Dear Bill,
Sure you can! If you want, you can do a SEP (Self Employed Pension plan) along with a Roth IRA and a 401(k). There’s no limitation to how many of these things you can have working for you.

The only limitations you’re looking at would be in terms of income. If your annual household income is more than $154,000, and you’re married, filing jointly, you’re going to run into issues with a Roth IRA. When it comes to a SEP, you have to provide it for any full-time employees who have been with you for three of the last five years at the same percentage of their income.

Good question, Bill!
Dave

Dear Mark,
Anytime you own real estate you’re going to have to deal with repairs, whether it’s fixing up a house to sell, a rental property or your own home. If you’re not the handyman type, then you’ll need to know some repairmen and have other connections in the building industry. I mean, if the house needs extensive work, or the central unit or water heater goes out, it’s your job to make things right!

There are a few things you can count on when it comes to rental properties. We just talked about repairs, and that’s a big one. Another one is a formula that goes something like this: on average, the cheaper the rent, the bigger the “character” you’ll have to deal with as a renter. Now, if you run too high on the rent, you’ll discover a different type of character. This type thinks you work for them, and it’s never good to have confusion on this issue.

A good, solid, middle-of-the-road house in your area would probably cost about $150,000 to $200,000. A lot of people will tell you to take on debt to buy the place, but I want you to pay cash on this trip. It may mean a less expensive house and dealing with low-income renters to start with, and that can be a headache. The good thing is that you’d learn how to be a landlord from the bottom up. You’ll learn how to be firm, but fair, and how to be gentle in the midst of a crisis. Believe me, you’ll have a crisis or twoor 10 or 12if you stay in the landlord business very long! You’ll also learn how to handle evictions. But once you get some experience under your belt, you won’t be intimidated by other, bigger, rental situations in the future.

So, either you’ll be a landlord, or you’ll be a person who buys and flips properties. Either way, make sure you do it with cash. Don’t go into debt to make this happen!
Dave

Dear Anonymous,
Start by having a gift-giving category as part of your budget. This works both ways, one for each of you. That way, you’ll both know how much goes into that category, but you won’t know where something was purchased or what was bought.

I think the gift category is the best and most fair way to give you both input and control over the budget. The idea that you’re going to sneak up on your wife or husband with a $10,000 gift is pretty unrealistic if you’re working on your finances together!
Dave

Dear Jason,
For purposes of allocating, a mid-cap is a medium-sized company. Generally, these fall into the growth stock mutual fund category. Try thinking of value funds this way: Let’s say you buy an expensive home in a good neighborhood. It’s okay that you paid a little more, because it’s a good area, and you’re just going to wait things out. It’s that kind of value mentality versus bargain hunting and trying to get a great deal.

When it comes right down to it, the differences in the two types are small. I’d go with whichever one has the best track record and rate of return. Regardless, always remember to spread your money across these four types of mutual funds: growth, growth and income, aggressive growth, and international.
Dave

Dear Jeff,
I love the fact that you’re thinking ahead, but I want you to save for college before you worry about investing. The best investment you’ll ever make is an investment in you, and that’s exactly what college is all about.

Now, if having money for college isn’t a big issue, you can go ahead and begin putting a little bit of money into a Roth IRA. You can put as much as $5,000 a year into one, but the great thing is that you don’t have to put that much into one. It would probably be pretty hard for you to invest to that extent while you’re still in college, anyway.

When it comes to a first mutual fund, I’d suggest a simple growth-stock mutual fund. They’re pretty calm, and they will do some great things if you can find one with a good, long track record of success!
Dave

Dear Matthew,
There’s usually no exception on cell phone contracts or utility service. Chances are you’ll have to put up the deposit, and you’ll probably get it back in six months or maybe a year from now. I still run into this kind of thing from time to time. It’s almost like you don’t exist if you don’t have debt and a credit rating.

The mortgage lending rules are changing almost daily at this point. Under the current rules, there are two ways to be in a great position to get a home loan. One is to have credit running out of your ears and a huge FICO score. This is pretty stupid when you think about it, but it will get you a home loan almost instantly. The second is to have no credit whatsoever. So, it’s really the people in the middle who are feeling the pinch.

