Mormon Life - Debt tag

Dave Says: Short Term or Greater Good?

Tue, 15 May 2012 00:03:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I don't use credit anymore - only debit - but I still overspend. Should I get rid of cards altogether?

Dear Dave,

I have a problem with impulse spending. I switched to a debit card so that the money comes straight out of my checking account, but I still buy things I know I shouldn’t. Should I stop using the card?

Lauren

Dear Lauren,

First, let me say that debit cards are great. You can’t spend money you don’t have with them like you can with a credit card, but you’ve still got to budget carefully and give a name to every single penny of your income. Otherwise, you can still overspend.

When I made the decision to get intentional with my money, I just used cash. It’s hard to spend it when you don’t have any on you. It’s a tough thing, I know, but you have to make a conscious decision to start living differently. You have to get mad at the things that steal your money a dollar or two at a time, and you have to put your foot down. Enough is enough!

Try looking at your life as a whole, not a moment at time. All the moments you’re living right now will have either a positive or negative effect on your future. I decided I wanted the greater, long-term good, so I gave up on the short-term stuff. No discipline is pleasant when you’re doing it, but as the Bible says, it yields a harvest of righteousness.

Trust me, Lauren. The greater good is worth the sacrifice. But until you make that decision for yourself, you won’t do it.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Treat Them the Way You'd Want to Be Treated . . .

Tue, 01 May 2012 00:04:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I have good tenants who missed their rent last month because of tough times. How lenient should I be?

Dear Dave,

I have tenants who have been perfect in paying rent on time for almost a year. Last month, the woman lost her job, and when I went to collect the rent the other day, she said she didn’t have any money. I’m pretty sure they used part of it for a car payment and the electric bill, and I know they need these things. Still, I’m torn over how to handle this and how lenient to be.

Alex

Dear Alex,

You’re right, what they spent the money on were things they needed. At the same time, they probably knew the rent was due and when it was due. Since you know about their situation, and you’re their landlord, it might be a good idea to offer to try and formulate a plan that would help them get through this tough time.

If it were me, I’d sit down with them and make a budget and list of priorities. Food comes first, water and electricity after that, then rent, and finally the car. Get into their business a little, and find out what else is going on in their lives. You have to be fair and firm to be a quality landlord.

I’d be willing to cut them some slack if they’re cooperative and honestly have to choose between feeding their kids and paying me. But if they insist on misbehaving with their money or having parties on the weekend, I’d have no problem telling them to find another place to live.

The biggest thing is to treat them the way you would want to be treated if the roles were reversed. I think most people want to do what’s right, but you want to feel good about extending mercy when, and if, it’s appropriate.

—Dave

For more financial help please visit daveramsey.com.

Dave Says: Downsizing House to Get Out of Debt?

Tue, 17 Apr 2012 00:04:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Is it ever a good idea to sell a home and buy a smaller one to get out of debt?

Dear Dave,

Is it ever a good idea to sell your home and buy a smaller, less expensive one in order to get out of debt more quickly?

Autumn

Dear Autumn,

It’s a good idea in some situations. If you don’t really like the house, or maybe you were thinking about selling it anyway, then I’d say go for it. It would also be a smart move if you simply have too much house and the payments are eating you alive.

I usually recommend that your monthly mortgage payment or rent be no more than 25 percent of your take-home pay. If your house payments are taking 40 to 50 percent of this figure, then it’s time to unload the house.

But selling your home can be a tough thing emotionally. I’d never advise someone to sell the place they love and move down in house if their payment is reasonable. In these situations there are usually other areas where you can cut back, keep your home, and still get out of debt in a reasonable amount of time.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Asking for Trouble

Tue, 03 Apr 2012 00:03:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I'd like to keep a rewards card open to use bill pay and get points. Am I asking for trouble?

Dear Dave,

I want to keep one of our credit cards open and use the bill-pay option for utilities and other monthly bills. I want to do this so we can continue earning rewards points, and the way I look at it, we’d just be re-routing the money and paying it off every month. My husband doesn’t like this idea and thinks we should get rid of them all. Am I just asking for trouble by wanting to keep the rewards card open?

