Dave Ramsey: Dave Says…

Dave Says

Silly gas move!

Dear Dave,

I drive 120 miles a day to and from work in an old, paid-for SUV that gets 14 miles per gallon. I’ve done the math and calculated that I would save $437 a month driving a vehicle that gets 30 miles per gallon. The SUV is worth $6,100. Should I trade in the SUV toward a new, small car and put the gas savings toward the payments?

Michelle

Dear Michelle,

No way! Why on earth would you want to pick up a car payment again when you’ve got $6,100 to work with?

I’m all for saving money on gas – especially with fuel prices being where they are now. But why not sell the SUV and use the $6,100 to buy a nice little gas-sipper? And please, don’t try to tell me that you can’t find a great used car – one with decent mileage that gets a whole lot better than 14 miles per gallon – for that kind of money.

There’s not a chance under the sun that I’d recommend you pick up a car payment, Michelle. Sell the SUV, find yourself a good little $6,000 car and keep your money in YOUR pocket!

- Dave

Dave Says

Absurd Debt Payoff Plan

Dear Dave,

We’ve been married for 11 years and have about $40,000 in credit card debt. The only other debt we have is our house. We make $90,000 a year, and my husband handles all the finances and says it will take us at least four years to pay off all the cards. Does this sound about right for our amount of debt?

Adria

Dear Adria,

I really appreciate you guys waking up and deciding to get out of debt. But considering how much you make, four years is a ridiculous amount of time to pay off that amount.

The average family in America makes about $40,000 a year. You guys make more than twice that much! It should be no problem for you to downsize your lifestyle and live on $70,000 for a couple of years. This means putting vacations on hold and saying good-bye to things like restaurants and toys for a while.

And here’s another thing. I hear you saying that your husband handles the finances. That stuff ends today! The two of you should be on the same page, and that means sitting down TOGETHER to make out a budget before each month begins. Does this mean that you have to be the one who writes the checks? No, but the two of you need to be in agreement on where every dollar goes.
This is very doable, Adria. Follow the debt snowball plan, and pay these cards off from smallest to largest. But you guys are going to have to pull together and live on rice and beans for a while to make it happen!

- Dave

Dave Says

Pay Off House by Tapping Reserves?

Dear Dave,

We’re debt-free except for our house. We also have $25,000 in our emergency fund. The mortgage payment is $940 a month, plus a remaining balance of $124,000. We also have $125,000 in a mutual fund and other stocks outside our IRAs, and a combined income of about $90,000. Are we in good enough shape to pay off the house by cashing out our non-retirement investments?

Will

Dear Will,

Saving $1,500 a month would be a piece of cake if you didn’t have a house payment. And in about five years you could save up everything you cashed out of your investments and re-fund them …

Write a check today and pay off the house, Will. With no house payment and your emergency fund and IRAs still in place, you’ll be sitting pretty!

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Single Stocks and Bonds?

Dear Dave,

My father in-law swears by single stock picks and CDs. He says he’d made lots of money this way over the years. What do you think of this strategy?

Norm

Dear Norm,

I guess that depends on what you call “lots of money.” Single stocks and Certificates of Deposit – I like to call them Certificates of Depression – are not the route I’d use for investing. There are much better ways to handle your money!

I don’t own single stocks, and I won’t suggest them as part of a good investment plan. The fact is that single stock investments don’t consistently generate returns like good, growth stock mutual funds. If, for some reason you’re just in love with the idea of owning stock, I’d suggest that you limit your single stocks to no more than 10 percent of your investment portfolio.

The problem with CDs is the possibility of having to pay fees for early withdrawal, and the fact that they have a very low rate of return. As an investor, you need to see high enough returns to outpace inflation – about three to four percent a year – and to pay taxes on the gains if it’s not inside a retirement account. Most investors need to see about six percent per year over time to do these things.

I’d suggest using CDs only for savings, like for purchases or maybe taxes if you own a business. Not for long term investing.

