QUESTION: Ethan in Nashville is 21 and about to start his senior year of college. He won’t have any debt when he graduates, but now he’s considering law school. He won’t have enough money to cover that, so what recommendation would Dave have for pursuing that while avoiding student loans?

ANSWER: I had a couple in here the other day, and both of them graduated from law school with no college debt—no student loan debt at all from law school. One of them went through the military. That’s how he did it. His wife—I asked how they did it, and he said, “We just worked our tails off, and we lived on nothing.” Now I don’t know where she got her law degree. Law schools are much like colleges in that there’s a huge difference in price from one to another. Depending on what kind of law you’re going to practice, where you graduate from may matter a lot or may not matter a lot.

I’ve hired a bunch of different lawyers over the years for different things. I don’t recall ever asking one where he went to school. Maybe I should. Maybe there are some law schools that are inept, but the last time I checked, you all take the same bar. There are people that graduate from every law school who flunk the bar, so I know it’s tough.

I think the trick is to learn the law to be able to A) practice and be competent and B) to be able to pass the bar. I think you consider what you’re paying to go to a particular school and talk with them and see what kind of deals they’ve got, what kind of scholarships they’ve got, what kind of programs they’ve got and try to work your way through that process.

Twenty thousand dollars is a pretty good start. That’s better than starting from zero. Law school is usually three years. I think not only just trying to get accepted to law school somewhere, but I would also—as I’m doing that—I would look at their prices and say, “I’m trying to get through here, and I have no desire to come out with $200,000 in debt and be a lawyer making … A junior guy working 80 hours a week making $45,000 or $50,000 a year trying to make partner someday maybe sorta kinda.”

That’s what it sounds like for the first year or two coming out. If you make it through that gauntlet in the first year or two, you oftentimes—in a big firm—will get up into the hundreds pretty quick—six figures—and can go in and repay. But as you know, everyone doesn’t graduate from law school, and everyone that graduates doesn’t pass the bar. And 100% of them that take out student loans have student loans. It’s really bad to get stuck with student loans and not end up with the six-figure lawyer income, in other words.

I’m going to fight around the edges of this thing and see if I can’t figure out a way to do it without the loans because I think it can be done. I don’t have a magic answer for you, though, that’s solid that’s the absolute thing that’s this, this, and this. But I would use my $20,000. I would pick my school carefully. That’s two big things, and then the third thing is I would work every one of those for scholarships. You could look at and consider what the military is doing right now. That has issues with it, obviously, but it’s a possibility. It just depends on what you’re doing and what your overall goals are.

QUESTION: Kristen in Oklahoma City and her husband are trying to decide if she can afford to stay home with their son. He makes $40,000 a year, and Kristen makes $40,000 a year right now. Dave is concerned about such a significant income drop and adjusting lifestyle.

ANSWER: You’ve almost tripled your income, but you don’t have much to show for it was my point. You saved $10,000 and you bought some baby stuff, but you tripled your income. I’m just concerned that you make it. I don’t want you to be under an illusion that this is going to be easy.

What you guys have got to do is you’ve got to sit down and say, “All right, here’s what our spending looks like for the last six months, and here’s what our budget will look like on $45,000.” And you have to write it out and say, “This is going to be our take-home pay on $45,000, and we’ve got to be able to live on that.”

You’re going to be tight. You’re going to be real tight. That’s a big house payment on a $45,000 income. That’s going to be like a third of your take-home pay. That’s pretty tough.

I want you to come home. If that’s what you want to do and you want to be a full-time mom, I’m with you. I want you to do that. I don’t want you to do that and then call me back in three years and go, “Well, we just couldn’t make it, and I just kept putting it on a credit card. Now I’ve got $30,000 in credit card debt. What am I going to do?” You have got to freaking live on this.

Now sometimes a police officer can pick up extra work that is very lucrative.

You cannot out-earn doing a budget. You have to do a detailed written budget, and you’ve got to be very, very careful. I think you should try it. I think you should come home. It’s what you want to do. It’s your goal, and you’re convinced you can make it. I’m not positive you can make it, but I think you can. It’s going to depend on you cutting your lifestyle, and a lot of the stuff you’ve been doing in the last year and a half you just can’t do anymore. You’ve just got to take those habit patterns and throw them in the trash because you’re going to go broke if you do that. You’re going to force yourself back into the marketplace by overspending, and you won’t be able to stay home with your child if you do that because you’ll have bills to pay, and you won’t be able to do that any other way or you’re going to force him to quit his chosen career field of being a policeman. Be careful and diligent on the budget.

