David Bach The Automatic Millionaire

I receive a lot of great questions, not only through this column but through my free monthly coaching call.

January is the most popular time for setting new financial goals, transitioning careers, and making other major life decisions. As a result, I had some really great questions this month that I'd like to share with you.

Conflict Resolution

Q: My financial resolution for 2008 is to end the debt cycle. My husband feels we don't have all that much debt and thinks I'm overreacting. Will I ever finish rich without my husband's help?

A: There's no doubt that getting out of debt is going to be easier if you and your spouse are on the same page. The first thing you should do is read my previous column, which covers the role values play when creating a meaningful plan for your finances.

In it, you'll learn how to identify your top five core values and their related goals. This is an important step in effectively sharing with your partner why it's so important to you to be debt free.

When sharing your goals with your spouse, you'll be more effective if you can really get down to the root issue. Instead of simply saying, "I want to get out of debt," try having a bigger conversation. It might go something like this: "Right now, having debt scares me. It keeps me awake at night because I don't feel safe. If something were to happen to you tomorrow, how would I take care of our family with this much debt?"

When it comes down to it, most couples don't have conflicting values. So having this bigger conversation about safety and security should help your husband see where you're coming from.

A Moving Experience

Q: You often advise that buying a home and living in it is one of the best investments one can make. We just relocated on the first of this year, but our jobs require us to move every three years. Does your advice still apply to us?

A: If you don't own your own home, it's very hard to become wealthy. That's a simple financial fact of life. Your challenge is that because you move so often you don't feel confident enough to buy a home, and therefore you never get the opportunity to build up any equity in a house.

What I recommend for a couple in your situation is to take a year to rent while you get to know your new community. Seek out a great real estate agent and really get to know the local real estate market. Then, when you're able to afford a decent sized down payment, make your purchase. When it comes time to relocate, hold on to your home and rent it out instead of selling it. A condo or townhouse might be a great choice because they're often easier to rent. This is an amazing way to build your real estate portfolio.

If you live in 3 cities over the next 10 years, you could potentially own 3 homes -- living in one while renting two out. It's not easy, but it can be done, and it'll start with your first home purchase.

To make this difficult leap, the real secret is to buy much less than you can afford. If your dream home has three bedrooms, buy one with two bedrooms. Start small and make it manageable.

Finally, I recommend that you visit the bank where you currently have an account and ask about their "first time homebuyer programs." Find out what kind of mortgage you qualify for, how much you'll need for a down payment, and how much you'll need to have saved in a reserve account. If you do this now, you'll have the next year to get your finances in order and look for a great deal.

Good Debt/Bad Debt

Q: I have both credit card debt and student loan debt. Should I work toward paying off my student loans early to get them out of the way? And does it make sense to consolidate several different student loans?

A: Should you pay off your student loans early, or before your credit card debt? My answer is a simple "no."

Think of your student loans as "good debt" and your credit cards as "bad debt." Most borrowers have student loans with very low rates -- 5 to 10 percent, which is cheaper than most credit card rates. Often, government loans are even lower than 5 percent.

Some graduates who come out of school with $50,000 to $100,000 in student loan debt feel that they can't save in a 401(k) plan or buy a home until their debt is paid off. That's simply not true. You're better off to start saving right out of school, make the minimum payments on your student loans, and add extra to your payments on high-interest-rate credit cards.

As far as loan consolidation goes, it comes down to the terms of the loan. Will you truly save money if you consolidate your loans? What often looks good in the short term can be a rip-off in the long term. You need to know the true cost of the loan, what the rate is, how long that rate is good for, and what the penalties are for late payments. Don't be fooled by a low teaser rate that's going to be jacked up in a year or two. Know the facts -- visit the U.S. Department of Education web site for more information about student loan consolidation and whether it makes sense for you.

Home Is Where the Work Is

Q: I'm a 43-year-old working mom with two young children. My goal for the new year is to leave my job so I can stay home with my two young children. In order to afford to do this, I'm looking for a way to find a legitimate work-from-home opportunity. I'd also like to withdraw the $37,000 I currently have saved in my 401(k) and profit sharing plan. Is there any way to avoid paying penalties on that withdrawal?

A: The brutal truth is that if you have to withdraw your 401(k) retirement savings in order to afford to quit your job and stay home, you're simply not financially prepared to make the change.

Unless you borrow the money (which I don't recommend), you won't be able to avoid taxes and penalties. So right off the bat, you're looking at forfeiting over $18,000 (depending on your tax bracket). In almost all situations, my advice is to leave your retirement account untouched.

I've done dozens of financial makeovers for couples, and the No. 1 thing I've seen destroy a family's finances (other than sickness or disability) is going from a double-income household to a single-income one with no adjustment made to the family's standard of living. I've seen families go through their entire savings within 18 months, rack up credit card debt over $25,000, and pay off that debt with a home equity loan only to wind up with more credit card debt -- only with no more equity in their home.

My advice is to increase your savings and actually practice living off half your income before you leave your job. If you really want to be financially prudent, you might consider moving to a less expensive area.

As for working from home, the good news is that today, employers are more open than ever to telecommuting arrangements. So rather than opening yourself up to a potential work-from-home scam, give your employer a business plan outlining the mutual benefits if you were to telecommute or even freelance. Telecommuting or freelancing on a part-time basis may be a great solution for you and your family. It'll allow you to spend more time with your kids while still earning some income.

Any Questions?

If you've got a question of your own that you'd like to see answered in a future column, leave a comment below and I'll pick the best ones.

Here's to getting your year off to a great start!