My husband was laid off a month ago from a job making $80,000 a year. We have no debt except our house payment. We owe about $82,000 on it, but itís valued at approximately $300,000. Weíve also got an emergency fund of $30,000, and I work part-time making about $2,000 a month while he collects unemployment and looks for another job. Do you think we should sell our home? Weíve also got a boat thatís worth about $18,000 we could sell.
The first thing I want you to do is take a step back and breathe. Yes, you guys just hit a big bump in the road. But the good news is youíre in pretty good shape financially to handle things for a while.
At this point, Iíd strongly recommend selling the boat over selling the house. Boats are a lot easier to replace than nice homes, and the process isnít nearly as traumatic on the family. You can also dip into your emergency fund a little bit, but for the next little while you need to make sure youíre living on a really tight, bare bones budget. Iíd love to see you not have to touch the emergency fund, because heís gone out and found at least a part-time position while heís searching for something in his field. I know thatís tough to do once youíve gotten used to making $80,000, but there are jobs out there that will help you guys get through this.
As long as heís being diligent in seeking a new job, and youíre budgeting and watching what you spend together, I think for now you should keep the house. God bless you both!
Income tax refund or better planning?
Do you recommend having people keep their W2 numbers as close to their tax return numbers as possible, even if they might have to pay at the end of the year or have more taken out? Every year I get a big tax return. But after listening to you I began to think that if I did a better job of planning I would have more money throughout the year.
I like your thinking, and youíre absolutely right. Thatís exactly what I recommend people do when it comes to their income taxes. Of course, you donít want to have to pay out a big chunk of cash. But a little number crunching and planning ahead of time can help you avoid those kinds of situations.
You really donít want a big refund, and hereís why. If you get a fat tax refund every year, all it means is youíve loaned money to the government interest-free for the entire year. Then, at the end of the year they gave it back to you. Some people seem to think Santa Claus has shown up when this happens, and thatís completely wrong. Youíve had too much taken out of your check every payday during the previous year, and then you got it back.
Try to adjust your W2 so that you are hitting within $100 or so at the end of the year. Then youíll have more of your own money in your own pocket throughout the entire year!
Dave Ramsey is Americaís trusted voice on money and business, and CEO of Ramsey Solutions. He has authored five New York Times best-selling books. The Dave Ramsey Show is heard by more than 11 million listeners each week on more than 550 radio stations and digital outlets. Daveís latest project, EveryDollar, provides a free online budget tool. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
Dave Ramsey: Sell the boat, not the house