Posted on 02/26/2013 2:31:01 AM PST by Kaslin
Dear Dave,
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?
Kevin
Dear Kevin,
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
Dear Dave,
What do you think about the HARP program, and what exactly is it?
Ivy
Dear Ivy,
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 refinancetheir home loans.
The HARP program is the only part of the Clinton administration’s 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 governmentpretending 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.
—Dave
Gotta love Dave!
No mention of his last name but this has to be Dave Ramsey.
There ain't much of this left in America these days...
At least you didn’t post him giving investment advice ...
DAVE RAMSEY SAY : “Put everything in diversified (di-worse-ified) growth stock mutual funds and never buy real asetts like gold or silver , if you have any SELL IT”
When is he going to figure out that there is no growth in this economy and that his numbers (average 8-12% a YEAR!) are a joke... he needs to hire a REALIST for his investing advice ... NOT EVEN DAVE RAMSEY takes his own investment advice , he buys REAL ASETTS , real estate ...
You’ve got an absurd amount of money wrapped up in those cars.
Don’t get me wrong. I have one car payment on a $10,000 loan, but you don’t get a lot of car (even used) for that kind of money. And $90k was ok money where I lived in Seattle. Here in central KY it makes you one of the “rich”.
Trouble with those two little paid-for beaters is that they require repairs at random intervals, that can be expensive. Sometimes you can ignore those repairs (most people don't care about suspension repairs unless the car is unable to move), but dead alternators, transmissions, transaxle shafts, blown heater cores (very expensive to fix), tires, etc, can be expensive and random. At least with a payment, you have a set amount every month that you're paying, a known quantity, so that you don't have to come up $1,500 out of your pocket on a Tuesday afternoon.
That said, $24k apiece for their cars is a lot, IMHO.
It sure is if he only makes $90,000 a year and has $80,000 in consumer debt. You don’t need a car with all those gadgets. I have a 2004 Chevrolet Cavalier which I bought in 2006. It has automatic transmission, air conditioning, and air bags for the driver and front passenger seat, but no power windows or automatic key lock. It is all I could afford when I bought it. Oh yes it has also a theft devise that I believe the previous owner had put in
Look at the top of the page below the title to the right of the date
One pickup truck today can cost $48,000 dollars, he has 2 cars for that. I would say that isn’t off the wall, still it is a lot of money, but if he drives a fair distane he needs a reliable car.
Today there are no back lot mechanics who will fix your car cheaply. If you take your car to a person who has no computer skills and little training working on the model of your car you will get stung.It isn’t unusual to pay $75. to $100 dollars an hour to have your car worked on.
When your car stops today there is little sense in raising the hood , there is nothing there that you can do, Just call the tow truck another $ 200 shot to hell.
My wifes old car became unreliable it was a Buick Roadmaster from 1994, I bought a new Toyota Venza that isn’t m,oaded with goodies and has a 4 cylinder. The old Roadmaster —Heavier, bigger, powerful 350 LT engine,got better gas mileage. I almost cried.
Good advice on the cars. I have never financed a car. I just bought a 2006 Toyota Camry with only 80,000 miles on it for $7800.
I respect Dave a lot, but he has painted himself into a corner on this gold thing and will go over the cliff with flags flying. While he has been trashing gold, others have been laughing all the way to the bank.
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$48,000 is absurd? He needs to check modern car prices.
What's absurd is buying a new car. You lose 50% or more of it's value in the first three years, well before you're done paying for it.
NEVER buy new unless you can pay cash and will be keeping the vehicle for 10 to 20 years or so. It's just not a wise use of your money.
I drive a 2000 Montana van that I bought for 12,000 in 2004 (let someone else eat the depreciation). It's paid for. If I spend 2400 a year on repairs (and I don't) I'm still way ahead of the guy who's paying 350 or more a month. With the amount of miles and the amount of use I figure it will serve me well for at least 4 more years.
My other vehicle (my boat pulling truck) is a 1998 Durango. Paid 7500 in 2006 for it. It's also paid for. I figure with the miles on it, and the amount of use it gets, it will serve me well for another 10 years or so.
Take good care of your cars and run them until they can't run anymore. Why spend money lining the pockets of obama's allies (GM or Chrysler).
I will admit that I bought my boat new. But I custom ordered exactly what I wanted and will have the boat until I die (pontoons don't go bad).
Gold can not always go up and like with everything else what goes up must come down. So if gold goes down, what then?
That said, $24k apiece for their cars is a lot, IMHO.
Do the math. Are you really going to spend $14,000 in repairs on a $10,000 car over its lifespan? No way. My wife and I are in the habit of buying used cars in the $5000 to $10,000 range. We pay cash for them, and we maintain money in an INTEREST BEARING account, standing by for the day when a car needs repairs. Sometimes I do the work myself, or my father-in-law does the work, and all we pay for is the parts.
We never have a monthly payment for a car. We're making money on interest, and the bank isn't. When one of our cars breaks down, we get by with one car instead of two for a while. If there are things going on that really require two cars, we rent one.
If the repairs are going to be really expensive and time-consuming (meaning a blown engine or transmission), we sell it on Craigslist to the highest bidder, and we go out and buy another one. It isn't hard to get $500 or $600 for it, because we always buy popular vehicles like the Ford Taurus or the Chevy Blazer. Somebody's always looking for a parts car to fix their own. Or they have a working engine or transmission, and they want to buy a car to put it in.
And we spend a lot less on insurance too, because we only pay for liability insurance, not full coverage.
Even if you don't do some of the work yourself, you'll still save $8,000 to $12,000 a year.
Exactly. Your whole post covered a lot of the points I didn't. Change the oil, check the oil and coolant, rotate the tires, and learn to watch for little problems that are cheap and easy to fix, before they become big problems.
I understand Dave’s point about the cars.
But he neglects to mention that most people are underwater in their cars the minute they drive off the lot.
You can’t exactly short-sale a car like you can sometimes do a house.
If the couple is already in financial trouble, where are they going to get the money to make up the difference in the loans to unload the cars?
The actual value of Gold(or silver for that matter)doesn't change. The reason gold is so high now is because of the very low value of the US dollar. If Gold goes down it will still buy the same amount of goods for the same volume of gold(in other words an ounce will buy the same regardless of the "price" of gold)because the value of the dollar will have gone up. It is simple once you figure it out. Buying Gold, actual gold not gold on paper, is a very smart move and will pay off big for those who do if the SHTF.
$48,000 is absurd? He needs to check modern car prices
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The price isn’t absurd. But keeping that kind of car debt while choosing to live with In-Laws due to debt so you can keep that debt is absurd.
When your car stops today there is little sense in raising the hood , there is nothing there that you can do, Just call the tow truck another $ 200 shot to hell.
I used to think that. Then I discovered, back in the early 90’s, the computer codes. Every car I’ve had since then (except one) has been a Chrysler product. They all allow you to see your codes without any tools.
I had a mid 80’s Omni that simply stopped running one day. I discovered the codes as it sat in the garage for a couple of months. Nothing would give it spark and I had pretty much given up. I checked the fault code and it said some electrical part was bad. I found the part (looked like a little relay under the hood), paid the $19, installed it and the car started right up.
Then, a 1987 Reliant. Stranded my daughter at work. Code said “bad map sensor”. I got one for free from the junk yard. Installed it in five minutes and it started right up.
2001 300m: Starts missing bad. Fault code says bad coil on number 5 cylinder. I replace the coil ($45). Problem fixed.
For most problems (even transmission related), modern cars tell you what is wrong with them. If your “check engine light” is literally your car telling you there is a problem and it pretty much knows what it is. It’s just waiting for you to ask.
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