Dave Ramsey is a money management expert, national radio personality and best-selling author. His nationally syndicated radio program, The Dave Ramsey Show, is heard by 4.5 million listeners each week on more than 450 radio stations throughout the United States.
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Im in the military, and my wife and I have our six-month emergency fund in place. Were also debt-free, and weve started investing in Roth IRAs. Were going to be in this area for eight years, and Ive seen lots of good, cheap houses around here. We really want a home of our own, but we havent saved up for a 20 percent down payment. What do you think we should do?
John in Fort Walton Beach, Fla.
Dave Says: Id buy a house! You guys are really kicking it right now. Im not going to get mad at someone for not putting 20 percent down on a house. All that means is that youll have to pay private mortgage insurance, or PMI. Now, technically you can avoid PMI if you get a Veterans Administration loan. The problem is that, with a VA loan, youll end up paying lots of extra fees, and itll feel pretty much like youre paying PMI. Plus, youre not going to run out and buy a house tomorrow. That means theres time to save up a little extra for a down payment. Youve also got some wiggle room where your emergency fund is concerned. Remember, it should be anywhere from three to six months of expenses saved.
Id go with as much as you can put down on a 15-year, fixed-rate mortgage. You can find some serious bargains out there if youll just do a little research. I think Florida is one of the best places to invest in real estate right now. The market is ridiculously low. Its just crazy. But I think the market is going to come back, and when it does, its coming back with a vengeance. When that happens, the people who own real estate there are going to be very, very happy they do!
Im getting married in August, and my fiancee and I have about $9,000 in savings. Wed like to pay for our wedding in cash, and that amount would pay for most of the expenses. Right now, were doing really well on our budgets and almost always have some money left over each month. Should we use the extra money to continue paying down our debt, or is it OK to use it for a few wedding incidentals?
Nathan in Houston, Texas
Dave Says: All right! I love the idea of having a nice, reasonable wedding paid for with cash. Some people look at weddings as an excuse to go nuts, but you guys sound like you have a good plan in mind. The average cost of a wedding in America right now is around $28,000. Even if the extras you mentioned run $5,000, youre still talking about half that amount. So lets look at it this way: Basically, youre asking me if its OK to put your debt snowball on hold temporarily in order to modestly enhance your reasonable wedding plans. My answer is yes! Now, if youd told me you wanted to drop $50,000 on the wedding instead of getting out of debt, Id think you were crazy. It doesnt sound like you two are going to abuse the situation, though. I think youre being wise. God bless you both, and I hope you have long and happy lives together!