Dear Dave,
How important do you feel identity theft protection is today? Shouldmyhusbandand I buy it just for ourselves, or should we cover the kids, too? Lastly, where does identity theft protection fall in your Baby Steps plan?
Lanie Dear Lanie,
Unless you’ve gone completely off the grid, and have been there for a long, long time, there’s a good chance someone out there has a few of your numbers. Unfortunately, that’s all part of living in today’s world. Between consumer carelessness and data breaches—which have becomeanall-too-commonoccurrence these days—almost everyone has experienced, or will experience, some sort of identity theft during their lifetime.
So, yes. I recommend everyone have identity theft protection. I don’t really consider it part of the Baby Steps, because in my mind it’s like car insurance or life insurance, in that it’s something virtually everyone needs. And things like that should just be part of your regular monthly budget.
Good question, Lanie!
—Dave Dear Dave,
I’m trying hard to get control of my money and get out of debt, but I had a situation come up the other day, and I really don’t know what to do. I’m one of four brothers, and our parents’ fiftieth wedding anniversary is early next month. My two oldest brothers got together and made plans for a party without consulting the rest of us. They want everyone to chip in $1,000 to help pay for things. I love my mom and dad, but the only savings I have is $1,000 in my beginner emergency fund. Will you tell me how to address this situation?
Ronald Dear Ronald,
I’m going to be blunt here, okay? Since you weren’t asked about any of this ahead of time, and had no say in anything, fair would be for you and your brother who weren’t consulted to pay zero. Zilch.
Planning something that expensive without consulting everyone involved well ahead of time—and expecting them to lay out $1,000 without warning—is way out of line. And don’t let your older brothers lay a guilt trip on you, either. This has nothing to do with how much you love your parents, being greedy or anything like that. It has everything to do with consideration and communication, or in this case, a lack of these on their part.
If I were you, I’d let your oldest brothers know exactly what your financial situation is like right now. Explain what you’re doing and why you’re doing it, then let them know in a nice, but firm, tone you’llgivethemwhateveryou can scrape up, but you won’t be chipping in anything close to $1,000. Oh, and I’d tell them next time they hatch up a big, expensive plan like this, to check with all their brothers way ahead of time.
Best of luck, Ronald. I’m sorry you have to deal with this.
— Dave Dear Dave,
My wife and I have three young daughters. Is there a Baby Step for weddings? We didn’t see one in your plan, but I was wondering if it was included in any of the other Baby Steps.
Cedric Dear Cedric,
This is a really good question. I’m glad you’re thinking about the future and planning accordingly.
I don’t have a specific Baby Step for weddings. If I did, it would probably come after Baby Step 5, which is setting aside a college—or trade school fund—for your kids. Maybe you could look at it as Baby Step 5b. Once you have retirement, education savings and extra house payments underway, you could start putting aside a little something for weddings.
Don’t get me wrong, weddings are special. You absolutely should mark these kinds of milestones with a celebration. But a wedding is only a one-day event. And to be blunt, a good education is more important than a fancy wedding. This idea may not make me popular with some folks, but it’s the truth.
Maybe this is the dad in me coming out, but if I had to choose between paying for more education and paying for big weddings, I’m going to pay for school every time. Besides, there’s no correlation whatsoever between the size and/or cost of a wedding, and the happiness and success of the marriage.
Good luck, Cedric!
—Dave Dave,
I have an idea for a small business I think would be a huge success in my area. How do you feel about me keeping my current day job, and hiring a full-time manager for the business to handle the day-to-day operations, while I do the accounting and oversee things? If it doesn’t break even or better, I can always closeit.Inmymind,Iequate my plan to being like selling real estate on the side, while keeping my regular, full-time job. What are your thoughts?
Victor Victor,
To be honest, I don’t think there’s a high likelihood of success using this model. Unless, of course, you’re willing to devote 40 to 50 hours a week to this new business, in addition to the time you spend at your current job. In my mind, you’d have a better chance of making it work if you bought an existing business with a manager already in place. That way, at least you wouldn’t have to be so entrepreneurial and constantly involved in things like adjusting the business model, checking prices and dealing with customers.
Honestly? This idea isn’t a lot like real estate at all. Real estate will run itself— for the most part—once you find a tenant. Also, the number of hours you’d have to put into selling real estate on the side is nothing like the time you’d spend getting a new business off the ground.