- Dave

Dave Says

Our Advisor Is Confusing Us!

Dear Dave,

We’ve completed the first three Baby Steps, and we’re ready to start investing. Our friends recommended an advisor, and after a few meetings with him we’re very confused. He seems to be pushing us toward certain things we don’t understand. Is this unusual, and will things become clearer over time?

Troy

Dear Troy,

Here’s the deal on advisors – they advise, YOU make the decisions. This is very important. If this “advisor” is being really pushy or not making things understandable for you, then you need to find someone else.

When you go to a financial advisor you’re paying them for their advice, expertise AND their ability to teach you to make smart decisions about your investments. You may have heard me say to search out someone with the heart of a teacher. This is so very important when it comes to handling your money. I mean, you’ve worked hard for it and now you want it to work hard for you. Are you willing to just throw it at something because a guy in an expensive suit says so? I hope not!

Don’t invest in anything unless you understand it fully and can explain how that investment works to someone else. Investing doesn’t have to be complicated, but you need a good teacher.

And good teachers can impart knowledge in a way that will eliminate fear and confusion.

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Don’t get “doc-itis”

Dear Dave,

I’m 33 and a resident doctor with $250,000 in student loan debt. This is the only debt I have, and I’ve managed to scrape together about $1,000 in savings. Next year I’ll finish my residency and increase my income from $40,000 to about $400,000. The interest rate on my loan is just 3.5 percent, so I’d like to postpone paying it off and buy a house and begin saving for retirement instead. Is this a good idea?

Derrick

Dear Derrick,

I wouldn’t do it that way. That student loan debt hanging over your head is unbelievable. I mean, it’s massive!
I’m thrilled that you’re going to be making that kind of money. You’ve spent most of your life going to school, training, living on nothing and working yourself to death. But if you’re not careful you might catch a nasty disease called “doc-itis.”

“Doc-itis” is an ailment that afflicts lots of new doctors. Some of the symptoms include two or three leased BMWs and a fully-furnished house with a pool on the golf course. It’s a financially-debilitating disease, and I don’t want you to get sick!
You’ve been used to living on $40,000 a year for a while now. Just keep on doing that for a little bit longer. With the kind of money you’ll be making you can have that student loan debt knocked out in a couple of years. After that, just follow the Baby Steps. The only difference for you is that there will be a few more zeroes attached.

If you stay smart and play this right, Derrick, you’ll have no problem living well and retiring a very wealthy man!

- Dave

Dave Says

Sorry, wrong number

Dear Dave,

I’ve been getting calls from a collection agency over an account that’s not mine. In fact, I’ve never had an account with the company they’re talking about. Every time they call they ask for my Social Security number to verify who I am. I haven’t given it to them, but I’m not sure what else to do.

Anne

Dear Anne,

You’ve done the right thing so far. NEVER give out your personal information over the phone when someone like this calls! If you had opened an account with the company they’re talking about the collector should already have had plenty of “verification information.”

This situation is more than just a pain in the neck. It could cause you more problems down the road if it’s not properly addressed. You may have to get tough and thump them a little. Let them know you mean business when you tell them not to call back, and if they do report them to the Federal Trade Commission.

I’d also consider putting a fraud victim alert on your credit report. It costs nothing except a little of your time to make this happen. You might look into getting identity theft protection insurance, too. It’s really cheap, and it can save you lots of headaches if someone steals your personal information!

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

His Agent Disagrees with Dave

Dear Dave,

My life insurance agent recently sold me a universal life policy. When I mentioned your name and asked if term life insurance was better, he laughed and said term insurance is horrible. I’m a little confused right now. What’s the truth here?

Guy

Dear Guy,

The truth is that universal life insurance is one of the worst financial products on the planet. You need to find yourself another insurance agent!

