Dear Dave,
I have about $36,000 in debt, not including my house. Of that amount, $30,000 is a truck that’s worth about what I owe on it, and the other $6,000 is student loan debt. I make $50,000 a year. I also have 24 EE bonds that were gifted to me that haven’t fully matured. Right now, they’re worth a combined $12,500. Should I cash those in, and use the money to pay off some of my debt, or let them fully mature before cashing them in? Also, are there any tax ramifications from cashing them in?
Patrick
Dear Patrick,
They might be taxed, but it won’t be much to worry about. EE bonds make less than one percent, so you haven’t really earned much. Never buy those things, man. They’re a horrible investment, with an even worse rate of return.
I’m glad you’re working out a plan and moving toward getting out of debt. A $30,000 truck doesn’t work with a $50,000 income. So, cash in the bonds immediately, sell the truck, and use some of the money from the EE bonds to pay off the school loans. Then, find yourself a cheap, little truck that will get you around for a few years.
You can do this, Patrick. I want you to have a nice truck one day, but I don’t want that truck to be a burden. This one’s got you by the throat, and you’re feeling it, aren’t you?
Drive like no one else for a little while now, so that later you can really drive like no one else!
—Dave
(ID theft protection in the baby steps?)
Word count: 183
Dear Dave,
Where in the Baby Steps does identity theft protection fall? Should we cover the kids, too, or only the adults in our household?
Laura
Dear Laura,
Everyone needs identity theft protection. Unless you’re one of these folks who have gone completely off the grid, someone out there probably has a few of your numbers. Between sloppiness on the part of consumers, and the massive data breaches that have occurred in the last few years, almost everyone has experienced, or will experience, some sort of identity theft. Unfortunately, this is today’s world.
I don’t really consider identity theft protection part of the Baby Steps. It’s like life insurance or car insurance, in that it’s something almost everyone needs. Things like that should just be part of your budget every month.
—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 wife and I are in our twenties. We have no debt and $50,000 in the bank. Our income is $90,000 a year, and we’re cautious to live on less than we make. Still, we can’t seem to get motivated to make a budget. How can we get inspired to do this?
Isaac
Dear Isaac,
Two of the biggest motivators we have are pain and pleasure. Financially, you guys don’t have any pain. You’re killing it! So, we’re going to have to figure out something associated with pleasure.
I think you need to look for something bigger than money to push you. You guys need to ask yourselves, “What are we saving for?” On a bigger scale, ask yourselves, “What can we do with this money?”
It sounds to me like you both realize money can’t be the goal. And that’s a good thing. You guys are obviously smart, gifted people. I’m sure you have ideas and goals, dreams and desires. Talk about them and write them down. By doing this, you’ll be taking the first steps toward making these things reality. When you have something specific that you want money to do, it gives you a reason to make it behave.
God calls us to manage well the resources He gives us, so that we’re able to do good things for His kingdom and His people. Broke people can’t give, so my advice would be to use your talents and resources for the good of others.
—Dave
(RV upgrade)
Word count: 278
Dear Dave,
My husband and I work and live in an RV. The vehicle is paid for, and I’d like to upgrade to a larger one, but that would mean taking out a $30,000 loan. We have $30,000 in savings, including our emergency fund, and we make $55,000 a year. What are your thoughts?
Renee
Dear Renee,
I think what you’re doing with your lives is kind of cool. But I can’t advise financing something that will go down in value as quickly as an RV. I wouldn’t even do it on the basis that it’s going to be your primary residence.
Let’s look at things from a different angle. First of all, I think your emergency fund is a little high. I recommend three to six months of expenses, and on a household income of $55,000, holding $20,000 in reserve would be a lot. If you kept $15,000 in the bank, that would leave you with $15,000. If you’re talking about a $30,000 upgrade, you’d only need to save up another $15,000.
See where I’m going with this? With a little patience and planning, you can have your upgrade in the not-too-distant future and still have the peace of mind that goes with knowing you have a reasonable emergency fund sitting in the bank!
—Dave
* Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books. The Dave Ramsey Show is heard by more than 8.5 million listeners each week on more than 550 radio stations. Dave’s latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com
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Dear Dave,
We’re debt-free including our home. My husband is a man of faith, but a bit of a dreamer. He has written several inspirational books that haven’t sold, but he feels this and public speaking are his calling. He wants us to sell the house, and live on the proceeds for a year, while he pursues this dream. What do you think of the idea?
Christy
Dear Christy,
It sounds to me like your husband has a good heart, but I think it would be a huge mistake for you guys to sell your home when he hasn’t proven that he can sell anything he writes or says. I understand where his head is at right now. He wants to help people, and that’s a noble cause. But being a motivational writer and speaker can be an addictive thing. For some folks, signing books and being on stage are almost a high; they can make you feel alive. But the whole idea can draw you into the land of financial stupidity if you’re not careful.
My advice would be for him to keep his day job, and work his tail off nights and weekends to try and make this dream a reality. Let’s draw up an internet strategy to get some exposure for the books he has already written. He could contact local civic groups, and offer his services as a speaker for their meetings, too. In the process he might sell a few books from a table in the back of the room, and I know he’d get lots of valuable experience while building his name.
It may take longer than he’d like, but that’s a much better idea than the one he has now. It allows him to work toward a goal and not put his family in financial danger. Then, once he’s making a nice income on the side from writing and speaking engagements, you guys can look at the numbers and see if it’s feasible for him to dive in on a full-time basis!
—Dave
(Stand up to them)
Word count: 226
Dear Dave,
I have a debt with a collection agency and they have started calling my office. Last week, I made an agreement for monthly payments, along with an initial payment. All of a sudden, they were calling me again this morning at my office. Can I legally demand that they not call me at my place of employment?
Joelle
Dear Joelle,
Yes, you can. I’m glad you’re keeping in mind that you have a legal and moral obligation to pay your debts. But collectors have rules they must follow, also. They’re governed by law just like everyone else.
If they call you at work again, simply remind them of the terms of the payment agreement already in place and demand that they never call you at your office again. Also, send them a certified letter, return receipt requested, so that you’ll have proof you sent the letter and they received it. In the letter, let them know that according to guidelines set forth in the Federal Fair Debt Collection Practices Act you are formally demanding that they not call you at your office again.
If they call you at your office after you demand that they stop, they’ll be in violation of federal law. And if that happens, let them know that you’ll be talking to a lawyer and you will sue them!
—Dave
* Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books. The Dave Ramsey Show is heard by more than 8.5 million listeners each week on more than 550 radio stations. Dave’s latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com
