D e a r D a v e ,
I lost my job a couple of years ago. As a result, I ended up in about $25,000 of debt through credit cards and a consolidation loan. Now I have a great job making more than I’ve ever made before, plus a car loan for about $13,000. The older debts went to collections, but I’m not beinghoundedbycollectors at this point. I want to get control of my money and do things the right way, so how should I handle things?
M ike
D e a r M ike , Well, being hounded isn’t the issue. Morally,youowe the money. You took money under agreements that you’d pay it back, and that means you need to pay it—both the old and new debts.
I’d start by running two debt snowballs. Let’s do one for the car and any other active debts you have first since the collectors aren’t after you about the old, dead debt. Then, smallest to largest, start knocking out the debt that’s in collections. When it comes to these guys, reach out and get an agreement in writing detailing exactly how much you owe and the monthly payment amounts. Remember, do not give any of these folks direct access to your bank accounts.
There’s no upside to not paying what you owe. It’s an integrity issue, it’s a legal issue, and it’s a credit issue. Did I mention it’s an integrity issue, Mike?
You want this stuff out of your life. If you don’t take care of it, I guarantee it’ll come back to haunt yousomewheredown the road!
— D a v e D e a r D a v e
, My wife and I are looking to move from Washington, D.C., to Greenville, South Carolina, in a couple of months, and then sell our current home inFebruaryorMarch after she gets things wrapped up with her job. We are a little worried, though, because of all the things we’re hearing about the housing market crashing. Could you speak to this, please?
ZONES: SE
N i c k D e a r N i c k , Your emotions and things you hear can creep up on you. I get that. But the fact is, there are still four buyers out there for every house that’s up for sale. Now, are the buyers and the market as active and frenzied as they were several months ago? No. But you have to remember, the last couple of years have been crazy-strange times for the housing market.
I’ve been in the real estate business since 1978, and I’ve never seen anything like it. Usually, it takes about 90 days to sell a house. You’ll get some offers, and none of them will be at full price, but everyone will have time tothinkaboutthings. That’s normal, and it’s probably a lot closer to how things will work themselves out for you now in Greenville.
But in any economy, my advice to you would be don’t buy another house until yours has sold. If you end up with two house payments and your old house is sitting empty while you’re having to pay for the mortgage, taxes, utilities and all the upkeep to make sure it’s ready to show, you’re going to become what’s known as a motivated seller. I don’t want you to just give it away, but you’ll need to be very careful to make sure the timing on this deal makes sense.
Personally, I wouldn’tbuyanother house until the first one sells.
— D a v e D e a r D a v e ,
I am on Baby Step 2 of your plan, and I am about four months away from being debt-free. My younger brother is a good person, but he is very careless with his finances. He is always asking to borrow money from me. I don’t want to be mean or damage our relationship, but what is the best way torespondtoasibling who continually asks for money?
J a m es
D e a r J a m es , Honesty is always a good thing. If I were in your shoes, I’d just tell him the truth. Sit down with him, and have a friendly—but real—conversation where you let him know you’re working hard to get out of debt and don’t have any cash to spare. Explain that you’ve decided being in debt is dumb, you want a better life and that you don’t plan to borroworloanmoney anymore.
You’ve got to look at the big picture in situations like this. You’re not helping someone if you participate in their misbehavior with them. Sometimes, especially when it comes to family, you have to love someone enough to tell them the truth. And in some cases, that can mean saying no and telling them to grow up and get their act together.
You’re not responsible for your brother’s reaction to all this, James, but you can control your words and use them in a caring manner. Do this with a kind spirit, and remember we all make mistakes. He may take it well, or not so well. But you’re not really helping someone who’s immature or irresponsible with moneywhenyougive them cash. At that point, you’re an enabler. It’s like giving a drunk a drink.
God bless you, James!
Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 16 million listeners each week. He has appearedonGoodMorningAmerica, CBS This Morning, Today Show, Fox News,CNN,FoxBusiness,andmany more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.