Cheryl

Dear Cheryl,

Yes, you are. Life never works out exactly the way you think it will. You can make all the well-reasoned and best-intentioned plans you want, but sooner or later that snake is going to bite you.

The only thing I’d consider in a situation like this is a debit card that has a rewards system attached. Lots of debit card programs offer the same kinds of rewards programs offered by credit card companies, with one big exception—you don’t have to go into debt!

You need to stop chasing these stupid brownie points, Cheryl. According to Consumer Reports, 78 percent of credit card airline miles are never redeemed. Studies also show that people spend more when using credit cards as opposed to cash. That extra money you spend on things you don’t need is money you could have been saving and investing. So, where’s the reward?

Cut up the card and close the account, Cheryl. You don’t build wealth by using credit cards!

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Does Payment to Collectors End Debt?

Tue, 20 Mar 2012 00:02:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: When we pay the debt collector, is the original creditor satisfied as well?

Dear Dave,

One of my husband’s credit card bills was turned over to a collection agency. They’ve offered three different payment options. If we accept one of the options, does this mean the original creditor accepts the agreement as well?

Cheryl

Dear Cheryl,

In a situation like this, the collection agency either owns the debt outright or they’re directly representing the credit card company. This is pretty much standard operating procedure when someone has defaulted on a loan.

I’d go ahead with the deal they’ve offered that makes the most sense for you guys. You’ll have a ding on your credit report, showing settlement on a defaulted credit card, but it’s really no big deal since you’ve already got a mark against you for having it turned over to collections.

Want another piece of advice? Never use credit cards again!

—Dave

For more financial advice, visit daveramsey.com.

Dave Says: Sell the Bike?

Tue, 06 Mar 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: My husband and I disagree about selling our motorcycle to help with debt. What should I do? Dear Dave,

My husband and I have been through Financial Peace University. I’ve always been the numbers nerd, although he’s catching on and doing pretty well. He has a motorcycle he bought a few years ago before we got married, and still owes $7,000 on it. My common sense says we need to sell it, but he doesn’t want to, even though we haven’t been riding in over a year. What should I do?

Gina

Dear Gina,

It sounds like he’s making progress, so we don’t want to ruin that. Here’s the question: if you win the bike battle, do you lose relationship war? In other words, if you force him to give up the motorcycle, will it damage the marriage and the progress he’s made toward getting out of debt and learning how to handle money?

If I were you, I’d first sit down with him and tell him how proud I am for the way he’s trying to improve the financial situation in your home. Then, I’d suggest that the motorcycle is a stumbling block to your shared financial goals. Ask him what he’d be willing to do to get the motorcycle paid off more quickly. Would he pick up a part-time job, or maybe sacrifice something else he’s spending money on?

But let him know the motorcycle isn’t really the issue. The issue is that you guys need a plan to get this $7,000 debt out of your life!

—Dave

For more financial help, please visit davesays.com.

Dave Says: Leave the 401(k) Alone!

Tue, 28 Feb 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Should we borrow against our 401(k) to help pay mortgages and other debt?

Dear Dave,

My husband has been transferred again in his job. Right now, we have three houses and about $60,000 in other debts. He just found out that he can borrow against his 401(k) without hardship at the beginning of the year. Is this a good idea?

Yvonne

Dear Yvonne,

Three houses? Do you buy a new house every time you move? You guys need to stop doing that. The “other debt” isn’t the problem. It’s those houses that are killing you!

I would never recommend that someone borrow against their 401(k) just to pay bills. It might be a different story if you were facing foreclosure or about to file bankruptcy, but that doesn’t sound like the case here. I think you’ve just made some really bad decisions, and these decisions are following you around and messing up everything else.

