Husband paying company’s finance charges?

By Dave Ramsey

Husband paying company’s finance charges?

Dear Dave,

My husband is in sales and he has to charge everything that he does for work on his credit card and then the company reimburses him. My problem is that we pay the finance charges each month because all of the expense reimbursement money doesn’t come in. My second problem is that my husband is a wonderful husband, but he struggles with finances. I’ve taken over doing our personal bills, but he procrastinates in turning in his expense reports. We used to do pretty well with finances. When we first married and he had debt, we paid it all off. We eventually got a house and we can make our payments, but we’re back in the boat of being in debt.

Faye

Nashville, Tenn.

Dear Faye,

So he’s running up credit card debt and not getting his expense reports turned in to get the reimbursements.

I would do two things. One is the two of you need to sit down and come to an agreement. You need to tell him what you’ve told me. I don’t think you’ve told him exactly what you’ve said here, as bluntly and honestly as you’ve told me. “Honey, I think you’re a good man, but you’re lousy with finances.” You’re playing footsy with him instead of telling him how this makes you feel. He’s out running up credit cards and you’re worried.

He doesn’t know the effect this is having on you and you need to tell him. He’s not a bad guy at all. He’s just not a nerd – a numbers guy. He’s a salesman. If he were to get a job in accounting it would destroy him. So you need to convince him to work with you and put these expense reports together. You both need to work on these budgeting issues together and he needs to be responsible because it’s messing with your respect for him.

The second thing is he needs to go to his boss and see if they won’t give him a credit card drawn on the company. Basically this company is borrowing money from you guys. Surely they’re not that poor. I know that’s a standard practice in corporate expense, but it’s also very stupid that this huge corporation should have to use your money. If they won’t give him a company credit card, then I’d suggest he get a debit card and only use cash he has on hand. That will prompt him to get the expense reports done. I would not use a personal credit card for expenses because if that company goes broke and he doesn’t get reimbursed, he’s baked!

Dave


Differences in Roth IRA and 401(k)?

Dear Dave,

I was listening to one of your videos that included a talk about investing and you made the comment that you ought to max out your Roth IRA if your 401(k) doesn’t offer matching funds from your employer. I’m a little confused because you put different amounts of money in each of those.

With a 401(k) you invest pre-tax, so you put $1,000 in there – compared to taking it home where it would only be $700 after taxes – but you pay the taxes later when you withdraw they money. If you invest in a Roth IRA, you invest with money that’s already been taxed, so you’re putting less in the Roth, but it gets to grow tax free.

Greg

Huntsville, Al.

Dear Greg,

This is assuming you actually did put less in the Roth and I’m not suggesting you do that.

Let’s compare apples to apples for a second. If we have $1,000 to invest and we brought it home, it would turn into $700 due to taxes. So if we put $700 into the Roth and we put $1,000 into the 401(k), assuming they’re in the exact same investments and they grow the exact same amounts, later the $300 difference we put into the pre-tax investment will grow to exactly enough to pay your taxes in that investment. So it’s a wash, because the 401(k) is taxable when you withdraw it and the Roth is not. So you don’t win.

Now, let’s say you do what I always suggest, which is save like a maniac and retire a multi-kajillionaire. Now your 401(k) and IRA mandatory withdrawals at 70 percent are going to drive you into the top tax bracket at retirement. For sure my plan is right then.

If you want to twist that even further and say, “Well, let’s just put $1,000 in the Roth.” We’re not really comparing apples to apples mathematically, but I’m not doing theory here, I’m living life – now we’ve totally beat the 401(k).

So if you’re going to do exactly the same pre-tax or after-tax investing in the same exact investments and the tax brackets are exactly the same, the outcome is exactly the same when all the smoke clears. But if you’re going to put a little more into the Roth or if you’re going to have a lot in there at retirement, which will drive you into the top tax bracket, then the Roth IRA is going to be better. I’m a huge fan of the Roth IRA, but we’ll certainly always do 401(k) and 403(b) up to the matching amount. Then we’ll do the Roth. And what I’d really like you to do is get out of debt so you’re just fully funding everything.

Dave

Disclaimer: Questioner’s identities have not been verified by Dave $ays column or this website.


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