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Dave Says

By Dave Ramsey
Author, The Total Money Makeover – Finanacial guru Dave Ramsey answers questions about wise financial decision-making.

Not Much Money Left at the End of the Month

Dear Dave,
I’m a 25-year old, married and we have three kids. We owe about $100,000 on our house, with monthly payments of a little over $800. We also owe $8,000 on a car and have hospital bills totaling $1,000. Our total monthly bills are about $2,000, while my take-home pay is only $2,100. We’ve also got no savings. What can we do to keep from going under and losing the house?

Dear Chris,
Wow, things really are tight. You’ve got too much house for your income – way too much. Selling a house is painful, but if you don’t get your income up immediately with a new job or extra jobs, you’re going to have to sell. Your car is pretty expensive, too, for someone making less than $30,000 a year. If I were you, I’d consider selling it, too, if you’re not able to increase your income pretty quickly.

I’d sit down a write out a game plan to just get vicious about it and attack that debt. First, get a beginner emergency fund of $500 in place. Then, just go crazy - have a yard sale, pick up an extra job and live on a really tight written budget. If you do all this, I think you could have the hospital bills and car paid off and be debt-free except for your house in a little over a year.

You guys have been doing what lots of folks do. You’ve spent your lives just rolling along, living without a plan, then suddenly you both look up and, whoa, we can’t breathe!
-- Dave

Instill values in kids about money?

Dear Dave,
Our church is running a missions trip, and has told the kids that they can send out sponsor letters if they can’t afford the cost. I’m trying to teach my kids that you should work for the money you get, and I don’t agree with the whole idea of sponsorships for this. What do you think?

Dear Gary,
I think you’re basically on the right track in terms of earning what you get, but let’s take a look at it this way. If your kids are going to be involved in the ministry – especially as a missionary – they’ll have to get used to the idea of receiving. It’s part of the job description.

The big thing is that the kids understand why the trip is important and why people should want to support their efforts. If it’s just another chance to hang out with friends or go party in another country, most people won’t be very supportive.

But, if her heart’s in the right place, the support she receives will be just another part of the process in making the ministry come to fruition. There’s certainly nothing wrong with kids, and even parents, working to pay for their own mission trips. Honestly, that’s preferable.
-- Dave

How did Dave save up for his current home?

Dear Dave,
How did you save up the money for your current home? I’ve heard the story of how you lost it all and then rebuilt your life. It’s amazing, but it seems almost impossible to save up enough money for a house, especially if you’re married and have kids.
-- Brian

Dear Brian,
It’s really simple. We just drew a line in the sand and said we’re not living in debt for the rest of our lives. We sold our previous home and moved into an old rental house we both hated. Then, we paid off our debts with the equity from the sale of the house, started saving piles of cash and we did that for many years.
We didn’t quite pay cash for our current home, but we got really close. We had a very small mortgage for about six months. That’s the truth of the matter, and that’s how you do it. Get out of debt and then save, save, save!
-- Dave

Dave Ramsey is a nationally-syndicated radio talk show host and author of the New York Times bestselling books, Financial Peace Revisited and The Total Money Makeover. His life-changing advice in the area of personal finance helps people get out of debt, stay out of debt and build wealth that will last a lifetime and beyond.

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