A little over the top ...

Dear Dave,
We have two teenage daughters, ages 17 and 16, who are both in high school and work in the family business. We’ve done our best to teach them how to handle their money properly, including how to spend, save, and give. Also, they’ve both been saving for college. My husband thinks it would be a good idea to start charging them rent to prepare them for life once they leave home. What do you think?
Frances

Dear Frances,
I think you’re way ahead of most parents. Teaching them to handle money properly when they’re young is a great thing. It sounds like they’re both bright, hardworking young ladies, too.

I appreciate your husband’s heart and the fact that he’s looking for teachable moments, but teenagers paying rent while they’re living at home is a little over the top. Now, if either of them were 26 or 27 it would be a different story. I’d have no problem charging them rent of about $10,000 a month! But seriously, at their ages it’s still your job as parents to provide housing for your children. That’s just the way it is.

These girls already know how to work and have grasped the basic concepts of managing money. I meet 50-year-olds on a regular basis who still can’t do that. With this kind of start, I think these young women will be fine and stand a great chance of becoming wealthy one day. So, while I understand your husband’s idea, let’s tell the drill sergeant to back off a notch on this one.
—Dave

It's about you!

Dear Dave,
I’m in the process of building an eBay store. How likely is it that this will turn into a full-time business for me?
Anonymous

Dear Anonymous,
I think the likelihood of this becoming a full-time gig has more to with you and your business model than it does with eBay. If you’ve developed something really unique and coupled that with great pricing and service, then eBay’s a great distribution and marketing system to reach people you wouldn’t otherwise reach.

Still, you have to remember that eBay’s not magic. The real magic is your brain, hard work, and whether or not your business model is a good one. If it is, then eBay becomes a cool methodology through which your idea gets to market.

Regardless of how you’re executing on the internet, you still have to be executing the business properly. You still have to use basic marketing and have good margins, prices and service. The big thing is you still have to love on your customers a lot.

Plenty of people think the internet is an easy path to fame and fortune, and they forget about the basics of building and handling an operation well on a day-to-day basis. Those are the ones who don’t last long in the business world, whether it’s online or brick-and-mortar!
—Dave

* For more financial help please visit daveramsey.com.

Questionable investment

Dear Dave,
My broker has recommended a managed futures fund. I’ve never heard of these, and I got the feeling she doesn’t know much about them, either. She’s always been very conservative and reliable before, so we’re concerned. Can you explain something about them?
Krista

Dear Krista,
It sounds a little like she jumped off the cliff and became a roulette dealer. The term “managed futures” is virtually an oxymoron. I think she needs to explain her behavior and the investment after this stunt!

With managed futures you’re basically betting on the future price of a commodity. What’s the price of gold, or oil, or wheat going to be somewhere down the road? You’re guessing as to what the future will bring, and managing a group of those guesses. What a joke!

People in the brokerage business represent dumb things every day. The sad thing is this is someone you thought you could trust.
—Dave

Life insurance for singles?

Dear Dave,
I know you usually recommend having eight to 10 times your income in life insurance. I’m 25, single, and I have no kids. Do I still need that much life insurance?
Anonymous

Dear Anonymous,
The need for life insurance is very low in situations like yours. All you really want is enough to cover burial expenses, and clean up any mess you may leave behind. If you own a home you may not have to worry about any remaining debt, because the sale of the house might cover it.

Many times an employer will furnish you with life insurance equal to your yearly salary, or maybe twice that amount. In lots of cases, that alone will take care of things for young singles. Check into it!
—Dave

Planning for the future

Dear Dave,
I’m 19 and about to start college. Thanks to my part-time job and generous parents, I’ll be able to pay for college without student loans. Since I won’t be borrowing money, what’s my next financial step?
Patrick

Dear Patrick,
Stay away from the free t-shirt tables. Those things always have credit cards hiding behind them. Remember, if it seems too good to be true, it probably is. But since the money is already there for school, the only thing you really need to do is save all the cash you can for after graduation.

