Dear Dave: My husband broke a few ribs and his collarbone a couple of years ago when he flipped our ATV. He’s fine now, but we still have about $20,000 in medical bills because we were both between jobs and didn’t have medical coverage when the accident occurred.
We also have two credit cards, one with a $1,000 balance and the other a $7,000 balance. We only have $200 a month we can put toward debt, so where should we start?
Dear Sandy: Not having health insurance at any time of your life is not smart, regardless of being between jobs or not. Ouch, what a mess! You didn’t tell me what you guys make, but I can tell you a few things.
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Number one, you’re probably going to have to get your income up. You may have to take on a couple of part-time jobs or work some overtime. My grandmother used to say, “There’s a great place to go when you’re broke — to work!” If you only have $200 a month to put toward your debt, you’ve got to create some margin, and that may be on the income side of things.
The other thing I’ve found is this: Most people seem to be able to magically find money when they feel it’s a life or death situation. “Magically” means that you do a budget. You make a written game plan where every dollar has a name before the month begins. When you write down every dollar, and you and your husband sit down and agree on where every dollar is going to go, you’re going to have an ah-ha moment that feels like you got a raise. If you’re normal, you waste a bunch of money because you don’t budget and have a written plan. And normal pretty much sucks!
So, here’s the drill. Start living on a written budget, extra work, start working the debt snowball and pay off those debts from smallest to largest and don’t even think about a vacation or anything else that’s not necessity based until you clean up this mess. When you start living with a scorched earth idea — beans and rice, rice and beans — I’ll bet you’re going to find a lot more than $200 in your budget to put toward killing off this debt!
Dear Dave: Recently, I met a young man who was put out on the street when he turned 18. He lives on food stamps and $10 a week. My wife and I are on Baby Step 7 of your plan and have a great income, and our whole family feels called to help this kid — maybe even taking him into our home. Do you have any advice?
Dear Mitch: You guys obviously have loving hearts and are doing great financially. But let’s take a look at a few important factors in a decision like this.
If you’re thinking about actually taking him in under your roof, you need to remember that your first responsibility is to your family. You have to make sure they’re safe, and that would include finding out everything there is to know about this guy. Talk to his past teachers, coaches or even family members if you can find them. Spend some time just talking to him, too, and find out more about his background, attitude, habits and goals. Then, if you still feel led to open your home to him, make sure everyone involved signs an agreement with really clear rules and guidelines about what is expected, what will not be tolerated and the rewards and consequences of each.
Helping him with food and clothing alone would be a generous act, but what you’re considering is absolutely amazing. Just make sure, if you go this route, to do it not just with love, but with lots of forethought and wisdom.
Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.