Dave Says: Not So Fast

These days it pays to be smart about money. That's why it's important to take this wise counsel from financial expert Dave Ramsey.

Dear Dave,

We've got our starter emergency fund in place, and we've paid off the last of our debt. Currently, we rent an apartment but my wife really wants us to buy a house now. She also wants us to use a 30-year, 100 percent financing plan, and says this wouldn't cost any more than we're paying in rent. I disagree with her idea, and she's upset with me. How can I make her see this is a bad plan?

Alan

Dear Alan,

I think she probably knows deep down this isn't a good plan. She's found something she really likes, and she's mad because you're not going along with the idea. It's called "house fever."

When you buy a home with nothing down and little to no money in the bank, you're inviting Murphy and his cousins — Broke, Desperate and Stupid — to move in with you. In other words, you'll find yourselves in a mess because you didn't have the maturity and wisdom to wait until you had your fully funded emergency fund of three to six months of expenses in place, plus a 20 percent down payment saved up for a house.

The idea that you save money because your house payment is the same, or even a little less than your rent, is a myth. It costs more to own a home, period. As a homeowner, you're exposed to all kinds of things you never have to worry about as a renter.

We all have times when we get excited by something we want and do things we shouldn't. I've done it, and I'll bet you have, too. But in situations like this, you've got to sit down and talk things out. I'm not sure how to get your wife to realize this or act more mature, but I do know that people who charge into things of this magnitude without thinking are the very ones who end up in my office for financial counseling or filing bankruptcy!

—Dave