Don’t go into debt to remodel

Q: The company where my husband works recently told everyone that massive layoffs are coming, and they should start looking for other jobs. Right now all of his options are out-of-town. A real estate agent told us we’d have to remodel our kitchen in order to sell the house. We’ve got $3,500, but remodeling would take about $2,000. Should we get a second mortgage to get the work done?
A:You might want to get another opinion. Sure, a new kitchen would be nice, but is that the end-all, be-all? Either way, there’s no way I’d go into debt to make this happen. Your house isn’t even on the market yet. There’s no reason to fix up a house that’s not for sale, especially when you only have $3,500 to your name.
There is, for sure, a financial storm brewing on your horizon. Start right now living on rice and beans and saving up piles of cash to build a bigger umbrella.
Wait until he actually lands another job before you make any big decisions. What if something pops up where you are? If you end up moving, then you might take $2,000 from savings to fix up the kitchen and get the house sold. Don’t do it unless you’re going to pay cash, though. You don’t want a second mortgage hanging over your heads, making everything even more difficult.

Viatical debacle
Q: Could you explain, and comment on, investing in Viaticals? I’ve been hearing offers that guarantee 10 percent. Does that sound fishy to you?
A:Everything about Viaticals is fishy. Stay away from them! A Viatical investment is when you buy a position in a terminally ill person’s life insurance policy. Mathematically, you’re betting on when they will die. A tremendous number of scam artists are involved in these things, and even the ones who go by the book have a lot of trouble, because you really can’t predict when someone’s going to die.
Viaticals are a disaster. They’re being slammed by state attorneys general all across the country. Lots of these companies are being shut down, and most of those that are technically legitimate in this area are incompetent.
Never put money in Viaticals.

Demand note dud
Q: My parents asked me if I know anything about GMAC demand notes. Apparently, they’re thinking about getting into these to diversify their portfolio. What do you know about these, and is this a good idea?
A: Your parents need to run as fast as they can from whoever is pitching this idea to them. A note is a debt. So, the next question goes something like this: Would you want to be in the position of having General Motors owe you money right now? I don’t think so.
Basically, people who invest in this kind of thing end up being creditors. Then if the company goes belly up, guess who usually doesn’t get paid? That’s right, the creditors. Plus, the company is teetering on the brink of disaster.
There’s no way I’d do this, and I’d never again take advice from the one who suggested it. This is one of the worst ideas I’ve ever heard.

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Dave Ramsey