Most of the time in situations like this I have to say: “Sell the car!” In your case, it’s: “Sell the houses!” I know the market isn’t great in some areas, but these things are eating you guys alive. You’ve got to put some effort into getting rid of them. Then, start living on a really tight budget and clean up the other debt!

—Dave

For more financial advice please visit daveramsey.com.

Dave Says: Take Your Time with This One . . .

Tue, 21 Feb 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: My boyfriend thinks it will be easier for him to pay his debts if we're married. What do you think?

Dear Dave,

My boyfriend has a lot of debt. The other day a creditor called, and he wouldn’t answer the phone. Then, he told me it would be easier for him to pay off his debts if we were married because I could act as his accountability partner. I don’t want to be the money cop, and I wonder if he would truly be more motivated. What do you think?

Janine

Dear Janine,

Someone who isn’t making any headway in getting out of debt while they’re single probably isn’t going to do a complete turnaround just because they get married. You can act as his accountability partner if you want, but you don’t have to get married to help him. In fact, dating is probably a better way to do this, because you can determine whether he’s really changing, or if he’s just trying to get you on board to help pay the bills!

Don’t misunderstand, Janine. Debt, in itself, doesn’t keep someone from being marriage material. But you’re definitely not marriage material if you don’t work, you’re irresponsible, you haven’t taken control of your life, have no character or can’t manage your own behaviors. These kinds of people are going to stay in debt and not be able to pay their bills for the rest of their lives.

I’d say date this guy a little longer, just to see if he’s serious about changing. But don’t get engaged yet, and don’t pay one penny of his bills for him!

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: What's in a Name?

Tue, 21 Feb 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: What should I tell my son if he wants to transfer to an expensive college?

Dear Dave,

My son is a sophomore at a local college, and he wants to transfer to a very prestigious university. If he did this he would incur more than $100,000 in student loan debt, and that’s with us picking up half of the cost. What do you think I should tell him?

Will

Dear Will,

I’d have a hard time telling anybody that one school is $100,000 more valuable than another one. The fact is unless he has $100,000 lying around somewhere, he shouldn’t go to that other school for one very simple reason – he can’t afford it!

We hire people every week at my company, and where they attended college is a very minor deal. There will always be a few corporate types out there who play games and try to turn the office into some kind of snooty country club, but the fact is most employers don’t care where you went to college.

It’s what you learn and being able to use that knowledge in the marketplace that’s really valuable, Will. Knowledge is king, and we live in a knowledge-based economy. If you can’t retain and apply what they’re teaching, then the only thing more worthless than a college degree is a college pedigree!

—Dave

For more financial help please visit daveramsey.com.

Dave Says: Don't Fall for "Same As Cash" Offers

Tue, 14 Feb 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: We made a mistake with the length of our same-as-cash plan. Now we're paying 30 percent interest. What can we do?

Dear Dave,

My wife and I bought some furniture a while back on what we thought was a 24-months-same-as-cash plan. The original purchase price was $1,600. The other day, I got a call from a collector saying that it was actually a 12-month plan, and the balance is now $2,800. We looked at the contract, and it was our mistake on the length of the plan. Still, that makes the interest rate about 30 percent. Is there anything we can do about this?

Robert

Dear Robert,

This is one of the reasons I tell people to stay away from “same as cash” agreements. You may not have agreed to a specific percentage rate, and I’ll bet it’s something less when you factor in the time before and after the 12-month period ended. Still, I’m pretty sure that when you signed the contract you did agree to have this thing convert to a financed contract if you didn’t pay it off in 12 months. These kinds of deals are really scummy. Not only have they charged you interest since the 12-month period ended, they’ve also back-charged you interest for the entire length of the contract!

These same-as-cash contracts are a bear trap. They’re designed to mess you over big time. You can try to dispute it, but I’ve got a feeling you’ll lose and have to pay about $1,200 in stupid tax on this one.

Lots of people think they can pull one over on a company with the “same as cash” deal, but stuff almost always comes up—even if you don’t misread the contract. I’ve said it a million times, Robert. If you play with snakes, you will be bitten!

