DAVE SAYS

Dear Dave,

I'm beginning to think we got in over our heads with our house. My wife and I make about $125,000 a year combined, but we've never been able to put anything aside for an emergency fund. Our mortgage payment is 35 percent of our take home pay each month. We have two young children, so we eat out a lot, but we have no debt other than our house. Do you think we should refinance our home?

Jeff

Dear Jeff,

You two are making good money, and you're debt-free except for your home. You can't tighten up your budget enough to save up an emergency fund? Stay out of restaurants, dude! There's no law stating you have to eat out a lot just because there are kids in the house. I mean, you've got no emergency fund. That's a pretty basic thing. You guys need to get on a written, detailed plan, and start hitting your goals. I'm talking about a strict, monthly budget. Now, I'll admit your mortgage payment isn't exactly what I would've signed you up for. Your house payments, or rent, should be no more than 25 percent of your monthly take home pay. But your house payment isn't what's holding you two back. What's holding you two back is the fact that you haven't been willing to tighten up the finances in other areas of your life to offset biting off more than you could chew in terms of a home.

No, I wouldn't refinance. You're fairly close where the mortgage payments are concerned, so I think you can make it through this by looking at ways to increase your income and selling stuff you don't need to build an emergency fund. You two have been smarter than some, but you're really going to have to buckle down and rearrange your priorities to make this happen!