He needs love right now

Dear Dave,My husband and I are adopting my nephew. His mom is involved with drugs and alcohol, and his father isn’t in the picture. We’ve got $1,000 in the bank, and we’re in the process of paying off all our debt, except the house. Should we slow down or stop the Baby Steps temporarily, and spend more on family things since my nephew is a teenager?Jocelyn

Dear Jocelyn,Hugs are free. Making cookies costs next to nothing, and spending quality time with a young man or woman doesn’t cost a thing. I call that a teenager-friendly environment.

I know your heart is in the right place, but I don’t want you to fall into the American trap of thinking he’ll be happy if he has a Wii or you take expensive vacations every year. It sounds to me like he’s coming straight out of a big mess. He wants and needs someone to put their arms around him, tell him he’s a good guy, and teach him how to grow into a strong man.

Doing some affordable family things once in a while is okay, if you can make it work with your budget. But I wouldn’t spend a bunch of money to try and prove that you love him. You’ve already proven that by bringing him into your home and making him part of your family. Continue cleaning up your finances. Then, when you’ve actually got some money to spend, you all can do some really cool stuff together.

You guys are awesome!—Dave

Dear Dave,My wife and I make about $100,000 a year combined, and we’re debt-free. Recently, we got an insurance settlement of $95,000. We have an $89,000 mortgage and a 19-month old baby. Should we use the settlement money to pay off the house, and use the rest to start a college fund for our son?Michael

Dear Michael,Absolutely! Then, if you guys save the equivalent of a house payment until your son is ready for college, he could travel the world while he’s studying. If I’m in your shoes, I’d pay the house off tomorrow. In fact, I do it today if there’s still time to get to the bank.

Being completely debt-free, and with your income, you guys have the money to do just about anything. You can start the kiddo’s college fund, save for retirement, and you’ll have the money to build wealth, too.

Don’t let this great opportunity to change your family tree pass you by, Michael. You two have the chance to live great lives and retire early—and wealthy!—Dave

Dear Dave,How do you feel about pre-nuptial agreements?Anonymous

Dear Anonymous,When I first started financial counseling, I told people to never get a pre-nup under any circumstances. Basically, I felt the whole process was like planning your divorce in advance. I still feel that way to a degree, because if money is more important to you than the person you supposedly love, then you don’t really love them and you have no business getting married.

I’ve changed my stance a little bit, though, and now I feel a pre-nup may be in order under one condition: If there are substantial assets in one person’s name. By “substantial,” I mean $2 million or more. I’ve counseled several wealthy people, some of whom were heading into a second marriage. It’s not that wealthy folks are weird or necessarily greedy, but sometimes they attract weird and greedy people.

In these kinds of cases, I’m okay with a pre-nup. But I still think you should love somebody enough to be willing to take a bullet for them if you’re thinking about marrying them.—Dave