QUESTION: Brian on Twitter asks if employer contributions count toward the 15% Dave recommends putting toward retirement.

ANSWER: Employee contributions would. Employer contributions don’t. I want you putting 15% of your money into retirement. That’s your rule.

Baby Step 4 is 15% of your income going into retirement. The first thing you should put money into is a matching retirement account. If you’ve got a 401(k) or a Roth 401(k) or a 403(b) and they offer a match, up to the match, you do that before you do anything. Once you’ve gotten up to the match, let’s say they match 3%—we said 15%, so you’ve got to do some more—so you’re going to take the first 3% over in that 401(k), get the match, then you’re going to do Roth IRAs. And if the Roth plus whatever match you have does not equal 15%, then you’re going to go back to your 401(k), 403(b), whatever it is, and fund the rest of it up to 15% of your income.

I want you putting 15% of your income in. What your company matches, what your pension is, what your military retirement is does not enter into that equation. I want you having money in your name that you put in there because guess what? If your company goes broke, you have a pension, you get nothing. Nothing. Ask these people whose companies have gone broke. They got nothing. If you have a 401(k) and your company goes broke, it’s your money. You don’t lose it. It’s in your name. It’s your money. You put it in there. You own it, including the company match that was put in there. It’s in your name. You don’t lose it. I want you in control of your destiny.

QUESTION: Angela in Omaha asks Dave when she can start living like no one else. They’re debt-free including the house, their kids are finished with college, and her husband makes $47,000 a year. They have $750,000 in retirement accounts. Dave thinks it’s time for them to start living like no one else.

ANSWER: If you’re paying a price to win, what does winning look like and what does the math tell you that the calendar date is going to be that you’ve won? Because it’s a math thing. If you’re there, why haven’t we lightened up?

You’ve done ridiculously good. You’re unbelievably successful. It’s ridiculous. You need to go buy cars. It’s ridiculous. You go spend $20,000 on a stinking car. You’re millionaires!

You’re not quite a millionaire, but you’re getting real stinking close. That’s $900,000. So if you’ve got another $100,000 in something else, you are millionaires. You can afford a $20,000 car.

Don’t touch your emergency fund. You leave your emergency fund alone, but you need to go buy a nice car. You’re millionaires.

What’s happened is your husband got—and you got—in cheap mode and real intense and focused to get to where you are, and I’m telling you, you need to lighten up. The other thing you need to do is you’re probably not doing enough giving.

Here’s what I want you to do more than that: I want you to go to lunch with the kids that get the scholarships you’d like to give away. And I want your husband to go too. You need to feel your giving. It doesn't need to be distant and institutional. You need to touch it because giving and enjoying your money—a reasonable level of spending, in other words—are tied to each other because somehow, it’s hard to enjoy when you feel like you’re being . . .

There are three things you do with money. You invest it and save it so you have a quality future. You give it, and you enjoy it. You guys have only done one of the three so far. You need to gear up the other two in order to have a well-rounded, fun life. You are rock stars. You have done a fabulous job. Yes, you have lived like no one else, and yes, it is now time for you to live and give like no one else. I’m not saying get crazy and go spend $200,000 on something, but I am saying let’s loosen up the purse strings a little bit here. Let’s put a little oil in the machine and enjoy the ride a little bit more.

You completely win this argument. Now if we can get old tightwad to loosen up, you and I will have won.

QUESTION: Alex in Los Angeles and his wife are trying to determine how much mad money they should each have per week. Does Dave have a suggestion?

ANSWER: The more detailed your budget is, the less mad money is needed because things are budgeted. For instance, if your mad money is going to your lunches while you’re at work, if you had a “His Lunches” category, then you would need less mad money. You see what I’m saying? The fewer things that are in the miscellaneous category, the smaller amount you would need for that category. I think that’s the big issue.

I don’t want people running around with $500 a week in their mad money. That just means you didn’t do a good job finishing up your budget.