The first couple of years after college may be the most life-changing, and volatile period of your life. If you keep working and saving like you have already, you’ll have cash on hand for an emergency fund and to start your new life. Plus, you’ll be able to plan for the future by investing in good, growth stock mutual funds, and maybe a Roth IRA after that!
—Dave

* For more financial help please visit daveramsey.com.

Continue taking unemployment?

Dear Dave,
I had a wreck seven months ago. As a result, I lost my job and have been drawing unemployment for the last five months. I was making $1,200 a month in retail management before this happened, but I’m getting just as much with unemployment, even though I can work again. I have a small daughter, and my wife doesn’t work right now. Should I continue taking unemployment so I can stay home and help with our daughter?
Tim

Dear Tim,
Absolutely not! You need to get a job right now. You could make more than you did at your old job or taking unemployment by delivering pizzas full-time. I know you probably wouldn’t have benefits running pizza, but how about the benefit of working for a living and making some money?

You need to get off your tail right now and find something to do – maybe even two or three things to do – until you find a job that pays well. And I don’t think I’d go back into the kind of management you were in before, because even working that gig you guys were barely getting by.

It’s sweet that you’re there with your baby, but it’s seriously time for you to get a real job. Take classes and further your education, or get into another line of work. You’ve got some serious responsibilities, and it’s time to be a man and take care of things!
—Dave

Spending makes her feel guilty

Dear Dave,
My husband and I almost feel guilty about spending any of the money we’ve worked so hard to save. Is it common for older people who have saved their entire lives, have no debt, good pensions, and Social Security income, to become obsessed about not spending their money?
Connie

Dear Connie,
It’s very common, especially among folks who have developed a pattern of living frugally for 40 or 50 years. I call it the embarrassment of riches. I’ve heard some people in your situation say that they’re even too embarrassed to order dessert in a restaurant. They feel like it’s a betrayal of who they are as a person.

You guys have worked hard, saved big, and now it’s time to begin enjoying some of that money. You don’t have to do things that are outlandish or wasteful, but there’s nothing wrong with having a little fun with your money when you can afford to do so. Here’s an idea that might help you loosen up a bit. Every time you spend money on a luxury, or something fun for yourselves, give a percentage of the amount you spent to help someone else. You don’t have to match it dollar-for-dollar, because you don’t want to blow through your nest egg and have nothing left.

Give it a try. It will bring balance to your life. You’ll be able to have some fun with your money, plus you’ll get the satisfaction of knowing you’ve helped other people!
—Dave

* For more financial help please visit daveramsey.com.

Becoming the good agent

Dear Dave,
I recently graduated from college, and I think I’d like to get into the real estate business as an agent. I don’t have much real world experience, so what can I do to learn and become a great real estate agent?
Ryan

Dear Ryan,
Congratulations on finishing college! It sounds like you’re ready to hit the ground running.

I think the first thing anyone in your situation should do right now is get a first-hand look at the day-to-day life of a really good real estate agent. Find out what someone who sells 100 houses a year does on a daily basis, how they got to where they are, and how long it took them to get to that level in terms of skills, referrals, knowledge, and recognition in the marketplace.

You might consider driving to a nearby city—one that’s far enough away so that competition won’t be a factor—and finding a superstar agent. Tell them your situation, and ask if you could ride around with them for a day or two and pick their brain. Basically, I’m talking about interviewing them and finding out how you can be them when you grow up. Believe me, you’ll learn tons about the technology and marketing sides of things, too.

Real estate is probably the perfect example of The Pareto Principle. It states that 80 percent of the people make 20 percent of the money, and 20 percent of the people make 80 percent of the money. Learning as much as you can as quickly as you can is a great first step to making sure that you’re in that top 20 percent!
—Dave

Finding life balance

Dear Dave,
I own a small company, and lots of times I feel like I’m devoting too much time to the business and not spending enough time with my family day to day. How do you find a balance between home and work?
Pat

Dear Pat,
You know, I get asked this question a lot. Truth be told, the idea of everything being in balance on a daily basis is a myth. No one can perfectly juggle all that life has to offer—the spiritual, emotional, financial, home, work, and physical—every single day. It’s just not possible. Still, you need to make sure you strive for balance over the scope of time.

