Dave Ramsey is a money-management expert, national radio personality and best-selling author. His column appears regularly in American Profile.
I'm 42 years old, and I haven't started saving for retirement. I'm self-employed and not making a lot of money right now, plus I have about $8,000 in debt. It feels like I'm living paycheck to paycheck, and I just can't seem to save or get anything paid off. Can you help?
Avis in Kansas City, Mo.
Dave Says: It's never too late to start saving for retirement. If you're breathing, there's still time. My guess is that it feels like you're living paycheck to paycheck because you are living paycheck to paycheck. Let's back up a little and take a look at this. You already know that you've got some stuff to clean up before you'll be in a position of strength. Paying off the debt is a great idea, but how do you make that happen? If you're not making much money, you may have to take on a part-time job while you grow your business. It might mean a career change or something as simple as putting in more hours and kicking that business in the tail to really get it running.
A lot of your money is going out the door every month to pay those debts. But if your debt were paid off, you'd have money to invest for retirement. It's a combination of an income problem and an outgo problem that's standing in your way, Avis. Get the income up and stabilized, knock out the debt, and then you'll create cash flow to save and fund retirement!
My wife and I make contributions to a company to help support children in Third World countries. This company has a plan where they make microloans to young entrepreneurs. It seems good in a way, because it makes them feel less like it's a handout. Still, I have a problem with the debt aspect. What's your opinion?
Taylor in Little Rock, Ark.
Dave Says: Well, I'm certainly not mad at anyone who wants to help people in Third World countries. I think there's one big question you have to ask yourself: If you truly believe that debt is a bad idea, then why would it be an acceptable or good thing in a poverty-stricken society?
If it were me, I'd love to help people get entrepreneurial projects off the ground in a way that's a "hand up" instead of a handout. Teach them good business and marketing skills, too, and turn it into an educational situation where they can really pay it forward. I think most people who are decent and have good hearts turn into big givers when they become successful. And really, this kind of scenario is about the only way the microloan will work, anyway.
Everyone seems to think these kinds of loans are some kind of great, altruistic thing. But to me they sound a lot like miniature credit cards, and that's the part that scares me!