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Just What She Needs

Tue, 24 Jan 2012 00:02:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Should my daughter use a financial windfall to pay off student loans or invest in a Roth IRA?

Dear Dave,

My daughter is a student and has $13,000 in student loan debt. Recently, her grandparents dissolved an LLC, and they want to give her a gift of $12,500. Should she use this money to pay off the loans, or invest it in a Roth IRA and keep working to pay off the student loans herself?

Meg

Dear Meg,

Let’s look at it this way. Pretend she didn’t have any student loan debt. Would it be wise for her to borrow money on a student loan in order to invest in a Roth IRA? Of course not. If you don’t pay off the loans, and invest it instead, it’s just like you borrowed money to invest. That’s not a good plan.

Your daughter needs to get her student loan mess cleaned up, and this is the perfect opportunity to do just that. And I think it’s pretty cool that God gave her what she needs to fix things. Besides, she can’t do a Roth IRA, except to the point that she has an earned income, anyway.

The last thing this girl needs is a pile of debt waiting on her when she gets out of school. She’s not in a position to be an investor right now. The minute she pays off her student loans, she should get to work on saving a pile of money for an emergency fund so she can complete her studies without racking up more debt!

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Going Too Far?

Tue, 17 Jan 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Should I help my in-laws pay their overdue property taxes?

Dear Dave,

Your plan has been a real blessing to us. Last week, my mother-in-law told my husband they haven’t paid their property taxes yet. Three thousand dollars is due. I love my in-laws, but they’re big spenders. They’ve got plenty of money and love to take lots of trips. We make good money, too, and could help them out, but we’re afraid this may be just the tip of the iceberg.

What’s your advice on handling this?

Kelly

Dear Kelly,

This is a really touchy situation. First of all, you shouldn’t do anything. Your husband needs to handle this, because he’s their son. Even if you make kind, polite suggestions, they’ll assume you’re the one withholding from them. You don’t want to be labeled as the evil daughter-in-law!

I understand your position and agree that you don’t want to enable their bad habits. Giving a drink to a drunk is never a good idea. But this is family we’re talking about. You should try to find a way to help them if you can. If that help includes money, make certain you know exactly where it goes. When you give someone $3,000 (the amount needed for the taxes) you earn the right to have a say in what’s happening.

Maybe your husband could go have coffee with them and just talk about things. He could explain how you guys are getting out of debt, and living on a budget to get control of your money. He could tell them how it’s been a fabulous thing for your marriage and your finances, and that he’d love to show them how you’re doing it.

I’ve got a feeling that mom and dad didn’t raise their son to have dessert first and then eat his vegetables, but that’s exactly what they are doing. They need to pay their property taxes before they go running off on a bunch of fancy trips.

From what you said, they’ve got the money to take care of what needs to be done and have some fun. But if they don’t correct their course, they’re liable to have their financial dignity stripped away.

—Dave

For more financial advice please visit daveramsey.com.

Dave Says: How Much Am I Really Liable For?

Tue, 17 Jan 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I owe $1,200 extra on old credit card debt. Am I really liable for all that?

Dear Dave,

I have old credit card debt that goes back a few years. The account has been sold and re-sold to several collection companies. The limit on the card was $300, but with late charges and fees I now owe $1,500. Am I liable for the extra $1,200?

Monica

Dear Monica,

You agreed to their terms, which included the right to charge fees and penalties. Legally, they can do this. The honorable thing would be to send the company you contracted with a check for the full amount.

However, that company no longer owns the debt, and they won’t get the money. They sold the debt. The present holder is just hoping to get something out of it. They buy debt in volume, dirt cheap, and whatever they can collect from any creditor is profit.

The current collection company would probably be thrilled to settle for a lot less than face value. Make them an offer, but start really low. You can probably meet them somewhere in the middle and settle this for around $500.

Do not give them any money until you have in your hand – on paper, in writing – a statement showing the amount for which they will settle, and do not give them electronic access to your bank account, either.