If a 30-year old buys $125,000 of universal life for 20 years it will cost around $145 a month. That same person can buy $400,000 of 20-year level term insurance for about $15 a month. That’s a savings of $130 a month! The term life may not have a savings program attached, but you can do your own saving using good, growth stock mutual funds and get a much better return.
Within the first three years you’ll generate nothing with universal life, because it all goes to fees and commissions. Plus, studies show that the average net yield on universal life is only two to five percent. That stinks! The 30-year old who bought universal life will turn around 20 years later to find it has a cash value of about $27,000. By the time he or she is 70, the cash value will only be about $66,000.

On the other hand, if you buy good, level term insurance and invest the difference you’ll see in savings in good, growth stock mutual funds, it will be worth $133,000 at age 50. By the time you’re 70, it will be worth about $1.5 million!
Which one sounds better now?

- Dave

Dave Says

Can’t Break the Habit!

Dear Dave,

We’re so close to being debt-free, but I can’t get my wife to stop using credit cards. We pay them off every month, but it still scares me. I’ve tried to get her to use a debit card instead, but she doesn’t like the idea of having $500 in the bank and seeing something she wants that costs more. Any ideas?

Dan

Dear Dan,

I think the real issue here is that the girl is just a little bit spoiled. I also think that you guys aren’t working together on your money. It sounds to me like she does whatever she wants, and then you guys cover it. That’s not togetherness.

To most people credit cards represent three things. One, they represent convenience. They’re easier to use because you don’t have to fool with a checkbook in the grocery store line. Two, they represent security. If you’re away from home and need money, you can just pop it into a machine. And number three, they’re a way to get stuff you can’t afford. This doesn’t sound like the case here, because you pay them off every month. But the fact remains that a debit card will do virtually anything a credit card can do.
I want the two of you to sit down together and start doing a written budget every month – on paper, on purpose before the next month begins. Ask her how much extra she’d need in the account each month to feel comfortable, and come to a reasonable, affordable agreement on this. Then, you pull out the scissors and cut up the credit cards – together.

You need some flexibility here, Dan. But she needs to grow up and get over the idea that she’s supposed to have whatever she wants the second she wants it!

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Use it to catch up!

Dear Dave,

We just received a small inheritance of $5,000. We have about $21,000 in debt, and one of the creditors is calling every day because we aren’t current with them. Do you think we should go ahead and start the Baby Steps or deal with this guy first?

Laura

Dear Laura,

Let’s get current before we start the Baby Steps. That way, you can focus on getting out of debt without someone hounding you all the time.

Once you’re current, get $1,000 in the bank for an emergency fund as fast as you can. Then, start on your debt snowball and pay off all of your debts – except for the house – from smallest to largest. Make sure you’re doing a written monthly budget to help you stay on track, too. On paper, on purpose before the month begins.

I’m proud of you guys, Laura. Taking control of your money instead of letting it control you is the first step toward financial freedom!

- Dave

Dave Says

Sinking into debt!

Dear Dave,

We don’t have a lot of debt. Right now it’s just the house and a student loan of about $9,000. My father just asked if I wanted to buy his boat. We talked it over, and I could take the cash from my spending money each month and pay him a little. Would this be okay?

Robert

Dear Robert,

I can’t believe you just asked Dave Ramsey if it’s okay to have a boat payment. I’m the guy who yells NO DEBT all the time, remember?

Basically, what you’re talking about here is going into debt to your dad to buy a boat. I love boats and being out on the water. If I were going to cave in on anything, it would be a boat. But there’s not a chance in the world I’m going to tell you it’s okay to have a stupid boat payment!

In this kind of situation, you’d be taking on more debt PLUS it would create an awkward situation with your dad. It doesn’t matter if the debt is to a finance company or a family member. The borrower is always slave to the lender, Robert. Trust me, that Fourth of July cookout would taste and feel a lot different if you were sitting down with your master instead of just plain old dad.

Having a boat is really cool and lots of fun, but first things first. Get out of debt, then save up!

- Dave

Dave Says

Can I piggyback?

Dear Dave,

What do you think about “piggybacking” on a person’s credit card so that their credit score can go up?