I started running a few years ago, and I’m out of balance if I’m training for a marathon, because I spend more time training. The same is true with work. There are times when you have to work hard, and occasionally this can bleed over into other things. I think the answer lies in really being into whatever you’re doing. Listen and participate in conversations with your kids instead of watching television. Take your spouse out on dates, and turn off the cell phone. When you’re with your family you should really be with them. Then, when you have to work, chances are they won’t be mad at you.

Honestly, we waste so much time and then we complain that we’re out of balance. Ebb and flow takes place in every aspect of our lives. So, I think we should all stop wasting the time we have!
—Dave 

* Dave may be coming to your town soon. For more information, please visit daveramsey.com/live/home.

Why can't she get another job?

Dear Dave,
I listen to you often and enjoy your radio show, but why don’t you ever ask women to go to work? When a family is broke, and the woman is at home raising one child who is already in the fifth grade, why can’t the wife get a “second job?”
George

Dear George,
I think far too many ladies, in the name of paying for stuff they don’t need, have left the household and the children for the workplace. Many of them didn’t even want to do this; they just felt obligated to do it by people like you. There are a lot of ladies who have sacrificed their ability to be full-time moms on the altar of the car payment.

Now, sometimes ladies have to go to work. There’s a time and a place for that kind of thing. But if there’s any way I can financially and budget-wise figure out how mom can be waiting at home with a big hug and a plate full of cookies when that fifth grader walks in the house – and if that’s what she wants to do – then you’re going to find me fighting for her opportunity to do that. There’s no higher calling on the planet than motherhood. We’ve lost that in our culture, and we’re suffering dearly for it.

I’m no Neanderthal jerk. I don’t say every mother has to be at home or they’re a bad person. But these days we’ve got very few people who defend full-time, in-the-home motherhood. The inference you’re making is that she’s not helping, or worse, lazy. Why don’t you go take over her job for a week? I think you’ll find out in a hurry there’s not a lazy bone in her body!
—Dave

Smaller down payment?

Dear Dave,
I’m 24-years old, and just got married two months ago. We make $80,000 a year, have our emergency fund and no debt, plus we’ve saved up for a 15 percent down payment on a house. I know you suggest 20 percent, but is 15 percent okay?
Tony

Dear Tony,
I don’t have a lot of issues with 15 percent instead of 20 percent. You’ll probably end up having to pay private mortgage insurance, but it sounds like you guys are in good enough shape financially to handle things.

However, I generally recommend that couples wait until they’ve been married at least a year before buying a home. Buying a house is huge decision. That’s why I think it’s smart to wait and get to know each other even better before making a decision of this magnitude. Plus, you need to figure out just how close you want to live to your mother-in-law!

Seriously, take your time and don’t rush things. There will still be great deals on the market in a year or so, and you’ll be able to save more money, too!
—Dave

* For more financial help, please visit daveramsey.com.

Saving up for dad?

Dear Dave,
I’m single, and I make about $70,000 a year. I’ve been able to set aside a nice bit of money in savings, and I’m paying off my student loans and car payment. One student loan is $4,000, the other is $30,000, and my car note is $21,000. Since I’m on the right track now, should I save up some for my dad’s retirement? He’s getting older, and he’s horrible with money.
Colby

Dear Colby,
Right now, you need to be getting out of debt, saving, and building wealth for you. As you do this you can choose to use some of your money to help family, friends, or your community, if you want. But just because you’re headed in the right direction, and being responsible with your money, is no reason to set up a “my dad’s an idiot with money” account.

