Dave Says - September 20, 2010

Dear Dave,
What’s your rule of thumb about how much your car should be worth in comparison with your income?
Madea

Dear Madea,
Great question! My rule of thumb is that all of your vehicles—I’m talking about cars, trucks, boats and their Sea-Doo sisters, motorcycles, and anything else like this—should not total more than half your annual income.

Why? It’s because all of these kinds of things go down in value. You never want half of your income going into things whose value is dropping like a rock. You don’t need a $20,000 car if you’re making $30,000 a year. That’s just stupid. Think about it this way. If you’re making that kind of money, and I walk up and tell you I’ve got an investment opportunity that will turn $20,000 of your hard-earned income into $12,000 in just three or four years, are you going to take me up on the offer? If you’ve got a brain in your head, the answer’s no!

Now, I’m okay with it if you make $300,000 a year and buy a $20,000 car if you pay cash. That’s like most people running out and buying a Happy Meal. It’s just not a big deal!
—Dave

Dear Dave,
Do you ever reach a point in your plan where you stop budgeting or using the envelope system?
Craig

Dear Craig,
I’ve been fortunate enough to build a net worth of several million dollars, and my wife and I never stopped doing either one. We still sit down together every month and plan out a written budget. Every dollar is spent on paper before the next month begins, and we follow it exactly. And I can promise that were you to look in my wife’s purse, you’d find one of our deluxe envelope systems, just like we sell in our office bookstore. She carries it with her everywhere!

We do these things because we’re responsible spiritually for handling that money well. Those of us who are Christians call that “stewardship.” We feel like we’re called to be good stewards—good managers—of God’s money. It’s not a freaky thing. It’s just a matter of following God’s good advice and common sense.

I want that money to behave, and these things are some of the best ways I’ve found to make it do what it’s supposed to do!
—Dave

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Dave Says - September 13, 2010

Dear Dave,
I’ll be starting college next fall. Is it okay to take out student loans if you have no other income to live on while you’re in school?
Mandy

Dear Mandy,
Wait a second! What do you mean you don’t have any other source of income to live on while you’re in school? Didn’t anyone ever teach you about a little thing called work? I worked 40 to 60 hours a week all through college, and I still graduated in four years. Nowadays, many people would call that child abuse. It’s absurd!

Don’t try to box me into a corner with the ridiculous notion that you have to take out student loans to go to college. You do not! Did you know that only 57 percent of people who start college actually graduate? That means 43 percent don’t. And guess what they have? Student loan debt and no degree!

Here’s what I want you to do. First, apply for every college scholarship you can find. Next, get a job! You may even have to take a couple of part-time jobs, but so what? Once you’re there, live in the dorm and eat dorm food, too. It won’t kill you. And a state college, where you can get in-state tuition, is always a good idea. If there’s one close by you can save even more money by living at home.

Is a college education important? Sure, it is. It’s a great thing, and I recommend going to college. But is student loan debt a necessary part of getting a degree and achieving success in life? Absolutely not!
— Dave

Dear Dave,
My fiancé is from a wealthy family. The other day, her father suggested a pre-nuptial agreement. I’m not sure what to think about this. What’s your opinion on pre-nups?
Jeremy

Dear Jeremy,
It sounds like her family values its money more than it values their relationship with you. That could be a problem. If your bride-to-be feels the same way, then you shouldn’t marry her. In most cases there’s just a really bad spirit that goes along with pre-nups. It’s basically planning your divorce in advance. And in most cases, what you set your eyes on is what you’ll end up getting. One of my daughters just got married, and I never even thought of suggesting a pre-nuptial agreement.

There may be one exception to this rule. If you’re fiancé was already wealthy on her own, I might change my answer. Extreme wealth has a tendency to attract a whole lot of weirdness and dishonesty. I’ve even gone so far as to tell my wife to get a pre-nup if I die and she marries again. This is different than just the potential to be wealthy, like your case.

You can still have a wonderful marriage, even if you don’t see eye-to-eye with her family on this. But both of you need to be on the same page and of one mind. That’s why I think it would be a really good idea for you guys to address this before the wedding with a heart-to-heart talk and some pre-marital counseling!
— Dave

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Dave Says - September 27, 2010

Dear Dave,
My husband says we can’t travel to Illinois for a family reunion next summer if we’re not out of debt by then. He thinks your rule is no vacations while you’re getting out of debt. I think if we plan and save, it would be worth it to go. Who’s right?
Ann

Dear Ann,
It must be your family reunion we’re talking about! Seriously, he’s right in this case. No vacations while you’re getting out of debt. You guys need to roll up your sleeves and get the job done.

Still, I’m not going to be an ogre or anything about this kind of trip. I mean, we’re talking about family. So, I’m okay with it if you guys work together and spend next to nothing to make it happen. But if traveling to Illinois involves $1,000 worth of plane tickets, then you’re staying home, girl! If I were in your place, I’d be staying home. That’s how you get out of debt. You have to get angry at it. You can’t just roll along living life as usual.

Live like no one else, so that later you can live like no one else. I know, you’re thinking life’s too short to not have some fun. Well, you’re right. Life is too short. It’s way too short to live your whole life being broke!
—Dave

Dear Dave,
Would you agree that pride is our biggest problem when it comes to debt?
Brian

Dear Brian,
That’s a really interesting question. I think pride is definitely toward the top of the list, but I’d say the biggest cause of debt is immaturity.

One really good definition of maturity is learning to delay pleasure. When you can’t wait to buy the video game, or the car, or the iPhone, then that’s a sign of immaturity. It’s like a four-year-old fussing and whining, “I want it right now!” Give me a break! That kind of stuff makes me sick.

But you know, pride may be the biggest reason people keep debt. People who walk around worrying about what everyone else would think if they got rid of the big house or the fancy car—worrying that everybody else would think they’re broke—now that’s pride. But it definitely enters into the equation.
—Dave

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