Tony

Dear Tony,

That is one of the worst things you could possibly do. It’s a really bad idea. It’s dumb. Am I being clear on this?

Want to know why it’s such a bad idea? If they don’t pay, YOU get to fork over the cash. What a wonderful privilege and opportunity! And if someone’s finances are in such bad shape they want to run on your credit, chances are they aren’t going to pay and you’ll get stuck.

Besides, you don’t want to run up your credit score, anyway. Do you know what your credit score really is? It’s your “I Love Debt” score. The only way you get a big FICO score is to get in debt, stay in debt and make a lot of debt payments.

Don’t do it, Tony!

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Unreliable Car? Don’t Think So!

Dear Dave,

My husband recently had his commissions cut in half at work. This has reduced our annual income from $100,000 to $50,000. Just before this happened, we bought a new car for $18,000 because he’s on the road a lot and needs something dependable. Before this we were debt-free except for our house. How can we get back there and keep him safe?

Donna

Dear Donna,

Are you trying to tell me the cheapest dependable car out there costs $18,000? I don’t think so.
I’ll agree that he needs a reliable car – every road warrior does. With the miles he’s racking up that $18,000 car is going to turn into a $4,000 car before you know it!

But I wouldn’t recommend he wear out an $18,000 car, even if you guys had a million dollars in the bank. I’d suggest he wear out a $7,000 car. And there are lots of solid cars with plenty of life left in them in this price range. You’re not looking for a vehicle to make a statement, Donna. You’re looking for dependable transportation – period.

If I were you guys, I’d sell that $18,000 machine. Take out a small loan to cover the difference and buy a good get-around car. Then, pay the loan off as quickly as possible so that you can re-focus on knocking out your house and becoming debt-free!

- Dave

Dave Says

Take Care of Your Own

Dear Dave,

My husband and I have made a commitment to get out of debt. We’re living on a budget, and we’ve both taken part-time jobs. This is my second marriage, and I have two kids. Unfortunately, my ex-husband has stopped paying child support. It’s always been an on-again, off-again thing with him. Do you think we should take him to court over this?

Jennifer

Dear Jennifer,

It’s your ex’s job to take care of his kids. If there’s a pattern of irresponsibility at work when it comes to that duty, then you need to thump him!

Now, it’s not his responsibility to take care of YOUR stuff. Keep this in mind. There’s a reason they call it child support. But a stand-up guy is going to take care of his kids if he’s got the money. Sometimes bad things happen to decent people, and anyone can have trouble financially from time to time. But if those kids were under his roof, they’d eat before he paid bills – assuming he’s a stand-up guy.

In this kind of situation, child support should be the first thing you do as a dad. And if he’s just not paying, then you need to get a judge to help him re-prioritize his life!

- Dave

Dave Says

Ludicrous Advice

Dear Dave,

My dad has been reading a book, and the author says the stock market is about to crash. He’s scared my dad to death, and now he wants to pull out all the money from his 401(k) and other investments and buy gold overseas. What can I say to talk some sense into him?

Amanda

Dear Amanda,

I’ve seen books like this every year since I was old enough to read. This is ridiculous!
COULD the stock market crash? Sure, but there is absolutely no realistic indication of that happening. In order for the stock market to crash all the giant companies like Microsoft, Ford, GM and GE would have to blink out of existence. I’m not talking about lower earnings and economic slow downs, I’m talking about closing their doors and going out of business completely. Can you honestly imagine this happening?

Our stock market and banking systems are structured and operate much differently than they did before the Great Depression. There are many more safeguards in place. When President Nixon resigned the stock market dropped almost the same exact percentage it did back in 1929. There was no depression. Fifty-six days after the attacks on 9/11 the market was back up to the level it was on September 10. Did it drop for a while? Of course, it did. But the people who run around spouting this end of the world kind of stuff are doomsayers trying to make a buck off people’s fear.

