parent is to look for teachable moments with their kids. Of course, when it comes to teaching there's always a chance the student won't learn the lesson well enough the first time around. I'm not sure how you're doing things, but if I were in your shoes, I'd follow these steps. First, give him a chance to earn some money. In my book, that means work. No allowances! There's a lot of self-esteem and value to be found in accomplishing a given task successfully. Then, once you pay him for the work he does, you have another perfect chance for teachable moments, because you can help him learn about saving, spending and giving, and how to do all three wisely.

It's always hard on parents when they see their kids unhappy. I know we went through it with ours. As a parent and protector, you want to jump in and make everything OK. But the hard truth is that fixing or doing everything for them is the easy way out. And in the process of doing that, a child will begin to develop a sort of learned helplessness.

Sometimes, Lane, you need to love kids enough to not do things for them. Let them make some mistakes, experience the consequences and fix things themselves. And it's better for them to do all this while they're still under your guidance and protection.

Dave

Dear Dave,

My husband and I bought a franchise recently, and we are opening our business in a couple of months. We've got $40,000 saved up, but my husband wants us to take a two-week vacation before we open for business. He feels that the business will completely consume us for the next two or three years, and he wants to go into things relaxed and refreshed. How do you feel about this idea?

Jill

Dear Jill,

I understand where your husband's coming from. A business is very time-consuming, and to make it a success you'll both have to eat, sleep and breathe it for a very long time.

But here's the reality of your situation. Right now, you're basically unemployed. On top of that, you have just $40,000 with which to start a business. It's time to rev up your engines and get to work, not spend a bunch of money vacationing. Trust me, there'll be plenty of time to celebrate after you've won, maybe in even bigger and better ways, if you'll just delay gratification and put in the dedication and hard work now.

When it comes to opening a new business, a good rule of thumb is this: Everything's going to take twice as long to accomplish as you thought it would, and everything's going to be twice as expensive as you thought it'd be. I'm sure you're both smart people, but my guess is you're not exceptions to this rule when it comes to opening and running a small business.

Think about it, every single dollar connected with your business could mean the difference between survival and going under. Like I said, I kind of get your husband's thought process, but it would be a very unwise idea right now. You've got to look at the big picture. You're going to be heartbroken, and maybe in a real financial bind, if you have to close up shop in a few months because you ran out of money.

On the other hand, if you work hard now, stay smart and make this thing a success, you can take a vacation – and really celebrate – when the time is right!

Dave

Dear Dave,

My best friend is having financial problems, and I'm worried about him. He's "between jobs" now and making less than $600 a month through a part-time job. He says he's holding out for his dream job, which is about 10 hours away, but even when he's working full time, he always asks to borrow money or says he's running low. He interviewed for his dream job several months ago, and I haven't got the heart to tell him he was probably passed over for the position. Is there anything I can do to help him?

Garrett

I assume that since you're good friends, he's willing to listen to what you have to say. There's absolutely nothing wrong with having a dream job. You just have to be practical and realistic at the same time.

This next part is more observation than insult, so I hope you'll understand. Your friend sounds to me like he might be a little impulsive and unrealistic. When it comes right down to it, maybe a touch immature, too. So, I think what we're talking about here is how to give your friend a gentle, well-intentioned nudge in a more realistic direction. He needs to open his eyes to some positive financial realities of life – like living on a written, monthly budget, and not making a habit of chasing rainbows and making excuses.

If he came to me for advice, the first thing I'd tell him is that the most employable people are ones who aren't broke. When you go into a job interview and you're broke, it's easy to come off as desperate and tense. That doesn't make for a very good interview.

The answer to that, when you're essentially unemployed, is to work any legitimate full-time job. At the very least, two, three or even four part-time jobs. Deliver pizzas, wait tables and mow yards. It's doesn't matter what you're doing, as long as you're generating a livable income for yourself. Smile and be professional at whatever you're doing, too. You never know when you might come face-to-face with your next real employer. But none of this will happen if you're working three or four hours a day, and spending most of your time at home in front of the television.

I hope this helps. I hope your friend will listen to you and understand you have his best interests at heart. But if he doesn't, all you can do is hope for the best and pray for him.

Best of luck, Garrett. You're a good friend.

Dave

Dear Dave,

My mom and dad always told me to live within my means. As an adult, I've made some mistakes with money, including falling right back into debt after paying off everything. I'm tired of this roller coaster, and I want to get control of my finances for good. Can you give me some advice on where to start?

Melissa

Dear Melissa,

It's frustrating, isn't it? But making mistakes with money means just one thing. It means you're human. We've all done it. Think about this, though. We're approaching a traditional time of the year for changes. On top of that, you're smart enough to have realized what you've done in the past hasn't worked.

Believe it or not, I was once in the exact same spot you are now. When it happened to me, there were three pieces to the puzzle that helped me break the cycle. One was fear. Specifically, I was scared to death that I wouldn't be able to take care of my family, and that I'd retire broke. Now, don't misunderstand me. No one should live their lives in fear. But a healthy, reasonable level of fear can provide needed motivation.

Another was disgust. I realized what I was doing was stupid. I was tired of living that way, and I made a conscious, purposeful decision that things were going to be different.

The third piece, and maybe the most important because it's connected to our spiritual walk, was contentment. We live in a society that's constantly having the idea that we'll be happier, or more successful, or more admired, if we'll only buy this or that product. We're constantly marketed to, and when we have this stuff in our faces day after day, we can become unsatisfied with just about every aspect of our lives. Don't let it drag you down. It's all just an illusion.

One of the things I did to combat this, was to start living on a strict, written, monthly budget. Also, I stopped going places where I was tempted to spend money. You shouldn't give a drunk a drink, right? So, don't put yourself in a bad situation when it comes to your behavior with money. If you go wandering through the mall without a specific plan, you'll lose every single time.

When you go to the store make a list of only the things you need. On top of that, take only enough cash with you to buy what you need. If you can walk in and back out without buying a bunch of stuff that wasn't on your list, it's a win. Every time you do this, it's another win and another step away from your old habits and in the right direction.

You can do this, Melissa. God bless you.

Dave

My parents were in the real estate business and were building homes. Then, the economy went sideways and left them in a mess. Outside forces brought trouble to our house. We never went without food, shelter, or anything else, but the air changed in our home. I always thought money would solve the problem, so I vowed that one day I would become a millionaire. I doubt I even knew what that meant, but in my head, I thought it meant money would never be a problem.

Believe it or not, I'm a spender by nature. I've always enjoyed spending money. Of course, when I was young and immature, that idea of spending for fun led me into the trap of thinking if I got enough Stuff, I would be happy. I would've never admitted it out loud, but there was also the stupid idea deep down that if I got enough Stuff, I would be happy and safe, or if I got the right Stuff, people would be impressed.

With that driving force, I went about the business of earning piles of money so I could spend piles of money. But a funny thing happened. The Stuff became … unsatisfying. There was never completion or peace after a purchase, only the need to buy more.

Stuff just doesn't do it.

By the time I was 26, I was a millionaire making $250,000 a year. Not long after that, due to some really dumb business decisions, I went broke and lost everything. That was 30 years ago.

I also met God during this time, who did bring me peace and completion. I finally realized I was pouring Stuff down a spiritual hole, and Stuff is not designed to fill that hole. No matter how many cars I bought, or fancy dinners I ate, or cool places I traveled to, there was always something still missing.

During the following decades, we slowly began rebuilding wealth, this time while always giving. In the process, we discovered there's much more joy in giving than in Stuff. If you haven't experienced the joy of giving, there's no better time to start than during the holiday season. Who knows? It might just be the encouragement you need to become a giver all year long.

Merry Christmas, everyone!

Dear Dave,

I think my mother-in-law has a serious credit card problem. She can't afford stuff, but she shops anyway, chalks up more and more debt, acquires more credit cards, and thinks she'll pay for it all later somehow. Her ex-husband has bailed her out a few times, but he's unwilling to help anymore. My wife and I, and my wife's sister, want to address this issue, but we're all worried about her reaction, and we don't know where to start. Do you have any advice?

Randall

Dear Randall,

First, everyone involved should understand they're likely to receive an angry response from this lady if she's confronted over her actions. Sometimes people get ticked off when they hear the truth, especially when it's connected to their own misbehavior. It may even be a good idea for your wife and her sister to get some advice from a family counselor beforehand. Really, what we're talking about here is an intervention.

Also, you need to stay out of the discussion. This is something for her daughters to handle. Support your wife and her sister through it all, but if you're in there asking questions and probing around, you're liable to come off as the evil son-in-law. And you folks don't need to add any more problems to the mix.

They need to sit down with her in a quiet setting, one where there are no interruptions, no television and no one else. Start with the fact that they love her and care about her deeply. That's very important in a situation like this. But they also have to walk through what's really going on, and let her know they're tired of watching her destroy herself, and her finances, with her irresponsible behavior.

If she had a drinking problem, you'd want to try to make her see how alcohol was hurting her and the relationships she has with her family. In this case, she basically has a credit card addiction. And it's wreaking havoc on her financial well-being and people who care about her.

So, show as much love and understanding as possible. But someone needs to say something soon.

Dave

Dear Dave,

We're following your Baby Steps plan, and we've paid off all our credit cards. But when I talked to my husband the other day about cutting up the cards and closing the accounts, he said he would rather keep the accounts open and the cards locked away in a drawer for use as an emergency fund. He says this will help us have an emergency fund in place quicker than saving for one. I think there's more behind his reasoning, though. He grew up in a very poor family, and I wonder if he's not afraid of somehow ending up in that kind of situation again. What can I do to convince him to follow your advice?

Ramona

I think you're a very perceptive lady. You said your husband grew up in poverty, right? So, what I'm hearing is the cards represent almost a security blanket for him – a financial security blanket. I get that, but here's the thing. If you had a fully funded emergency fund of three to six months of expenses sitting in the bank, I'm talking about hard cold cash, you'd have the security of knowing that the expense of a new air conditioning unit or transmission for the car would only be a minor inconvenience. And, you'd be able to cover it easily without going back into debt.

