I live outside Houston with my wife and our 9-month-old daughter. I’ve received a job offer from a company on the other side of the city that would pay, with bonuses, $25,000 a year more than I’m currently making. This would require moving to a new house and away from our extended family. My wife wants to move because my mom can be a little overbearing. I understand how she feels, but I’m not certain I want to move or take a new job. What’s your advice?

David

Dear David,

I’m not so sure this is a job change question as much as it is about the state of your relationships. I know it’s hard to keep the grandparents away when there’s a baby in the house; that kind of goes with the territory. But I can also understand how lots of unexpected visits and unsolicited advice can wear on a person.

If it were me, I wouldn’t change jobs just to run from something. My advice is to try setting boundaries in your relationships with your parents instead of installing geographical boundaries. You might want to pick up a copy of Dr. Henry Cloud’s great book “Boundaries.” Remember, your mom may not realize she’s intruding on your lives. This book is full of insight, and it will give you both some good advice on how to manage relationships in a healthy, loving way.

Like I said, I really don’t feel this is a job-move issue. I think you guys just need to establish some fair and reasonable emotional distance between yourselves and your family.

Dave

Altering a Baby Step

Dear Dave,

My husband and I are debt-free except for our mortgage, and we make $65,000 a year. At this point, we have only $17,000 left to pay on the house. We haven’t fully gotten into all the retirement planning you say should come before paying off your home. But with so little left on the house, should we attack this last bit of debt and pay it off as soon as possible? We can have it done in five or six months.

Nancy

Dear Nancy,

I don’t see anything wrong with going ahead and knocking out the house, especially if you’re that close to making it happen. Normally, the people I talk to still have $100,000 to $200,000 left on their mortgages. This is a little bit different story.

Usually, I’m pretty hardcore about sticking with the proper order while doing the Baby Steps. Even in my book “The Total Money Makeover,” I didn’t leave room for people to go ahead and pay off a tiny, little mortgage ahead of investing for retirement. But in this situation, I think that’s exactly what I’d do.

Think about it, Nancy. You could be completely debt-free by year’s end, and you’re still under way with retirement planning. What a great Christmas gift for you and your husband to give each other!

Dave

I’m a stay-at-home mom now, and my husband brings home $2,600 a month. We’re trying to get out of debt, but we need more money coming in. I want to go back to work, but emotionally part of me feels like I should stay home with our 2-year-old daughter. What do you think?

Kayla

I understand the feelings involved, especially if you’ve spent all of your time home with your child. But don’t make the mistake of blaming the debt if you simply want to go back to work. You’re not a bad person if you have kids and you work outside the home.

I have several ladies on my team who have young children, and they work 40 hours a week. Guess what? They’re excellent mothers! Anyone who says a woman can’t be a great mom because she works outside the home is full of crap. On the other hand, if anyone says you’re not fulfilling yourself as a person or you’re stunting your intellectual development because you’re a stay-at-home mom, they’re full of it, too!

I’d advise you and your husband to sit down, talk about this a lot, and pray about the situation. Don’t worry about what anyone else thinks, because it’s none of their business. You guys are in charge of your lives and your family. That makes it your job to decide what’s best.

If you want to stay at home, and you guys can make it happen financially, that’s a great thing. If you can’t right now, or you simply want to go back into the workforce, that’s fine, too. It’ll help solve your debt problem. Then after you’ve got your money under control, you might find you want to come home again. The option will be there.

For now, I think you should go back to work. Why? Because you want to!

Dave

Dear Dave,

We live in New Jersey, and my wife and I can afford the $10,000 to send our son to a state college. However, we have a younger child who is heading to college in a couple of years, and I’m having a hard time justifying room and board when he can commute. My wife doesn’t have a problem paying for it, even though it would mean taking out a loan. What do you think?

Andy

I’m with you on this one. If you had an extra $40,000 lying around, this wouldn’t be an issue. But if you’re talking about borrowing money just for him to live in a dorm, my answer is a resounding no!

If your son, or your wife, wants the “college experience” to be part of the equation, then Junior can get a job to pay for the added expense. Anyone can make $10,000 a year delivering pizza while in school, and it would be a great life experience. You might spot him a little something to get him in there and get things going, but I’d make it contingent on him working to pay the remainder.