I don’t own any gold, and I’m not buying any gold. The returns are horrible – only about four percent over the last 50 years – and the volatility is all over the place. Next to gold, the stock market looks like a cake walk!

- Dave

* For more financial advice and special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Giving a Drunk A Drink

Dear Dave,

My sister and her husband are wonderful people, but they don’t know how to handle money and are in debt up to their eyeballs. On top of this, they just found out they’ll have to pay $30,000 in taxes this year. I paid off my home and became debt-free almost two years ago, but some big medical bills have eaten into my savings. Should I take out a home equity loan for the amount of the taxes to help them?

Toni

Dear Toni,

Absolutely not!

You just told me they won’t behave when it comes to their money. Well, you don’t give money to people who won’t behave properly with money. It’s like giving a drunk a drink. In this kind of situation you’d go borrow the money, they would still be broke and you’d be back in debt with a mortgage hanging over your head again.

A quick fix is never the best way to try and help people in these kinds of situations. You have to help them learn to change their ways. Teach them to fish, because if you just give them a fish it will just stink! Keep in mind that none of this makes your sister and her husband bad people. But you really shouldn’t endorse this kind of behavior or participate in the denial associated with it. You can love them as much as you want, Toni, but YOU can’t fix their problem. And handing them money definitely isn’t the solution.

If they’re willing, sit down with them and show them what you did to get out of debt and get control of your money. Start out by showing them how to do a budget and give every dollar a name on paper before the month begins.

And do it with a loving heart. Because we’ve all made mistakes with money!

- Dave

Dave Says

Can’t Sell House!

Dear Dave,

The closing date on our new house is very soon. The problem is that we still haven’t sold our current home, and we’re getting nervous. What can we do?

Ruby

Dear Ruby,

I’d be nervous, too, if I were in your shoes. Never, ever buy a new home without making the deal contingent upon the sale of your current home!

You’ve turned yourself into a desperate seller because you made some bad decisions. You may have to pay some Stupid Tax to fix this thing, and that might mean losing some cash and making other tough choices.

If there’s any way to call off the deal honorably and without breaking your word to the other people involved, I’d do it. But if you’re locked in you might try negotiating a deal to delay the closing or flat out restructuring the contract to make it contingent on the sale of your current home.

If the other party isn’t agreeable to these ideas, then you need to drop the price on your current home and get it sold today!

- Dave

Dave Says

Making Kids Save?

Dear Dave,

We make our 16-year old daughter save $40 out of every paycheck she receives from her part-time job. She always fusses and complains about this. Do you think it’s wrong to force your kids to save money?

Debbie

Dear Debbie,

What a mean mom! Making your child do smart things …

No, it’s not wrong. It’s for her own good!

Here’s a news flash for you – teenagers are insane! They gripe and complain even when there’s no reason to gripe and complain. And most of the time their brains don’t work right because they have all those hormones racing through their bodies. Sometimes, it’s our job as parents to be the only sanity in the room.

At 16 she hasn’t earned the right to do dumb things with her money. When she gets out on her own, then she can do all the stupid things she wants. But now is the time she should be learning how to handle money responsibly and according to your rules.
Being a parent is often a thankless job. But chances are when she matures a little and realizes how important saving money is, she’ll understand.

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Mortgages-Killer house payment!

Dear Dave,

I’m about to get a settlement of $35,000 from an auto accident. Do you think we should use it to pay down our mortgage, or save it, sell the house and try to find something cheaper? Together, we bring home about $3,200 a month, and our monthly mortgage payment is $2,400. We also have about $5,000 in credit card debt, plus medical bills from the wreck.

Sherry

Dear Sherry,

I don’t say this often, but you’ve got to get that house sold. And I mean today! You’ve got 75 percent of your take home pay wrapped up in a mortgage payment, and it’s eating you alive!

Your house payment should be no more than a fourth of your take home pay on a 15-year fixed-rate mortgage. And with what you guys bring in, that means your house payment should be around $800 a month – not $2,400.