I would save up for a gun as part of your budget. I would break your lunches out as part of your budget. Then I would have mad money. That's exactly what I was describing before I asked the questions because what that does is it keeps you real pure on your mad money because mad money should be unexpected things that you don’t see coming—just odds-and-ends things—and a little bit here, a little bit there. It’s okay for it to be $50 a week, but I would break your lunches out for now, especially at the start of doing your budget. Break your lunches out and do an envelope for lunches with cash in it. Then say, “All right, I want to save $X for a gun.” And she says, “Okay, I want to save $X for a purse,” or whatever. And those are just budget items that you all are looking at and agreeing to.

If you’re doing all of that while you’re trying to get out of debt, then we’re confused. We’re not buying purses and guns while we’re getting out of debt. We’re in the process of getting out of debt, and you pour everything on the debt.

If you want to keep it all in the mad money and kick it on up, it’s okay. But another way to do it is to break it out, and then that makes the mad money actually more flexible because the other things have a line item in the budget. Certainly, that’s the way we do it.

QUESTION: Shauna asks if it’s ever okay to stop paying health insurance to pay down debt. Dave says no way.

ANSWER: No. The number-one cause of bankruptcy in America today is medical bills. It’s not medical bills necessarily from the uninsured. It’s medical bills also from copays and deductibles and no one had any savings.

The number-two cause of bankruptcy is credit card debt.

Let me just tell you, you blink your eyes and you have $200,000 worth of medical bills. One little thing, and you’re just devastated. It’s a bankruptcy event.

No, you do not walk around without health insurance. And I’m not talking about Obamacare and I’m not talking about mandates and I’m not talking about penalties and I’m not talking about any of that crap that the government is mandating. I’m talking about you having common sense, which says you ought to have health insurance. That simple. Then you can get into the philosophy of who pays for it—like I’m supposed to pay for yours or something. Or you’re supposed to pay for mine, but at the end of the day, you’ve got to have health insurance, so you need to go get it and you need to pay for it and you need to do it right now.

That wasn’t unclear, was it?

QUESTION: Alicia asks how to tactfully tell someone she can’t attend their out-of-town wedding.

ANSWER: That’s his problem. It’s not your problem. There isn’t a tactful way to deal with somebody who has temper fits and throws a little fit about everything that’s about them. He doesn’t get to decide how you run your family. “I’m sorry. I can’t come. I don’t have the money, and we don’t borrow money. You’ve got to have a little more communication about things than that. Sorry.”

Furious is furious, and such it is. I can’t control other people’s temper fits. I can’t fix that for them. They have to deal with their own self on that. You can’t do it otherwise. It’s that simple.

QUESTION: Justin on Twitter asks what the best financial decision he can make is before he starts his first year of college.

ANSWER: Raise your right hand and swear, “I’m never going to borrow money.” There you go! That’s it.

How do you follow that up? You have a plan, and the plan is you look into the future, which is not hard to do, and you say, “I need this much money for tuition this semester. I need this much money for housing and food and books this semester. And next semester, I’ll need something that looks a lot like that. My annual college budget is $X divided by 12 is $Y.” That’s how much money you need to come up with per month.

How are you going to do that? It’s probably going to involve living frugally. It’s probably going to involve a written budget and game plan. It’s probably going to involve work—working for money. That’s usually where money comes from. It’s an amazing place to go—work. The more you go there, the more they pay you. You may come up with some great small business ideas while you’re in school. There are a lot of things there that just make a lot of sense.

The biggest mistake I think people make with college—and the parents are included in this stupidity, by the way—is they just assume that in order to be a student, you have to have a student loan—that automatically I’m going to go into debt because that’s how I’m going to be able to go to school. Otherwise, I’m not going to be able to go to school. That’s such a dumb assumption. It’s like saying I can never have a nice car unless I have debt. Oh, really? Why don’t you just save up and pay for it? The average car payment in America is $485 over 86 months. What if you save $485 for 10 months? Would that be $4,850? It’s almost $5,000. Can you buy a pretty decent car for $5,000? You can buy a pretty decent car for $5,000. Do you want to drive that car for the rest of your life? No. It’s a hoopty. You don’t want to drive that the rest of your life. It’s a little above a hoopty, actually. But if you did that for another 10 months while driving that $5,000 car and saved another $485 a month, you’d have another $5,000 to go with your $5,000 car. Would that be a $10,000 car 20 months in—not even two years in?