When you have no credit, the lender has to do the underwriting themselves. It’s something banks used to do, back when they actually had some sense when it came to making loans. They take a look to see if you have a stable job and a decent income. They’ll probably want some kind of proof that you pay your bills on time, and this could be as simple as showing them a few electric bills and other receipts to show that you honor your financial commitments.
Dave

Dear Wade,
To the best of my knowledge, there’s no indication in Scripture that you should tithe on an inheritance. It never hurts to give, but I think when it comes to an inheritance, you’re talking about something that would be more of an offering than a tithe. I don’t think you’ve got a biblical mandate to tithe on an inheritance.

References to tithing in the Bible seem to me to be connected to money that you earn. In Deuteronomy 28, it says to tithe on your net increase. Now yes, you’re increased by an inheritance, but many of these people were herders and lived in an agrarian society. If you had a herd of 100 sheep one year, and two died but seven were born, then you’d have a net increase of five, and you might calculate your tithe on that basis.

It would be the same principle if you owned a small business. Your net profits would be your income, and you would determine your tithe based on that amount.
Dave

Dear N,
I don’t think so. I think you just need to enjoy this ride the market’s on right now, because it’s coming back up.

Now, I’m not saying that the market is going to rise dramatically every day. Things just don’t work that way. But overall, is the market coming back up? You bet it is! Don’t you wish you’d invested $1 million back on March 9? If you had, you’d be sitting on about $2 million right now!

The truth is, I don’t know where the bottom is, and neither does anyone else out there. That’s why I keep investing with a steady, long-term mindset, and it’s what I advise you to do, as well!
- Dave

Dear Chris,
The purpose of insurance is to transfer risk. Specifically, I’m talking about risk that you can’t afford to take. Most people can’t afford to have a heart attack and triple bypass surgery. Having to pay for something like that completely out of pocket would bankrupt just about anyone. That’s why health insurance is a vital part of any good financial plan.

It’s also important to have auto and homeowner’s insurance. If you don’t own a home, make sure you have renter’s insurance instead. Don’t forget about life insurance, either. If you’re married or have kids, you should carry eight to 10 times your yearly income in a good, 15- or 20-year level term life insurance policy. This means if you make $40,000, you should have about $400,000 wrapped up in life insurance.

Long-term disability insurance is vital. The cheapest way to get this is in a group. If you buy it yourself, out on the open market, you’ll find that the rates are based more on your occupation than your age or health. So, if you fly a desk, it’ll be a lot cheaper than if you work with your hands.

And don’t forget long-term care insurance. You need “nursing home insurance” if you’re 60 or older. It will also take care of you in your own home. The statistical probability of needing it before age 60 is about one percent, so wait until then to buy long-term care insurance. This kind of insurance can make sure you get the kind of care you want in your declining years. Plus, it can keep your nest egg with you and your family and out of the hands of the nursing home!
- Dave

Dear Chad,
I have a zero-tolerance policy for gossip. Gossip will absolutely destroy an organization, and most places that have gossip running rampant are just cesspools. I can’t imagine wanting to be a part of a situation like that. Gossip is small-minded, it shuts down everyone involved, and the worst gossip of all is when workers gossip about the person who pays them!

It’s really simple at my place. My team knows they need to go to someone in leadership if they’ve got a problem or something’s bothering them. They know better than to stand around and complain to the receptionist about something someone in another department did or said. Negatives go up, and positives go down. If you’ve got a problem, you take it to someone who can fix the problem.

If I walked into the kind of mess you’re talking about, I’d call a staff meeting, and we’d definitely cut that cancer out. I’d have no problem telling them if they want to keep their jobs they’d better stop the gossip and quit acting like a bunch of teenage drama queens. I’m not talking about being a bully. I’m talking about being clear and blunt about what will and will not be tolerated in your organization.

You may have to be a tough guy for a while and fire a few people. That’s okay, because there are lots of folks out there looking for work who can take their places. But as a result, you’ll be left with people who want to work there, who want to be responsible, mature team members, and a culture that defends itself against gossip!
Dave