Dave Says: Everything down!

Dear Dave,

I’m 21 and make $45,000 a year. I’ve heard about your 100 percent down plan to buy a house. I’d like to know more about this, and where I should put the money I’d be saving.

JP

Dear JP,

I like the way you think! But there’s really no big “plan” to what I’m talking about. It’s not rocket science. It’s just a matter of saving like crazy and living on rice and beans for a few years, so you can save up the cash to buy your home outright.

If you’re looking at buying a place in less than five years I’d put it in a money market account. In this case, you’re not going to be saving long enough for interest to be a huge factor. Your best buddy is going to be a low-key lifestyle.

If your timeframe is more like 15 or 20 years, then you should look into mutual funds. Most people don’t stretch the idea out over that period of time, but if you do you’ll get some great help from a friend named compound interest.

I don’t beat people up for taking out a 15-year, fixed rate mortgage. But I’m always for people living like no one else so that later they can live like no one else!

—Dave

Is it worth it?

Dear Dave,

I’m interested in your opinion regarding buying a maintenance agreement on a new treadmill. It covers repairs, and an annual visit to check and lubricate all moving parts. Is a maintenance agreement ever worth the money, especially if you’re not the handyman type?

Anonymous

Dear Anonymous,

You know why they sell those agreements? Because they’re huge moneymakers!

No, I wouldn’t do that. We have exercise equipment in our home, and we don’t have any maintenance agreements. Lots of folks decide at some point to start working out and get in shape, but very few see it through to the end. A high percentage of expensive workout equipment turns into very expensive coat hangers in a short amount of time.

I don’t recommend maintenance agreements or extended warranties. I self-insure by having money saved up!

—Dave