Dear Dave,
My husband will be leaving his full-time job in a year so that he can go back to school full-time and finish his degree. We’ve both agreed this is what we want to do, but it means that we’ll go from a yearly income of $90,000 to $45,000. We’ll have tuition assistance from my job and his veteran’s stipend to help pay for things, plus we’re debt-free except for our house. But in this scenario, once we complete Baby Step 3 should we move directly to Baby Step 4 or continue saving?
Erin
Dear Erin,
I think this is a good plan, as long as the two of you are on the same page and you’re willing to save like crazy for the next year and beyond. Even with help from your employer and his stipend you’ll still have some expenses, so you’ll have to be ready.
Once you complete Baby Step 3, which is having three to six months of expenses set aside as an emergency fund, Baby Step 4 is usually starting to invest 15 percent of your income toward retirement. In this case, while he’s finishing his degree, you’re not investing for retirement directly but you are investing in your husband and your future together. That’s a great investment, by the way. As long as he’s studying something that has marketplace application, you’re setting the stage for him to make back the money put into his degree and much more.
If that’s the plan, and he’s not off pursuing a Ph.D. in something like German polka history, you two are making a great investment. So work hard now, cut all the corners you can and pile up money so you two can get through his time in school!
—Dave
Dear Dave,
How do you sell a vehicle with a lien amount that’s higher than the actual value of the car?
Miranda
Dear Miranda,
First, you have to find a way to cover the difference between the amount of the lien and what you can get for the car. Let’s look at an example.
If the car is worth $15,000, and you owe $18,000, that would leave you $3,000 in the hole. How do you get out of that car? The bank holds the title, and until you give them the payoff amount of $18,000, you’re not getting the title. The easiest and simplest way would be if you had $3,000 on hand to make up the difference. But if someone comes along and buys the car from you for $15,000, you’ve got to be able to cover the remaining $3,000, right?
Barring the best-case scenario where you actually have the money, you could go to a local bank or credit union and borrow the remaining $3,000. I hate debt, but being $3,000 in the hole is a lot better than $18,000 in the hole. Then, you could turn around and pay back the $3,000 quickly.
After that, you’d give the total amount owed to the bank. They would give you the title, and you sign it over to the new owner. That’s how it works!
—Dave
Follow Dave Ramsey on Twitter at @DaveRamsey and on the web at daveramsey.com.
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