Should mom go back to work?

Dear Dave,

I'm a stay-at-home mom with two preschool kids. My husband brings home about $2,800 a month, and our mortgage payment is $1,100 a month. Over the last two years we've been tapping into our savings to help pay bills. Do you think I should find a good day-care center for the kids and go back to work?

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Toni

Dear Toni,

I can't blame you for wanting to stay home with your children – especially when they're so young. Being a full-time mom is a great thing.

The biggest problem I see is that you guys are a little rich on your house payment. Forty percent of your husband's pay is going toward your home, and that's just too much. Your house payment should never be more than about 25 percent of your take home pay.

It's no picnic trying to live on $1,700 a month especially with two babies in the house. But there's not a lot of fat to cut out at this point. One option would be for your husband to do something to get his income level up, whether it's taking a part-time job for a while or furthering his education. Another is to sell the house, and I'm not a big fan of that one.

Think of this as a math problem with three components – income, lifestyle and house payment. One of these has got to give. But I think you and your husband need to sit down, hold hands and talk this one out together. There's going to have to be some sacrifice, and only you two can determine what you're willing and unwilling to do.

Dave

Go for the mutual funds

Dear Dave,

My husband has a terminal neurological disease that will probably last for some time. We've got about $600,000 in a traditional IRA in government money market funds. I'm afraid of losing or misusing it, and I want him to be able to enjoy a few things and have something of an inheritance left over. What's your advice?

Crystal

Dear Crystal,

I'm sorry to hear about your husband. I know you're both going through a really scary time.

I'd suggest sitting down with someone in the mutual fund business – someone with the heart of a teacher – and learning all you can about good growth stock mutual funds. Then, once you have a good understanding of how they work, I'd move the majority of the money you've got in that IRA into one.

Here's the deal, Crystal. You really don't need that $600,000 in cash. You need the income it can produce. And properly invested in a good growth stock mutual fund, that nest egg could provide you with $40,000 to $60,000 a year for a long, long time.

Dave

Is 'hobby' car wrong?

Dear Dave,

My husband has a 1980 Camaro that's a real source of friction between us. He bought the car for $2,400. It needs $3,500 in repairs. Our household income is $29,000 a year, and this car is taking money away from our ability to save and pay off $39,000 in debt. We both already have decent cars, so what should I do?

Katherine

Dear Katherine,

This isn't a matter of having a car that runs. It's a matter of someone having a maturity problem.

Guys like shiny toys, especially cars. But these kinds of things are luxuries, and they should have to wait until the household and finances are in order. The family should always come first!

I'm not saying he has to sell the car today, but dumping money into it while you guys are struggling doesn't make sense. Sit down with the guy, explain how you feel and what this is doing to your finances and your marriage.

And you might even give him a little incentive. Let him know that once your debt is gone and you've got some savings in place, he'll have the money to get that muscle car up and running in no time!

Dave