Should Mom go back to work?
Dear Dave: Iím a stay-at-home mom with two preschool kids. My husband brings home about $2,800 a month, and our mortgage payment is $1,100 a month. Over the last two years weíve been tapping into our savings to help pay bills. Do you think I should find a good day-care center for the kids and go back to work? —Toni
Dear Toni: I canít blame you for wanting to stay home with your children — especially when theyíre so young. Being a full-time mom is a great thing.
The biggest problem I see is that you guys are a little rich on your house payment. Forty percent of your husbandís pay is going toward your home, and thatís just too much. Your house payment should never be more than about 25 percent of your take-home pay.
Itís no picnic trying to live on $1,700 a month, especially with two babies in the house. But thereís not a lot of fat to cut out at this point. One option would be for your husband to do something to get his income level up, whether itís taking a part-time job for a while or furthering his education. Another is to sell the house, and Iím not a big fan of that one.
Think of this as a math problem with three components — income, lifestyle and house payment. One of these has got to give. But I think you and your husband need to sit down, hold hands and talk this one out together. Thereís going to have to be some sacrifice, and only you two can determine what youíre willing and unwilling to do. — Dave
Money market funds
Dear Dave: My husband has a terminal neurological disease that will probably last for some time. Weíve got about $600,000 in a traditional IRA in government money market funds. Iím afraid of losing or misusing it, and I want him to be able to enjoy a few things and have something of an inheritance left over. Whatís your advice? — Crystal
Dear Crystal: Iím sorry to hear about your husband. I know youíre both going through a really scary time.
Iíd suggest sitting down with someone in the mutual fund business — someone with the heart of a teacher — and learning all you can about good growth stock mutual funds. Then, once you have a good understanding of how they work, Iíd move the majority of the money youíve got in that IRA into one.
Hereís the deal, Crystal. You really donít need that $600,000 in cash. You need the income it can produce. And properly invested in a good growth stock mutual fund, that nest egg could provide you with $40,000 to $60,000 a year for a long, long time. — Dave
Is Ďhobbyí car wrong?
Dear Dave: My husband has a 1980 Camaro thatís a real source of friction between us. He bought the car for $2,400. It needs $3,500 in repairs. Our household income is $29,000 a year, and this car is taking money away from our ability to save and pay off $39,000 in debt. We both already have decent cars, so what should I do? — Katherine
Dear Katherine: This isnít a matter of having a car that runs. Itís a matter of someone having a maturity problem.
Guys like shiny toys, especially cars. But these kinds of things are luxuries, and they should have to wait until the household and finances are in order. The family should always come first!
Iím not saying he has to sell the car today, but dumping money into it while you guys are struggling doesnít make sense. Sit down with the guy, explain how you feel and what this is doing to your finances and your marriage.
And you might even give him a little incentive. Let him know that once your debt is gone and youíve got some savings in place, heíll have the money to get that muscle car up and running in no time! — Dave
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