You save up and pay for things. You’ll always have nice things doing that, and your nice things won’t have you. Oh, there’s a weird idea.

QUESTION: Justin in Spartanburg has a year left in college, and he has no idea what he’s going to do with his life. He takes out $5,000 in student loans each semester, and he’s trying to craft a financial plan for his life. He can finish school without taking more loans if he cuts his lifestyle. He needs to know if Dave thinks that’s a good idea.

ANSWER: Don’t take money out in the first place. You say you can get a job and cut down your cost of living so you can get through the rest of school without borrowing, so that’s what I’d do. I’d cut down my lifestyle.

The goal here is education, not borrowing money to invest. Assuming your degree is usable and you use it, education is one of the best investments. If you get a degree that you don’t ever apply, then you need to work on that part of it. You need to start aiming at something from the career side. It will motivate you to finish and it will motivate you to do other things. You cannot borrow your way into prosperity. I wish we could send that message to Washington.

QUESTION: Jason asks how debt to family should be prioritized in the debt snowball. Dave explains.

ANSWER: No. If there’s no big pressure, no breakdown in the family—you didn’t borrow money from your grandmother, so now she’s having to eat dog food because she gave you her last dime, nothing like that—then you just treat it like any other debt in the debt snowball. The debt snowball’s not about interest rate. The debt snowball’s not about risk, and it’s not about default. It’s about what is the lowest balance? Pay that off next. The only time I make an exception for that is when we’re dealing with something like the IRS, and you put them at the top, and you knock them out as fast as you can.

You need to go ahead and just put family in line. Again, if somebody’s got a problem, there’s some kind of other pressure and your dad’s going to lose his home because you don’t pay the loan back where you borrowed money from your dad, then you’ve got to reprioritize it. But otherwise, if there’s not, then you don’t. “Well, I don’t ever have to pay it back.” If you don’t ever have to pay it back, then you need to not have a debt. It’s not a debt if you don’t ever have to pay it back, but if you’ve got to pay it back, it needs to be in the debt snowball with the exception of extreme situations.

Robin in Kansas City and her husband started working through the Baby Steps in 2006 and got life insurance, a will, and by 2009, they were debt-free but the house. They had an emergency fund, and then her 36-year-old husband was killed while abroad visiting family. She and her son were okay financially. They had a son in 2002 who died at eight months old and they struggled during that time, so Robin is thankful she could grieve in peace when her husband died.

QUESTION: Allen on Twitter asks what Dave’s opinion is on return-of-premium life insurance policies.

ANSWER: I would never buy a return-of-premium insurance policy of any kind.

Let me tell you what return-of-premium means. It means if you don’t use the policy by the end of the policy, they give you all the premiums that you have paid back. That sounds very nice. It is very nice except that feature is an add-on, and they charge you extra for that return-of-premium feature. That extra charge that they’re charging you gives them the money to return your premium. In other words, whatever you’re paying for that return-of-premium feature extra, if you had invested that much, you could have returned your own premium because you would have had the money. This is what’s known as a gimmick. It’s a way to get you to save money with insurance companies—maybe save money.

Sometimes people even do this with long-term care insurance. They’ve got a return-of-premium feature. All kinds of different policies now are offering a return-of-premium feature. If you don’t use the policy by the end of the policy, they return all the premiums you have paid in to that point, but with what you have paid extra to have that feature, you could’ve returned your own premiums. So don’t fall for stuff like that. Something that sounds too good to be true is.

QUESTION: Barbara on Twitter wants to know how to use the debt snowball if her budget can’t support all of her minimum payments.

ANSWER: You don’t. Your first goal is to get and be and stay current. Something’s got to give. You’ve got to sell something that’s got debt on it to get rid of the debt like that car payment. You may have to amputate the Tahoe. Something’s got to go away, right? Or you’re going to have to take an extra job or you’re going to have to sell something or you’re going to have to take an extra job or you’re going to have to sell something. Something’s got to move here. You’re not in Congress.