If I’m in your situation, Sherry, I’m selling the house and finding a decent, inexpensive apartment to live in for a couple of years while I get my finances stabilized. Start on the Baby Steps, and get $1,000 in the bank as fast as you can for an emergency fund. After that, attack your debt using the debt snowball and pay them off from smallest to largest.

After you do all this you might be ready to think about owning a home again. I know you’ve been through some hard times with the car wreck and all, but you guys really need to practice being conservative right now so things don’t get out of hand again!

- Dave

Dave Says

Credit Score-I’m not dead!

Dear Dave,

I went through a divorce about six years ago. Recently, I re-married and when we went to apply for a home loan my TransUnion credit report said that I was deceased. What should I do to let these people know I’m not dead?

Stacy

Dear Stacy,

This is too much! But I think we can revive you.

Write a letter to TransUnion – certified mail, return receipt requested – advising them that according to the federal Fair Credit Reporting Act you’re challenging the accuracy of the credit bureau report listing you as deceased.

They’re usually pretty good about clearing these kinds of things up. But the reason for sending a certified letter is there will be proof of the letter being delivered. At that point, the fuse is lit and by law they’ve got 30 days to fix the problem.

Good luck, Stacy!

- Dave

Dave Says

Real Estate-House on the Lake

Dear Dave,

I was wondering if you think we can afford to buy a lake house. The house we’re looking at costs $1 million. I bring home about $15,000 a month, and we have no debt. I started saving and investing when I was 18, and right now my wife and I have about $4 million sitting in our savings account. Even though we both love the water, part of me thinks we should just rent one for a few weeks a year.

Mike

Dear Mike,
Dude, you are a classic! You have done an absolutely PHENOMENAL job with your money!

Generally speaking, lakefront property is a great investment. Plus, if you buy instead of rent, it’s YOUR investment and you get to leave your clothes in the closet!

If I’m you, I’m buying that house before the week is up! I own a lake house, and I can tell you it’s one of the best investments I’ve ever made – money-wise and relaxation-wise.

Do the deal, Mike. You guys have earned it!

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Christian School Is Busting the Budget!

Dear Dave,

We have three kids enrolled in Christian schools, and it’s very expensive. We truly believe they’re getting a great, faith-based education, but they’re only in elementary school and already we’ve had to dig into our savings.

Maureen

Dear Maureen,

Private schools can have academic advantages, and in some cases a good Christian school can have spiritual advantages. But if you can’t cash flow it, you can’t do it. It’s just that simple.

My kids didn’t go to private Christian schools, and they’re all strong Christians. They went to public schools and learned to interact with people of no faith, different faiths and how to display their faith adequately in the marketplace.

Lots of times people send their kids off to a Christian school, only to find out they still have to teach them about life – the good and the bad. And the fact is, you’re just kidding yourself if you think sending them to a Christian school means they’ll be in a perfect world where no one ever acts mean or nasty.

I hope you can find a way to continue, since this is an important decision to you. But from what you’ve said it just doesn’t make good financial sense.

- Dave

Dave Says

Stupid’s Not Illegal

Dear Dave,

Is there some way to put a block on a credit report prior to sending a kid to college, so that the credit card hustlers can’t get to them?

Trevor

Dear Trevor,

No, there’s not. Unfortunately, in today’s culture that’s part of becoming an adult. When you hand them car keys there’s no way to put a block on how they drive. And when they turn 21, there’s no way to put a block on what they ingest.

About the only thing you can do, Trevor, is teach your kids to the best of your ability and be a good parent – a good example. Teach them WHY debt is dumb, and show them how it eats away at their ability to save money and build wealth. And for goodness sake, don’t use credit cards yourself. Kids can smell a hypocrite a mile away!

But even after all that it’s still not illegal for people to be dumb with their money. If it were, there would be a lot more jails!

- Dave

Dave Says

Giving with plastic?

Dear Dave,

Our church is considering letting members use credit cards to tithe or give to other programs. I’m trying to prepare for a finance team meeting, and I want to be prepared. What advice would you offer?

