Dave Says - March 4, 2013 In-laws and out of debt
I’m 27 and married, and we have two kids. I make $90,000 a year, but we have $80,000 in consumer debt—$48,000 of which is in car loans. The rest is credit card debt. My wife’s parents have offered to let us move in with them so we can get out of debt faster. Do you think this is a good idea?
If I were in your situation, I would not move in with the in-laws. You’ve got an absurd amount of money wrapped up in those cars. I’d sell the stupid things, start living on a budget and paying down debt, and keep my dignity.
In my mind there are only two scenarios where you’d even consider taking the in-laws up on their offer. One is where they’re absolutely wonderful people and you have a great, non-toxic relationship with them, where everyone involved knows their boundaries. Even then, I’d only consider this if it were for a very short, agreed-upon amount of time.
The second scenario would be if moving in with the in-laws were the only way to accomplish your goal. And you don’t pass that test. You guys can get out of debt pretty quickly if you’ll just lose these ridiculous cars! Think about it. If you had two little paid-for beaters, your lives would be so much different. You could even save a little money on the side while you were paying down debt and buy a better car as soon as the debt was gone.
If you can’t tell, I’m pretty big on maintaining dignity. You might love your cars so much that you’re unwilling to make the sacrifice. Not me. The money going into your automobiles is insane, and that’s your biggest problem!
Dave's thoughts on HARP
What do you think about the HARP program, and what exactly is it?
The Home Affordable Refinance Program is designed for people who have made their payments on time but are underwater on their mortgages. Being “underwater” means they owe more on their homes than the homes are worth. So basically it gives them the opportunity to refinance their home loans.
The HARP program is the only part of the Making Home Affordable program that actually worked. And to be honest, it has worked well. In contrast, the recent Home Loan Modification program is a piece of junk and all about political posturing. About 93 percent of the people who applied for a home loan modification didn’t get one. It was just another case of the government pretending to do something.
I’d advise looking into the HARP program if you’ve got a good credit history and you’re underwater on your current home. Lots of HARP program applications are being approved, and the deals are closing. That’s what really matters when you find yourself in a situation like this.
This Monday is just not going to be the same. I will miss the Monday Night FPU peeps. We warped up this past Monday with a grand celebration. I've never seen so much food at the graduation pot luck. The last two weeks of class were in the chapel and it provided an intimate environment to bring the group even closer together. I wonder if we should always have the graduation in the Chapel? I heard amazing stories of life change that people shared graduation night. Stories of marriages improved, hope restored and confidence gained. I received comments like I'm giving for the first time" and "giving substantial more" on the exit surveys. These are powerful behavior changes that will lead to a more fulfilling life. We learned lots of tactical money best practices over the 9 weeks. More importantly we learned that the tactical stuff is only 1/2 the recipe to winning with Money. We learned about living openhandedly and being intentional with the resources God has given us. We learned about the power of living in community and the power of prayer. Bill, Carolynn & I got a front row seat to witness all of this. We did small group breakouts for the Real Estate Lesson and people were huddled all over the chapel, listening, laughing, and learning together. Powerful stuff. I'm indebted to my co-facilitators, Bill & Carolynn, I couldn't have pulled this off without you guys. Thank you! I'm praying someone will step up and help us develop an "After FPU" small group or monthly reunion / accountability group to help graduates stay focused and encouraged. If you are interested please contact me.
Here are some of the statistics from this class. 62 Credit cards bit the dust, some undoubtedly are in the picture above. I always have the jar in my office, stop in anytime to add your card. We had $2,000,000 in non-mortgage debt in response to the early class survey. Just under $70,000 in non-mortgage debt was paid off in 9 short weeks and $50,000 added to savings. All in 9 weeks! You guys are amazing.
Please keep me posted as you guys continue to move through the baby steps and win with money and impact the world with the margin you have created in your lives financially, emotionally, and spiritually.
It can be hard to stay focused after FPU graduation. Life creeps back in, intensity and focus on accomplishing your long and short term financial commitments from FPU can get hard. There is strength in community and being around other people who are "Living like no one else" So later they can "Live like no one else". If any one is interested in hosting / facilitating a POST FPU small group please let me know. I'm happy to help get the word out for you. I believe there is a need and want for this. If your interested please let me know. dave
I received this email from an FPU graduate, and friend, today. Sounds like it's time for Washington to attend FPU? What do you think?
A person I recently saw put our government’s spending habits into perspective, that a normal person can actually understand.
Say a household had an annual income of $25,000 per year, but say they spent $38,000 each year. Not only that, but they also owed $160,000 in debt. And for their total savings, they only had $2,000 in the bank.
$25,000 - Annual Income (taxes / revenue)
$38,000 - Yearly Spending ($3.8 Trillion = $3,800,000,000,000)
$160,000 - Debt ($16 Trillion = $16,000,000,000,000)
$2,000 - Savings (Reserves)
Looking at this household, you would quickly come to the conclusion that they simply can’t handle money. What you are looking at is our government! All you need to do is add 8 zeros to each of these numbers and you come out pretty closely to what Washington has done to our country. They have saddled our children with an incredible amount of debt, and want to go even further down this path. It is time that both sides take this issue seriously and actually do something about it.
Here is an idea. How about instead of raising the debt ceiling (so that we can go further into debt) and actually cut our spending. And not just a little bit, but drastically! How else are we going to be able to get a handle on the debt? Even if they passed a balanced budget amendment so that they can’t spend any more than they bring in, there is still a $16 trillion dollar bill that has to be paid. Try not paying on your Visa or MasterCard bill for a while and see how that goes.
And for the president’s ‘tax on the rich’ that he wanted, it is like the family above getting a bonus check for only $500. And this is for a family who is spending $13,000 more a year than they are making. It is a drop in the bucket!
Dave Smith is part of the KCC finance staff and a Dave Ramsey Certified Coach.