Weekly financial Q&A, with advice on emergency funds, real estate default and owning a franchise.

Dear Dave,

My husband needs a liver transplant within the next two years, because he has Hepatitis C. We make about $70,000 a year, but we have $25,000 in debt. He’s still able to work right now, and we have health insurance, but how can we prepare for the operation and medical bills?


Dear Nikki,

God bless you guys. It’s going to be tough, because you’re going to face a lengthy loss of income, and sky-high medical bills even if everything goes well. I’m really sorry you have to go through this. Life can be hard enough without major health issues knocking you for a loop.

The good news is that there’s something you can do about all this, and it all starts with saving. First, set aside an emergency fund of three to six months of expenses as quickly as you can. In your case, I’d recommend leaning toward the six-month side. Second, you guys need to have no life for the next year or two, and get very serious about paying off as much debt as possible after you get your emergency fund in place. I’m talking about following a very strict budget, and living on rice and beans. Bottom line? The less debt you have, the better off you’ll be.

Wouldn’t you love to be debt-free and have six months of expenses in the bank before they perform this operation? You can do it, if it becomes important enough to make it priority one!

Who’s liable?

Dear Dave,

I attend a small church with about 100 members. There is a $97,000 mortgage at 8.75 percent on the building, and the note was signed only by the pastor. In the event of default, are the members of the congregation liable?


Dear Charlene,

Unless you signed the note, you are not liable. If the pastor signed the note personally, or on behalf of the congregation, it would actually depend on the wording in the note as to who is liable in case of default.

But this whole situation is kind of silly, and I’ll tell you why. If everyone in the congregation gave an extra $83 a month in their tithe – that’s only about $20 more every Sunday – you could have this mortgage knocked out in a year! There’s absolutely no reason for your church to be in debt 12 months from now.

This is a prime example of what happens when a church adopts the same mentality as the rest of the world. The Bible itself warns us that the borrower is slave to the lender!

I want to open a franchise, but …

Dear Dave,

I’ve always been intrigued by the restaurant business and wanted to open one of my own. Recently, the opportunity presented itself to open a McDonald’s franchise. I really want to do this, but it would take years for me to save up the money. Is it OK to borrow money to start a business?


Dear Jim,

It will take longer to save up the money and open the business debt-free, but that’s exactly what you should do. Most small businesses fail within the first five years. One of the main reasons for these failures is the struggle to repay debt.

If you’re into restaurants, try starting small with a catering business out of your home. This will give you a taste of managing your own food service business, and let you know if you really like that kind of work.

It will also give you the opportunity to make and save some money. That way, when your restaurant dream becomes a reality you can honestly say that you own the business instead of it owning you!