Here’s the deal, Victor. The secret ingredient to your small business success is you. You are the ideas, the passion and the energy. The problem with your plan is that you are only a small part of the equation. Franchisesandchainstryto train this kind of stuff into people with pep talks and other forms of motivation, but when something’s your baby, it’s really your baby. You’re going do your best, days, nights and weekends, to grow it properly. You’re going to worry over it constantly, and treat it almost like it’s your very own child.
I love your entrepreneurial spirit, but I’m sorry, Victor. I just don’t like this plan. It sounds like your idea is to swing by once in a while, eyeball things and crunch a few numbers. And if that’s the case, I wouldn’t waste my time or money if I were you. You’d probably benefit your community more by just giving what you’d invest in the venture to a good charity.
—Dave Dear Dave,
I’m a single mom, and I opened my own small business last year. The business isn’t growing at all, and my mom and dad are helping me with the bills. On top of all this, I don’t receive any child support payments from my ex-husband. But my biggest concern is our home. I bought it four years ago, and when I opened my business, I did it with a home equity loan. Do you have any advice?
Tammy Dear Tammy,
You need to close up your business, at least temporarily, andgofindsomemoneymaking work. I’m sorry to be so blunt, but you’ve got a really big mess on your hands.
Long story short, the money you make at another full-time job is likely to decide whether you can stay in your home. If you’ve got a mortgage, home equity loan and business debts hanging over your head, the chances of this are slim. You probably need to consider the idea moving into a small, affordable apartment for a while, too. If you do this, get your debts paid off and your finances back in order— which includes living on a budget and saving—you might be able to buy a house again in a few years.
I know the idea of giving up your home and business is hurtful, but sometimes when you have a serious illness, extensive surgery is needed to fix the problem. And right now, you’ve got a very serious financial illness.
I want you to understand how I’m looking at this, Tammy. The house alone is not the problem. You borrowed money to open a business, and that was your first mistake. You also have no savings, which is another mistake,andnowyourbusiness isn’t making a profit. See how all of it combined adds up into one big mess?
I love your spirit, and the fact that you want to be an entrepreneur. But you’ve got to get control of your money first. If you don’t, this thing will eat you alive.
—Dave Dear Dave,
Our 21-year-old son is in college, and we’ve always warned him to stay away from credit cards. Despite our warnings, we recently learned he got a storebranded credit card. The good news is he has stayed under the credit limit. The bad news is he has never made any payments on the purchases he made, and now he owes about $3,800. He’s a good student, and my husband and I want to look at this as a young person’s one-time mistake. Do you think we should pay off the card for him just this once?
Melinda Dear Melinda,
Believe me, I understand youwantingtohelphimout. It means you’ve got a good heart, and you love him. No parent likes seeing their child in a bad situation.
There’s a reality here, though, I hope you won’t overlook. It’s his debt, not yours. He knew what he was doing when he signed up for that credit card. He knew what it meant, what was expected, and he’s the one who should make good on the repayment. There’s nothing unfair about that.
Now, you’re right. This is a typical young person’s mistake. And like a lot of mistakes our kids make, it’s one that’s bad and wonderful at the same time. It’s bad because if he had just listened to you and his dad, he would’ve avoided the whole mess. It’s wonderful, though, because it gives you two the opportunity to provide him with a real world, teachable moment.
At this point, my advice is for both of you to give him a great big hug, and lovingly explain where he went wrong and why it was a bad idea. If you want, you can even go a step further, and help him find a parttime job if he doesn’t have one right now, so he can pay off his debt and get out of this mess. It’ll take some planning and discipline on his part, but leave the payments to him. Hopefully, by thetimehefinishesworking his tail off—and scrimping and saving to pay this debt—he will have learned a lesson he’ll remember for the rest of his life.
—Dave Dear Dave
I switched to a debit card so that the money I spend comes directly from my checking account. But I still have a problem some months with overspending and buying things I shouldn’t. Do you think I should stop using my debit card?
Debbie Dear Debbie,
When I made the decision to get intentional with my money, I just used cash. It’s hard to spend it when you don’t have any on you. It’s a tough thing, I know, but you have to make a conscious decision to start living differently. You’ve got to get mad at the things that steal your money a dollar or two at a time enough to take action.
Try looking at your life as a whole, not a moment at time. All the moments you’re living right now will have either a positive or negative effect on your future. I decided I wanted the greater, long-term good, so I gave up on the shortterm stuff.
Debit cards are great tools. You can’t spend money you don’t have with them like you can with a credit card. But you’ve still got to budget very carefully for each month, and give a name and a job to every single penny of your income. Otherwise, you can still overspend.
—Dave