Instead of actively trying to convince him of something, a better route might be to sit down together and talk through the whole thing. Explain to him you think you know why he feels the way he does, and that it's understandable. Then, ask him if there's a reasonable amount you two could have in the bank that would help him stop worrying. Discuss it, agree on an amount and then agree to cut the cards up and close the accounts when you reach that figure. Remind him, too, you'd still have your debit cards in hand in the event of an emergency.

Above all, Ramona, make sure you work together. Be patient and understanding. If he has recognized the wisdom of getting rid of debt and taking control of your finances, he's moving in the right direction!

Dave

Dear Dave,

My wife and I are debt-free except for our mortgage and two Parent PLUS loans for our daughters' college educations. One of the loans totals $18,078, and the other is for $41,500. Both girls want to pay them off using the new extended plan being offered, but I'm 59 and a half, and I've got about $500,000 in a 401(k) from a previous job along with $125,000 from a job I started five years ago. We've been thinking about just paying the loans off for the girls, but we wanted to know your thoughts.

Mike

Dear Mike,

If I were in your shoes, I'd just go ahead and pay them off. Technically, you're liable for the loans. They are not.

The extended plan you're talking about is garbage. In reality, it means the loans are never paid back. The extended plan is 30 years of not even making the principal payment. No interest is paid, and they don't touch the principal. The whole thing works backward for 30 years, and it's the very definition of a stupid government program.

I really don't think you want your daughters to be part of something like this. But that means you're going to be stuck with paying off these loans. You might as well just own it and pay them off now.

I want you to understand this, Mike. I don't advise people to dip into their savings every time a problem comes up prior to retirement. But you're 59, and at that point there's no penalty. Plus, you've got $625,000 sitting there. You're going to pull less than $60,000 out, plus a little in taxes, to make the problem go away. It's not as bad as it could be, but I'm afraid you're going to have to pay a little stupid tax on this one. I'm sure your girls didn't know all this, but it's a perfect example of what can happen when you put your faith in a stupid plan coming out of Washington, D.C.

I hate it for you guys – and everyone else in America who took out a bunch of student loans – because you're getting messed over by your own government. The first way they messed you over was to put a student loan program out there and then tell you the way to success was to borrow tens and hundreds of thousands of dollars for a degree in left-handed puppetry. And now, guess what? You're a barista! Then, they start shouting they're going to forgive it all. After that it's, "No, we're not. Yes, we are. No, we're not. Yes, we are."

The fact is, they don't intend to forgive it. It's the biggest scam in history – mathematically speaking – perpetrated on the American public by our government.

Dave

Dear Dave,

Our daughter's college education is pretty much paid for already through grants and scholarships, and my wife and I make good money. We just started your plan, so when we get to Baby Step 5, saving for college, can we substitute that with saving for a wedding?

Benton

Dear Benton,

I'm glad you're thinking ahead, buddy. And I don't have a problem with your idea. It's always a good plan to save for a wedding, if you have the financial resources to do so.

Did you know the average wedding in America this year, according to Zola.com, ran around $29,000? Of course, you don't have to pay anything close to that amount to make a wedding a beautiful and memorable occasion. Your household income, debt, savings and other factors will all play a part in how much you can legitimately afford.

Sit down with your wife, crunch some numbers and see what makes sense in your situation. Just remember to pay cash for the wedding. If you have to go into debt to make it happen, you're spending way too much!

Dave

No, 50 is not old

Dear Dave,

My husband and I 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, and we both just turned 50. We would like to buy a house soon, but we know we need an emergency fund. It would take us over a year to build up an emergency fund, so since we're getting older, should we make adjustments to the Baby Steps?

Debbie

Dear Debbie,

You've been making great progress, and you obviously have a good income to be able to pay off debt that quickly. But 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.

Yes, you need a fully funded emergency fund of three to six months of expenses set aside before you start saving a down payment for a home. Maybe in your case, you could lean a little more toward the three-month side with your emergency fund. Then, after you're all moved in, you could revisit the emergency fund and beef it up to six months.

Fifty isn't old, Debbie. Just stay on course and stick with the plan. You two have plenty of time to get your finances in order and find a great home!

Dave

Dear Dave,

My husband and I want to do a live-in and flip real estate purchase. The idea is to buy a fixer-upper and rent out the basement to help with the mortgage payments. How do you feel about ideas like this?

Erin

Dear Erin,

In a situation like this you need to do a basic business analysis. You've got to have a plan in place, and you've got to figure out the worst-case scenario. Part of this is determining whether you can survive if things fall apart. In this case, the worst case is that you can't get a renter, and the house doesn't sell. It puts your family in jeopardy, so to me it's not an option.

Want my honest opinion? I think you've both got a case of house fever right now. The possibility I just mentioned isn't a rare occurrence. Lots of people have had the same idea, with the best of intentions, and still wound up in a big mess. I love real estate. I mean I really love real estate. And I've flipped more than a few houses in my day. But the particulars of this deal make me a little nervous. If you and your husband are willing to accept the possibility of things not working out like you planned – and the fact you might have to take additional jobs for an unknown length of time just to make ends meet – then it might be a play. But for me? Nope. I don't like putting myself into these kinds of situations.

When I was much younger, I was willing to do all kinds of dangerous stuff and ignore the risk. But going broke decades ago knocked that kind of thinking out of me in a hurry. Any deal that runs the risk of leaving you bankrupt, or the victim of a foreclosure, just isn't worth it, Erin.

Dave

Dear Dave,

My fiancée and I plan to get married in May, and we are preparing to buy a house. We both work in sales, and combined we bring home about $7,400 a month before commissions. Our average commissions usually boost that to $12,000 a month. I'm worried that the house we're looking at doesn't fit our budget, though. The home costs $350,000, and we're looking at monthly payments of $2,840 with taxes and insurance figured in. Do you think this scenario will work for us?

J.T.

Dear J.T.,

Are you doing this on a 15-year fixed-rate mortgage? If you're not, you need to change that right away. That's the only kind of mortgage loan I recommend. With the numbers you've given me, you two can afford that on the shorter terms I mentioned.

Now, let's move on to the next thing. You're speaking about buying a home as if you're already married, and you're not. I will not advise you to buy a house with someone to whom you're not married. You're talking to a guy who's been doing this for 35 years, and I've heard all the horror stories that go along with, "We bought the house together, but we didn't make it to the altar together." Talk about an ugly breakup!

You two have a bad case of house fever right now. Believe it or not, you aren't required by law to run out and buy a home just because you're planning to get married. Please, wait until after the wedding to buy a home. And even then, wait another year or so. Buying a home is the biggest – and most expensive – life decision most people ever make. Take some time to just enjoy being married and getting to know each other even better for a while.

Listen, if you've already jumped the gun, if you already have this house under contract or anything like that, I would not close the deal. I'd talk to the sellers and tell them they can keep my earnest money, but I'm walking away. And get ready, because if you do this, your fiancée is liable to look at you like you've got snakes coming out of your ears. Make sure to communicate with her about where you're coming from and why you're doing it. It's the best, and smartest, thing you can do in the long run, J.T.

I'm not predicting you two are going to break up or anything. I hope with all my heart nothing like that happens. But I'm begging you, buddy. Don't buy a home with someone you're not legally married to. The potential downside is just too great.

Dave

Dear Dave,

I read where you recommend saving 15% of your income for retirement. Should I count my employer's contribution to my retirement plan as part of that 15%?

Carlotta

Dear Carlotta,

That's a great question. Employer contributions do not count toward the 15% I recommend setting aside for retirement. It's great if you work for a company that offers perks like that, but I want you putting 15% of your money into retirement. Whatever your company matches, whatever its pension may be, or even having a military retirement package, none of that enters the equation. I want your money in your name.

Baby Step 4 of my plan says to put 15% of your income into retirement accounts. The first thing you should put money into is a matching retirement account. If you've got a 401(k), a Roth 401(k) or a 403(b) and your employer offers a match, you should do that up to the match before anything else.

Let's say your employer will match 3%. Since the goal is 15%, that still leaves you with some work to do. You've got 3% of your own money already going into retirement, so then you could look at a Roth IRA. If the Roth, plus what you invested previously to get the match doesn't equal 15%, then you could look at a 403(b), or go back to your 401(k) to hit the 15% mark.

And remember, if you're going to reach your retirement goals, you can't do it alone. King Solomon, one of the wisest men who ever lived, wrote: "Where there is no counsel, the people fall; But in the multitude of counselors there is safety" (Proverbs 11:14 NKJV). That's why you need a quality financial adviser – one with the heart of a teacher – to help you navigate complicated financial issues, and guide you toward the kind of retirement you want.

Do you see what I'm saying here, Carlotta? I want you – not the company you work for – to control your financial destiny. I want you to be able to retire with dignity, and enjoy life after working hard and saving. The responsibility for making that happens falls to you!

Dave

Dear Dave,

My wife and I are both 36 years old, and we have two children. Our son is 6, and our daughter will be 4 next month. We've been walking through the Baby Steps, and we should have our home paid off sometime next summer. We realized the other day the one thing missing from our financial picture is life insurance. We both work outside the home. She makes $60,000 a year, while I make $80,000 a year. At our age, and in our current situation, do you think we should we get 20-year or 30-year level term life insurance policies?

Clay

Dear Clay,

You guys are doing a great job of getting control of your finances and planning for the future. Speaking of the future, do you plan on having more kids? If you do, you might want to go with 30-year policies. If you've decided two are enough, then based on your present situation I think 20-year policies would work out fine.

I recommend folks have 10 to 12 times their annual income in life insurance coverage. That means you'd need between $800,000 and $960,000 in coverage, while your wife needs a policy in the $600,000 to $720,000 range. But let's take a deeper dive into all this.