Once you have this in hand, send them a cashier’s check or money order, and keep a copy of that payment and the letter for the rest of your natural life!

—Dave

For more financial advice, please visit daveramsey.com.

FHE: Self-reliance

Mon, 09 Jan 2012 00:03:00 -0700

by Shauna Gibby
source: MormonLife.com

Mormon Life says: Prophets have commanded us to be self-reliant and prepared for all situations. Use this lesson to discuss these principles and how to attain them. Conference Talk:
For more information on this topic read “Providing in the Lord’s Way” by President Dieter F. Uchtdorf, Ensign, Nov 2011, 53.

Thought:
The Lord’s way of self-reliance involves in a balanced way many facets of life, including education, health, employment, family finances, and spiritual strength. Familiarize yourself with the modern welfare program of the Church.

(President Dieter F. Uchtdorf, “Providing in the Lord’s Way” Ensign, Nov 2011, 53.)

Song:
“The Prophet Said to Plant a Garden,” Children’s Songbook, p. 237.

Scripture:
And again Alma commanded that the people of the church should impart of their substance, every one according to that which he had; if he have more abundantly he should impart more abundantly; and of him that had but little, but little should be required; and to him that had not should be given. (Mosiah 18:27)

Lesson:
Display a 72-hour kit, or other food storage item. Explain that when a natural disaster occurs, people often begin to think about preparations they wish they had made. Have your family suggest things they think are important to have prior to a natural disaster. Invite a family member to read Exodus 11:1–3. Ask:

• What was Israel asked to do?
• Why were they successful in their requests of their Egyptian neighbors?

Ask your family to silently read Exodus 11:5–10, looking for the plague about to come upon the Egyptians. Ask your family why they think Pharaoh would not let the children of Israel go, even after all the previous plagues sent upon Egypt (see footnote 10a).

Read D&C 43:23–27 aloud. Testify that the Lord continues to speak to us by the voice of disasters and plagues, and that it is important for us to heed His warnings. Make a plan to be prepared both physically and spiritually and to follow the warnings of our modern prophet.

(Dennis H. Leavitt and Richard O. Christensen, Scripture Study for Latter-day Saint Families: The Old Testament, [Salt Lake City: Deseret Book, 2009], p. 37.)

Story:
During a particularly difficult financial time, I turned to God for help. I suppose that I am like other people whose prayers are offered with more feeling in times of urgent need. I remember feeling ashamed that I had not previously put more effort into my relationship with God when money had been plentiful. Still, believing that such petitioning could help, I arose one morning and began to plead for help.

The answer came in a strange way. A thought entered my mind: Your friend Paul [name changed] has no food in his house. Go and take him some money.

“But I have so little,” I said aloud. Then, considering to whom I was talking, I asked, “How much?” One hundred dollars.

I felt anxiety shoot through me. One hundred dollars was all I had in the bank! I searched myself, hoping that I had imagined the whole thing. I tried to pray again but felt only silence. Then, through the quiet I perceived a message. It seemed to say, Will you trust me or not?

Paul was a good man who had recently lost his income source and was struggling through very difficult financial times. No effort of his had seemed to be able to stop the rapid decline of his assets and reserves.

I drove to the bank, withdrew one hundred dollars, and headed to Paul’s house. When I pressed the money into his hand, he couldn’t hold back the tears. He said, “My wife and I totally ran out of food last night. We have been up since four o’clock this morning praying for a miracle.”

I never missed the one hundred dollars. One thing after another fell into place that allowed me to sustain my family. But no miracle was as great as the one that occurred inside me when I discovered that God truly loves his children and often uses other people to prove it.

(Larry Barkdull, Gifts: True Stories of God’s Love, [Salt Lake City: Deseret Book, 2004], p. 101.)

Activity:
Build a pyramid with canned goods. Try for highest, largest, or most creative.

