Hold off paying student loan to buy a house?

Dear Dave,

Fourteen months ago, my wife and I set a three-year goal of being out of debt and buying a house. Last year we paid off $12,000 in debt, and now we have about $10,000 left to pay, excluding a car lease with two years left on it and a student loan of about $40,000. By the end of this year we will be debt free except for those two payments.

We really want to get into a house as soon as we can, and I don’t want to wait two more years for the student loan to be paid off. Our household income is about $80,000 per year, so the student loan is manageable for us, and my question is this: is it okay for us to go ahead and get the house?


Joplin, Mo.

Dear Steve,

I would wait until I was debt free to get the house. And on top of that, I would sell the car as well. You should get out of the car fleece so that I could attack the loan harder and be out of debt faster. Get a cheaper car that you can pay cash for, and then get this debt paid off.

If you are serious about this, it shouldn’t take you three years to be out of debt.
The average household income in America is $40,816. If you just lived ‘average’ you could be out of the student loan in a year. Right now you are living a high lifestyle, and you should trim that down, for now. I’m saying you should not take a vacation this year. Don’t eat out. For one year you should limit yourself.

People will probably make fun of you, and if they do, then you know you are on the right track.

If you are serious about this, you should be as intense about it as the little gazelle on the Discovery Channel is when he is trying to get away from the cheetah. That little guy is working like crazy to get avoid becoming someone’s dinner. You need to be working that hard to get out from under this debt or it won’t go away, trust me. You need to get fired up.

I would get rid of the student loan before I bought a house, and I would do it fast because you want that house pretty badly. Work hard at this debt, and you can get out of debt and into your house in no time. But the length of time it takes for you to do this is directly related to the intensity level that you put into getting out of debt.


Compensating Sales Representatives

Dear Dave,

We are starting a company and I have a question about compensating my sales people. In order to attract the best quality of sales people, and of course I would like to grow the business, what type of plan do you think is best? Is a full commission model better or would a base salary with a commission bonus structure work?


Spokane, Wa.

Dear Rob,

I have a bunch of folks here at my company who do sales and marketing for me. Depending on what it is they are selling and what the lead-time is on it, I put them on a ‘Survival For All’ plan.

For instance, their base will be smaller. They have enough each month to eat and to get by, but then they have to sell a couple of thousand per month in commissions before they get more than that. That part is called a draw. In my case it is a non-refundable draw because I don’t borrow money and I also don’t loan money. It’s non-refundable meaning that if they crash and burn and after 90 days they haven’t made a dime, then I eat that amount. That makes me hire more carefully to make sure I get quality folks working for me.

This will eventually be irrelevant because they should make that amount every month, no problem. Then it turns into a straight commission situation.

This works wonderfully as a motivator to your employees. They have to leave the cave, kill something and drag it home, so to speak.

This is my favorite way to pay employees. I would even put the receptionist on straight commission if I could figure out a way to make that work.

You have to know that I come from a background where both of my parents were in the real estate business, so I know nothing but straight commission. I had a salary job once for about three weeks and couldn’t take it. I have to be able to set my own limit to how much I am making. In your new business you may have to deal with someone who would panic in a straight commission setting, and that may affect his or her performance. Some people can’t perform unless they are relaxed, so the base plus commission structure may give them a bit of security.

So there are a few options, you just have to pick the one that you are most comfortable with, and that creates an atmosphere in the workplace in which your people can excel.



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