Dave Says

Wednesday, March 5, 2008 at 1:55am

Dear Dave,

My husband and I divorced a few months ago, and I got custody of our children, ages 12 and 17. I’m lucky enough to be debt-free, and I own the house we’re living in, which is worth about $350,000. I also have $160,000 in savings, and we receive $1,200 in child support every month.

People are all telling me I should be investing, but each one tells me to do a different kind of investing. What do you suggest?

—Mary

Dear Mary,

I know going through a divorce has got to be hard on you and your kids. Make sure you spend lots of time hugging on them and letting them know they’re loved.

Fortunately, things are still pretty good in your world in a financial sense. Your net worth is a half-million dollars, plus you have no debt. Most ladies don’t find themselves as lucky money-wise after a divorce.

But the trauma from the divorce is still pretty fresh, and I wouldn’t recommend making any life-changing decisions right now. You should never make important, long-range decisions when your emotions are out of whack.

I wouldn’t do too much with the $160,000 right now. Just park $100,000 of it in a CD for a year until you get over the shock of everything that has happened. You won’t make a lot of money, but you won’t lose anything, either. Then, take the remaining $60,000 and invest it in good growth stock mutual funds – ones that are very conservative and have at least a 10-year track record of success.

Also, you’ve got to take a look down the road and decide what you want to do with the rest of your life. You’re going to be an empty-nester is a few years. Do you want to go back to school or maybe start your own business?

You’ve got a little learning to do about investing, too. Taking a year or so will allow for education and thinking about what you want out of life. Knowledge has a way of erasing fear. Plus, you’ve got a responsibility to your kids to invest this money wisely.

When everything settles down a bit, just take your time and make sure you don’t invest in anything you don’t understand. And spend lots of time loving on your kids, too. That’ll help with the healing process as much as anything.

— Dave

Dear Dave,

The grand opening for my new business is coming up soon. So far, I’ve done everything on a cash-only basis and my husband has been a huge help the whole time.

Do you think it would be a good idea to officially make him a partner in the business?

— Beverly

Dear Beverly,

Way to go! I love the fact that the two of you have worked toward a dream together AND done it without going into debt. Doesn’t it feel great to own a business instead of the business owning you?

I know you love your husband, and he sounds like a great guy to have worked with you and given you all that support. Still, I don’t think I’d make him a partner in this deal. A partnership is a pretty bad form of business ownership, and it can be even worse if the partner is your spouse.

First, making him your partner won’t really accomplish anything worthwhile.

Second, if things go wrong and this thing tanks you’ll both be liable. If you’re in the type of business where you have some liability and you’re afraid someone might try to come after your personal stuff, I’d look into the possibility of a Sub S Corporation.

Congratulations and best wishes, Beverly. Grow slow and keep up the good work!

— Dave

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Filed under: City Business
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By: WickedTribe on 12/31/69 at 6:00

I'll never understand why someone with $160,000 in the bank would even ask Dave for advice.That would be like Bill Gates writing in "Dave, I'm not sure how I could make money. Got any suggestions?"
"15640

By: Tinsoldier on 12/31/69 at 6:00

Are you equating a person with $160,000 in the bank with being a successful multi-billionaire businessman? Is it also true what that anyone making more than $50,000 is considered "rich" and therefore should be paying more in taxes? ..........Right.

By: danceking on 12/31/69 at 6:00

I think the reason Ramsey wants to cater to people like this is that they have a lot of money to give to his church. Surely he is tired of browbeating widows into sending 10% to his church instead of paying their electric bill.

By: theplantsman on 12/31/69 at 6:00

WickedTribe let me guess. Your astute financial/retirement planning is the lottery and the government…right. Asking Dave is probably more in line with what novices need than those that are more affluent. Nonetheless, Mary apparently is smarter than you are if for no other reason than she does not feel that she is too smart to ask for advice or at least a second opinion.

By: dxfret on 12/31/69 at 6:00

$160,000 in the bank is good. But, is this part of a 401(k) or something similar, or outright savings? What about retirement, pension, etc. That money won't last long if she does not already have some sort of retirement savings. Is the house owned free and clear?

By: mccullochd on 12/31/69 at 6:00

"Debt is dumb, Cash is king and I owe my creditors thousands from my prior bankruptcy, but I ain't paying them now that I'm living like no one else!"
"15702

By: WickedTribe on 12/31/69 at 6:00

So what are you saying? That the money just fell into her lap (including the money to pay off the house) and it wasn't earned through her own financial acumen in the first place?Oh wait, she is a divorcee. It probably did fall right into her lap from her husband's bank account. I see her point in asking Dave's advice now. My bad.

By: danceking on 12/31/69 at 6:00

I went to one of Ramsey's seminars in the '90s and at the end he mentioned some crazy plan that would allow the Churches to purchase all the public schools in America.I filed him under KooKoo religious maniac ever since.

By: Blanketnazi2 on 12/31/69 at 6:00

Wicked, that's exactly what I thought.

By: JDG on 12/31/69 at 6:00

I love anti-religion zealots. If they are right, all that happens is that they turn to dust in the end like everyone else, religious folks included. No big deal. But if they are wrong, they get to burn in h*ll for eternity. I think I will err on the side of caution.

By: danceking on 12/31/69 at 6:00

I am not anti religious. I love God. I am against wolves in sheep's clothing who promise to show you how to manage your money then tell you first thing you do is send my church 10% of your gross income whether you can buy your medicine or not.Ramsey has ulterior motives

By: nnoseworthy on 12/31/69 at 6:00

I tend to like Dave's advice. He is quite obviously a "man of faith" for whatever it's worth. That and his life experiences (bankruptcies included) are where his advice is based.On his radio program, he never admonishes anyone for NOT tithing (10% of your NET income), and I have never heard him suggest a person forgo medicine or basic utilities to give any amount to a church.DK: Even when he DOES suggest tithing, he never says which church, and nowhere in this column does he mention tithing at all. Obviously you have some personal issue with Ramsey.I would rather take financial advice from a "kookoo religious maniac" who has piles of money than anyone who is broke or a millionaire-on-paper-only.my 2¢

By: BigPapa on 12/31/69 at 6:00

Ramsey never tells people to send the money to HIS church, he tells them to send it to their church. Now, I personally do not agree with that, but for basic financial advice 99% of people would be far better off if they paid attention to 99% of what he says.- don't use credit cards- dont have a car payment- don't buy a house you can not afford- save 15% for retirement- keep an emergency fund (keeps you from credit card debt.)- live within your means, dont play keep up with the Jones.