Your kids will be in their mid-20s in 20 years. Ideally, they both should have finished college by that time, or at the very least, be working and living on their own. If you continue to follow my plan, you and your wife will have paid off your home in a few months and be completely debt-free. And, you'll have been saving 15% of your income for retirement over those 20 years. On average, that alone should give you more than a half-million dollars for retirement.

Do you see where I'm going with this, Clay? Eventually, you two will become self-insured by getting out of debt, staying out of debt and piling up cash. So, if you've got $500,000 or more in a retirement fund, no debt and your children are grown and out of the house, even if you or your wife were to die unexpectedly at that point, the other would still be taken care of and in great shape financially.

Keep up the good work!

Dave

Dear Dave,

I'm 67, and I've been wondering what your position is on preplanning for a funeral versus prepaying. Is one a better idea than the other, or should you do both?

Shannon

This is a great question. I wish more folks would think about these kinds of things ahead of time.

Preplanning a funeral is truly a gift to your family. But if you prepay, it's a gift to the funeral home. Doing the legwork and setting things up ahead of time so your family doesn't have to make a lot of financial decisions in the middle of an emotional situation shows them respect and consideration.

When you buy a prepaid plan, you could be years or decades away from needing it. Plus the inflation rate on funerals is about 4%, so in essence, you'd be making 4% on your money. And, of course, you're locked into everything at that point. If you took the cost of a funeral and invested it at age 30, instead of 4% on your money, you'd get an actual investment return. By the time you're 80, you'd have about $600,000. So prepaying in your 30s or 40s is mathematically ridiculous. Now, if you're in your 60s, like you and me, there aren't as many years for that money to grow. You wouldn't see a huge return on investment, but it would still provide for a nice service.

Believe it or not, it took me a while to figure out that the funeral world is an industry – an extremely profitable industry. And like with many things, when you add on stuff like financing or prepayment to a purchase, you're adding to their profits. Most funeral providers make as much money on prepayment plans as they do in actual margin on the goods and services that go along with this kind of thing.

That being said, I've got no problem with a business or industry making money. If they treat their customers well, no one's taken advantage of, and a quality product or service is provided, it's all good. But when it comes to funerals, I tell people to preplan. Don't prepay.

Dave

Dear Dave,

I'm currently on Baby Step 2, and I have about $7,000 in debt to pay off before I can move to bulking up my emergency fund in Baby Step 3. When you're paying off debt, what do you recommend for 401(k) contributions?

Rae

Dear Rae,

I recommend putting a temporary stop to investing while you're getting out of debt. Lots of people are shocked by this advice, and some disagree with it, because they're afraid of missing out on their employer's match or the wonders of compound interest. But before we go any further, let me emphasize one thing. The key word here is temporary.

Baby Step 1 is to save $1,000 as a starter emergency fund. Baby Step 2 is paying off all of your debt, except for your home, from smallest to largest using the debt snowball plan. During this time you're attacking your debt with incredible intensity, and putting every penny you can scrape together toward paying it off.

Working my plan, the average person can pay off all their debt, except for their home, in 18 to 24 months. Some folks can do it faster, and for some it takes a little longer. But during this time I want your financial focus to be on nothing but getting out of debt. Once that's done, you'll find you have a lot more control over your biggest wealth-building tool – your income.

Trying to accomplish too many things at once diminishes the ability to focus. And when you spend all your time nickel-and-diming everything, the result is that nothing at all gets done very well. You need to really move the needle and see results, because personal finance is 80% behavior and only 20% head knowledge. It's not so much a math issue, because if you'd been doing the math all along you wouldn't have a bunch of debt.

That's why, for a short period of time, I want you to concentrate with laser intensity on knocking out debt. Once that's out of the way, you can pour even more money into investing, saving and giving!

Dave

Dear Dave,

About a year ago, my husband and I offered an empty house we own to a young man at our church, who had lost his home and everything he owned in a fire. He has taken good care of the place, but has made no effort to pay rent. We don't need the money, because we're in good shape financially, and we were thinking about selling the other house, anyway. I'd like to simply write it off, and gift the home and title to this young man, but my husband feels he owes us something for putting a roof over his head all this time. What are your thoughts?

Penny

Dear Penny,

I think you and your husband have good hearts. I also think you handled this situation poorly.

From the sound of things, you put him there originally on a charity basis, and now your husband wants to change the deal. You didn't set up any kind of rental agreement, but your husband feels you two are owed something? I'm sorry, but no. That's on you.

At this point, you have some big decisions to make. Were you providing free housing to someone who was struggling, or were you providing a free house to someone who was struggling? I understand this young man experienced a terrible tragedy. But at the same time, I'm not hearing lots of evidence that he's putting his life back together. If after this long the guy's not back on his feet and out on his own, you may be enabling bad behavior on his part.

Now, if you want to gift him the house, that's your decision. If you want to approach him with a rental agreement or sale proposal to which all parties are amicable, that's OK, too. If neither of these ideas are in the cards, I'd make sure to sit down with this young man and have a gentle – but firm – talk. I'd let him know I had been happy to help him over the last several months, but that he needs to start moving forward with his life. I'd set a very reasonable and patient timeline for a move-out date, and let him know once that time is up, I'll be selling the house.

That's fair to everyone concerned.

Dave

Dear Dave,

My girlfriend's parents are divorced, and they're both in their early 70s. We talked the other night, and she's thinking about buying them each life insurance policies. The only coverage her dad has is through his employer. Her mom has remarried, and she doesn't have any life insurance at all. On top of this, her dad is worried he might have to pay her mom's funeral expenses if she died, and he's not in good enough shape financially to do that. Do you have any advice?

Joshua

Dear Joshua,

If the only life insurance her dad has is furnished through his employer, then he probably won't have it anymore once he stops working. I suppose it's fine if she wants to buy them each a small policy, but it's liable to be pretty expensive at their age.

Now, she can do this, but I don't think it would be a good long-term plan. I'd tell your girlfriend she needs to start saving money and building up her own wealth. If she had just $20,000 in savings, that'd be more than enough to bury two people. Please understand, I don't mean to sound insensitive. We're talking solely about the economics involved in this kind of situation.

The other thing your girlfriend should do is have a discussion with her mom to find out if the stepfather has the money to handle that kind of thing. When it comes right down to it, any final expenses for her mom would be his responsibility now – not her dad's. She should have a discussion with her dad about preparing for things, too. But if her dad's got insurance through work, and the stepdad is ready to pay for her mom's burial, then they're covered for the immediate future.

In short, I wouldn't do it unless they absolutely don't have this sort of thing covered. Even then, I'd prefer she just covered it with cash, because all we're talking about is enough to cover burial costs. No matter what anyone else says, Joshua, a nice funeral doesn't have to be crazy expensive.

Dave

Dear Dave,

My car was declared totaled because of hail damage, and my insurance company says I have two options. One is to take a higher total loss settlement check of $19,000 and use it toward the purchase of another car. The insurance company would then take possession of the car. The other option is to accept a check for $13,000 and have the car on a salvage title. The car is worth $15,000, and I have 20% car replacement assistance on my policy that increases the total loss settlement to the $19,000 amount I mentioned earlier. I'm on Baby Step 3 of your plan, and I owe nothing on the car. What should I do?

Meagan

Dear Meagan,

Take the bigger check! That's a quick and easy decision, but give me a minute to explain why. It's not about being greedy – it's a little more complicated than that.

If you had $19,000 in your pocket, would you go buy a $6,000 hail-damaged, salvage-title vehicle for everyday driving? Of course, you wouldn't do that! The insurance company is probably hoping you'll overlook the $19,000 offer and essentially pay $6,000 for this beat-up car. No. Thank. You. I'll pass on that deal.

With $19,000, you'll have plenty of cash to rent a car for a couple of weeks and take time to find a great-quality used car at a good price. You might even be able to negotiate with the insurance company to give you a little time to look for another ride before they come pick up the old one.

But no, you don't want that messed up, old car. Why would you? That thing probably looks like a kid with a bad case of acne right now. Go find yourself a nice car, hon. There are plenty of affordable, slightly used vehicles on the market right now. There's no reason for you to drive around in something that's all beat up if you don't have to.

Best of luck, Meagan!

Dave

Dear Dave,

My wife and I have been very fortunate in our careers. We both have six-figure incomes, and as a result we have a little over $2 million in savings and investments. With this in mind, do you have any advice on how to make sure your kids aren't spoiled as they grow up in a family that's doing well financially?

Gary

Dear Gary,

First, don't spoil them! Teach them to work, and teach them to be givers. Oh, and gently remind them every so often that it's you and your wife who are wealthy – not them. Yeah, I know. This probably sounds mean to some folks, but I'm talking about simply explaining to them how you and their mom have worked hard, been smart with your money, and that's why you're in the position you're in.

We taught all our kids, from a very young age, just how important it is to work. Work equals money. When you do that, and kids see it in their parents' attitudes and actions, it makes a big impression. With little kids, it can start with simple things like cleaning up their rooms or clearing the table after dinner. And it should carry over into their teenage years, as well. Every able-bodied child should be working and earning money, whether it's their own entrepreneurial idea, at a fast food joint or babysitting.

Another thing we did was based in our faith. As Christians, we taught our kids that we don't really own anything. It all belongs to God, and one of our jobs is to wisely manage the things He entrusts to us. The first rule is to take care of your own household – the important stuff. After that, it's OK to have some nice things, but it's not all about fun. It's also about thoughtful giving and being generous.

As a parent, your job isn't to be a buddy to your kids. It's not to give them every little thing they want, and make sure they're running around carefree and playing every hour of the day. Your job is to teach them about the important things in life, and over time, mold them into mature, responsible human beings who can survive – and succeed – in the real world.

Dave

Dear Dave,

I just discovered you and your teachings a couple of weeks ago. I'm already on Baby Step 2, and I was wondering if I should buy life insurance now or wait until I've finished paying off debt. I'm single with no children, and I owe a total of $44,700. I have a $25,000 company-funded life insurance policy through my employer. What do you think I should do?