Anonymous

Dear Anonymous,

My advice would be to say no to this idea. Do you really believe people should tithe or give to the church with a credit card when we live in a culture where the number one cause of divorce is money problems?

I know people will argue that it’s more convenient. Well, part of the exercise of giving is to build the character of the giver. I doubt anyone’s going to break a sweat writing a check, but if they do it probably won’t cause them any spiritual harm.

I would also challenge your finance team to find one place in the Bible where something positive is said about debt. God calls debt a curse and says the borrower is slave to the lender. When God talks that way about something, it makes me think it’s probably not a good thing.

This isn’t a salvation issue. But why in the world would leaders of a church want to steer the congregation toward something negative? Hopefully, you can put an end to this bad idea before it’s too late!

- Dave

* For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

Dave Says

Covering Childbirth

Dear Dave,

My wife and I are debt-free, and we just found out we’ll be having another baby. We have individual health insurance, but it doesn’t cover childbirth. What’s the best way to go about paying for this?

Justin

Dear Justin,

Congratulations on the new baby AND on being debt-free!

Labor and delivery in most areas of the country can be done for the typical retail value of $6,000 to $7,000. And there are hospitals that will knock off about half the cost if you pre-pay for these services in the last trimester.

Since you’re debt-free, it’s going to be really easy for you guys to save up about $3,500 in the next six or seven months. Then go to the hospitals in your area, tell them you plan on paying with cash and that you’re trying to make up your minds about which hospital to use. Make sure they understand that one of the main considerations is which hospital will give you the best price!
Remember, in most ways hospitals are just another business. Plus, the birth of a child is one of the few times people actually WANT to go to a hospital. It’s a happy occasion and a joyous time for family and friends.

And it’s great PR for the hospital!

- Dave

Dave Says

Will this hit me?

Dear Dave,

My husband and I are in the process of getting a divorce, and he wants to take out a car loan. I don’t think he’d do anything illegal, but how can I protect myself – just in case?

Jennifer

Dear Jennifer,

Don’t put your name on anything where this purchase is concerned. About the only way it could affect you at all is if you sign for the car.

Now keep in mind he could always sign your name fraudulently, or the judge could hold you liable in divorce court. But chances are neither of these things will happen.

No good judge would saddle you with debt he incurred on his own. If he’s the one buying the car, all the payments and other headaches should be his – not yours.

I’m really sorry you have to go through this, Jennifer.

- Dave

Dave Says

Attitude Change

Dear Dave,

Our 18-year-old doesn’t quite get where we’re headed in getting our finances in order and becoming debt-free. He’s used to us handing him at least $30 on weekends, and that amount has dropped to $10 if he’s lucky. How can we explain it when we’re ashamed as parents that we let our own financial situation get so bad?

Cheryl

Dear Cheryl,

Everybody’s fallen down at some point. Being imperfect doesn’t make you a bad parent. And if you’ve made mistakes with money it just means you’re alive and you’ve had money in your hands at some point.

I don’t think you’ve got any reason to be ashamed as parents. You’ve fed him, clothed him, he’s got shelter … that’s pretty much all you’re obligated to do. The idea that you’re supposed to just hand kids stuff all the time is ridiculous!

At his age, he’s old enough to grasp a conversation that goes something like this: “We didn’t do a good job teaching you to handle money in the past because WE didn’t know how to handle money. We’re sorry about that. But it doesn’t mean we’ve given up our rights of parenting and making quality decisions from here on out.”

No 18-year-old needs to be sitting around having money handed to him. Shove about a dozen job applications under his nose, or show him the business end of a lawnmower – something! This kid needs to be making money!

Once that happens, you can show him the lessons you’ve learned about budgeting, saving and handling money properly. Then, he can begin spending his own $30 on weekends!

- Dave

* For more financial advice plus special offers for our readers, please visit www.davesays.org or call 1-888-22-PEACE.