You can’t continue to be obligated to pay more than you have coming in. You have a problem. So don’t go there. I would clean that mess up immediately. You have to get current before you can start your debt snowball. Once you’re current, your first Baby Step is $1,000 in the bank, and your second Baby Step is to begin the debt snowball listing your debts smallest to largest.

QUESTION: Steve in Georgia says his dad opened a credit card a few years ago and made Steve an authorized user to help him pay for expenses while he was in college. His dad is now delinquent on the card, and he’s receiving collections notices about it, and it’s on his credit report. Does he owe this money?

ANSWER: No. An authorized user is not liable. The account is in your dad’s name, not yours. You are just allowed to use the credit card. You never signed anything.

Now, Chase has no ethics and they are not above trying to collect from someone who doesn’t owe the money. They know you don’t owe the money, but they are not above trying to get you to pay them. They’d probably try to get me to pay it if they could.

Get them to remove you as an authorized user. Send them a letter, certified mail, return receipt requested, so you have proof of it. Tell them that if they do not remove you as an authorized user immediately, you are going to sue them.

Technically, you should not be reported to the credit bureau. But you can report anything, even inaccurate information to the credit bureau. You as the consumer have rights on removing things on the credit bureau that aren’t associated with you. Someone else’s account that you are not liable for should not be reported. Even though they routinely do it, they shouldn’t because you are not legally liable for the debt when you are just an authorized user.

I would challenge that as an error on your credit bureau. The problem is that the stupid people at Chase will keep downloading this information onto your bureau as long as they can because they will try to bother you and bully you into paying a bill that you really don’t owe by any stretch of the imagination.

QUESTION: Matt in Oklahoma City and his wife have about $63,000 in the bank, and they owe $47,000 on their house. Matt is considering paying off the house early, but he’s concerned about Murphy moving in once he does. They make $100,000 a year, and the home is worth about $250,000. Dave advises Matt to pay off the house today.

ANSWER: We’re only talking about nine months—maybe 12 months—but somewhere in there is the only discussion you and I are having. You can either continue like you are, and somewhere around a year from now, you’ll be debt-free. Or you can write a check today and be debt-free today, and you would have $20,000 or so in the bank. The next month, you would have that plus $3,000–5,000, and the next month plus $6,000–10,000, and the next month plus $12,000–15,000. So three months from now, your savings would no longer be $20,000 but would be $30,000-something.

I think if you sit down and actually look at it that way, it doesn’t do your security gland as much damage to pay the house off today, because we’re not really saying we’re going to limit your emergency fund to that low point. It’s a very, very temporary low point.

Dave and Sharon Ramsey would write a check and pay the house off today. Then we would continue paying what we were planning to pay on the house back into the emergency fund to build it up to three to six months of expenses back up to that comfort level. In your case, you like six months, probably, just because you do. Then you have no payments at all, and you’ve got that six months of cash and now you’re in a position to really do just about anything you want to do from this point.

QUESTION: Matt on Twitter wants to know at what net worth he should consider umbrella insurance. Dave explains.

ANSWER: Probably $500,000 net worth or greater. Let me help you understand what net worth means because even the politicians don’t know what it means, apparently. Your net worth is what you own minus what you owe. If you have a $600,000 house that you owe $625,000 on, that is a negative $25,000 toward your net worth. It’s not your asset base; it’s your net worth and net of debt is what it amounts to.

A millionaire is not someone who makes $1 million a year. That is not the definition of a millionaire—not by anybody’s definition except politicians who are twisting things and throwing phrases out there. A millionaire is someone whose assets minus their liabilities—what you own minus what you owe—are $1 million. If you own a $1 million paid-for home and have no other money, you’re a millionaire by definition. That is the definition of a millionaire. A billionaire would be the same thing. What you own minus what you owe—that determines your net worth. It is not your income. There are a lot of millionaires who do not make an income of $1 million a year.

I would get umbrella insurance, which is extra liability insurance, when you reach about a $500,000 net worth. Prior to that, I would carry a $500,000 of liability, which you’ll be carrying for the rest of your life anyway, on your homeowner’s and on your car insurance and any other policies that you buy that have liability attached to them. But once you get above that, you can pick up another $1 million in liability insurance called an umbrella policy that attaches to the top of that and covers everything for an additional $1 million for about $200 a year in most states. It’s a great buy.

