Everything down

Dear Dave,I’m 21 and make $45,000 a year. I’ve heard about your 100 percent down plan to buy a house. I’d like to know more about this, and where I should put the money I’d be saving.JP

Dear JP,I like the way you think! But there’s really no big “plan” to what I’m talking about. It’s not rocket science. It’s just a matter of saving like crazy and living on rice and beans for a few years, so you can save up the cash to buy your home outright.

If you’re looking at buying a place in less than five years I’d put it in a money market account. In this case, you’re not going to be saving long enough for interest to be a huge factor. Your best buddy is going to be a low-key lifestyle.

If your timeframe is more like 15 or 20 years, then you should look into mutual funds. Most people don’t stretch the idea out over that period of time, but if you do you’ll get some great help from a friend named compound interest.

I don’t beat people up for taking out a 15-year, fixed rate mortgage. But I’m always for people living like no one else so that later they can live like no one else!—Dave

Dear Dave,I’ve heard you recommend having seven to 10 times your income in life insurance. How much would you suggest having on a policy for a stay-at-home mom when there’s no direct income involved?Dale

Dear Dale,I’d say somewhere in the $300,000 to $400,000 range, because financially-speaking it’s going to take $35,000 to $40,000 a year to replace all the things she does.

Your wife may not bring home an actual paycheck right now, but there’s a ton of personal and economic value attached to everything she does every day. That lady works hard. What she does is very important and would be very difficult to replace!—Dave

Dear Dave,I’m interested in your opinion regarding buying a maintenance agreement on a new treadmill. It covers repairs, and an annual visit to check and lubricate all moving parts. Is a maintenance agreement ever worth the money, especially if you’re not the handyman type?Anonymous

Dear Anonymous,You know why they sell those agreements? Because they’re huge moneymakers!

No, I wouldn’t do that. We have exercise equipment in our home, and we don’t have any maintenance agreements. Lots of folks decide at some point to start working out and get in shape, but very few see it through to the end. A high percentage of expensive workout equipment turns into very expensive coat hangers in a short amount of time.

I don’t recommend maintenance agreements or extended warranties. I self-insure by having money saved up!—Dave