Dave Says

There’s going to be sacrifice involved

Dave Ramsey

There’s going to be sacrifice involved

Dear Dave,

I bring home about $2,800 a month, and our mortgage payment is $1,100. We have been forced to take money out of our savings account occasionally over the last year or so to help pay the bills. My wife loves being a stay-at-home mom with our two preschool kids, but even she is talking about finding a daycare for the kids so she can go back to work and help out financially. How do you feel about this idea and our situation?

Cade

Dear Cade,

I can’t blame your wife for loving the idea of staying home with your kids when they’re so young. Being a stay-at-home mom is a great thing if you can make the numbers work. Still, I’m sure it’s no picnic trying to live on $1,700 a month with two little ones in the mix.

Let’s look at it like a math problem with three components – house payment, income and lifestyle. Forty percent of your pay is going toward your home. That’s way too much. Your mortgage payment or rent should never be more than 25 percent of your take home pay. I suppose you could look into the possibility of refinancing your home, but that’s not going to solve all your problems.

One option would be finding a way to generate some extra income, whether that means a part-time job nights or weekends, or pursuing additional education or certifications to get your income level up at work. Another is to sell the house and find a less expensive alternative, but I’m never a big fan of that idea– especially in a family situation – unless there’s absolutely no other way to avoid bankruptcy or foreclosure.

I think you and your wife need to sit down, and spend some serious heart-to-heart time talking things over, crunching the numbers and creating a plan. There’s going to be some sacrifice involved for everyone, and only you two can decide what’s worth it and what isn’t – for you two and your kids.

God bless you and your family, Cade.

Dave

Budgeting for car repair costs

Dear Dave,

I am following your plan and recently became debt-free, but I have a question. When doing a monthly budget, should I figure in a specific category for car repairs and maintenance, or just use my emergency fund?

Ashleigh

Dear Ashleigh,

Congratulations on becoming debt-free! You know, new cars, old cars and in-between cars all have one thing in common – they’ll need repairs at some point. Fixing your car is just a basic part of car ownership, and something every car owner should be prepared for.

When life happens, to your vehicle or anything else, an emergency fund acts like an airbag. Only instead of keeping your face from hitting the dashboard, it keeps your finances from getting smashed up. When it comes to car repair costs, I advise creating a sinking fund in your budget. A sinking fund is a special place in your budget where you save up money for specific, big ticket items – like car repairs.

I know, stuffing money into a sinking fund each month sounds about as enjoyable as waiting in line at the DMV. But look at it this way, if you had a car loan like most people, you’d be putting hundreds toward that debt each month. Instead, you’re one of the smart ones who doesn’t have any debt and can easily create a repair fund for your car by setting aside less than the average car payment each month. Even “reliable” cars need repairs and maintenance, and a sinking fund within your budget for this sort of thing means you’re ready to handle virtually any auto issues that pop up.

You know you’ll need to pay for repairs and maintenance. It’s a thing with all cars. And when you know something’s coming, that’s not an emergency fund situation. Great question, Ashleigh!

Dave

Dave Ramsey

Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

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