Elizabeth

Dear Elizabeth,

If you have a life insurance need, it's not a Baby Step. It's a necessity in your budget and something you need to put in place as soon as possible. But from what you've told me, you don't have a great need for life insurance at this point. No one, except you, is depending on your income, and the $25,000 policy you have through your employer is more than enough to take care of any final expenses if something happened to you.

The main purpose of life insurance is to take care of those you leave behind when you die. If someone is financially dependent on your income, I recommend having 10 to 12 times your annual income wrapped up in a good level term life insurance policy. That means if you make $80,000 a year, you should have a policy worth anywhere from $800,000 to $960,000.

If I were you, I wouldn't buy another life insurance policy at all right now. If you get married or have kids somewhere down the road, then buy it immediately. In that case, both you and your spouse should have 15- to 20-year level term policies of 10 to 12 times your individual incomes.

And never buy anything except level term life insurance. The reason? That covers you until you're out of debt – should a spouse bring some into the picture – and the two of you have so much cash piled up that you don't need to pay for a life insurance policy anymore. It's called being self-insured, and that's a great place to be.

Good question, Elizabeth!

Dave

Dear Dave,

My mother-in-law is 85, and she's had some health setbacks recently. The family got together with her, and as a group, we decided it was time to sell her property and move her into an apartment at a nice senior living facility. She should see a little over $300,000 from the sale of her house. Aside from that, she has about $10,000 in a savings account. The problem is, she'll only receive $2,100 a month in Social Security, and rent at the facility is $2,600 per month. Plus she loves making donations to charities. With interest rates where they are, is a CD ladder a good place to put the money to help her cash flow expenses in the future?

Ed

Dear Ed,

If this were my mother-in-law, I'd want her to do better than a CD (certificate of deposit) ladder. Even with the deficit between her Social Security income and the cost of rent, she'll only need to see $6,000 a year from the investment to make up the difference. And plus, she's 85. Even if she got nothing in terms of interest, the chances of her burning all the way through her nest egg before she dies are almost zero. I know the thought of her passing away isn't pleasant, but it's something you have to take into consideration.

As far as the charities go? Right now, she's the charity. Maybe not in the traditional sense of the word, but it's time for mom to come first. Only the strong can help the weak. I didn't let my toddlers carry our newborn. And when it comes to money, you've got to have the financial strength – the free and clear assets – to carry others. Take care of your own household first. That's her responsibility at this point.

Ed, you're not going to mess this up unless you put the money in crypto, or something stupid like that. If you want to do some high-yield savings as a part of it, that's fine. If it were me, I'd probably end up investing some of it too. Here's the thing: Overall, if you could make 8% on it, that's $2,000 a month, and it lasts indefinitely. That's not even touching the principal. But like I said before, even if you make nothing on it, just divide $6,000 into $300,000. See what I mean? It's probably going to last as long as she does.

Of course, there may be some other medical bills, and you'd probably want her to have a life other than just paying bills. That's why I'd like to see that extra $2,000 a month happening. It would provide a little cushion. And there may be a few other little things from time to time the family would have to pick up, but that's not unusual in a situation like this.

You all can make this work for her. Just don't be super aggressive, but don't be super conservative either.

Dave

Dear Dave,

I've heard you talk about paying for college for your kids. Why is this a requirement? I'm not trying to shirk my responsibility, but I worked my way through college and so did my parents. My wife and I have talked about paying for their books and maybe rent. Am I missing something here?

Thomas

Dear Thomas,

First, I don't believe it's a requirement that all parents pay for college for their kids. It's not a moral issue, and you're not an immoral person if you don't or can't do it. I've told plenty of single moms, single dads and parents who don't earn a big income that their kids need to apply for as many scholarships as possible, learn how to work and choose an inexpensive school if they want to continue their education.

As a parent, one of your biggest jobs is to give your kids a moral compass and the tools they'll need to succeed in the real world. And one of the keys to being a successful adult is engaging in a lifetime of learning. If the last time you read a book was when you were in high school or college, and you've never done training of any other kind since, you're probably not very successful. Never. Stop. Learning. If I'd stopped learning after getting my bachelor's degree, do you think I would've been able to build Ramsey Solutions? Absolutely not!

Do you see where I'm going with this, Thomas? As an adult, learning is your job. An entire lifetime of learning is your job. And if you can encourage that in your kids with some level of help, financial or otherwise, then it's your obligation to help them. You can't expect a 17-year-old to figure it all out. They don't have the tools yet.

The point is this: You don't have a moral responsibility to pay for your kids' college education. You do, however, have a moral responsibility to highlight the importance of knowledge, share what you have and show them how to get more. If you can't afford to help with money, do everything else you can. There are plenty of more important things than cash. If you want to help financially, that's fine too.

Just don't use debt to make it happen!

Dave

Dear Dave,

Is there any flexibility in your rule about not spending more than 25% of your take-home pay on rent or monthly mortgage payments? I live downtown in Washington, D.C., and I'm finding it's pretty hard to do here. I make about $90,000 a year, but I'm spending a little over $2,000 a month in rent. Rent is my largest expense by far, and I don't spend a lot of other money, so I'm still able to save a little and do other things. Can you give me your opinion about this approach?

Tanner

True, I advise people to spend no more than 25% of their take-home pay on housing. Math still works in every city and state in the country. You don't get a pass on math just because you live in Washington, D.C., even though Congress and a lot of other people there think you do.

But there's really nothing magical about 25%. The purpose behind it is, I don't want you to be house poor. If you find yourself still able to save and invest because you keep other financial aspects of your lifestyle so low, then you're OK. The problem with most people starts when they've got a high cost of housing, and those payments put a real squeeze on their budgets. It doesn't leave them enough room to save up to buy the next car, so that car becomes debt. The same thing happens with Christmas and vacations and everything else. They don't have enough extra money to save for things because a huge chunk of their income is flying out the door every month wrapped up in rent or a house payment.

Now, you're telling me your situation works for you because you've made room in your budget and live a very frugal lifestyle by choice. That's cool. I'm not mad at you about that. But here's the thing: Whatever you spend on rent disappears. And the more money you burn, the less you've got on hand for other things.

I'm not exactly sure how you adjust that in your situation. Maybe you move outside the city and commute, or perhaps you add a roommate into the equation. Or, maybe you're fine with how things are and that's the way you want to live. That's OK too. But my reasoning behind the 25% figure – which is actually more of a guideline than a rule – is so you don't become house poor. I want you to be able to save, invest and give generously. Plus, I want you to own your own home one day.

And you won't be able to do that if everything you make is going toward big payments!

Dave

Dear Dave,

My husband recently opened his own commercial painting company. We know he will have three months or so every year when he's making very little, if any, income. We started following your plan recently, too, and have $1,000 set aside for our starter emergency fund. We were ready to begin paying off all our debt except our home in Baby Step 2, but now he wants to skip that, and move to Baby Step 3 to build a fully funded emergency fund of three to six months of expenses. I think I know why he feels this way, but would you give me your thoughts?

Crystal

Your husband's excited about the new business. I get that. And in his own way, it sounds like he's trying to make sure there's extra money on hand for the down months he may experience as a commercial painter. But I wouldn't advise this approach, not for his business, and not for your family's finances.

Baby Step 3 is an emergency fund of three to six months of expenses. The scenario he wants to plan for, however, isn't an emergency. He knows it's coming. It's the same with things like Christmas, birthdays and stuff like that. You know they're coming, and you even know which months and days. Things like that aren't emergencies, and they don't catch anyone by surprise. They're things you plan for – and budget for – ahead of time.

But the first thing your husband needs to do is rework his business model. He needs something to do during the down months, so that his income doesn't dry up completely. Setting money aside in a business for an expected down time is smart, but it's not a Baby Step 3 issue. It would be a line in the budget where you set money aside because you know something's coming.

Again, if it's something predictable, something that happens at the same time every year, it is not an emergency. If you want to budget some household money for the down time, that's fine. But do you know what would be even smarter? Figuring out a plan for this time, based on his skill set, which will allow him to keep earning money!

Dave

Dear Dave,

My husband and I are having arguments about money where our children are concerned. They are both 16, and I think they should have part-time jobs and be learning the value of work. He feels they're only young once and wants them to enjoy being teenagers. He also gives them money anytime they ask. I want our kids to have fun, too, but this is beginning to cause tension in our relationship. I'd love your advice.

Kaytee

Dear Kaytee,

I understand your concern. I'm sure your husband has a good heart, but by doing this he's acting like a friend instead of a parent. In the process, he's allowing them to be nothing but takers and consumers. He's setting them both up for lifetimes of helplessness and ridiculous expectations without realizing it.

But yes, kids should absolutely learn to work, make money and manage it wisely from an early age. My wife and I gave nice gifts to our kids from time to time, but they also worked and made money for themselves. And the nicer gifts we gave them were for special occasions. Even then we didn't go crazy with things.

Still, the biggest problem you and your husband are experiencing is a communication breakdown. Your husband should stop being so impulsive and grow a backbone where the kids are concerned. You've recognized this – and you're right about it – so it's up to you to take the first step in finding a solution.

Try sitting down with him, just the two of you, and sincerely explaining your feelings. Let him know you love him and how generous he is. But let him know, too, you're worried this is having a negative impact on your children and why. Talk it out, openly and honestly, and try to agree on some changes together. There's a middle ground here, but it's going to take some time and effort from both of you to reach it.

Most of all, it means you two will have to communicate with each other like mature, caring adults, and pull together for the sake of your kids. It might be difficult at first, but it'll be worth it in the long run. For you and them.

Thanks, Kaytee!

Dave

Dear Dave,

I'm a widow, and I retired recently. My husband took care of most of our finances. We never had any debt, but after my husband died and I started learning a little bit more about how money works, I'm concerned too much of it may be invested in CDs. The total nest egg is a little over $1.5 million, with $300,000 of that in CDs. There's also a $317,000 annuity, a 403(b) and around $900,000 in IRA mutual funds. I want to learn even more about financial matters, so how do you think I should handle things going forward?

