QUESTION: Ken in Grand Rapids co-signed for his sister to move into an apartment. She moved out of the apartment last year but ran up a lot of bills, and now Ken is getting the bills and collection notices. Dave suggests paying them and chalking it up to stupid tax.

ANSWER: So the net result of co-signing is that you lose contact with your own sister that you were trying to help. How sad.

Here’s what I would do: I would call the sister and leave her a message that just says, “I love you more than $911. I’m going to pay it. Don’t worry about it. Forget it.” It’s your fault, too. You were stupid for co-signing. It’s stupid tax. Don’t do that kind of stuff again because it will cost you relationships.

Then you have to call the people at the apartment and try to get some kind of a settlement. Whatever you do, get it in writing before you give them any money. I would try to negotiate it. I would say, “I don’t have a lot of money here. My sister sprung this thing on me. I had no idea.” Whine a little bit and then offer them an odd amount. Just make up an odd figure so that it sounds like you really thought it out. Offer them that, and when you get it in writing that they will accept that as settlement in full, then and only then do you send them money in the form of a cashier’s check—no electronic access to your checking account. They will clean you out.

It’s not worth it. It’s $900. Settle it and tell her she’s forgiven and get it out of your life. You’re going to chalk it up to something stupid you did, and never co-sign again.

When you do something stupid with money and it costs you money, we call that stupid tax. Sometimes, you just chalk it up to the tuition of the school of life. You never co-sign—ever—for anything under any circumstances. You have to love someone enough to say no.

QUESTION: Thomas in Tampa wants to know what a core bond fund Class C is. Dave tells Thomas he isn’t sure since he hasn’t familiarized himself with bonds and wouldn’t buy them.

ANSWER: Class C probably has to do with the shares that you’re buying. I’m not a fan of buying bonds, and I have not become an expert on them.

When interest rates start going up, the value goes down. That’s what usually happens with bonds. Bonds typically have an inverse relationship to interest rates. Core bonds could be, I guess, just some high-rated stuff that they’re holding there. It sounds like it’s just a bond mutual fund and invested in some very low-risk bonds—would pay more in corporate bond fund in a sense than CDs would pay. But you are at risk—a lot more risk—than a CD holds. When the stock market or interest rates move, it is going to go with them. That’s another reason I’m not a fan of bonds, especially in this environment. We’re in the lowest long-term interest rate environment in probably 30 or 40 years. When this starts ticking back up, bond holders are going to take a bloodbath.

You need to be where you understand what you’re investing in. What you need to look for in an investment broker is not someone who’s going to take care of you and not someone who’s never going make you have pain. You don’t need to look for somebody who has the latest flashy thing to put in front of you. Instead, you need to look for someone who has the heart of a teacher, who helps you understand what you’re getting involved in.

I wouldn’t be in bonds. I don’t sell any of this, so I don’t care what you buy, but I don’t own a single bond. It’s not because I like risk or something like that. It’s because the bond market is almost as volatile as the stock market, but it has not given the same rates of return. And we’re in a 30–40 year low in long-term interest rates. When these interest rates tick back up, it’s going to be bloody. That’s why I’m not in any of them.

QUESTION: Louise in Salt Lake City is calling on behalf of her mom. Her mom received a letter from CitiBank regarding a debt settlement. Her mom is going to accept the settlement, but when Louise asked for a letter saying that it’s settled, CitiBank wanted electronic access to her mom’s account. Dave advises against giving them access.

ANSWER: You have got to be kidding me. That should have been your response. You should have laughed and said, “You’ve got to be kidding me.”

Their offer will come back, or we’ll get a better offer out of them. If you don’t pay them for three or four years, they’re going to be flexible. That’s just absurd. I mean, why does it expire? Do they not want money? I would lose the deal.

Here’s the thing: You don’t have a deal. So you haven’t lost anything. The problem is you have to give them electronic access for the letter to be good. We’re not doing that. If you give them access, you’ll have to close that account after you do it because you won’t ever be able to use it again. Don’t have a dime more than the settlement amount in the account because they’re going to take that, and periodically, they’ll try to take more. They lie.

If they don’t take the amount out by the time the letter expires, you’ve got to clean that account out and close it the next day. They’ll take it out later and then say they didn’t receive payment until after it expired. They won’t honor the letter.

If you can’t get something in writing and hold these people ironclad, you’re going to get messed over.

QUESTION: Carl emails Dave to ask if you skip vacations while you’re paying off debt, and once you’re out of debt, what percentage of your income should you spend?

ANSWER: Yes, I do skip vacations while I’m getting out of debt. We didn’t go on a vacation for almost 10 years. We had work to do and children to feed. That’s how it works.

As far as a percentage goes, it can’t damage your financial foundation. You can’t touch your emergency fund, you can’t stop funding your kids’ college funds or not fund retirement to go on vacation. You’ve got to be able to save up the money and pay cash, and then that will force it to become a reasonable percentage in most cases.