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Ask Dave

Try Working the Plan First

Nick and his wife have an opportunity to move into his mother's house. She has a full basement, and they'd like to pay off their debt while living there. Is this a good plan?

QUESTION: Nick in Illinois and his wife have an opportunity to move into his mother’s house. She has a full basement, and they’d like to pay off their debt while living there. Is this a good plan? Dave thinks they need to roll up their sleeves and get on a plan instead.

ANSWER: Your house is not your problem. Long before I sold my house, I’d sell my car. It’s a lot easier to sell, a lot less impact on the family, and has almost the same impact on your cash flow. You don’t have any equity in your home. By the time you sell the house and pay real estate agents and closing costs, you’re not going to walk out of there with any money. You told me you owe $51,000 on it. You just paid $57,000 for it the other day. You may walk out of there with $5,000 or $10,000, but it doesn’t solve your problem.

I don’t think you guys have lived on a written budget yet, and I think you still go to restaurants all the time. Long before I moved in my mommy’s basement, I would roll up my sleeves and get my butt on a plan and start selling crap. Sell so much stuff the kids are hiding. That includes that stupid car. A $14,000 car is not that bad, but if you’re willing to sacrifice to the point that you move in your mom’s basement, let’s go ahead and sacrifice the car first and get you a $1,000 beater to drive around for a little bit.

Let’s get on beans and rice, rice and beans and put the family on a strict budget, because that’s what you’re talking about doing anyway. Crap, we’re putting them in the basement. Before we put them in the basement, let’s try everything else because if you told me your house payment was $1,500 in your situation with a $60,000 income (so your take-home pay is about $4,500), we could start to talk about this. But your house payment’s the most reasonable thing in our entire discussion, and it’s the one thing you’re ready to give up. I would give up your life for a period of time, get on a written game plan—beans and rice, rice and beans. Don’t you be on the inside of a restaurant unless one of you is working there. Let’s put so much stuff up for sale that Craigslist is your middle name. Just rock and roll, baby. And maybe take an extra job and maybe your wife does because there’s a great place to go when you’re broke: to work.

You do all of that, and I think you could be debt-free in about 18–24 months without selling your home. Then if you choose to move from financial strength rather than out of weakness, then that would be fine, but I don’t think it’s necessary in your case to move into your mom’s basement. I think it’s a bad plan. I would do a lot of stuff before I would go back home at your age. That’s just short of being homeless. You’re a long way from there. You haven’t even given this other stuff a good run yet.

I’m going to send you a copy of the book The Total Money Makeover. Read it and do every stinking thing on every page. You go bananas to the point that your broke friends are making fun of you. Then see if you don’t turn this around without having to sell your house. I can promise you, with the numbers you gave me, you can.