Naomi

Dear Naomi,

Well, the CDs (Certificates of Deposit) give you stability, if nothing else. They're generally considered a safe, low-risk investment, but they don't really give you the best bang for your bucks. If you've had good luck with a variable annuity, that's fine, too. It sounds like you've also been very fortunate with your mutual fund investing. So, with all this money in different areas, you're definitely diversified.

In my mind, it's just a matter now of wrapping your arms around it all and developing a deeper understanding of things going forward. I'd urge you to find an investment professional in your area with the heart of a teacher. I'm talking about someone who wants to help people, and is interested in more than just making money off fees or commissions.

It sounds like you understand the value of learning about this stuff, and I'm really impressed by that. It's a smart and necessary thing. From here on out, every time you see an investment person – whoever it may be – your goal should be to leave the room smarter, and with more financial understanding, than you had before.

Naomi, I'm truly sorry about your husband. But you two did an amazing job with your finances over the years. You're worth well over $1.5 million, and you have no debt. So, you're basically set for life.

Be wise, and be careful, Naomi. God bless you.

Dave

Dear Dave,

I graduated from college six years ago with a business degree. Currently, I'm in data analytics making about $40,000 a year and have $155,000 in student loan debt. Do you have any recommendations as far as refinancing my student loans and getting the interest rates and monthly payments down?

Austin

Dear Austin,

I'm not trying to be mean here, but what in the world are you doing in data analytics that pays so poorly? Most of the folks I know in that area make a ton more. And you're going to need to start making a whole lot more to pay off $155,000 in student loans.

For starters, you shouldn't be looking at this from a what-can-I-do-to-make-this-manageable perspective. You don't want to give this Sallie Mae nightmare a haircut, then tell her to sit in the corner all nice and pretty. You want her to leave! Now, there's nothing inherently wrong with refinancing to get a lower interest rate, or lower payments, if you do it the right way. But in most cases that translates into keeping the debt around forever. You need a better plan.

Instead, let's shift the main goal from that to paying this thing off as fast as possible. That means big, hairy chunks of payments on the principal. And that'll probably mean picking up an extra job or two, because right now you've got what I call a shovel-to-hole ratio problem. The hole you're in is a big one – a $155,000 one. And you're working with a $40,000 shovel. You need a bigger shovel, and a lot of extra work, instead of trying to keep these loans around like they're pets. What can you do – for a short period of time – that's legal, moral and will make you the most money the fastest?

On the day job side of things, you may want to consider looking for a position with a different company, Austin. You're way underpaid if you're in data analytics and making just $40,000 a year.

Good luck!

Dave

Dear Dave,

Should I cash in my 401(k) to pay off my car? I have just enough in the account to pay off the car and free up money in my budget.

Marina

Dear Marina,

If I were in your shoes, and I could pay off the car in 18 months or less, I'd live on rice and beans – plus a very strict monthly budget – and just push through until that car payment was out of my life. If that wasn't realistic, then I'd take out ads online and in the local paper, and sell the car as fast as possible.

Cashing out your retirement plan to make this happen isn't a good idea. I love that you want to get rid of your car payment, but if you use your 401(k) they'll charge you a 10% penalty, plus your tax rate. That means you'll lose anywhere from 30 to 50% of it to the government.

I don't know about you, Marina, but I think those guys get way too much of our money already!

Dave

Don't jump the gun

Dear Dave,

My husband was recently told layoffs are about to happen at his company, and that it might be a good idea for him to start looking for another job. He has found a couple of good possibilities, but the jobs are located 100 miles away. In preparation for a possible move, we spoke with a real estate agent who told us we'd have to remodel our kitchen to sell the house. We've got about $4,000 in savings, but the agent said remodeling would take between $2,500 and $3,000. Should we get a second mortgage to pay for the work?

Natalie

Dear Natalie,

For starters, I'd suggest cutting expenses any way you can, living on a strict budget and saving as much cash as possible. But taking out a second mortgage? No! You don't want that hanging over your heads.

You might want to get another opinion on the kitchen remodel, too. Sure, a new kitchen would be nice, but would it be a make-or-break kind of thing if you decide to sell your home? Probably not, unless it's in really terrible shape right now. Regardless, there's no way I'd go into debt to make this happen. I mean, your house isn't even on the market yet. There's no reason to fix up a house that's not for sale, especially when you've got just $4,000 to your names.

My advice is to wait and see how the whole job situation plays out before making any big decisions. Then if you end up selling the house and moving, you might take $500 or so from savings to freshen up the kitchen a little bit.

Dave

Dear Dave,

I know you recommend using cash or debit cards instead of credit cards. But can you explain why my husband and I shouldn't take advantage of credit card points for travel expenses that are required for work but will be reimbursed by the employer?

Cathy

Dear Cathy,

So, your employer is so poor they require you to advance them for your travel? You do understand if your employer decides not to pay you one month – for whatever reason – that it's your credit card and your debt, right? Even if this hasn't happened yet, you're exposed to the risk. All for a couple of airline miles that are virtually impossible to use? No, thanks.

I understand this is standard procedure for some companies, but then a big chunk of corporate America has conned its employee base into taking out a loan on their behalf – with a promise of repayment – and the employee taking on all the risk. On top of that, these companies act as if operating this way is no big deal. Well, it is a big deal. And it's not a good way to run a business or treat your employees.

Cathy, I once counseled a guy who walked into my office with $11,000 on his American Express card that was "supposed" to be reimbursed. Guess what happened? When he went into work earlier that day, he found a padlock on the door. The company he worked for had filed Chapter 11 bankruptcy, and he got nothing. At that point, he had $11,000 on his American Express card, and the credit card company didn't care one bit about his company going broke. They wanted their money.

When you use a credit card, you spend more than when using a debit card or cash. Tons of research has proven this to be true. Using someone else's money just doesn't produce the same friction in your brain as paying for something with your own money. You don't feel the sting of it leaving your personal account. Do you want to know something else? I've never met a single millionaire who pointed to credit cards and airline miles as the reasons for financial success.

But I do know a lot of broke, middle-class people strutting around, bragging that they gamed the system. They'll tell you they beat a multi-billion-dollar company, one that spends tens of millions of dollars every year on studying consumer behavior in depth, at their own game. No, they really didn't. I'm telling you all this, Cathy, because I want you and your husband to protect your No. 1 wealth-building tool: your income.

Long story short: If you play with snakes, sooner or later you'll get bitten.

Dave

I bought a house about a year ago. Currently, I have $45,000 sitting in an account with a money manager. I’ve had this account for a little over three years, and the investment hasn’t grown much, if at all. Under the circumstances, and being single, too, would it be better to pull the money out of that investment and put it toward my mortgage?

Johnny

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Dear Johnny,

I recommend putting 100% of any non-retirement savings, above your emergency fund, toward paying off your mortgage until the mortgage is paid off. I’d still tell you to pay down the house, even if you were making 20% on your money. Just make sure you’re following the Baby Steps, and you’re already putting 15% of your income into good retirement investments before attacking the house. Paying down your mortgage is not an expenditure that’s just lost money. The cash is sitting there, you’re just banking it in your home and land. And on a side note, with all the craziness in the market over the last three years, you might come to realize breaking even over that time wasn’t so bad after all.

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Johnny, the shortest distance between where you are and your first $1 million to $5 million in net worth is getting your house paid off. After that, load 15% to 20% of your income into a serious retirement plan. And by that, I don’t mean playing financial footsie with some little brokerage account. Investing in good, growth stock mutual funds with a proven track record of at least 10 years is a proven way to build wealth the right way.

I’m sure you can find someone on TikTok telling you to do the exact opposite of what I’m suggesting. But you won’t find that kind of advice coming from real millionaires.

— Dave

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Dear Dave,

I've been struggling for about a year, ever since I made a stupid new-college-graduate decision to finance a car. It's a 2018 Jeep Compass, and I owe $21,000 on it. The trade-in value is about $11,000, so I really got stung on the sticker price and everything else. I also have $85,000 in student loan debt and around $7,500 on credit cards. The good news is, I make $63,000 at my job, and that should increase to $75,000 by January of next year. My girlfriend and I are renting an apartment and engaged to be married in 2025. How do I clean all this up before then?

Austin

Dear Austin,

Well, the good news is, you have the rest of your life to never make this kind of mistake again. I'm really sorry you're going through all this, son. What a horrible thing to experience right after college.

So, you're $10,000 upside down on a vehicle you owe $21,000 on, right? The truth is, you're kind of stuck. If you're serious about getting out of this mess and not repeating the same mistakes twice, you're going to be working like a dog for the next year or two. Right now, you need a serious side job nights and weekends – maybe two. And I'm talking bare-bones living. No vacations and no eating out for a while. You don't need to see the inside of a restaurant unless you're working there. Get what I'm saying? No unnecessary spending. Period. On top of all this, you've got to start living on a strict, written monthly budget.

Now, about your fiancée. I get the desire to fix things before you get married. But married people work together on this kind of stuff all the time. Believe it or not, there's no perfect time to get married. I mean, it sounds like you two have already decided to go there and figured out neither one of you is perfect. That's just called being human. So, there's really no reason to wait on tying the knot at this point. And the truth is, the two of you can whip your finances into shape faster and much more efficiently working on it together – as a married couple.

Austin, I want you tear into this debt like your life depends on it. Because guess what, dude? It does!

Dave

Dear Dave,

My employer offers an employee stock purchase plan at a 15% discount. I'm usually the kind of guy who buys stocks and holds on to them forever. But when it comes to an opportunity like this, should I buy it and wait for a year to sell it, or should I buy it and sell right away?