In your situation, you need to be working the debt snowball. List your debts—and it’ll be easy since there are only three of them—from smallest to largest. For you, this means you’ll make minimum payments on the car and the big student loan while you attack the $4,000 loan with a vengeance. Scrape together every penny you can to throw at that thing, and once it’s paid off, take the money you were putting toward it, plus any other you can scrounge up, and knock that car out.

It may take you a couple of years of rolling up your sleeves and really attacking these things, but you can do it!
—Dave

Stay as a renter?

Dear Dave,
I’m 58, my kids are all out on their own, and I rent a great little apartment. It’s a perfect setup for me, because I travel quite a bit. However, I’ve had several people tell me I should really look into buying a house. I’ve saved about $450,000, I make $90,000 a year, and my rent is $1,100 a month. So, I guess I’m looking for validation. Is it okay for me to continue being a renter?
Alan

Dear Alan,
I think it depends a lot on the ratio of rent to wealth. By this, I mean if the rent isn’t much compared to the size of your income and nest egg, then I’d say keep the apartment. It’s not doing you any real financial damage, plus you still have the ability to invest in things other than a personal residence.

Now, if you’re not doing any other investing because your income is being eaten up by rent, then apartment living starts to become a bad idea pretty fast. But the only real downside, long term, is that market rents will go up eventually. If they rise faster than your income, then you could lose control of that part of your life. Or what if the current owners sell the building, and the new management jacks up the rent? Then, you’d need to look into buying something so you could regain control of all that.

Still, if I’m in your situation, with your lifestyle and having piles of cash saved up, I’d stay put. It sounds to me like you’ve got a pretty sweet situation, Alan. But if things get sassy instead of sweet, you’ll be forced to revisit this issue.
—Dave

* To see where Dave is appearing live this spring, please visit www.daveramsey.com/category/events/.

Increase your earning potential!

Dear Dave,
We have $21,000 in credit card debt, and ongoing medical expenses for our special-needs child. My husband works very hard, but only makes about $25,000 a year, and we’re living in a 30-year old trailer. My dad is willing to help us pay off some of the debt, and get us moved into a house, if we’ll get financial counseling. Is there a better way out of this situation?
Sheryl

Dear Sheryl,
If you’re going to have to make payments to your dad, in other words, if the money is going to be a loan, don’t do it. The borrower is always slave to the lender. If you really want to ruin family events, have debt to your parents. It twists you up inside, and it’ll be especially hard on your husband.

Now, if this is going to be a gift, and there are no expectations of re-payment being made, that’s a little different. But if you were my child and I wrote you a $21,000 check, I’d expect you to go into financial counseling and start saving money for your child’s future and for yours. That’s only reasonable. You guys obviously aren’t wasteful yuppies spending money right and left, but having a family and raising kids in the Dallas – Fort Worth area on $25,000 a year is tough – even  without the credit card bills you’re talking about.

Another thing I’d advise is that your husband get on a five-year game plan to improve his earning potential. Sit down with him, hold hands, and let him know he can be anything he wants to be. Then, help him decide what he wants to be in five years, what he wants to be making five years down the road, and the steps he’s going to take educationally or in terms of training to achieve that goal.

He’s a hard-working man, but today’s culture doesn’t reward hard work alone. You’ve got to engage the gray matter a little, and boost your brain power, too. You make more money when you plan to make more money!
—Dave

Relationship fix

Dear Dave,
I have three stepchildren, the oldest of which is married and has a little baby. The only time we hear from him is when they want money. We don’t mind helping out once in a while, but his wife just seems lazy. She stays at home all the time, and doesn’t help bring in anything. What can we do to fix this?
Cindy

Dear Cindy,
When your relationship with someone is based on you giving them money, then you don’t have a relationship. But there may be other reasons they aren’t calling very much.

If you say things about his wife being lazy when you do talk, it probably makes them both angry. If this is the case, they may only call when they’re desperate enough to put up with your comments about her. Plus, taking care of a baby is one of the hardest full-time jobs around. The value or importance of what someone does isn’t always reflected in a paycheck.

