Don’t let the house own you

Q. I’ve heard you say that your mortgage payment shouldn’t be more than 25 percent of your take-home pay. Does this figure include taxes and insurance, or just principal and interest?
A. That figure includes taxes and insurance. Just remember, the whole idea is to make sure your house payment is manageable. You don’t want to have so much money going toward your mortgage every month that you can’t enjoy life or take care of your other financial responsibilities.
I figured out a long time ago that I’ve got more money when I don’t have debt. It’s a pretty simple formula, isn’t it? If you want to build wealth, you have to get out of the payment business. I don’t beat people up for getting a 15-year, fixed-rate mortgage, but you don’t want all of your income going toward your house payment, either. If half of what you make every month goes straight to the bank, you’ll have less money for other stuff. Plus, after a while that great house will stop looking so great. It’ll be a chain around your neck instead of a place you love to call home.
Don’t try to figure out how much debt you can get into. Instead, figure out how much debt you can get out of.

Q. I’ve only got a high school education, and I’m stuck in a dead-end job. I’ve always been a hard worker, so the 70-hour weeks don’t bother me. However, I do miss getting to spend time with my kids. I feel like I’m missing out on their lives. Do you have any advice on how to change my situation?
A. I think you’ve already solved a lot of the problem by realizing that you’re like a mouse stuck in a wheel. You know you’re not getting anywhere and you’re ready for things to change. Identifying the problem is a huge step in solving the problem.
Now, mechanically and logistically, how do you make the change when you’re handcuffed to a job that works you 70 hours a week? You’ve got a family to feed, so you can’t just quit your job. But you can talk to your boss and see if the company will back down on your hours a little bit. Let him know what’s happening with your family and that you’d like to take some classes and improve yourself and your value in the workplace.
But before you do any of that, you’ve got to have a definite direction in mind. The idea of making more money and working less isn’t the answer. You need an in-depth, detailed game plan for where you want to be in the next three to five years and how to get there. It may involve going back to school for some classes or even getting a full-blown degree. If you identify your long-term goal in detail, it will lead you to some of the short-term goals that will help you arrive at your final destination.
The best book I’ve ever read on this kind of thing is “48 Days to the Work You Love” by Dan Miller. He’s my all-time favorite career coach. He’ll lay out the steps to discovering what it is you really love to do and how to get there.

Don’t miss Dave Ramsey’s Total Money Makeover LIVE! event – simulcasting at host locations throughout the country on Sept.19 from Atlanta. For more information visit www.daveramsey.com.

Dave Ramsey