Need some financial advice? Debt and income crisis? Pay off the house mortgage first? Check cashing? Taxes? Credit Cards? Check out what folks are asking Dave Ramsey.
Landlords and duplexes
I’m 23, debt-free, and I’ve almost got my fully-funded emergency fund in place. I was curious about your thoughts on saving up money to buy a duplex, living on one side, and renting out the other. It would be my first home purchase, and my first rental property.
Well, the good news is your renter would be right next door. You can keep an eye on things. The bad news? Your renter would be right next door. It would be a necessity to have very clear boundaries in your relationship. Otherwise, some people will come knocking on your door at midnight expecting you to change a light bulb or something silly like that. The trick to being a good landlord, especially for a rookie, is learning how to balance being firm with people, while still being fair and kind.
Another thing to consider is the purchase of a duplex in general. The upside is you’ve got someone helping pay the bill when it’s rented. The downside is when you get ready to sell a duplex, most of the time your buyer is an investor. This means you’re dealing with a wholesale-minded buyer, and that tends to hold prices on duplexes down more than it would a comparable, traditional, single-family home. On the other hand, the cute, young couple looking to buy a perfectly-staged and freshly painted home is usually more than willing to pay full retail.
I’ve owned several duplexes in my life, but I’ve always done much better with single family homes. They’re easier to rent, they tend to stay rented more consistently, and as a rule, they appreciate faster. Just know your upsides and your downsides if you’re planning on moving into a duplex and doing this. And be very careful about your location. You’ll come out much better mentally, emotionally, and financially in an area where homeowners take pride in their neighborhood!
Cash them in, and do something better!
My wife and I are following your plan, and recently we found some old savings bonds that had been given to her by her grandfather when she was a kid. Do you think we should go ahead and cash these in before they reach their final maturity date in a few months?
Absolutely! Every one of those savings bonds is accruing interest at the appropriate rate for the type of bond it is. The problem is every one of those rates stinks. I hate savings bonds. We’re talking about some very low interest rates.
Another reason I don’t like savings bonds is they’re not financial instruments which cause you to be responsible with them. People lose them, they forget about them, and then maybe they turn up in an old lock box somewhere down the road after making a whopping two or three percent.
Back in the day, they used to be positioned as patriotic and all that. But who wants to finance the stuff this government does? We’re not supporting World War II anymore, you know? Cash them in, and depending on what Baby Step you’re on, put it toward your emergency fund, your debt snowball, retirement, your mortgage—just be proactive, and do something better with the money!
Decisions and sacrifices
We have two preschool kids, and I’m a stay-at-home mom. My husband brings home about $2,500 a month, and our mortgage payment is $1,000 a month. Recently, we’ve had to tap into our savings in order to pay the bills. Should I go back to work? There are a couple of reputable daycare centers near us, but I’m just not sure if this is the right thing to do.
Being a full-time mom is a wonderful thing. And honestly, I can’t blame you for wanting to stay home with your children when they’re so young.
The biggest problem I see is that 40 percent of your husband’s paycheck is going toward your mortgage. That’s way too much! A house payment should never be more than 25 percent of your take-home pay.
I know trying to live on the $1,500 that’s left is hard, especially with two babies in the house. But it doesn’t sound like a lot of fat can be trimmed right now. One of you might consider taking on a part-time job nights or weekends for a while, or he might look into enhancing his education. Either one of these would help get your income up. Selling the house is an option, too. But I’m not a fan of that one except in the most extreme circumstances.
Right now, I’m viewing this as a math problem with three components. The components are income, house payment, and lifestyle. You and your husband need to sit down, and have a serious heart-to-heart talk about things. There will have to be some sacrifices in order to make things better, but only the two of you together can determine exactly what’s best for your family.
God bless you all.