Dave Says

Wednesday, March 12, 2008 at 1:46am

Dear Dave,

I’m curious as to how you feel about the government’s stimulus tax rebate plan. Our household income is over the maximum income amount to receive the rebate, so we’ll be getting nothing but the bill — again. It seems that those who will receive this money are encouraged to do nothing but spend it. Does this bother you, too?

—Keith

Dear Keith,

I’m not crazy about this plan, either. I don’t like the idea that my money could be going to help someone else buy a big-screen television or whatever toy they’ve got in mind. I understand that the “rebate” is designed to stimulate the economy and pull us away from a possible recession, but it sounds a little like socialism to me — and that’s just the opposite of capitalism.

The whole idea — increased consumer spending giving the economy a boost — sounds good in theory. But, I think a much better idea would be to encourage freedom from debt. THAT would increase consumer spending, and in turn, cause the economy to flourish.

I’m sure, too, that a lot of people have already spent this money in their minds. That’s a really bad idea! It’s an open invitation for Murphy to move right into their spare bedrooms lock, stock and barrel. I’m still amazed that so many people waste this “free” money instead of making it work for them by paying off debt or investing.

Think about this. If you invest this chunk of money in a good mutual fund for a few years you’ll receive a lot more free money than just the original $600 or $1,200. Let’s say you get $600 back and park it in a mutual fund averaging 12 percent. In 10 years that investment will grow to about $2,000. Leave it in there for 20 years and it’ll be worth $6,500. For married couples that $1,200 can grow up to $13,000 over 20 years.

Don’t get me wrong. I’m not a total scrooge, and there’s nothing wrong with having a little fun with your money. But the quicker you get out of debt, the quicker you can have the fun stuff, change your family tree and bless others!

Dear Dave,

We couldn’t afford a 15-year mortgage, so we financed our house on a 30-year note. Now, even after doing this, we’re still having trouble paying our debts, saving and making the house payment every month. Do you think we should sell the house?

—Larry

Dear Larry,

If you couldn’t afford the house on a 15-year mortgage, then you couldn’t afford the house. Period.

When you can’t save or get out of debt because you’re being strangled by your house payment, you are what’s called “house poor.” This usually happens when your payment is 30 to 35 percent – or more – of your monthly take-home pay. That’s why I recommend your mortgage payment be no more than about 25 percent of this figure.

There are lots of cases where I tell people to sell stuff to get out of debt. But having to give up your home is an emotionally and spiritually damaging experience. Try everything else that makes sense first before you give up your home!

I want you to try living on really tight budget for the next six months. Give every dollar a name and spend everything on paper before the month begins. It’ll be tough. You may have to cut out cable television, stay away from restaurants and put vacations on hold for a while.

Then, take a really close look at the situation and see if you’re getting out of debt and into savings. If not, then you may have to consider selling the house.

For more financial advice plus special offers to our readers, please visit www.davesays.org or call 1-888-22-PEACE.

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By: HokeyPokey on 12/31/69 at 7:00

Dave, you're right.I'm giving my stimulus check to Jesus, I'll send it directly to you to forward it to Him.Praise the Lord.

By: WickedTribe on 12/31/69 at 7:00

I love the mutual funds that average 12 percent.

By: courier37027 on 12/31/69 at 7:00

Here is a unique solution: since there is a mortgage payment crisis, we should demand tapping into our social security accounts to pay these mortgages. Anyone who has worked twenty or so years should have hundreds of thousands saved in social security. What could be more secure than keeping your house? Is it more inportant to keep your own house, or pay illegal immigrants to jump the border and access all services at taxpayer expense?

By: jwk6179 on 12/31/69 at 7:00

I find it odd that Dave Ramsey CLAIMS to be a Christian, yet he still refers to what he pays in taxes as "MY MONEY". If he were a TRUE CHRIST FOLLOWER, he would know that it is actually GOD'S MONEY and he is just letting Dave Ramsey use it.

By: NewYorker1 on 12/31/69 at 7:00

Don't get me started on that stimulus package. It pisses me off when I think about it. The government is basically rewarding people who have made bad decisions. I'm sorry people are losing their homes, but the reality is, most of these people knew up front that they really couldn't afford these homes. I'm starting to believe that ALL of our government officials are on crack with some of these decisions they are making.

By: courier37027 on 12/31/69 at 7:00

NewYorker, as someone who did not force anyone to sign their mortgage papers under duress I agree with you. My high school coach would preach, "Stupidity should be painful". Buying too much house with too little money through a sub prime lender falls under that category.

By: courier37027 on 12/31/69 at 7:00

jwk, I think the Almighty gives us a better deal than our government. Creator lets us keep 90%, govenrnment takes about 35%.

By: BigPapa on 12/31/69 at 7:00

Yes, it's sickening to me to think that people that don't even pay taxes will get money back. It's total redistribution of wealth. It's sets a bad presedent. Now every time there is a dip, the government will send my money to some slob.How did they come up with $600? If $600 is OK, why not $6000? why not $10,000?And why cap the income at which you receive a "rebate"??

By: HokeyPokey on 12/31/69 at 7:00

The part I don't understand is why every letter that starts "Dear Dave," isn't signed "—Dave."
"16537

By: idgaf on 12/31/69 at 7:00

The stimulus package is great. FOR THE CHINESE.

By: OneTimer on 12/31/69 at 7:00

So glad you guys have this column from Dave each week to whine about and pick apart. I know you whine about other things the other days of the week, but I always look forward to Wednesdays.

By: yazoo on 12/31/69 at 7:00

If you follow Dave's persistent advice you will create infinity. His only advice is to "save and invest

By: BigPapa on 12/31/69 at 7:00

Not true yazoo. If you call Dave and tell him you want to buy a car and you have no dept and you are investing for your retirement, AND you can write a check for it. He'll tell you to buy the dang thing. Now he will tell you to try and get a deal, meaning buy a 1-2 yr old car, but as long as you can pay for it, Ive never heard him say you can't have fun.It's just that you can't buy a new car if you are struggling to pay our cc off.

By: NewYorker1 on 12/31/69 at 7:00

I have no bad debt i.e., credit cards, car loans, etc. The only bills I have every month are my mortgage and utilities and let me tell you it is a wonderful feeling to have. I highly recommend getting out of debt and you will really start to see a difference in your life; both mentally and financially. I've been "bad" debt free for many many years now and I can pay cash for a brand new Mercedes if I wanted to, but don't want too. I can pay my house off if I wanted to, but choose not too. There are so many more options when you don't have all that "bad"debt drama every month.

By: NewYorker1 on 12/31/69 at 7:00

I could also spend $80K on a prostitute if I wanted too.

By: HokeyPokey on 12/31/69 at 7:00

NY1 it would probably take that much to get the woman that close to you ;-)