My wife and I are debt-free, and were ready to start building our first home. Were a little short on cash to make the 20 percent down payment you recommend, but we do have a fully funded emergency fund in place. Would it be okay to take a little out of our emergency fund to make up the difference?
Well, you didnt give me exact numbers here. I dont know how short a little short is, and I dont know how big your emergency fund is. If you use a little of your emergency fund to round off the 20 percent and then you have an emergency, where are you going to be?
I recommend always having 3 to 6 months of expenses set aside for emergencies. If youve got $50,000 in your emergency fund and you use $10,000 of it, youll be fine. But anything that leaves you with less than 3 or 4 months of expenses stashed away would worry me. Thats the way youve got to look at it. Just use a little common sense with the numbers.
Id love for you to put down 20 percent because youd avoid private mortgage insurance (PMI), which runs about $75 a month per $100,000 borrowed. It costs you a lot of money if you dont put down 20 percent. You should try to do that if possible, but dont be irresponsible with your emergency fund in the process.
Your emergency fund, when its there, tends to keep emergencies away. When its not there, you have a tendency to attract emergencies and your life starts to sound like a sad country song!
Ethics and integrity
Ill be getting out of the military soon, and I want to open a coffee roastery in civilian life. I had planned to work at an established place like Starbucks for a while so I can learn the business. Recently, Ive become concerned with this idea from an ethical point of view. Can you give me some guidance?
First, thank you for your service. The fact that you have enough integrity to even think about this means youre a conscientious, honest person. I think youre going to be okay.
Making and serving coffee is not a proprietary set of information. Its done all over the world by lots of people, so youre not violating any ethics by doing that. Now there would definitely be something wrong with you stealing another companys exact recipes or logo, but I think you already knew that.
Theres nothing wrong with learning how to make different coffee drinks that are made all over the world. Starbucks doesnt have a corner on that. There are coffeehouses all across America these days, so theres no ethics breach. Just understand whats proprietary about a company or a brand, and dont duplicate that.
Best of luck to you, sir.
-- Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.