By Dave Ramsey
Q. I’m 27 and married, and we have two kids. I make $90,000 a year, but we have $80,000 in consumer debt – $48,000 of which is in car loans. The rest is credit card debt. My wife’s parents have offered to let us move in with them so we can get out of debt faster. Do you think this is a good idea?
A. If I were in your situation, I would not move in with the in-laws. You’ve got an absurd amount of money wrapped up in those cars. I’d sell the stupid things, start living on a budget and paying down debt and keep my dignity.
In my mind, there are only two scenarios where you’d even consider taking the in-laws up on their offer. One is where they’re absolutely wonderful people and you have a great, nontoxic relationship with them, where everyone involved knows their boundaries. Even then, I’d only consider this if it were for a very short, agreed-upon amount of time.
The second scenario would be if moving in with the in-laws were the only way to accomplish your goal. And you don’t pass that test. You guys can get out of debt pretty quickly if you’ll just lose these ridiculous cars. Think about it: If you had two little paid-for beaters, your lives would be so much different. You could even save a little money on the side while you were paying down debt and buy a better car as soon as the debt was gone.
If you can’t tell, I’m pretty big on maintaining dignity. You might love your cars so much that you’re unwilling to make the sacrifice. Not me. The money going into your automobiles is insane, and that’s your biggest problem.
Q. What do you think about the HARP program, and what exactly is it?
A. The Home Affordable Refinance Program is designed for people who have made their payments on time but are underwater on their mortgages. Being “underwater” means they owe more on their homes than the homes are worth. So basically it gives them the opportunity to refinance their home loans.
The HARP program is the only part of the Making Home Affordable program that actually worked. And to be honest, it has worked well. In contrast, the recent Home Loan Modification program is a piece of junk and all about political posturing. About 93 percent of the people who applied for a home loan modification didn’t get one. It was just another case of the government pretending to do something.
I’d advise looking into the HARP program if you’ve got a good credit history and you’re underwater on your current home. Lots of HARP program applications are being approved, and the deals are closing. That’s what really matters when you find yourself in a situation like this.
Follow Dave Ramsey on Twitter at @DaveRamsey and on the web at daveramsey.com.