There’s no reason to take out loans for something like this. It sounds like you guys can cash flow the important stuff, but make sure this kid learns what work is and why it’s important. I worked full-time while I was in college and still graduated in four years.

Besides, most college dorm rooms look a lot like prison cells; they’re tiny, with concrete block walls and maybe a window, if you’re lucky. Does this really sound like an “experience” worth going into debt for? I don’t think so!

Dave

Can you please define “necessities” in today’s world while trying to get out of debt and live on a budget?

Matthew

Whether you’re talking about the world today or 50 years ago, necessities haven’t changed. Necessities are still food, shelter, clothing, transportation and utilities. We’re talking about needs versus wants. The problem is that many people were never taught that there’s a difference between the two – a big difference.

Most people have enough food to eat and a decent place to live. Those are necessities. I’m not talking about eating out or having a big, fancy house. Those are wants. Most people also have enough clothes in the closet and a way to get around town. They may not have designer clothes or a fancy foreign sports car, but again, those are wants, not needs. Keeping the lights on and the house warm in winter and cool during the summer? Utilities are a need. But no one needs a $300 super-deluxe cable television package.

Now, there are some important wants. I want you to have life insurance to protect your family. I also want you to have a will and health insurance. I want you to have some other nice things, too, like a better car or a nicer house. There’s nothing wrong, at some point, with having a few toys or eating at a good restaurant once in a while. But again, these things are wants, not needs.

Believe it or not, very few Americans struggle with basic necessities. Sure, there are hungry people and homeless people in America. Those of us who have been financially blessed should want to help the less fortunate in ways that allow them to get back on their feet and start providing for themselves again. But most folks in this country have nothing to whine about. There’s nothing wrong with having a few wants, but you should define them correctly – and never, ever put them ahead of your needs!

Dave

Dear Dave,

I’d like to start investing in mutual funds, but I have no idea how they work. Could you explain about them please?

Jennifer

First of all, don’t rely solely on my answer here. You should never invest in anything you don’t fully understand. Before you do anything else, sit down with a good mutual fund broker, someone who has the heart of a teacher, who will help you find what’s best for you and your specific situation and goals.

Simply put, a mutual fund – if it’s a stock mutual fund – is a group of 90–200 stocks. If it’s a growth stock mutual fund, then it’s a group of 90–200 growth stocks. Analysts buy the stocks they think will increase in price and sell the stocks they feel will go down in price. When the analysts buy growth stocks, it turns it into a growth stock mutual fund. If they buy bonds instead, it becomes a bond mutual fund. Several people put money into these groups, and that’s where you get the name “mutual fund.” They’re mutually funded.

These types of investments are much safer than single stock investing because your money is spread across several different stocks. Plus, you’ve got people who know what they’re doing picking the stocks. My advice would be to take a hard look at mutual funds that have been out there for 10 to 20 years and have a good track record for a long period of time. I have one that has been open since 1934, and that kind of longevity and stability gives me confidence that over time they’ll be just fine!

Dave

If a wife takes out a credit card in her husband’s name without his knowledge, and they get divorced, can the husband claim identity theft?

Nancy

Dear Nancy,

Absolutely! Unless they have power of attorney, anytime someone opens an account in a name other than their own, they have stolen an identity. Being married to someone doesn’t give you the right to sign their name to a document.

I knew a guy in the real estate business years ago who was doing a lot of property deals under his own name. Occasionally, the title company would require his wife’s signature, and he would sign her name on the papers himself. Sometimes he signed her name after calling her up and explaining what was happening, and she was OK with the situation. Then, he signed some papers she didn’t know about, and it came back to bite him. He was charged with criminal fraud!

You cannot legally sign your spouse’s name without first having power of attorney privileges. If you do, it’s called identity theft. It’s a crime anytime you lie to get money.

Dave

What are ‘essential’ expenses?

Dear Dave,

I’m following your plan and currently I have $14,000 in my emergency fund. What are essentials for three to six months of expenses?

