DAVE SAYS

First the baby or the debt?
Dave Ramsey

Dear Dave,

My wife and I are following your plan. We want to start a family, but we’re still in debt and still owe about $8,000 on our car. Should we pay that off and fully fund our emergency fund before we think about having children?

Robert Dear Robert,

When two people who are married and love each other very much decide it’s time to share that love with a family, then it’s time. You’ve done a great job of managing your money, setting goals and formulating a game plan, so there’s no reason to wait.

If it were me, I’d begin aggressively paying down the car now. Then, when the doctor confirms she’s pregnant, you can temporarily push the pause button on your Total Money Makeover. If you haven’t managed to pay off the car at that point, use the money you were putting toward it to build up a big cash pile of savings, and go back to regular payments on the car after the baby comes.

By doing this you really lose no ground on your get-out-ofdebt plan. You’re just redirecting your resources in case you need additional money down the road. But who knows? It may take you guys a while to get pregnant. And if that happens, you could have the car paid off and plenty of opportunity to save up more before the little one arrives!

—Dave

How do mutual funds work?

Dear Dave,

I’d like to start investing in mutual funds, but I have no idea how they work. Could you explain about them please?

Jennifer Dear Jennifer,

First of all, don’t rely solely on my answer here. You should never invest in anything you don’t fully understand. Before you do anything else, sit down with a good mutual fund broker, someone who has the heart of a teacher, who will help you find what’s best for you and your specific situation and goals.

Simply put, a mutual fund—if it’s a stock mutual fund—is a group of 90–200 stocks. If it’s a growth stock mutual fund, then it’s a group of 90–200 growth stocks. Analysts buy the stocks they think will increase in price and sell the stocks they feel will go down in price. When the analysts buy growth stocks, it turns it into a growth stock mutual fund. If they buy bonds instead, it becomes a bond mutual fund. Several people put money into these groups, and that’s where you get the name “mutual fund.” They’re mutually funded.

These types of investments are much safer than single stock investing because your money is spread across several different stocks. Plus, you’ve got people who know what they’re doing picking the stocks. My advice would be to take a hard look at mutual funds that have been out there for 10 to 20 years and have a good track record for a long period of time. I have one that has been open since 1934, and that kind of longevity and stability gives me confidence that over time they’ll be just fine!

—Dave

Dave Ramsey is a trusted voice on money and business. He’s a best-selling author and his radio show is on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.


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2013-05-16 digital edition



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