Dave Ramsey doesn’t mince words when he gives advice.
The personal finance personality recently encountered a woman who asked for his wisdom about a plan she had in place for her adult children.
The woman, who called the Ramsey Show from Charlotte, N.C. and said her name was Debbie, explained the situation.
She and her husband have two grown children, Debbie said. One is a daughter, who is married, and rents a home independently. The other is a son, who lives with the parents, but pays rent.
“They both would love to be able to find homes of their own,” Debbie said. “They’ve been unable to do that because of the market and just their personal finances. They would love to live close to us and we would love for them to live close to us as well.”
A few months prior to the phone call to the radio show, some land came available close to them, Debbie said. She and her husband purchased the acreage.
“Our home was paid for, but we used an old HELOC (home equity line of credit) that we had there to purchase the land because we didn’t have enough cash to buy it outright,” Debbie explained. “So since then, the rates on the HELOC have more than doubled, which means our payment has more than doubled.”
They all would still love to be able to build on the land and for the kids to live there, but no one is currently financially able to, she said.
“So my question is, do we refinance this because the land is paid for but now we’re back in the mortgage situation?” Debbie asked. “Do we roll it into a fixed rate mortgage and just work on paying it off or do we sell it?”
Ramsey asked a couple quick questions and found out the land was worth about $200,000 and the HELOC was for $250,000.
Debbie explained that she and her husband have a handyman service and they used the extra $50,000 to replace a truck that no longer worked.
“You bought a $50,000 truck that you couldn’t afford and you bought a $200,000 piece of ground you couldn’t afford,” Ramsey surmised. “By definition that means you couldn’t afford it if you didn’t have the money to pay for it. Your business is not making enough money to justify a fifty thousand dollar truck. I know that because you didn’t have fifty thousand dollars.”
“You need to sell the land,” Ramsey bluntly said. “If you’re sitting on three or four million dollars and you wanted to play this out then I would just question whether you’re being an enabler for kids that aren’t handling money well. But we don’t even need to get to that because none of the three of you have the money to do this deal.”
“You shouldn’t have called here if you didn’t want the truth,” Ramsey said.
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