John

Dear John,

Generally, I don't recommend buying single stocks at all. Single stocks are way too risky, and a 15% discount is nothing special in this kind of scenario. Virtually every single company out there that has an employee stock option plan offers a 15% discount.

In most situations like this, if you pull up a 52-week chart on the stock's performance, you'll find a variance of as much as 15% in those 52 weeks. In other words, you could lose any or all of that discount in one move of the stock. Plus, it's not like 15% is a big discount to begin with. Fifteen percent off a single stock, considering how volatile they are, is no big deal. But hey, if you love your company that much, they have a great track record and the stock has a good history, go ahead. Just don't allow single stocks as a category to make up more than 10% of your net worth.

The core issue here is a lack of diversification. When you put all your eggs in one basket, there's always some clown twirling the basket. The first time I ran into that was a long time ago with a lady who was 70 years old. She had worked for a large company for 40 years. On top of that, she invested all her 401(k), all her wealth – $800,000 total – in that one company. Well, this company experienced a crisis. It lost nearly half of its value, and her $800,000 was suddenly worth about $400,000. She left herself vulnerable with a high-risk play, John.

I'll say it again. Don't bet the farm on one horse, and don't have more than 10% of your net worth wrapped up in single stocks. Hundreds of research projects have been done that show individuals who buy individual stocks and think they know what they're doing actually lose money much more often than they make money.

Dave

Dear Dave,

When my wife and I got married she had about $70,000 in savings, and I had a lot of debt. We bought some property from her parents to build a home on, and she made a 20% down payment on the land from her savings. We've paid off some debt, and she has more in savings now. But I feel guilty, and it seems unfair to ask her to pay on our debt with her savings since most of it is debt I brought into the marriage. How do you feel about this?

Sonny

Dear Sonny,

This question tells me you're a good guy with a good heart. But let me ask you a thing or two. When your wife gets sick, is it unfair for you to take care of her? You didn't cause it. It's not your fault. Of course, it's not unfair. I'm not mad at you, buddy. I'm just throwing your own logic right back at you.

Maybe these next lines will sound familiar: for richer or for poorer, in sickness and in health. The old "Book of Common Prayer" continues the vows and says, "Unto thee, all my worldly goods I pledge." This is called oneness. It's called unity. And it's what a good marriage should be about.

Do you get what I'm saying, Sonny? The two of you are in this together. This is not a business partnership or joint venture. It's a man and a woman pledging themselves, and all they have and are, to each other. I understand your feelings, but if you're not careful, that kind of guilt will stand in the way of you two creating a successful marriage – both financially and emotionally.

When you got married, the "me" and "mine" became "we" and "ours." You got all her stuff, the good and bad, and she got all of yours. Now it's time for you to work as a team to make the bad stuff go away and the good things even better. What's fair (and what's right) is to combine all of your income, all of your assets and all of your liabilities.

I know it's uncomfortable, but you've got to choose courage. Ask her to go all in on this with you and attack your debt together. Work toward making your dreams come true together as one.

That's what's fair, and that's what's best when you're married.

Dave

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Dear Dave,

I'm 61, and I hope to be able to retire soon, but I'm watching my retirement savings completely eroding away day after day. The only place I'm not losing money is $180,000 I have sitting in the bank earning almost zero interest. What should I do?

Jesse

Dear Jesse,

Come on, man. "Completely eroding away day after day?" That's a little dramatic. One of the things you have to understand, and coming to grips with it has helped me since I began doing research on things like this 30 years ago, is we all have a drama queen living in our brain that exaggerates things – especially when it comes to investing. So, take a deep breath and calm down. Everything's going to be OK.

Studies have shown us it takes $3 of gain in an investment to emotionally offset $1 of loss. Our brains record negative things at a much greater rate than they do positive things, and it takes a lot of emotion to recover from that. Your investments may be down a little. If you've got $1 million in there, it may be worth $900,000 right now. Next year, it's liable to bounce up to $1.1 million. In other words, your entire retirement savings is not "eroding away."

Have you ever heard people say they lost all their money in the stock market? Well, that's mathematically impossible, unless you put all your money into one company, and that company completely closed and was worth zero. Remember Enron? What most people really mean when they say that is they lost a bunch of money because they freaked out and went into hyper-drama mode, then pulled all their money out while the market was down.

Jesse, did you know that in the last 20 years, every down year in the stock market was followed by two years of record gains? Facts and mathematics are your two best friends when it comes to telling your inner drama queen, "Shut up, we're going to continue to invest!"

Dave

Dear Dave,

I live in Dallas, Texas, and I'm wondering if I should sell my condo in order to pay off debt. I owe $120,000 on it, and it's worth around $260,000. Plus, the homeowners association fee used to be $450 a month and has gone up $100 each year for the last two years, so now we're paying $650. No one has ever told us why the fee went up so much. There haven't been any major improvements to the complex in the last five years, so I don't know what to think. Can you give me some advice?

Daniella

As a homeowner, I'd want some answers by the end of day as to why the HOA fees are so high. I mean, for a $260,000 condo, the fee you mentioned is ridiculous unless the building owners are doing a major renovation, like replacing the parking lot or updating the community's clubhouse. Even then, it's crazy! On top of all that, it devalues your condo. Nobody wants to buy a $260,000 condo with a $650 HOA fee every month, especially when the fee has gone up that much for no apparent reason.

There's always the possibility the company is building up a war chest for improvements in the next year or so. But you have a right to know exactly where the money you pay in HOA fees is going. Ask to see a copy of their financials, and if they won't do that – or explain why the fee is so high and where the money's going – you need to sell the place because it's being poorly managed.

You've got to get an explanation. You're owed one. And, if you try to sell the place, you're going to have to tell prospective buyers why the HOA fee is so high. Maybe there's a good reason for it buried somewhere. But without knowing more, as a buyer, there's no way I'd take this thing off your hands.

There are a lot of red flags fluttering around the situation, Daniella. Even in a place like Dallas, this HOA fee is about double what it should be for a $260,000 condo. I'm not saying this just because I don't like HOAs, which I don't. And that's mainly because I don't like paying money for something, and then being told by someone else what I can or can't do with it. But you need some answers for your own information, peace of mind and to give potential buyers an honest answer when they ask why the fees are insanely high.

Lose the headache. Sell it.

Dave

Dear Dave,

I'm hearing more and more about "de-dollarization" and how several countries are moving away from the U.S. dollar as their basis of international trade. Will this affect the strength of the dollar, and should I be concerned about how I'm saving and investing because of this?

Zack

Dear Zack,

First and foremost, I care enough about you to say you may be spending way too much time on the internet, buddy. You're drifting into the realm of conspiracy theories here, so let's slow down and take a look at some facts.

China, Brazil and Russia are the three main players in all this. They already don't use the U.S. dollar as their basis of international trade – all three have their own currency, and there's a conversion rate between all those currencies and the U.S. dollar. Those three countries, along with some of the oil-producing countries from the Middle East they're trying to get on board with the idea, are talking about developing one currency they all use. In international trade, that currency would be converted back and forth to dollars – much like what Europe did with the euro. Which, by the way, really hasn't worked out so well.

Are those countries going to be able to devalue the dollar by doing that? No. Why? Because while those countries take up a lot of land mass, they don't take up a lot of the gross domestic product (GDP) of the world. The United States still represents the vast majority of the world's GDP. Sure, China's big in that regard. But Russia doesn't bring much to the table, and Brazil is barely scraping by in a failed economy. Plus, they're tiny as far as economics are concerned. I mean, Texas probably has a larger GDP than Brazil.

In other words, they just don't have the muscle to take down the dollar mathematically speaking. Now, if they do manage to put this idea together, it still won't end in "de-dollarization." The dollar will not be done away with. Even if they create their own currency, they're still going to have to trade with the 800-pound gorilla, which is America. And they're going to have to trade with us in dollars.

Am I worried about this, Zack? Not one bit. And you shouldn't be either.

Dave

Dear Dave,

I'm a senior in high school, and I'm enrolled in a personal finance class. From your perspective, should I be worried about the national debt being over $30 trillion, and should this affect a person's overall personal finance strategy?

Chris

Dear Chris,

I'm sorry you have to worry about such things at your age. I, personally, have a long history of fretting about, and alternately being angry about, the national debt being out of control. This is mainly because it represents a Congress that's out of control, and the fact that the American people don't seem to have enough backbone to vote these clowns out. So, they keep spending like there's no tomorrow. There's probably a tipping point somewhere, but the good news is it hasn't happened yet.

I'm with you on this when it comes to being concerned, though. I think the entire situation represents a lack of discipline on the American people's part and on the part of our elected officials. It's pitiful, and it's outrageous. Now, does it affect my investing? Not one bit. I invest based on good long-term track records, because the national debt has been out of control for as long as I've been alive.

Here's the thing. If everything did finally fall in on itself, there's nothing at all you could've invested in from a financial point that would protect you. So, if I were you, I wouldn't worry too much about it, or walk around scared that I was suddenly about to lose everything. In my mind, it's going to take more than a crop of inept, or dishonest, politicians – and there have been bunches of those, from both sides of the aisle – to sink this thing called America. I believe the country, and its people, are much more resilient than that.

You're a thoughtful young man, Chris. But I want you to remember one very important thing. What happens in your house carries much more weight in your life than what happens in Washington, D.C., or the White House. That means being personally responsible for yourself and your money. Live on a written budget, save money and stay away from debt. If you do those things, I think you're going to be OK!

Dave

Dear Dave,

I plan to buy another investment property with cash in the next year or two. Currently, I have $83,000 sitting in a high-yield savings account at 4% interest. My goal is to save another $50,000 to $70,000 in the upcoming months. Right now, 4% is good, but I want to make sure I'm maximizing my returns. Should I be doing something else with the money?

Brett

Dear Brett,

I like the way you're doing things. Right now, you're simply parking the money short term for a purchase a few months down the road. If you invest it, you might make a little more, but you're taking more risk too. If I'm you, I'm parking the cash.