Brian

Dear Brian,

Basically, you should ask yourself this question: What would it take to operate my household for a month? There are several different things that could be classified as “essentials,” but if you take those things and multiply the number by three, four, five or six, you’ll see how much money you need to have a fully loaded emergency fund of three to six months of expenses. This is Baby Step 3 in my plan.

Some people get really technical about exactly how many months of expenses they need to save in this range. And that’s OK. You can take a little time to evaluate things before moving on to Baby Step 4, which is investing 15 percent of your household income into Roth IRAs and other pre-tax retirement plans.

Believe me, it’s a great feeling to have a big pile of cash sitting there just for a rainy day. You don’t want to go nuts and make it so big that you sacrifice retirement or other important aspects of your life, but after a point you shouldn’t be too concerned whether you have three months or six months of expenses – or somewhere in between – saved just for emergencies.

Having a nice emergency fund, along with no debt, creates a wonderful sense of financial peace!

Dave

My divorce will be final in a month, and I’ll have $100,000 when everything is over. I will also have $8,000 in credit card debt, and I’m currently unemployed. Do you have any suggestions to help me move forward?

Meryl

Dear Meryl,

The first thing I want you to do is raise your right hand and promise never to use credit cards again. Then, if you still have any of those awful things, I want you to cut them up and close out the accounts. The next step is for you to find some kind of income, whether it’s a regular job or just something part-time to get money rolling in on a regular basis.

Your credit card debt is a small part of your financial picture right now. I think I’d go ahead and pay off the cards. That way, you’ll be debt-free and still have $92,000 in the bank. But here’s the key. You have to live like that money doesn’t exist. Use just enough to get yourself settled, and go make some money so you can eat and keep the lights on.

A year from now, when you’re past some of this stuff emotionally and looking toward a new future, that money will still be sitting there. As long as you have this mentality, you’ll come through this mess stronger and in good financial shape. God bless you, Meryl!

Dave

Should she have skin in the game?

Dear Dave,

My daughter has the opportunity to take a trip with her eighth-grade class. The cost is $650. Do you think she should have to contribute to the cost of the trip, or should I cover it all?

Colleen

Dear Colleen,

This is a really good question. When it came to making these kinds of decisions at our house, we’d take a look at whether the kid was behaving, getting good grades and stuff like that. It can be a challenge at that age, I know. But if they were living like responsible young people, we would pay for this sort of thing as a reward.

Still, at that age a kid should definitely have some skin in game. If you can pay for this without breaking the bank, and she’s fulfilling her responsibilities as a good kid, it would be a good idea to make her come up with her own spending money for the trip. You don’t want her to grow a sense of entitlement, and doing this would force her to work and save a little bit to make this thing happen!

Dave

I’ve been on medical leave from my job due to an injury. My doctor recently advised extending the leave another six months, but during this time I wouldn’t be paid. My husband makes $75,000 a year, and we owe $40,000 on our cars. This includes a $30,000 note on one of them. Should we take money out of our 401(k) to make it through the additional time off?

Crystal

Dear Crystal,

Absolutely not! You guys have dug a hole for yourselves, and borrowing from one place to fix another will only make that hole deeper. In cases like this you have to address the core issue. Your income has dropped significantly, so you need to cut your lifestyle to match your new income level.

My advice would be to sell the cars, at least the $30,000 one. There’s no justification for $40,000 worth of vehicles in your garage when you’re living on $75,000. It makes me think you don’t have any savings, either, if you’re talking about raiding your 401(k). Financially speaking, you have no room to breathe right now.

Serious situations call for serious actions. You’ve got to get your lifestyle down to a manageable level until you’re able to work again. And even then, there’s no reason to raise your lifestyle up to your income. Live on less than you make, Crystal. That’s what enables you to save money and be prepared when Murphy comes knocking on your door!

Dave

Welcome the repo man?

Dear Dave,

I’m having trouble making my auto payment. I owe $20,000, and the car is worth $17,000. Should I allow the bank to repossess it, and could they take a lien against my house if they do?

Jose

Dear Jose,

You bet they could slap a lien on your home. You never want to go through repossession if there’s any way to avoid that scenario. If they repossess, not only does your credit take a huge hit, you also lose control of the price of the car.

