dave ramsey
Dave Says
By Dave Ramsey
Author, The Total Money Makeover
CBN.com –
Financial guru Dave Ramsey answers questions about wise financial
decision-making.
Growing Family Needs More Space
Dear Dave,
My wife and I are completely debt-free, and we live in a 1,400-square
foot home. Our family is growing, so we need a bigger house. She
saw a small, seven-acre farm with a larger house she’d like
us to buy, but I don’t ever want to go back into debt or
experience the hassle of another mortgage. I make about $100,000
a year, and we have $50,000 in a 401(k), in addition to $15,000
in savings. What do you suggest?
- Jack in Louisville, KY
Dear Jack,
With the kind of income you’re talking about and no debt,
you should be able to save money like a crazy man and pay cash
for this farm in no time.
I’d suggest budgeting at least $2,000 a month for a house
payment from your monthly income. That’s what Dave and Sharon
Ramsey would do. If we decided to buy a new home today, we’d
save up the money and pay cash for it.
Here’s the drill on home-buying. If you go into debt for
it, you don’t really own it – at least not for a while.
Lots of people don’t have the luxury of being able to pay
cash up front for something as expensive as a home. I tell them
to save up and make a down payment of at least 20 percent, then
go with a mortgage of 15 years or less.
But you DO have the money, Jack, or you will in a very short time
if you just SAVE, SAVE, SAVE. When it comes to buying a home,
you want the security and peace of mind that goes with owning
that sucker outright. And with your income and being debt-free,
you can get this deal done fast!
- Dave
Should We Sell Our New Car?
Dear Dave,
We recently bought a new car, and the payments are $336 a month
over four and one-half years. We still owe about $12,000 on this
vehicle. We bought the car before we started listening to you,
but we’ve cleaned up our other debts to the car is the only
one hanging over our heads. We’ve also managed to put $10,000
in savings. Would you sell the car, pay it off early or what?
Alicia
Dear Alicia,
You’ve decided car payments are stupid, so congratulations
on that! It’s virtually impossible to build wealth with
things like car payments hanging around your neck.
My rule of thumb is when you’re serious about getting out
of debt, sell anything you can’t pay off in 18 months or
less. Since you owe $12,000 on the car, it would mean cutting
a check for about $700 a month to pay it off in that amount of
time. If you can afford it, that’s one way.
You could also sell the car, but don’t go to a dealer for
this. They’ll want to give you wholesale price for it so
they can sell it later and make money. This means you’ll
walk away with a lot less in your pocket, and probably not enough
to pay off the debt.
If you can’t manage $700 a month, I’d sell it retail.
Lots of times that’s as easy as putting a sign in the windshield
or taking out an ad in the local newspaper or shopper. Once you
get the car sold, pay if off quickly, then use $3,000 - $4,000
from your savings to buy a dependable, used car. You’ll
be out of debt, plus you’ll still have the bulk of your
savings in place and the available income to refuel that savings
account in a hurry.
- Dave
* You can see all of Dave’s columns at
www.davesays.org.
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