Dear Dave,
I borrowed some money from my parents in January, and it took a few months longer to pay them back than originally planned. Since then, I’ve noticed our relationship seems to be strained. They will sometimes make remarks about money when I’m around, and it’s obvious the things they say are aimed at me. I don’t want things to be like this between us during the holidays. I have taken steps to become more financially responsible, like watching my spending and living on a budget, so how can I address this issue with them?
Robbie
Dear Robbie,
I’m sorry you’re going through this, but I hope everyone has learned a valuable lesson. It’s okay to give money sometimes, as long as you’re not enabling irresponsible behavior in the process. But loaning money to or borrowing from friends and relatives will often lead to bruised feelings.
If you paid them back, especially if it took longer than expected or agreed upon, there’s not much you can do if they choose to hold a grudge. With some folks, it just takes a little while for those kinds of things to heal. And considering it’s your parents, my guess is they’ll become more and more forgiving with time.
Until then, maybe you could look for opportunities during conversations with them to mention your new approach to finances. Something as simple as referring your budget, or getting excited about how much you were able to put into savings from your last paycheck, might get their attention. A few subtle hints that you’re actively working to gain control of your finances might go a long way with your parents.
If they realize you’re starting to handle your money more wisely, I’ll bet you’d start to notice a real difference in their attitudes!
—Dave
* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.
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Dear Dave,
My husband and I recently inherited my parents’ home. It’s in a small, rural town with little industry, and we’ve been told that the place would be worth $85,000 if it’s cleaned up, compared to $75,000 as-is. Should we spend about $10,000 to really clean it up, replace a few things and make it presentable to sell it faster?
Terri
Dear Terri,
It’s really up to you guys, because both options — whether you’re sitting on the house or rehabbing it — are going to take time and emotional energy. From a real estate person’s perspective, houses always sell better when they’re shined up and looking nice. When a prospective buyer walks in and sees and smells new carpet and fresh paint, they don’t have strain their imaginations looking past everything. When you force potential buyers to look past things, it usually ends up costing you money.
In most cases, if you spend $10,000 you gain more than what you put into the house. Honestly, I think one of the numbers you’ve given me is wrong — either the $85,000, the $75,000 or the $10,000 you think it will take to fix up the place. In other words, if you spend $10,000 on a project like this, you’ll usually gain $20,000 when you’re talking about stuff like a thorough cleaning, new carpet and flooring, fresh paint and basics like that. My guess is if the place is worth $85,000 fixed up it’ll probably bring about $65,000 as-is.
If it’s me, I’m going to clean the place and fix it up. I’ve done hundreds, if not thousands, of these kinds of deals, and I can’t stand to try and sell something that’s dumpy, grungy and out of shape.
—Dave
(Where does this money go?)
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Dear Dave,
If you have a mortgage that will be paid off in the next two or three years, should you pay extra toward the house or invest that money over and above the 15 percent you recommend putting toward retirement?
Walt
Dear Walt,
I would pay extra on the house. You know, a magical thing happens when you pay down a house and sell it somewhere down the road. The money comes back. You didn’t lose it.
Honestly, you’re not doing a bad thing by putting it into retirement either. But you don’t know exactly what will happen over the next several years of your life or the life of your investments. You might think you know. You might even have a plan. But the truth is even the best plans don’t always work out the way we want.
And if that happens, it sure would be neat to own your home outright!
—Dave
* Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
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Dear Dave,
I’m in college, but I’m not the typical college student. I’ve gone back to law school after working for several years. My wife and I have followed your plan, and we’re completely debt-free. I’m cash flowing school, and we’ve been fortunate enough to build up about $2 million in investments. The other day I saw what I consider to be a collectible car I’d love to have — a 1988 Pontiac Fiero that’s in excellent condition for $10,000.
Should we wait until I finish school, or is it okay to buy it now?
Rick
Dear Rick,
Wow, I’m impressed. You guys are in great shape. You’re totally debt-free, cash flowing law school and you have $2 million sitting there. My advice? As long as you’ve got the cash on hand, and it won’t hinder your college plans, your lifestyle or come out of your investments, buy the car!
You’ve worked your butts off to the point that $10,000 is nothing in your world. It’s like most people buying a biscuit for breakfast. I mean, a purchase like this doesn’t even move the financial meter.
Remember, there are three things you can do with money — save, spend and give. You’re in an incredible position here, so there’s no reason not to have a little fun. You’ve earned it. Now, you might have to open your own practice when you’re through. I remember the Fiero, and owning something like that might make you unemployable …
I’m kidding, of course. But you guys have done a fantastic job. You’ve been smart with your money, and now there’s nothing wrong with having some fun and buying a little toy.
Congratulations, Rick!
—Dave
(Ask for expectations)
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Dear Dave,
I loaned some money to a good friend recently. He’s going to help me with a job I’m working on, so do you think I should pay him for the work or just forgive the debt instead?
Charlie
Dear Charlie,
The big question is whether or not you’ve already agreed to pay him for the work. Another is how he views the situation. In his mind, he may just be helping a friend and looking at it as he still owes you the money.
If you don’t already have an agreement, my advice would be to ask him what his expectations are. Just talk to him, find out what he’s thinking and figure out what seems fair to you both. The big thing at this point is that you’re on the same page. If you have already agreed on a certain amount, and the value of the work is pretty close to the amount you loaned him, you might talk to him about the possibility of knocking out the debt that way. He could work off the debt while helping you on this project.
There’s really no right or wrong answer to this question, Charlie. However, I would recommend not loaning money to friends or family in the future. Sometimes things work out and everyone’s happy. But in most cases it changes the dynamics of the relationship. The Bible says that the borrower is a slave to the lender, and there’s a lot of truth to that statement financially and emotionally.
I’ve seen situations like this go bad and even ruin friendships. It sounds like you two are good buddies and have a great bond, but if someone close to you really needs help, and you’re not enabling bad financial behavior in the process, just make the money a gift. Sooner or later this kind of thing will mess up a relationship.
—Dave
* Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com
