Dave Ramsey: Pay off debt, save before returning to school

Dear Dave,

My husband and I both work two jobs. Together we make about $53,000 a year, and we’re trying to get out of debt. We have $35,000 in debt, and most of that is on our truck. I’d like to go back to school and become an ultrasound technician so we’ll have more money. Do you think this is a good idea?

— Sarah

Dear Sarah,

Getting more education is always a good idea. For starters, I’d begin doing some research to find out what ultrasound technicians in your area are earning. Then, look into the cost of training at a nearby school.

But I would only recommend starting school after you guys have done some work and cleaned up your finances. You’ve got a bunch of debt hanging over your heads, and the truck you mentioned is a big part of the problem.

Sell the truck and move down to something very inexpensive to drive for a little while. Then tear into the remainder of the debt and get it paid off as fast as you can. After that, save up a bunch of money so you can go to school debt-free.

I know that may seem like a long time before you can start school, but chances are you can get this done in less than two years. And trust me, going to school debt-free will feel a whole lot better than having another bunch of payments buzzing around your heads for years to come.

— Dave

Dear Dave,

My husband and I are following your plan, and we’re trying to reconcile our on-paper budget with what’s going on in our bank account. Most of our bills are due the first half of the month, but we receive most of our income during the second half of the month. Can you help us figure out what to do?

— Kathy

Dear Kathy,

If you’re actually making a budget and sticking to it, what you’re describing is a cash-flow bind. You are in charge of your budget until it’s on paper. Once it’s on paper, it has to accurately represent reality. In your reality, that means a cash-flow strain on the first checks and extra money on the second checks.

You won’t be able to fix this in just one month, but there is a long-term solution. Move some of the money from your second checks into the first half of the next month. By doing this, you’ll start running from the 15th to the 15th instead of from the first to the first. It will help you stay ahead and avoid getting pinched.

The second part of this equation is that you are in charge of your budget. The budget does not become the boss of you until you get it done. When everything is written and agreed on by you and your husband, that’s when the budget becomes the boss. You can’t come home with a new shirt or a new purse and hope it fits into the plan. The budget has to be the plumb line by which you build your finances straight and true.

— Dave

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