By Dave Ramsey
Q. In your plan, you talk about Baby Step 3 as saving enough to have three to six months of expenses in your emergency fund. My husband and I were wondering how you can determine whether you need to be on the low end or high end of that range?
A. Lots of times in a marriage you’ll have a situation where one person wants to save more, while the other is excited to move on toward investing. Technically, neither is wrong. So, the emergency fund really deals with someone’s own personal level of peace. Remember Murphy’s Law and how it says that says if something can go wrong it will go wrong? Your emergency fund is Murphy repellant. Some people just want to make sure he doesn’t knock on the door, while others make sure he stays in the next county.
There are always practical considerations you can use to determine the amount of your emergency fund. If you both have very stable jobs, you’ll probably be OK saving three or four months of expenses. But if just one of you works outside the home, or if one is self-employed or on commission, leaning toward the six-month side is probably a good idea.
Of course, you can always compromise. Start out with three months, but add a little every once in a while until you reach a point where you’re both comfortable.
Q. We’ll be completely out of debt in September and looking to buy a home in the next year or two. We’re thinking of buying a repo home. Do you have any suggestions on where to find these?
A. One way is to buy the home from the owners before the sale happens. It’s better for them because they realize some money and it stops the foreclosure. It’s better for you, too, because you won’t find yourself in a bidding war later on the courthouse steps.
You can also find listing in your local newspaper under the legal notices section and if you live in a metropolitan area it’s not hard to find a legal newspaper that lists incorporations, real estate transactions and foreclosures.
Q. I’ve never heard you discuss at what point it’s advisable to let someone else make and manage your investments. Also, is there a point at which it’s good to go with a fee-only financial planner?
A. I think it’s always a good idea to do it yourself. And to be honest, I never recommend fee-only planners.
Don’t just turn everything over to someone else – no matter how many letters they have after their name – and let them manage it all or make all the decisions for you. You’re the one who made the money, so you should take care of your own stuff. In many cases, people looking for this kind of help have a greater net worth than the bozos dishing out advice and wanting to “handle” it all.
None of this stuff – investing, personal finance or saving – is rocket science. You need to be in control of your money. Now can you have counselors in your life? You bet. Everyone needs the benefit of people around them who have wisdom and experience.
But it’s never a good idea to just blindly trust someone. If you do, you might end up like an old, washed up boxer – no money and no teeth!
For more financial help, visit daveramsey.com.