QUESTION: Patty in Winston-Salem says her son is about to graduate from law school. She and her husband allowed him to get a student loan, but they paid for two years. The loan is about $76,000. They could pay it off for him, but her husband is hesitant. Dave says it depends on how hardcore they want to be.

ANSWER: I would want some concessions were I to do this at this stage of the game. Number one, I think it’s perfectly okay for a young lawyer to go and earn a living and pay off his lawyer debt. There’s nothing wrong with that whatsoever. There’s no deal broken here. It’s not going to kill him. He can roll up his sleeves and clean up the mess that he participated in making.

If you choose to pay it off, I don’t think that’s a bad thing either. But I don’t want you to think you’re obligated to do that. You’re not. This should be a gift. It should be accompanied by two things on his part. One is a signed letter of agreement that he will never borrow money again the rest of his life, thereby you have changed his life. You can decide how hardcore to be.

Never borrow money again. You called Dave Ramsey, remember that? That’s the number you dialed.

In other words, I want some permanent commitment that I changed my family tree. I want his kids to be affected by this decision and this gift. That’s the first thing I want from him. The second thing I want from him is unbelievable levels of gratitude—worshipful levels of gratitude.

QUESTION: Christine in New York borrowed some money from her aunt to buy a condo eight years ago. Now she sold the condo and lost both her $30,000 and her aunt’s $30,000 as well. Christine is resentful that she has to pay her aunt back the money that was lost, but Dave explains an unpleasant fact to her.

ANSWER: It’s the deal you signed up for. You knew going in. She didn’t mislead you, right? She didn’t do anything wrong, honey. All she did was give you $30,000, and now she dares to want it back.

If I were in her shoes and it was my kid, I might have some mercy. I might do some things if she were calling, but as far as you’re calling, I’m going to challenge your right to be resentful here. If the agreement was that she loaned you $30,000 and you pay it back and she gets a piece of profit—that was the agreement—there was no profit, so now you owe her $30,000. You don’t really have a reason to be resentful. She might, but you don’t.

Please, God, just pay this back quickly and get it out of your life. I don’t want to be mean or anything, but you’re completely wrong.

Let me help you with how I deal with that sometimes. Sometimes it helps me. I don’t always get through it. Everybody has the feeling. She’s got plenty of money. She’s kind of like your mom. Why doesn’t she just forgive the debt and forget it? It was a bad deal. It wasn’t like you made any money. You lost your shirt and your shoes. You lost everything. I get how mercy would be in order toward you, so I can kind of go where you are. Sometimes in these things, I can switch shoes with the other person and walk a mile in their moccasins and then I know what I’m supposed to do. In other words, if the roles were reversed, you or I might grant mercy and just say forget it. I’ve got plenty of money. I don’t need it back.

The good news is you don’t have any debt except this, and you’ve got a great income. Honestly, I think this is causing you more angst than the math—if you told me you make $32,000 a year, I might say go have a cup of coffee with her and beg for mercy. You make enough money. Just knock it out and be done with it. Forget it. I wouldn’t put the relationship at risk.

Just say out loud what you’ve been thinking. If you want to call that kicking your butt, that’s fine. We’ll call it kicking your butt. You were already thinking part of that, and then there’s a little girl part of you that goes, “Oh, come on! Just let me go.” The grownup part says, “Yeah, I know what I need to do.”

QUESTION: Brad in Knoxville is a small business owner with $300,000 in gross sales. He nets $50,000 a year and has $110,000 in total debt. He makes a lot of purchases with vendors using net 30 terms. How do those fit into the Baby Steps?

ANSWER: They don’t. You should have the cash flow to cover them, or you shouldn’t be doing purchases. That’s just like having an electric bill; you need to pay the electricity. If you order stuff from a printer, you don’t prepay it. You pay it when it comes in. They drop the stuff off and leave you an invoice, and you pay it within 30 days.

We generally clear those in eight to 10 days if everything was all right on the purchase order and the quality was there because the order met our specs and everything. If we don’t have the money, we don’t order the stuff. We’re not hoping we can sell it after they get it here to pay them. That is planning debt and riding on the back of your vendors. We have the money here so that as soon as it clears accounting and goes through the purchase order system and everything, then we cut checks the following Tuesday.

You are doing a good job of planning your cash flow. As long as you plan the cash flow like that, it’s fine. We’ve bought stuff where we didn’t have the cash there right that second, but we had a pipeline full of receivables that were steady and predictable in coming in, so we didn’t get ourselves in trouble. You just don’t want to get in a cash flow bind that ends up getting you in debt. But it is normal course of business to clear stuff in 30 days.

QUESTION: Matt in Colorado is 58 and self-employed. His son works with him. In a couple of years, Matt plans to retire and would like his son to take over the business. The business has a $45,000 yearly net profit and his Matt’s son makes up to $55,000 a year. For the transfer, Matt’s son would buy the tools and equipment that he wanted and sell whatever he didn’t want. What’s the best way to transfer it?

ANSWER: If he wanted to give you $50,000 for the tools and he owned the business, he could probably do that in about a year because he’d have the extra income in addition to his salary. He would make $80,000 to $100,000 a year if he owned it by himself, between his income and the profit. If he gave you $50,000 out of the first year and had a slim year, that wouldn’t be a bad deal for him.

Clearly define his role in using your shop. If you say that he can use it until he needs to move, you might look up 10 years later and he’s still there. As far as you’re concerned, he’s five years overdue on having to move, but has far as he’s concerned, he’s just using the shop. You need to say that, in three years, he needs to plan to move. If it doesn’t work perfectly, you can talk about it, but that needs to be the time frame.

Start thinking that way, and that means he has a year to buy you out and two years to find a place to rent. If there’s a major problem in the economy or something, you can put it off for a year if you need to, but go with the three-year schedule and write that down.

You guys are both married, so it’s very important for the four of you to all be in agreement on this. When family works together, there has to be very clear communication. That way, his wife doesn’t feel like her father-in-law ripped them off or something. If she’s in on the decision and your wife is in on it, and you are all in agreement and they’ve gone over the agreement with you and everyone is all right with it, then put your stamp on it and move forward.

It sounds like a pretty easy thing. The other thing is handing off succession. It needs to be very clear and stated. Go ahead and start talking to your team about that as well. Tell them you’re on a two-year schedule and that your son is going to be learning certain things during that time and you are going to make sure he is a leader who can run this place.

That actually gives your employees a lot of confidence that everything is going to be all right. I am probably about 15 years away, not from retiring, but from not running this place as the CEO. I’ve already begun the succession process of building leaders and working with the new owners, who are my kids.

The leadership team here knows that and knows the details, so they are helping all of us achieve that 15-year goal. But that gives them the sense that we are heading the right way. They don’t feel like they have to leave because the old man is getting old and the place will close down when he dies. Instead there is a plan, and that gives them great peace.

It has been very good for attitude and moral around here that we’ve begun to talk and look generationally about how we’re running the place. You’re being very wise about how you are doing this.