5/30/2005
Advice from Nashville's leading Financial Aid Advisor Dave Ramsey
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover
"Niece wants to help widowed uncle with his mess!"
Dear Dave,
My uncle’s wife died last year. He had an attorney handle probate for him, but I
don’t think it was an estate attorney. He doesn’t know if she had life
insurance. Now he’s left with a bunch of medical bills totaling about $8,000. In
addition, they also have lots of credit card bills totaling about $11,000. They
also have a townhouse that is paid off. He’s thinking about going out and
getting another loan to consolidate the bills, but I’ve read in the past that
you think this is a bad idea.
He currently receives about $3,000 a month income between pension and social
security. He’s a little bit slow to understand all of this financial stuff, but
I’d like to help him. What should we do?
Sheila in Greenville, SC
Dear Sheila,
You’re right. A consolidation loan isn’t the answer to his problem. You both
need to sit down together and think clearly through what is going on. Here is
how things stand as you’ve explained them to me. Whenever someone passes away,
their estate – anything they owned – stands good for any bills they owed. In
this situation, her portion of the townhouse has to stand against her bills that
she owed. If her bills go unpaid, the companies owed – medical or credit card –
could take a lien against the townhouse. That means if he ever sells the
townhouse, they’ll take what’s owed from that sale before he gets any money.
He can get out of this mess if he’ll make a plan and stick with it. You need to
sit down and work out a really tight budget for him to live on. If he would live
extremely frugally – say $1,000 a month – and use the balance to pay off debts,
he’d be debt-free in a year. If he’s lives a little less frugally, it may take
18 months. List all of his debts, smallest to largest, and this is how he will
attack them. Break this down into bite-sized pieces for him and then have a plan
for how to handle each bite.
You’ve identified the biggest problem here, which is disorganization and no game
plan. Creating a budget this way is essentially setting out mathematical goals.
And as a loving family member, it would probably be a good idea for you to give
him a hand with this and help him work this plan, at least for the first few
months. He hasn’t done very well with this so far and you could help him write
out the checks and make sure he meets all of these mathematical goals.
-Dave
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