Dave Says Charity Needs Clarity

Townhall.com ^ | August 28, 2012 | Dave Ramsey

[Kaslin]

Dear Dave,

My old car has been having lots of problems lately. Do you have any advice on how to decide when it’s best to just fix an old car or get a newer one instead?

Kristin

Dear Kristin,

This is a good question! Mathematically, the first thing to look at is the car’s worth if you don’t make repairs. Should you spend $1,000 to increase the value of the vehicle $500? Dumb question, right? At that point, you sell the car as-is and put the $1,000 it would take to fix it toward something newer.

On the other hand, let’s say you’ve got a little hooptie worth $1,000 but by putting $500 into it, you can have it up and running again. Suddenly it’s worth $2,500. That’s money well-spent, because what you’ve done has significantly increased the value.

The other side is that at some point, the hassle factor of an old car can turn it into a money pit. If you can’t get anywhere because the car’s always busted, then you need to find something else for the sake of safety and reliability. If this happens, though, you should still pay cash for a better car. Even if you’re not taking a step up in price or fanciness, it’s still better than taking on a car payment. I’d walk or ride a bike everywhere before I did that!

—Dave

Dear Dave,

About 17 months ago, my wife and I allowed a lady who had lost her home to a fire to move into an empty house we own and had thought about selling. During that time she’s made no effort to pay rent. My wife wants to write it all off and just give her the house and title, but I think she owe us something for putting a roof over her head. What do you think?

Thomas

Dear Thomas,

Honestly, I think you handled this situation poorly from the very beginning. From what you’re telling me, you put her there originally on a charity basis, and now you want to change the deal. You didn’t say anything about giving her a house, but you didn’t set up a rental agreement either. And now you’re acting like she owes you 17 months of back rent. I don’t think so. I think that’s on you.

Now, you have some decisions to make. Were you providing free housing to someone who was struggling, or were you providing a free house to someone who was struggling? I understand this lady has experienced a terrible tragedy, but even with that, I’m not hearing lots of evidence that she’s moving toward gaining control and getting her life back together. You may be giving a drunk a drink, if after 17 months of this situation she’s not back on her feet again and out on her own.

If it were me, I’d sit down with her and have a gentle talk. Let her know the last 17 months were a gift, but you want to see her making her way and winning at life again. Set a reasonable time limit, whether it’s six months or even a year, and tell her you’ll be selling the house at that point. This is fair to her and to you guys as well.

—Dave

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