After a repo, the lender will sell the car and sue you for the difference. But if you sell the car, you might be able to work out a higher price, leaving you a lesser amount you’d owe for the difference. Chances are if your loan is with General Motors, they won’t work with you on the $3,000 difference. In that situation, you can either negotiate with the bank or go to another bank or credit union and get a small loan for the difference. Just make sure you pay the loan off as quickly as possible.

Keep in mind, too, that even if the car is worth $17,000, it won’t bring that much on the repo lot. More than likely it would sell for about $11,000, leaving you $9,000 in the hole. By giving up control, you’d create a much bigger financial mess. I wouldn’t do that.

Dave

Is there ever a time you should dip into emergency-fund savings to pay off your home early?

Eric

Dear Eric,

The only time I would advise this is when your emergency fund is too big, and you have a very small amount left to pay on the house. Keep in mind that your emergency fund should be three to six months of expenses, not three to six months of income. Besides, paying off the house doesn’t fall into the category of an emergency. The fact that you have to pay for your house doesn’t catch anyone by surprise.

I understand it can be very tempting to throw a bunch of money at your house, get rid of the mortgage payments and own it outright. But I wouldn’t drain my emergency fund to make it happen – even if it meant being completely debt-free sooner. Life happens, and the moment you write that big check and weaken your emergency fund, the central unit will go out, the roof will spring a leak, or you’ll have major repair issues with a vehicle.

When you do things like that, you’re just begging for Murphy to come visit. And that’s not my definition of financial peace!

Dave

Date night on the cheap

Dear Dave,

My husband and I have a baby and are trying to live on a budget and pay off about $14,000 in debt. He wants to spend $100 a month for a date night, but I think this is too much under the circumstances. I’m a stay-at-home mom right now, and after taxes he makes about $3,200 a month. What do you think?

Ashley

Dear Ashley,

You win on this one. If you’d told me you guys make $150,000 a year, then I’d say he was being completely reasonable. But with your income and a lot of debt to boot, it sounds like he’s just looking for an outlet to spend some money. The good thing is you’re working together and beginning to take this personal finance thing seriously. You’re just a little bit apart on the particulars in this area.

I think you back this amount down to $40 or $50 for now. That’s plenty for a reasonable dinner and perhaps a babysitter for a couple of hours. If you have family or friends nearby, you might not have to figure babysitting expenses into the equation at all. Keep in mind, too, that going out on a date doesn’t have to mean spending money. Years ago, when my wife and I were broke, we did tons of stuff that didn’t cost a dime. Picnics in the park or a pretty hike through the woods are great ways to spend time together while keeping the pocketbook in your pocket.

Be creative and make sure you find ways to have “us” time on a regular basis. But you’re right on this one, Ashley. You can go out and have plenty of fun together without spending a lot of money!

Dave

My younger sister moved to Atlanta, and she came to live with my husband and me a few months ago. She’s 19, has a job and is attending a local college. But even though she’s working, she hasn’t said anything about helping out with utilities or paying rent. We don’t need the money, but do you think it’s time for us to push her out of the nest so she can start living as an adult?

Molly

Dear Molly,

The way you’ve described your little sister makes me think she’s a pretty good kid. She’s doing all the right things for someone her age, and it doesn’t sound like you’ve got a party animal or drug addict in your home. In my mind, this is the kind of person you want to help.

In a sense, you’re acting as surrogate parents to this young lady. If it were my little sister, I’d let her live in the house without paying rent as long as she was living smart and moving in a positive direction. To me, this includes working, saving money and going to college. At the moment, you’re enabling good, positive behavior. You have a chance to be her biggest cheerleader and prepare her for the future.

But if things change and she starts behaving irresponsibly or living a lifestyle you don’t approve of, then it’ll be time to put the brakes on the deal. But right now this kid’s a rock star. Thanks to the generosity and support shown by you and your husband, she can gain traction for a successful launch into the world as a smart, responsible adult. I think it’s awesome!

Dave

Double check ‘forgiven’

Dear Dave,

I have some old debts that have been forgiven. Should I still pay these if and when I have the money?

Matt

Dear Matt,

First, you need to double check and make sure the debts have been officially forgiven. Commercial debts, such as old credit card debt, are almost never forgiven. They might be in default, or it may be that the company has written it off, but that’s not the same as being forgiven.