But I don’t think you should be giving them money all the time, either. You could try gently giving advice, instead. Maybe they need to be on a budget, or perhaps they should be spending less.

Regardless, I’m always against perpetuating relationships that are based on handing out money!
—Dave

* Dave may be coming to your town this spring. For more information, please go to http://www.daveramsey.com/category/events/.

Girlfriend's money problems

Dear Dave,
I’m fairly responsible with finances, but my girlfriend is in a terrible financial situation with a lot of credit card debt, an expensive car payment, and a big, fancy apartment. Plus, she just quit her job because she didn’t like it anymore. Now, she’s thinking about filing bankruptcy and thinks us moving in together will help solve her problems. If she can’t handle her finances on her own, what’s going to happen if we get together? Can you help?
Dino

Dear Dino,
This is someone to keep dating, not marry right now or move in with, and see if she changes her spending habits. You’d have a very tough life being married to this woman, unless she makes some real attitude adjustments where her money is concerned.

I can’t say if she’s technically bankrupt, but she definitely needs to move into a cheaper apartment and sell the car for starters. Still, bankruptcy’s not going to solve anything if she’s got a heart problem. By this, I mean if she buys stuff to try and make her happy and lives beyond her means in the process.

Lots of people have the idea that they are what they drive, or they are where they live. Those are heart problems, and that’s the way I was many years ago until I had some sense knocked into me by going broke. Then, I realized I had to stop and make some changes.

This doesn’t mean that she isn’t worthy of your love or she’s a terrible person, but it does mean that the girl has got some growing up to do. Money matters aside, you don’t quit your job without a plan unless you’re being sexually harassed or abused, or there’s some matter of principle at stake. Leaving one job for another is okay. But the idea of deciding you just don’t like something, and walking away from it when you’ve got a bunch of bills, is just plain irresponsible.

She’s probably not bankrupt, but there are some definite character issues that need to be addressed. Hopefully, you two can work through this together.
—Dave

So, he knows how to handle money?

Dear Dave,
My husband likes to borrow money on fix-up projects around the house. He says he knows how to manage money, and will pay the loans back quickly. The other day, he came to me for money to make the payment on the latest loan he took out. Then, he started fussing at me when I didn’t have the money to make the payment. It’s not the first time this sort of thing has happened. How can I make it stop?
Crystal

Dear Crystal,
This guy needs a swift kick in his rear end! He says he knows how to manage money, but he doesn’t know how to save up to re-wire the garage?

It sounds to me like you’ve got am overgrown teenager on your hands instead of a husband. It’s bad enough that he can’t take care of his own responsibilities, but then he turns around and fusses when you won’t do it for him. That’s ridiculous!

Marriage is all about unity. Once the rings go on those fingers it’s a we thing, not a me thing. Husbands and wives should work together to form a game plan that will help them win in life, and that includes finances.

I think you should take the money he’s asking for and use it to see a good marriage counselor. There are some real issues here that need attention. You guys need to deal with them, and create a real marriage, before this situation gets any worse!
—Dave

* For more information on how you can see Dave live, please visit http://www.daveramsey.com/category/events.

Why retirement before college?

Dear Dave,
I noticed that your Baby Steps list puts saving for retirement before saving for your kid’s college fund. Sending your kids to college would come first on the timeline, so why do you suggest this?
Jen

Dear Jen,
I advise this approach because everyone is going to retire someday, unless, of course, they happen to die before reaching retirement age. Retiring and eating are necessities. College is a luxury. Lots of people succeed in life without going to college, and thousands have worked their way through college. I worked 40 to 60 hours a week in college, and I still graduated in four years.

Having a college fund set aside by your parents is really nice, if they can afford that kind of thing. But you can go to school by getting good grades, applying for scholarships, working your tail off, and choosing a school you can afford. I believe in education, but there are lots of ways to get a college degree other than having your parents foot the bill.

