Monday, 02 June 2014 17:06

Giving Money and Mortgage Payments

Written by  Dave Ramsey
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Q. My wife and I have a friend we met through the Big Brothers Big Sisters program. She has a 1-year-old child, and she recently asked us for some money. We don’t really approve of how she’s choosing to spend her money—she’s spending a lot of it on alcohol and cigarettes—but she does need financial help. What should we do?


A. I have a very simple rule for situations like this. If someone is bold enough to ask me for my money, I can be bold enough to attach requirements to the money for their own good.


One of two things will happen when you handle things in this manner. They’ll welcome the help and graciously accept your conditions, or they’ll get mad and act like you have no right interfering in their business. I don’t have a problem helping people who have a good heart and really need a break. But if someone cops an attitude with me in this situation, I wouldn’t break out my wallet anytime soon.


Regardless, if you choose to do this, I’d make the money a gift and not a loan. Concentrate on trying to get her on a path where she thinks a little straighter, and, as a result, she will make better choices. Teach her how to make and live off a budget or help her enroll in a personal finance course. But right now, just handing her money is like giving a drunk a drink.


This whole situation is a lot bigger than giving someone $35 for diapers. The answer to that is easy. It’s yes. But in this case I’d probably give it to her in the form of a grocery store gift card. Many of those don’t allow alcohol and cigarette purchases. Or, I’d just go buy diapers and baby food and take them to her. Actually helping people is a lot more work than just throwing money at them. To really help someone, you have to get down in their mess and walk beside them.


Financially speaking, her problem is just as much mismanagement of money as it is a lack of money. Anyone who chooses smokes and alcohol over diapers for their kid needs to be smacked. But since you can’t really do that, you can put conditions on your help that are designed to help her improve her decision-making abilities and, by doing that, improving her life.



Q. I know you recommend that no more than 25 percent of your take-home pay should go toward rent or a mortgage payment. Should taxes and insurance be figured into this amount?



A. Yes, they should. Mortgage companies will qualify you for twice as much house as you can realistically afford. They’ll try to put you on a 30-year, adjustable-rate mortgage and leave you in debt up to your eyeballs for half of your life. Payments like that can easily equal 36 percent or more of your take-home pay. That’s just nuts!


I see so many people who can’t take a decent vacation or save anything for retirement or their kids’ college fund because their mortgage payment is through the roof. That’s called being “house poor.” And I’ve even seen it push people into debt just to buy groceries.


Engage in some critical thinking when it comes to your finances. There’s so much more to life than that building we call a house. I want you to think about your future and your family’s future and make smart money decisions that will change your family tree for years to come!
















Last modified on Tuesday, 10 June 2014 17:16
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