Years ago, my grandfather loaned me money when I was in college to pay for part of my tuition. He forgave that debt not long after, so I didn’t owe him the money morally, legally or in any other way. But in a commercial setting, meaning you’re dealing with a bank or other lender, that doesn’t happen.

If a credit card company decides to take less than the original amount owed, that’s a business decision that has changed the terms of the deal, both morally and legally. Sometimes they’d rather have a bird in the hand rather than promises in the bush. You don’t have an obligation to pay the original amount because the terms of the deal have been altered.

Forgiven is forgiven. That means the deal and any obligation is completely wiped out and gone. But chances are, Chase or MasterCard aren’t going to call you up and forgive the debt.

Dave

My daughter is 14, and she was recently offered a steady weekend modeling job. Do you have any advice on how to handle the money she earns?

Cynthia

Dear Cynthia,

In terms of investing some of the money she’ll make, a Roth IRA would be pretty cool. You would have to oversee it, of course, and you’d have to file a tax return, but starting something like this when she’s 14 would help set her up for some serious money later.

I think the biggest thing, however, is to make sure you create lots of teachable moments for this young lady. There are three areas every child should learn about when it comes to finances: spending, saving and giving. If she’s working and earning money, she should be able to spend a little and enjoy the fruits of her labors – within reason, of course.

Saving for the short term might include putting money aside for a car or even college. Long-term goals would include the Roth IRA, so she would have a head start on being able to retire with some dignity one day. Then you should always make sure to give some. Whether it’s tithing to your church or finding other good causes, giving helps others and it’s good for the giver. When we give, it helps us realize that we’re not the center of the universe. It also makes us a little more Christlike.

This is a phenomenal opportunity for your daughter. It’s also a great chance for you, as a parent, to involve her in the process and teach her important lessons that will last a lifetime!

Dave

Trusting in the family

Dear Dave,

When should a couple think about creating a family trust?

Angie

Dear Angie,

A family trust can take different shapes. Couples with young kids sometimes consider creating a trust in the event that they both die unexpectedly. In these situations, a family trust would be managed for the care of minor children.

Some people also create trusts for the purpose of avoiding estate taxes. These trusts aren’t as common, because you don’t have to worry about estate tax problems unless you have assets in excess of $5 million, based on current law.

But to be honest, Angie, I can’t think of a situation where you’d want to create a family trust to manage money while you’re alive. Unless, of course, it contains some kind of estate-planning implications.

Dave

I want to buy an inexpensive car, and I was wondering what you think about salvage titles.

Eric

Dear Eric,

It’s not impossible to find a decent salvage car. But I’d take extra precautions to find out exactly why it was salvaged. If it’s a salvage car because it was wrecked, I’d take a look at what kind of wreck caused the damage. Lots of people know how to repair and rebuild cars, so it might end up in better condition than before if you find the right mechanic. On the other hand, I’d probably walk away if the vehicle had been flooded. Some people claim they can fix waterlogged cars, but that’s a tough job. In most cases water just doesn’t do very nice things to onboard computer systems and wiring.

Regardless, do as much research as you can into the car’s history. See if CARFAX has a record. But if the seller doesn’t know anything and other searches don’t turn up good information, my advice is to say no. Make sure you check with your insurance company before you make the purchase, too. Salvage cars are sometimes more difficult, or more expensive, to insure!

Dave

Beware overbuying!

Dear Dave,

What is your opinion on wholesale club memberships?

Anonymous

Dear Anonymous,

My wife and I are members of Costco and Sam’s Club. We don’t buy everything at these places, but do they save you enough money on some things to justify the annual fee? I think so.

The biggest problem most folks run into with wholesale clubs is overbuying. I mean, who needs nine gallons of mustard? You don’t, unless you’re in the restaurant business. So, if you don’t need at that level and won’t use at that level, don’t buy at that level! You’ve got to shop around and know your values.

Lots of people think overbuying isn’t a big deal, especially if it’s something that only happens by mistake once in a while. But the truth is it’s really dangerous. You should plan your shopping the same way you plan your budget – with great care and common sense. If you don’t, you can end up spending way more than you can afford on things you’ll never use. Talk about dumb!

Dave