The last time I checked, there aren’t any good ways to retire except for getting yourself ready for retirement. I mean, you can always live off Social Insecurity and buy that great cookbook, “72 Ways to Prepare Alpo and Love It,” but I don’t consider that a plan.

In short, college funding is not a necessity. That’s why it follows saving for retirement in the Baby Steps. Should you try to save up for your kid’s college education? Sure, if you can. But there are lots of parents out there who won’t be able to pay a dime toward someone’s college education. And that doesn’t make them bad parents!
—Dave

Why insurance and not warranties?

Dear Dave,
Can you explain how you view the difference between warranties and other types of insurance?
Anonymous

Dear Anonymous,
The purpose of insurance is to transfer risk that you cannot afford to accept. Let’s look at life insurance as an example.

I recommend having about 10 times your annual income wrapped up in a good, level term life insurance policy. If you make $50,000 a year, have a family, and you don’t have $500,000 saved up, then your family cannot afford the risk of you dying and losing that income. In cases like this, you buy insurance to transfer the risk. Now, once you have that kind of money saved up, and especially if you have no debt, you won’t need the insurance policy, because you’re self-insured.

When it comes to items like warranties on things, I look at it this way: If you can’t afford for the item to break and pay out of your own pocket to have it fixed without it crushing you financially, then you can’t afford that item. Don’t go out and buy some big, fancy computer if you can’t afford the repair shop bill if it crashes.

You shouldn’t be buying stuff if you’re that broke. Period!
—Dave

* To see if Dave is bringing the Total Money Makeover Live! event to your city this spring, please visit daveramsey.com/category/events/.

Dating on a dime

Dear Dave,
I’m a recent college graduate, and I’m determined to follow your plan and get out of debt. My biggest problem is when it comes to dating. Things aren’t cheap today, so aside from not dating, how do you handle this area of your life when you’re trying to get your finances in order?
Roland

Dear Roland,
First of all, you definitely need to date people. I couldn’t have gone without dating, especially at your age. So, I’m not going to tell you to do something I couldn’t do.

There’s absolutely nothing wrong with dating inexpensively if you’re thoughtful. Just don’t be so cheap that you’re freakish about things. There are plenty of nice, stylish places that don’t cost an arm and a leg. A picnic and a Frisbee will go a long way on a pretty day! Your efforts to be a gentleman and make things happen in creative ways will be a lot more charming to any lady worth dating than throwing down an extra $100 at a snooty restaurant you can’t afford.

The other thing is to make dating part of your monthly budget. In your situation, it’s a legitimate expense, and you need to make it part of your financial game plan. Then, if you’re seeing someone on a regular basis, and the money in the “dating” envelope is getting low, you can explain to her that you’re working hard to manage your money properly so you’ll be wealthy one day.

This will make you even more attractive to the right kind of person, because it shows that you’re mature enough and responsible enough to be thinking toward and planning for the future!
—Dave

Nix the lawn service?

Dear Dave,
We currently pay to have our lawn mowed each week. This expense is figured into our monthly budget, but we’re not quite out of debt yet. My wife says this is a luxury at this point, and I should cut the grass myself until we’re out of debt. What do you think?
Ty

Dear Ty,
I think it depends a lot on your income. If you’re a surgeon making $350,000 a year, then making lawn care part of your monthly budget is probably pretty reasonable. Now, if you’re only making $26,000 a year, you probably need to get behind the mower and start pushing it yourself!

Is this a snobbish attitude? I don’t think so. It’s a simple matter of mathematics. What is your personal time worth in the marketplace, and should you be plying your trade out in the world rather than mowing the lawn?

Let’s say you’re an attorney who charges $400 an hour. In that case, you’re probably going to be better off out there lawyering—especially if you’re trying to get out of debt—than you would pushing a mower. But if you make $12 an hour, it’s a good idea for you to be cutting your own grass, isn’t it?

Whether or not something is a “luxury” depends on your own personal income and financial situation. That’s how I look at it.
—Dave

* For more financial advice, please visit daveramsey.com.