Refreshment
Shufly Cake

4 1/4 cups flour
1 cup light brown sugar 1 cup sugar
1 cup butter
2 cups boiling water
1 cup molasses
1/4 cup apricot jam
1 tablespoon cinnamon
2 teaspoons soda
Blend flour, sugars, and butter into crumbs. Set aside 1 cup of crumbs for topping. Mix boiling water, molasses, jam, cinnamon, and soda. Add to remaining crumbs. Grease and flour 13 x 9-inch pan. Pour in batter and sprinkle with reserved crumbs. Bake at 350 degrees for 40-45 minutes. Do not overbake.

(Hollee Eckman and Heather Higgins, All that Jam, [Salt Lake City: Shadow Mountain, 2003], p. 81.)

To get the PDF version of this lesson, click here.

Dave Says: Guilt and Cynicism

Tue, 03 Jan 2012 00:02:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Why do you think people get so defensive when it comes to talking about budgeting and how they handle their money?

Dear Dave,

I’ve noticed that lots of people get defensive when it comes to talking about money and living on a plan. Why is this?

Tonya

Dear Tonya,

I think it’s because there seem to be two negative emotions connected to people who have failed with money: guilt and cynicism. They feel guilty because they’re terrible when it comes to handling money, and they don’t want to talk about it.

Cynicism may be more prevalent in people who feel like they’ve been messed over by some “money expert” out there. Maybe they got caught up in a deal that went bad, or they lost a lot of money following their advisor’s advice. The results can be they end up believing that anyone connected to the financial arena is a bad, incompetent or manipulative person.

If you’ve made mistakes with money, that just makes you human. Everyone alive has messed up financially, and that includes me. I made mistakes with lots of zeroes on the end, but I managed to turn things around. Now, I’m running my own company based on those mistakes, how to fix them and how to keep people from making the same mistakes I did years ago.

Sometimes people just don’t want to be around others who are trying something new or different and winning in the process. Then, there are people in life—I call them losers—who just don’t want anyone else to win, because it reminds them that they’re not winning. Being stuck around those kinds of people is no fun for anyone!

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Trust Broken after Co-signing

Tue, 27 Dec 2011 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I missed some car payments after my dad co-signed on it, and our relationship has been affected. How do I make things right?

Dear Dave,

My dad cosigned on a car loan for me a few years ago before I began working your plan to get control of my money. I missed some payments back then, and it has affected our relationship. I’ve since paid off the car, but how do I make things right with my dad?

Stephanie

Dear Stephanie,

I know you’re hurting, but a lot of this is up to him. The truth is he’s partially to blame for being dumb enough to cosign in the first place. And if this was just a mistake you made when you were a kid, then he should be mature enough to realize that and recognize the progress you’re making now with your finances.

If you haven’t yet apologized for messing up, I think it’s something you should do very soon. Let him know how much you hate that it harmed your relationship, and tell him you’re following a program that will help you make sure nothing like that ever happens again.

Then, if he can’t accept that and move on, it’s all on him. I know that’s not what you wanted to hear, but sometimes time is the only thing that heals those kinds of wounds.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Review the Research

Tue, 27 Dec 2011 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: What do you mean by, "people spend more with plastic than cash"?

Dear Dave,

I’ve heard you say that people spend more with plastic than with cash. Exactly what does that mean?

Edmund

Dear Edmund,

There have been several studies done in recent years that show people spend less money when buying with cash as opposed to swiping a credit card. One study in particular conducted by MIT and published in Carnegie Mellon magazine, indicated through the use of Magnetic Resonance Imaging (MRI) that the pain centers of the brain are activated when you spend cash. Of course, it depends on the item in question and individual spending patterns as to exactly how much less is spent, but the average is between 12 and 18 percent.

Want some more information? When McDonald’s first began accepting credit cards they conducted a focus group study in their restaurants on credit card users versus cash users. At that time, the difference was about 42 percent, meaning that a person using cash bought 42 percent less in a fast food setting than someone paying for their meal with a credit card. On other, more expensive items, the percentage generally drops. But these studies and others have proven that people spend more when using credit cards instead of cold, hard cash.