QUESTION: Ben in Nashville and his wife want to know the best way to learn how to efficiently budget other than by trial and error. Dave tells him trial and error really is the best way.

ANSWER: You know, truthfully, trial and error is the best way, and that’s why we say in The Total Money Makeover it takes about 90 days to get it right. The more years and months that you budget, the more accurate you’re going to be—the more able you are to anticipate things. So just cut yourself some slack. It’s not something you can microwave. It’s more of a Crock-Pot thing. Just give yourself some grace.

I don’t mean just bail on budgeting or to give yourself grace to go on a spending spree, but I am saying that if you just make an error straight up on the budget—you just underestimate something or overestimate something—just correct it the next month. Keep at it.

The thing that you’ve got to think about is the first month you did a budget: 70—80% of it was accurate, but the other 20% will drive you nuts. Then the second month you do it, you’re going to knock off about half of that stuff. You won’t do it again. You’ll get it right. The third month you do it, you’re only going to have three or four things that pop up every so often that you just miss—you didn’t think about that. “Dad-blame it! We were doing so good, and then we forgot about that,” you know? It’s that kind of an experience, and you’ll adjust. But you’ll get most of the kinks out of it—90-something percent of the kinks out—within 90 days. Three budget cycles—three months—and you’ll find most of your trial-and-error things.

That is the most efficient way that I’ve ever come up with because there’s just no way to say . . . there’s no template that’s big enough or detailed enough for your life because your life is different than the people next door to you.

We have general guidelines and ideas and concepts and a few forms—as you found—in the back of The Total Money Makeover book. But still, at the end of the day, there’s just a lot of stuff that’s hard to figure out, and it just shows up and smacks you in the face.

Just say, “It’s okay if we’re not perfect the first two months. The third month, we ought to be getting pretty close to perfect. From then on, we’re not going to be perfect, but we’re going to have a discussion about those little areas.” Your miscellaneous category, so to speak—your mad-money category for each of you—is going to get smaller and smaller as you more carefully refine the budget and more thoroughly refine it, but I think you’re probably doing better than you’re giving yourself credit for.

QUESTION: Ryan in Los Angeles wants to know why he should invest in mutual funds given all the fees they incur. Dave warns Ryan to take that advice with a lot of caution and goes on to explain why using a professional will statistically cause him to do better investing.

ANSWER: Obviously, this particular guy has done well, and I know people who have bought stocks and done well with stocks. I know a lot more people who have done poorly with them.

The studies that have been done of individuals buying and selling single stocks on behalf of their own account using whatever strategy—from a book or a money magazine formula or whatever formula like this guy—he’s got it figured out supposedly, ha ha—they average about a 7% rate of return where the S&P 500 has averaged about 11.69% through the years. If you just bought an index S&P 500 fund, you’re going to beat 90% of the people who play single stocks. You’re not going to have the tremendous upside, but you’re not going to have the tremendous downside.

You’re not going to have that story to tell your golfing buddies about how you made $X on this or that, but I’ve got to tell you . . . for every one of those stories that those guys have, they should tell you the other story of the one that got away—the time that they lost their butt on something because they were playing a game and they missed a trade by three hours, the market shifted on them, and they’re basically day trading. There are very few people who really make money doing that. It’s stuff out of the movies, mainly.

I know a lot about it, and I could develop a stock trading formula. I’ve been licensed in all of that. I’ve been trained in all of that. If I didn’t do anything else all day long and I just sat and did that, I could develop a little stock trading formula and then print a book and say, “Dave Ramsey’s stock trading formula” and all that. It would be a lie because my personal investments do not include any single stocks because I don’t like the risk.

Here’s the thing. Take Fidelity or American Funds or Vanguard. You’ve got a team of people leading one of those mutual funds that has literally billions and billions of dollars in it. If the people running that fund—if there was a formula out there for buying stocks that was proven, they would all be using that formula. So anytime someone says, “I can sell you a book or a piece of software. I’ve got a system,” and they’re not running a billion-dollar mutual fund, it doesn’t play out. That’s kind of like your guy saying “day job.” But this guy’s day job is to run a billion-dollar fund or a half billion-dollar fund, and if there were a formula, they’d be using it because those funds want to buy stocks to create returns for the mutual funds.

