Close-up of a man showing empty pocket

Close-up of a man showing empty pocket

When to Consolidate Debt

By Lifestyle and Budget FOXBusiness

Dear Dave,

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Some friends recently offered me a timeshare. It’s an older place on the beach, and they’ve had it for about 20 years. I’d have to pay a transfer fee of $100, plus a yearly association fee of $500. I know you’re not a big fan of timeshares, but does this deal sound okay?

Jill

Dear Jill,

In essence, you’re looking at $500 a week. I know the $500 is technically an annual association fee, but you’re basically paying $500 for your week at the timeshare. And in the future, say five years from now, the association fee could increase. You might be paying $1,000 a year at that point — again, for your week.

In actuality, the numbers you’re talking about right now aren’t completely terrible. Still, it’s not a huge blessing. In my mind it’s kind of like, “How would you like a kick in the knee that’s not too hard?”

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If it were me, I’d much rather spend my $500 a year on travel and be able to go and stay wherever I wanted. Not only does this free you up it that area, but you’d only spend the money when and if you did it. With a timeshare, you get charged whether you show up or not.

This one’s not as bad as if you’d have to pay $8,000 for the opportunity. But if these were my friends making the offer, I’d have to say no thanks.

—Dave

Dear Dave,

I’m 38, single and I have three kids. I make $65,000 a year and have $34,000 in debt. I’m about to get remarried, and my new husband will make about $100,000 a year. Should I take the $34,000 and put it on my mortgage to consolidate it?

Leslie

Dear Leslie,

Please don’t consolidate this debt. If you guys are about to get married you need to learn, as a couple, to make debt a thing of the past and live on a written, monthly budget. Think about it. Once you’re married, your family will have a great income. You could really push and attack that debt, and have it paid off in no time.

As a new couple, you need to learn to set goals and work on things as a team. Budgeting is a great exercise for any marriage, but it’s an especially good thing for newly married couples to learn to do. A budget isn’t just controlling your money. It’s two people sitting down together and sharing their hopes and dreams for the future. Not just that, it’s the process of making an actual, workable, written plan that will help make these dreams become reality.

Don’t do a debt consolidation, Leslie. Debt consolidation is nothing more than a "con," because you think you've done something about the debt problem. But the truth is the debt is still there, as are the habits that caused it. All you did was move it around.

You can't borrow your way out of debt, just like you can't get out of a hole by digging out the bottom!

—Dave

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