See what I mean when I say you can’t beat the credit shark at his own game? Even if you’re one of the few who pays their credit card bills on time every month, you’re still throwing your money away!

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Where Does Debt Go When Filing Bankruptcy?

Tue, 20 Dec 2011 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: What happens to all the money owed when someone files bankruptcy?

Dear Dave,

What happens to the money that is owed when someone files bankruptcy? Do creditors just have to write it off, or do other people pay the price through taxes or higher interest rates?

Grace

Dear Grace,

In most cases the creditor just loses the money. That’s one of the risks businesses face. Of course, any bankruptcy is also a seriously bad mark against the filer’s credit record.

Chapter 13 filings may be considered a little less severe than Chapter 7 because you’re showing an interest in retiring the debts. They often allow – if you have a regular income and limited debt – to keep some of the property you might otherwise lose. Also, some debt balances may be partially discharged, with the filer agreeing to make monthly payments to the trustee for distribution among remaining creditors.

A Chapter 7 bankruptcy is lots tougher on the one who files. It involves liquidating all assets that aren’t exempt. Some of the filer’s property may be sold by a court-appointed official – a trustee – or just turned over to creditors.

It’s really a lose-lose situation, Grace. The business loses money, and the filer suffers the emotional pain of participating in a shameful process.

—Dave

For more financial help please visit daveramsey.com.

Dave Says: Co-signing Leads to Stupid Tax

Tue, 13 Dec 2011 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: A collection agency is after my wife for a loan she co-signed years ago. Do we have a better option than bankruptcy?

Dear Dave,

My wife co-signed on a loan for an ex-boyfriend five years ago when they were together, before we even met. Now a collection agency is after her. Our attorney has recommended we take Chapter 7 bankruptcy, but the debt is only $5,000. Is there a better way?

Jeff

Dear Jeff,

You bet there’s a better way! It’s just plain stupid to even consider trashing your financial life over $5,000, because bankruptcy stays on your record for years.

This is an old loan with very low expectations for collection. The collector probably bought it for next to nothing, and everything he gets will be profit. It’s not uncommon for debts this old to be settled for fifty cents on the dollar, and sometimes even less. Haggle with them, and I’ll bet you can talk them down to $2,500.

Get an agreement in writing before you send them a dime, and do not give them access to your bank account. They’ll threaten to sue, or ruin your credit and that kind of stuff, but my guess is you can work this out. It may take a couple of weeks and some patience, but that’s nothing if it will save you $2,000 to $3,000.

You guys will have to pay some Stupid Tax on this one, but I hope it will teach you both a very valuable lesson. Never co-sign a loan!

—Dave

For more financial help please visit daveramsey.com.

Dave Says: Intensity Hurting the Marriage?

Tue, 06 Dec 2011 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I think all our effort to get out of debt is hurting our marriage.

Dear Dave,

When does reaching the point of being debt-free become more important than marriage? We’re following your plan and doing the debt snowball, but my husband’s been working a second job, and it’s really cutting into our together-time at night and straining our relationship. I’m afraid we’re going to end up debt-free, but divorced. When does one outweigh the other?

Tracy

Dear Tracy,

Getting out of debt is never more important than your marriage. But families go through all kinds of stuff, and one of those things is cleaning up messes they’ve made. It’s not always fun, but there’s a price to pay if you want to win with your money or anything else.

It sounds to me like your husband has gone gazelle intense about getting out of debt, and in the process may have left you behind a little bit. I don’t recommend that! He probably needs to take some time to come back and emotionally re-connect with you. And I’m sure some good, old-fashioned back rubs and words of encouragement from you are in order. Your man could use them if he’s been working two jobs!

But there’s plenty of time for snuggling and stuff later. Right now, you’re trying to do something—something really important—for the good of your family. I know it can be difficult, but it won’t last forever. And I can promise you this: Once you’re done, you’ll be very glad you toughed it out!

—Dave

For more financial help, please visit daveramsey.com.