I think it’s a bunch of crap. I really do. I don’t doubt that particular guy has done well. I don’t do it, so I wouldn’t tell you to do it. It would be inconsistent.

QUESTION: Michelle in Washington, D.C., and her husband owe $300,000 in student loans. Their debt-free date is 10 years away, and she’s worried about retirement since she’s 37 years old. Should she start saving for retirement while paying off the debt?

ANSWER: No. I hope you’ve got an income to match $300,000 in student loan debt. If you spend that kind of money on your education, I hope you learned something that’s valuable in the marketplace. I think you have an income problem in ratio to your debt anyway.

If you wait 10 years and start saving at 47, will you be okay? Yes, you’ll be okay. You would not be as okay as if you started saving five years sooner because you increased your income and cleaned up this mess even faster. I think that’s the thing you’ve got to face and have to look toward there before you do anything else. That’s a big part of this.

QUESTION: David in Montana is a college and career counselor. He’s working with a senior in high school who just found out her dad is not planning to file taxes and hasn’t done so for five or six years. She won’t receive $5,000–6,000 in grant money if these taxes aren’t filed. Dave warns David that his approach has to be careful.

ANSWER: The problem is, you’re—on behalf of his daughter—walking into a man’s house with muddy boots on, trying to tell him how to live his life even though what he’s doing is stupid. I agree with that. It’s stupid on two fronts. One is not filing your taxes is what’s known as a criminal act. Not filing them for five years will get you put in jail. It’s a problem. Yes, it’s stupid—not to mention that his daughter is going to miss out on $5,000 or $6,000 worth of money here, and he doesn’t seem to care, which is kind of weird except that he’s scared about it.

He has come a long way for a guy who doesn’t fill out taxes, because a FAFSA is harder to fill out than taxes.

He’s just afraid. He doesn’t know what to do, and he’s stuck.

Here’s what you might try to do, and you’re going to have to be very careful with this because you’re going to create an explosion if you’re not. I can just tell you A) he’s an entrepreneur and B) he’s resistant to this, and C) he’s not asking your opinion. You’re really walking in here with muddy boots into his living room. If you can get a cup of coffee with him somehow and offer to help … I would just say, “So-and-so told me that you haven’t filed in five years, and so that makes it very difficult for you to file now, which presents a problem for her because she doesn’t get the $6,000 worth of money. Truthfully, sir, it’s a problem for you. I wouldn’t want to see you get into trouble. If I could help you, I’d love to help you. What I could do is I’ll get with one of Dave Ramsey’s Endorsed Local Providers—the CPAs—that know how to catch up back taxes like this and know how to help you get filed. You might not even owe any taxes. But not filing is a criminal offense, and I wouldn’t want you to get in trouble.” Don’t let him accidentally think you’re threatening him with that, because you’re not. You’re just saying you don’t want this for him, and you’re trying to help him. In the process of doing that, of course, the kid’s going to get the grants. He could get this mess cleaned up and she could get the grants, and you can help him hook up with a CPA that works with people who haven’t filed for several years. If you were in his shoes, you’d be kind of scared. Just try to get over on his side of the problem and offer to lift. If you get much resistance, you’re probably done.

You could also bring up that he has other kids coming up, so this is $6,000 per year per kid. This is probably worth $50,000 or $100,000 to his family in money that’s available for them to get an education, and he doesn’t have to worry then about not having filed his taxes or worry about the IRS come calling with a criminal thing.

Even if he saw it as a big help to his family, he might not be able to see his own way through getting this problem solved. That’s why I’m saying if you can direct him, go to our website daveramsey.com, click on CPA under ELP (Endorsed Local Provider) for taxes, and they’re used to working with people “coming in out of the cold.” If you don’t do that—and I don’t want you to say this to him because he may take it as a threat, and I don’t want to push that button with a guy like this—you could tell him that a financial coach told you if you come to the IRS, they don’t press criminal charges hardly ever, but if they find you, that’s when they do it. It’s much safer for him if he comes in out of the cold on his own. That’s the truth.

I think he’s stuck in not knowing what to do about him while still trying to love his kid well. If we can help him get unstuck without him perceiving that as a threat or that you’re minding his business for him—if you push either one of those buttons, you’re going to have trouble.