Here's the deal: The money you'll have to purchase another property won't come from a return on the investment. It'll come from you putting money in the account. The investment isn't the secret sauce in this scenario – you are. If you invested the money and made 10% rather than 4% over two months, let's say, that amounts to about a 3% difference. That's nothing in your case. You're not within a couple thousand dollars of doing a deal at the moment. Your deal is a $150,000 deal. Your return on investment isn't going to make this happen, or keep it from happening. See what I'm saying?

Just keep doing what you've been doing and park the money. That's what I'd do. People who are math nerds, like us, always look for things to fix an investment. But sometimes the thing that fixes the investment is you. You are the one doing the investing. You are the one putting money in the account. So, in this case, don't try to fix it. Just pile up money and go do it.

Great question, Brett!

Dave

Dear Dave,

I was recently in a car accident that totaled my car. My old car was paid for, and the insurance company is writing it off and giving me $15,000. I'm a physical therapist who does home care treatment, so I need a reliable car for work. I'm debt-free, and I'm in the process of finishing up my emergency fund, but I can't seem to find a car like my old 2014 Toyota Camry with all the accessories. My rental car is paid for by insurance until the end of the month, and I've looked at used cars at a few dealerships, but the dealers and salespeople are telling me used cars still cost the same as new ones, and that I should just finance a brand-new car. I'm not sure what to do.

Valerie

Dear Valerie,

Asking a new car dealer if you need a new car is like asking a dog if it's hungry. The answer's always going to be yes.

The smart answer, though, is this: If you've got a $15,000 insurance check in your hand, go buy a great, used $15,000 car. You may not be able to find the exact car you had before, right down to all the bells and whistles, but Toyota Camrys aren't exactly rare, either. That money will get you virtually the same car – one that is very comparable in equipment, reliability, miles and overall quality to the one that was totaled.

I realize this whole thing is a big inconvenience. And you're probably feeling a little pressure to make a decision. But the line you're getting about used cars still costing the same as new cars is a load of crap. Used cars do not cost as much as new ones anymore. That was true for about five minutes on the back end of the pandemic, when the Mississippi River ran backwards and used cars went up in value. It was an absolute miracle!

There seems to be something in the human brain that tries to tell us we have to get an upgrade if we total a car. I want you to fight that idea, because you don't need to wreck your emergency fund over something that's not an emergency. Go online, and look around there without the pressure that always goes with being on a car lot.

And I'm just going to say this out loud: A $15,000 car today is a much better vehicle than anything I drove for the first 30 years of my life. The quality of used vehicles and the life left in them are so much greater than even a new car back in the day. You know that old saying, "They don't make 'em like they used to"? Well, thank God for that!

But a $15,000 pre-owned car in today's world? That's a nice car!

Dave

Dear Dave,

I'm about to start paying off debt in Baby Step 2, but there's a motorcycle loan my ex-girlfriend took out for me. I crashed the motorcycle and sustained some injuries. After two months of litigation, I received a settlement of about $15,000 that was just enough to cover the loan. Do I use the settlement money toward my debt snowball, or should I pay her back so I can get her out of my life for good?

Arnold

Dear Arnold,

Pay her back. Anything else would be unfair. And, on top of that, it's just the right thing to do.

The whole move of her taking out a loan to buy you a motorcycle was kind of a dumb anyway. It was dumb on her part, and it was dumb on your part. And you can see why it was now, can't you? It has left you in a lurch emotionally and relationally. We're not talking about a random chunk of cash here. This money was for the motorcycle, from the motorcycle and about the motorcycle. So, you just pay her back, and that'll clear things up.

I'm sorry the relationship didn't work out, brother. But I'm glad you're taking steps to get in control of your finances. And I hope making things right where the bike is concerned will bring you a little peace of mind.

Dave

Don't look to government – ever

Dear Dave,

My husband and I are on Baby Step 2. Among our debt is about $14,000 in student loans. I think we should roll the student loans in with the rest of our debt snowball, but he wants to wait and see if the government will pay it off. What do you think we should do?

Kristy

Dear Kristy,

I'm sure your husband's a great guy, but I think he's being a little naïve. I don't believe this whole student loan forgiveness thing is going to happen. If I'm wrong, I'm wrong. And if that time comes, I'll admit it. But to me, this is just another ploy – another carrot being dangled by politicians.

I've lived through several presidents – from both parties – who promised to give me prosperity. So far, none of them has delivered. Any success my wife and I have experienced has come as a result of God's blessings, our hard work and a stubborn refusal to give up.

Virtually none of the millionaires I've studied over the past 30 years got to where they are by looking to the government to take care of them. Instead, they left the cave every morning, killed something and dragged it home. Believe me, there's a high correlation between people's ability to build wealth and the belief that their destiny is in their hands – not the government's.

If you sign for a loan – any loan – you have a moral and legal obligation to repay the money. Go ahead and roll the student loan debt into your debt snowball. Continue taking charge of your finances and your lives!

Dave

Dear Dave,

I'm thinking more seriously about buying a home in the next year or so. It seems like the housing market has cooled off a bit, so I am also planning to get a secured credit card to help me rebuild my credit score in the meantime. I make $60,000 a year, and I have about $15,000 in debt and $3,100 in savings. Is this a good idea and a good start toward getting my credit back on track and taking control of my finances?

Martin

Dear Martin,

In a word, no. I want you to become debt-free before you buy a home. I also want you to have an emergency fund of three to six months of expenses set aside, and have a down payment – preferably of at least 20%, so you can avoid having to pay private mortgage insurance – before buying a home.

Let me tell you a couple of things. Number one, your income is your most powerful wealth-building tool. If you don't have any payments, you have the ability to build wealth and be generous. When you have debt, all you do is send money out the door to make payments. So, being in debt is a guaranteed way to stay broke. That means getting a secured credit card is not a good idea, either.

Also, did you know you can get a home mortgage with no credit score through a process called manual underwriting? All you have to do is make sure you have a good, long history of paying other things, like your utilities and rent, on time. Most mortgage lenders who do manual underwriting would also require that you have all your debts paid off completely and the accounts closed for at least six months.

Buying a house when you're in debt and broke is a really bad idea, Martin. It's the fastest way I know to turn something that should be a blessing into a financial and emotional curse. Just be patient, get out of debt and save up. Getting control of your finances is the smartest thing you can do before buying a home!

Dave

Dear Dave,

I'm going to sell a rental cabin I own, and the sale should bring me about $388,000. Should I take the proceeds from the sale and use it to pay off my home and other debt or use the money to buy another, similar rental property where I could collect about $1,500 per month in rent? Right now, I owe $200,000 on my home, and I have just under $50,000 in miscellaneous debt.

Valerie

Dear Valerie,

Let me start by asking you a question. If your home were paid for and you didn't have a mortgage at all, would you take out a loan against your home to buy a rental property? Let me give you a hint. The answer should be a big, fat no.

The shortest distance between where you are right now and a high-quality financial life – including wealth building – is getting your home and other debt paid off. Then, use the cash flow that's freed up, and the increased peace of mind, to rapidly pile up a bunch of money and buy another rental property.

There's nothing wrong with owning rental properties and other kinds of real estate, Valerie. I love real estate, and today, I have several rental properties of my own. The difference is I bought all of mine with cash. I didn't go into debt for them. I learned my lesson about debt the hard way over 30 years ago, and I don't want you to take a chance on suffering through all that crap too.

Use the money from the sale of the cabin to pay off your home and other debt, and to make sure you've got a solid emergency fund of 3 to 6 months of expenses set aside. After that, if you want to start saving aggressively for another rental, go for it. Just make sure it's a smart buy when the time comes and that you pay for it in cash!

Dave

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Dear Dave,

I'm 20 years old, and I'm planning to buy a home in the next year. Besides having a 20% down payment, what other tips do you have for a first-time home buyer? Also, is there anything I need to guard against when it comes to buying a house?

Jacob

Dear Jacob,

I'm glad you're planning on making a down payment of at least 20%. That's a smart move, because it'll help you avoid the added expense of private mortgage insurance (PMI). Also, remember to get a 15-year fixed-rate mortgage loan, one where your payments are no more than 25% of your monthly take-home pay.

Now, the next pieces of advice are for you, Jacob, and anyone else who's planning to buy real estate: Always get title insurance. Always! If you're buying a piece of property that's not a traditional subdivision-type lot, have a survey done. This isn't as much of a worry with a standard subdivision lot, something that's pre-platted and has changed hands three or four times. But you don't want to buy a piece of land under the impression that it's 3 acres and then find out the hard way it's only 2.25 acres. Get a home inspection too. Unless you happen to be an electrician, contractor or something like that, you're probably not an expert on things relating to home construction.

This last piece of advice may sound funny, but don't buy a house with a great, low price if it looks ugly from the street. I did that with the very first house I bought, and it's a bad idea. No matter what you think, when it comes to houses, you can't fix ugly. You can change out carpet, and you can put up new shutters or gutters and stuff like that. Those things aren't a ton of work. But there's a reason you can get a screaming deal on an ugly house – it's ugly. And the guy you sell it to down the road is going to get a great deal on the house. Why? Because it's just an ugly house.

If you're not careful, you can get a little too excited on your first home purchase. So stay smart, look at everything involved, and don't let a case of house fever push you into a big, expensive mistake!

Dave

Dear Dave,

I've having some problems with my parents, and I'm hoping you can help. Last summer I borrowed $2,500 from them, and it is taking me longer to pay them back than we agreed. Since the pay-back date passed, they have made several comments about money when we're together, and our relationship seems strained. I have taken steps in the last couple of months to become more financially responsible. I am now doing things like living on a budget and putting something from each paycheck into a savings account. How should I approach this issue with them?

Remi

Dear Remi,

Loaning money to, or borrowing money from, relatives or friends often leads to bruised feelings. I'm sorry you're going through this, but I hope it will teach you and your folks a valuable lesson going forward. There's nothing wrong with giving money in a situation like this, as long as you're not enabling bad behavior by doing so. But a loan between friends or family is something I never recommend.

