Tuesday, 31 January 2017 07:56

Dave has Answers to Your Money Questions!

Written by  Dave Ramsey
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Q.  My dad has been really bad with money his entire life. Anytime he would get into trouble, my grandparents would always bail him out. This time he came to my wife and I, asking for $350 to get out of overdraft at the bank. We’re trying to live on a budget and get control of our finances, and $350 would make things kind of tight at the moment. What do you think we should do?


A.  I understand feeling an obligation to help your dad. But there’s a lesson here that dad needs to learn, and it’s something that goes much deeper than the money or helping out a family member.


You have to do the right thing, no matter how dad reacts to this. Right now, the right thing is taking care of your family and not putting them in jeopardy. So my answer to dad would be no. Another thing that needs to happen is for the definition of “help” to change. When you say he’s been irresponsible with money his whole life, giving him $350 won’t help — and it will make you an enabler. Just handing him $350 will actually hurt him, and it will give him the idea he can continue being dumb with money and hit you up for cash anytime.


Like I said, I understand the pull of helping out a parent. So if you feel this is something you absolutely must do, I would advise making the $350 contingent on the fact that he begin and complete a financial counseling course. Be gentle when you talk to him, and let him know it hurts to see him struggling. But let him know, too, it’s his responsibility to work through his debts and take care of his own finances!



Q.  My wife and I owe $90,000 on our mortgage, and we have no other debt. We are able to save about $20,000 a year, so we could have the house paid off in just over four years. She likes the idea of having lots of money saved up, but I would love to be completely debt-free. Should we pay off the house or hang on to the savings?



A.  Let’s pretend your house is already paid for in full. Would you borrow on your home so that you had enough cash that your wife liked it? You say you wouldn’t, so what’s the difference? If you had a paid-for house and you wouldn’t borrow on it to have cash laying around to feel better, why wouldn’t you use the cash laying around to pay off the house? It’s the same thing.


The first thing you want to consider is having an emergency fund of three to six months of expenses. You also need to make sure you’re putting aside 15 percent of your income for retirement. Other than that, if you have enough cash laying around to pay off your home and you don’t, it’s the same thing as having borrowed on your home in order to have cash laying around.


If I’m in your shoes, as soon as the emergency fund is in place — six months of expenses since your wife likes the security factor — and 15 percent is being put away for retirement, I’d take the other money and throw it at the house. Get that thing paid off as fast as you can!

Last modified on Tuesday, 31 January 2017 08:02
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