Dear Dave,

I’m currently on Baby Step 2 of your plan, and I’m six months away from being debt-free, except for my home. Recently, I’ve run into an issue with my sister, who has a good job, but continually makes poor choices with money. Over the last six months, she has also asked to borrow money from me and others in our family several times, including again yesterday. I don’t want to be cruel, but the whole issue has gotten out of hand. How do you think I should approach her about this?

James

Dear James,

Handling issues like this can be complicated, especially when family or friends are involved. But honestly, I think you should just tell your sister the truth. Keep it simple. Let her know you’re trying to get out of debt and change the way you handle your finances, so you don’t have extra money sitting around. Explain to her, too, that part of this is you’re not playing around with debt anymore, and this means you won’t be loaning or borrowing money again.

Make sure you do this with a kind spirit, James. Most people in your sister’s position already know deep down that they’re making bad decisions. So, it’s important that you talk to her in a gentle, caring way. See if you can get her to talk about what’s really going on with her money. You could even let her know you might consider giving her some money as a gift if you had any extra lying around—and you knew she was in control financially. But you’re not really helping someone who’s financially incompetent, or just plain immature, when you give them cash or even loan them money.

You’re not helping someone if you participate in their misbehavior with them, so you’ve got to look at the big picture in situations like this. Your sister hasn’t just hit a hard time, with lots of unexpected expenses or a job loss. Right now, her behavior with money isn’t just a bump in the road, it’s a lifestyle.

Sometimes you have to love someone enough to sit them down, and tell them the truth. Even if it’s family, that can also mean saying no and telling them it’s time to straighten up and start acting right.

—Dave

 * Dave Ramsey is an eight-time No. 1 national best-selling author, personal finance expert and host of The Ramsey Show, heard by more than 20 million listeners each week. He has appeared on Good Morning America, CBS Mornings, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for the company, Ramsey Solutions. 

Listen to the Ramsey Show weeknights 9 to midnight on WLVL 1340 AM and streaming at WLVL.com  

Dear Dave,

I own a small rental house, and for the most part my tenants have been conscientious people over the years. Recently, I learned my current tenant is subleasing the property for the short term as a vacation site. This kind of thing is prohibited in the rental agreement. He has always taken very good care of the place, so should I confront him about this, or just ignore it until it becomes a real problem? 

Karl 

Dear Karl, 

This may sound hardnosed, but it’s already a problem. He’s in obvious violation of the lease agreement. If it were me, I’d have a face-to-face talk with this guy today. I’d let him know how much I appreciate that he’s been a good, respectful tenant in the past, but the subleasing has to stop.

An agreement is an agreement. I have several rental properties myself, and I always try to be gentle and nice, but really clear about things. You may not have experienced any problems up until now, but what happens next time? If you don’t know and trust who’s in the house, you could end up with holes in the walls, ruined carpets and worse. On top of all that, what if they don’t have the money to fix things when they leave? It’ll be on you, because you lost control of your property. 

Again, be decent when you talk to this guy. It sounds like you two have a good history. But remind him he’s in violation of the lease agreement. And gently let him know if anything like this happens again, you’ll begin the eviction process.

—Dave 

 * Dave Ramsey is an eight-time No. 1 national best-selling author, personal finance expert and host of The Ramsey Show, heard by more than 20 million listeners each week. He has appeared on Good Morning America, CBS Mornings, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for the company, Ramsey Solutions.

Dear Dave,

How important do you feel identity theft protection is today? Should my husband and I buy it just for ourselves, or should we cover the kids, too? Lastly, where does identity theft protection fall in your Baby Steps plan?

Lanie

Dear Lanie, 

Unless you’ve gone completely off the grid, and have been there for a long, long time, there’s a good chance someone out there has a few of your numbers. Unfortunately, that’s all part of living in today’s world. Between consumer carelessness and data breaches—which have become an all-too-common occurrence these days—almost everyone has experienced, or will experience, some sort of identity theft during their lifetime.

So, yes. I recommend everyone have identity theft protection. I don’t really consider it part of the Baby Steps, because in my mind it’s like car insurance or life insurance, in that it’s something virtually everyone needs. And things like that should just be part of your regular monthly budget.

Good question, Lanie! 

—Dave

 * Dave Ramsey is an eight-time No. 1 national best-selling author, personal finance expert and host of The Ramsey Show, heard by more than 20 million listeners each week. He has appeared on Good Morning America, CBS Mornings, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for the company, Ramsey Solutions.

Dear Dave,

We sold our rental property recently. When we bought it, we thought it would be a good source of passive income. But owning it wasn’t passive at all. It got to the point where the work and hassle became too much. We have $240,000 from the sale, and we’re debt-free except for our home. We owe $140,000 on our house, and could pay it off instantly, but part of me wants to invest the proceeds from the sale of the rental property. Is it better to become completely debt-free at this point, or should we invest it so we can have even more money for retirement?  

Anthony

Dear Anthony,

You mean you had to actively manage your rental property? Listen, anyone who tells you real estate is passive income is full of crap. It’s a natural extension of the garbage people spout about how it’s okay to go into debt to buy real estate, because the renter is making your payments. No, it’s your payment. And when the renter doesn’t pay, or it sits empty, guess what? You have to pay it.

If you want passive income, buy an S&P 500 index fund. Set it and forget it. You won’t have to fix a leaky roof, replace worn out appliances or try to collect from deadbeat tenants. Real estate is a great way to invest, if you do it the right way. I love it. It’s anything but passive, though.

Let me ask you this about your situation. If you had a paid-for house, would you borrow $140,000 against it to invest? Of course not. It’s pretty much the same thing, and that would be dumb. Pay off your home, brother. Just pay it off. You’ll be debt-free, and you’ll still have six figures to invest.

I love that you’re thinking about the future, Anthony. And I know the compound interest you’re visualizing down the road is really tempting. Your compound interest calculator will tell you some amazing things, but what it’s leaving out is risk. It also can’t tell you about the carefree way you’ll walk, and how it’ll feel like a huge weight has been lifted off your shoulders when you don’t have a house payment. You’ll be able to live life on your terms, and all the decisions you make will come from a completely different point of view—one that isn’t burdened by the weight of bankers hovering around, waiting for you to give them what’s theirs.

The borrower is always a slave to the lender. Think about it. Only one implication of slavery is mathematical. All the rest are spiritual, physical, relational, emotional and mental. Being debt-free changes your life from the inside-out. Not only does it make your life better, but it allows you to give with incredibly generosity, and be an agent for positive change in the lives of others.

Pay off the house!

 * Dave Ramsey is an eight-time No. 1 national best-selling author, personal finance expert and host of The Ramsey Show, heard by more than 20 million listeners each week. He has appeared on Good Morning America, CBS Mornings, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for the company, Ramsey Solutions.