If they choose to hold a grudge, there's really not a lot you can do, especially if you took longer than agreed upon to pay them back. It just takes more time with some people – and in some cases even parents – for those kinds of things to heal. You have to remember, in their minds there's an element of responsibility and trust involved here. But considering it's your mom and dad we're talking about, I'd say they'll lighten up and become a little easier to be around with time.

Until that happens, though, maybe you could look for chances to mention your new approach to finances during conversations with them. Even something as simple as an off-hand remark about how much you were able to put into savings from your recent paychecks may encourage them to see things in a different light. Letting them know you're actively working to change your ways and gain control of your finances could mean a lot to them.

Give it a try!

Dave

Dear Dave,

How do you handle a situation where someone needs financial help, but has misspent money you've given them in the past? My wife and I have been trying to help a young man we recently met. He told us he was trying to get his life together after a divorce and job loss, and he just needed a little money for groceries and household items. He has asked us a couple of times since for more money, but we discovered he was buying alcohol with most of the cash we gave him. We learned from friends what he said about losing his job and being divorced was true, but we are unsure what to do next.

Andrew

Dear Andrew,

This young man's problem sounds as much like a mismanagement of money as it is a lack of money. He seems to have an issue with lying, and possibly an addiction problem, too.

I've never been against helping people who have good hearts and just need a break. But if someone is bold enough to ask for your money, you have every right to attach requirements to the help you give—especially when it's for their own good. If he really needs food or household things, you can just buy them for him. At least that way, you'd know you were providing necessities.

But in many cases, truly helping someone is a lot more work than just giving them money. Sometimes, you have to get down in their mess, get real with them and walk with them. If you haven't been put off by what has already happened, and you still really want to help, I'd suggest getting to know this young man and his situation a little better. Be straight with him, and let him know you've learned he hasn't been honest with you in the past. Hopefully, as a result he'll apologize and start making better choices. If he does, you might even offer to arrange for him to talk to a good pastor or counselor.

This whole situation is much bigger than helping someone with a little cash. This guy needs someone who cares enough to help him get his life back together.

Dave

Dear Dave,

I have an uncle who wants to gift some property to one of his sons, myself and my sister. The property is about two-and-a-half acres, and it's probably worth around $125,000. My wife and I are trying to pay off debt in Baby Step 2 of your plan, and we're not sure how we feel about the situation. What do you think?

Dave

Dear Dave,

If your uncle asked me if he should do this, my answer would be no. The thing is, you've got three different sets of people with different lives and very different situations. Not only that, but these three potential co-owners probably have differing ideas about the land and what should or shouldn't be done with it. To me, the whole thing sounds like a big family fight just waiting to happen.

If I were in his shoes, I'd just sell the property and split the money equally between the three of you. It'd be a lot easier that way, and you'd avoid the chance of hard feelings between you and your relatives down the road. Don't get me wrong, your uncle sounds like a kind and generous man. He's trying to be a blessing to all three of you, but it has a very real possibility of causing unintended problems he may not see coming.

That's the way I'd handle it, Dave. A couple of acres of dirt split between three people isn't worth all the squabbles and bad feelings it could cause.

Dave

Dear Dave,

I'm an anesthesiologist, and I make between $260,000 and $270,000 a year. My wife is a stay-at-home mom who takes care of our preschool-age kids. We have about $50,000 in a retirement fund, $50,000 in consumer debt, $220,000 in student loan debt, and we owe $280,000 on our house, which is worth around $500,000. We're thinking about using our retirement fund to pay off credit cards and such, then selling the house and using the money to pay off the student loans. After that, we'd live in an apartment for a while, save up 20% or more for a down payment on the next home, and do things right financially moving forward. What do you think about this game plan?

Jake

Dear Jake,

Wow, I really appreciate your motivation, man. You're willing to do whatever it takes, and that's pretty cool. Not many people have the determination to do the kinds of things you're talking about.

I almost never tell people to sell their homes. If you actually can't afford it, that's one thing – and in that case, we'd sell the house. If it's the only way to avoid bankruptcy, we'd get rid of it in a heartbeat. But in your case, things are a little different. You're in a pretty deep hole, but your income as an anesthesiologist gives you a really big shovel you can use to carve out some steps, get up out of that hole and fill it in so you never fall in again.

Now, this is going to mean some real lifestyle changes for a few years. I'm talking about beans and rice, and no vacations. There's no more living like a rich doctor, because you're not a rich doctor – you're a broke doctor. We're going to temporarily stop adding to your retirement fund, not cash it out, and we're going to start living on a written, monthly budget where every single dollar is given a name and a purpose.

Cleaning up $270,000 of debt sounds scary. But with a $260,000 income and the other changes we talked about, you could put $90,000 a year toward all this and have it completely cleaned up in just three years. That's what I'd do if I woke up in your shoes. It will set you free for the rest of your lives to invest and save.

Get on it, Doc. You can do this!

Dave

Dear Dave,

The other day, my wife and I discovered a Thrift Savings Plan (TSP) we'd forgotten about for over 10 years from my time in the Army. There's a little over $3,200 in there. We're both in our 30s, and we're trying to save up our starter emergency fund in Baby Step 1 of your plan. We were wondering if we should withdraw the money and use it toward Baby Steps 1 and 2, or just leave it in there.

Todd

Dear Todd,

The best thing to do is roll the money over into an IRA. Otherwise you're going to be hit with a 10% penalty – plus your tax rate – and end up paying 30% to 40% of it to the government. That's kind of like asking, "Would it be a good idea to borrow $3,200 at 30% interest to pay off debt?" Of course not! That would be a really dumb idea. And in a sense, that's what you'd be doing by just taking the money out of the TSP.

It's not a ton of money, but conceptually, I hate the idea of giving the government 30% to 40% of my money just to get my money out. So yeah, do some research, find a good investment professional near you – one with the heart of a teacher – and roll it into an IRA.

Congratulations to you and your wife for deciding to take control of your money. And thank you for your service to our country, Todd. I hope this helped.

Dave

Dear Dave,

My parents are both in their 70s. They have been healthy and active all their lives, but in spite of them both having good jobs, they neglected to plan and save for retirement. Is it my responsibility now to provide them with financial help in their old age?

Reagan

Dear Reagan,

It sounds like you might be a little irritated that your parents haven't been responsible with their money. The way you described the circumstances, it's understandable – to a point. But in my mind, there's a bigger question when it comes to helping your folks. How big is the burden?

Let me ask you a few things. Do you have the money to help? Now, can you provide this help without your own family suffering or going without? If both answers are yes, I think your question may be a little more about your own aggravation with your folks than any ethical or moral obligation.

A few years ago I spoke with a guy who was in really good shape financially. He made over $1 million a year, and he had plenty set aside in savings and retirement accounts. His father was in poor health and had never handled his money wisely. The son asked me if he should help out his dad by giving him some money every month.

In my mind, there's no question the right answer was yes. And that's what I told him. If you're making millions, but don't want to help out your sick dad, there's something wrong with you. There's something missing inside you that money just won't fix. However, if you and your family are barely getting by – let's say you bring home $3,000 a month – you're not morally required to help a parent who was irresponsible with money their entire life.

I'm not sure what your situation is, Reagan, but I hope you'll look at things with a little grace and reason. It's a tough situation to be in, because it sounds like your heart is being pulled in different directions. My advice, above all else, is to pray about it. And, if you have a spouse, talk to them about everything, and make sure the two of you are in agreement on what should be done before moving forward.

God bless you, friend.

Dave

Dear Dave,

I'm single, and I make $35,000 a year. Next year, my salary and bonuses should be around $50,000. I have a little over $30,000 in debt right now, including student loans, and I'm not sure how I'll be able to keep up with bills and everything else right now if I have to save $1,000 for a starter emergency fund like you recommend. Can I get by with a starter emergency fund of $500?

Jonas

Dear Jonas,

I really think you're making this whole thing sound a lot harder than it really is. They key is making and living on a budget, and that's not rocket science. It's a simple, written planning process where you give a name and a job to every dollar you make before the month begins.

Food, shelter, clothing, transportation and utilities are necessities, so they come first. After that, make sure you're current on your debts. Once all that is out of the way, put every spare dollar you can into your emergency fund. If you do this with a sense of urgency, and limit spending to necessities, you'll be surprised by how fast it will happen. And you'll love the newfound sense of security.

The truth is you really need a starter emergency fund of $1,000 if you're at a point in life where student loans and other debts are in the picture. That may seem like an impossible goal right now, but it should be your first priority. And a written, monthly budget will go a long way toward helping you achieve that goal.

You can do this, Jonas!

Dave

Dear Dave,

Earlier this month, my husband and I both were laid off from our jobs within a few days of each other. The layoffs were not our fault. The company is letting several people go as a cost-cutting measure. We cashed in an annuity because our finances have been tight, but the good news is he began training for a new job last week. We don't have children, so I am interviewing or filling out applications every day. Should we use the cash from the annuity to live on until things are stable again, or should we use it to pay off debt?

Anjanette

Dear Anjanette,

If you haven't done so already, contact your creditors and explain what happened. Let them know the layoffs weren't because either of you did anything wrong, and that you'll get current with them as soon as possible. This is a scary situation you're facing, so make sure you two keep the lines of communication wide open and encourage each other while you're solving this problem.

The good news, though, is it sounds like things may be looking up. Support your husband all you can as he takes on his new job, and make sure you continue looking for work, too. A little extra money never hurts, so temporarily taking on a part-time gig while you're looking for a permanent position isn't a bad idea, either.

Of course, you need to be honorable and pay your debts if possible. But that may have to be put on hold for a while. Right now, the important thing is keeping food in the house and the lights and heat on. Hug on each other, stay determined and keep each other's spirits up. You're a team, and you'll get through this.

Always remember, too, that prayer's a good thing.

Dave