You have to take responsibility for your actions

Q. I wrecked my car, and have spent all the insurance money. I owe $10,000 on the car, and it’s now worth $5,000 but still drivable. I bring home about $1,000 a month, and I’m single. I feel like I’m stuck and I’m afraid my car might fall apart at any second.

A. You’re not stuck. If you sit around and don’t take action to fix this situation you’ll be stuck, because you decided to be stuck. That’s called laziness. It’s time to step up to the plate, take some personal responsibility for your actions and fix this thing.

You made one mistake already by blowing the insurance money, so you’re going to have to pay some stupid tax to make things right. Find a part-time job at night or on weekends to make some extra money. No one wants to work 60 to 70 hours a week all the time, but if you’re willing to endure the pain for a little while you can make enough to have that busted car fixed or even pay it off and buy yourself a decent used car.

Sometimes life just happens. But most of the time what happens to us is the fault of the person we look at in the mirror every day. There’s no magic wand or microwave for this situation. I can HELP you change your life, but it’s going to take a little time, some hard work and most of all YOU have to come along for the ride and make it happen.

Refinancing with balloon

Q. I’m going through a divorce, but I get to keep the house. I’m thinking about refinancing, and was wondering if I should take a fixed rate or balloon payment.

A. Never do a balloon payment on a house. Anytime you take a balloon payment you’re painting a big, red target on your back asking Murphy to shoot at you over and over. Anything can happen between now and the time that balloon comes due, and if you’re not credit-worthy they can foreclose on you in a second.

People come into our office every week in this exact situation. Take the fixed rate. Then, if you decide to sell the house later it’s your choice and not a situation where life has taken another chunk out of you and you were forced to sell.

Staying afloat

Q. My husband and I have been married for nine years, and we’ve recently started our own graphic design company. We’re beginning to make a little money, but we have two car payments – a balance of $6,000 on one and $8,000 on the other – in addition to a mortgage payment. What can we do to make sure we don’t do something stupid and go under?

A. The two car payments are a little alarming. Now, if you turn around and make $200,000 profit it’s not so bad. But if you only make $20,000, then those are big problems.

The first thing I’d do is sell the car that you owe the most money on, because if you make a bunch of money it’ll be pretty easy to go out and buy a good, used car. Right now I’m trying to keep you from sinking, but you’re trying to swim with ankle weights and no life jacket. You can get away with that for a while, but sooner or later you’re going to get tired. I want to get at least one of those weights off of you so you don’t drown.

Another thing you need to do is really prioritize the money you’re going to make from this company. Don’t spend a bunch of it right off the bat, because you need to bring as much home as possible. Set aside a fourth of what you make for taxes each quarter. Also, set up a separate checking account for the business, and make sure all of the money from the business goes into that account and all the expenses for the business comes out of that account. What’s left is called profit.

The next step is a fourth-grade civics lesson for the home. Make sure you take care of the necessities like food, shelter, utilities, house payment and that remaining car payment. You may have to put things like cable television, vacations and eating out on hold for a while if you’re serious about making this business work. This is a fun, but critical time in your lives. You guys have to hardcore prioritize what it takes to stay alive and keep the dream alive. Good luck!

Dave Ramsey is a best-selling author and radio-show host. All of Dave’s columns can be read at www.davesays.org