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Dave Says

It'll Take Lots Of Discussion And Planning

 

 

Dear Dave,

 

My wife and I are in our late-twenties, and we have a full emergency fund saved up. Our only debt is our home. We have talked about having a child sometime next year, but I am on the road three weeks a month for my job. I don’t want to be gone so much once we have a child, and I am thinking about opening my own business, so I can eliminate the travel and control my hours better. Do you have any thoughts on this situation?

 

Mike

 

 

Dear Mike,

 

An entrepreneur is the person I know who can go from sheer terror to sheer exhilaration and back every few hours. You’ve got to have a strong mind and a strong heart to be successful, plus there’s a good chance your idea won’t last long if you don’t love what you’re doing. Remember, too, you’re basically on straight commission as an entrepreneur, and there probably wouldn’t be a regular paycheck you could count on for a while.

 

Okay, that was a quick dose of reality. Now, if time and money weren’t considerations, what would you rather do—stay at your current job or run your own business?

 

My advice to anyone, entrepreneur or not, is to make sure your work falls in line with the passions, skills and talents you were born with. You don’t need to work in the construction business if you don’t like being outdoors and working with your hands, just like you don’t want to be stuck in a call center if you hate talking on the phone and being cooped up inside all day.

 

Everyone wants to be successful in their job, enjoy what they do and make lots of money. But personal happiness is just as important. If you wake up excited about what you’re facing every day, chances are you’ll be successful and happy. If you wake up dreading the day and your job, I can almost guarantee you won’t be successful or happy.

 

You’ve got a lot more thinking and research to do, Mike. There’s nothing wrong with wanting to change jobs or be an entrepreneur. Being able to spend more time with your family is a noble and worthwhile thing, too. But I’m not hearing a lot of direction in what you’re saying right now. Maybe work with a career coach, and spend some time tossing ideas around with your wife. I know you both want great things for your child, but you’re not going to make the best possible decisions for yourself—and your family—without a lot more planning and thoughtful discussion.

 

 

* Dave Ramsey is an eight-time national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Use That Momentum To Win!

 

 

Dear Dave,

 

We are ready to start Baby Step 2, and we have about $35,000 in total debt. Our two smallest debts, a credit card and a truck we financed, are both $4,500 right now, and we have a combined income of about $95,000 a year. Since the credit card has a higher interest rate, my wife thinks we should pay it off first. To me, the truck is a necessity, and we should pay it off first for that reason. What do you say?

 

Grant

 

 

Dear Grant,

 

When the rule of paying off debts from smallest to largest doesn’t apply, I think you should attack the one with the larger interest rate first. In your case, that’d be the credit card debt.

 

I get what you’re saying about the truck. And I agree that transportation is a necessity. You guys might be in a bind if something happened and you lost a vehicle, but it’s also a situation you could probably work around for a little while if you had no choice. My guess is you have friends or relatives who could loan you a car in a pinch, and public transportation is an option for some folks. So yeah, knock out the credit card first, then move on to the truck.

 

Do you understand my reasoning, Grant? Going this route serves two purposes: First, it will save you a little money. And second, I’ve got a feeling it will fire up your wife, and get her on board with the idea of you two getting your finances in order even more than she already is.

 

She’s taking this whole thing pretty seriously if she’s eyeballing interest rates, buddy. She loves the thought of you two having control of your money. Use this momentum to work together as a team, and knock out that debt!

 

— Dave

 

* Dave Ramsey is an eight-time national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Commission, Not Allowance

 

 

Dear Dave,

 

What is the right age to begin giving children an allowance?

 

Ben

 

 

Dear Ben,

 

In my mind, there’s never a right time to give kids an allowance. Instead, work out a plan to pay them commissions, and assign them age-appropriate weekly chores.

 

This can be done with very simple tasks starting at an early age. When the work gets done, they get paid. If they don’t do the work, guess what? They don’t get paid. This helps teach them a healthy work ethic, and it introduces them to the idea that work creates money. 

 

Simply giving kids money is a sure way to plant the seeds of entitlement in a young mind. You don’t want your kids growing up with the idea they deserve money simply because they’re alive. Of course, there are things kids should be expected to do without pay, too. When you’re part of a family, everyone needs to understand they have a responsibility to pitch in and help out sometimes!

 

— Dave

* Dave Ramsey is an eight-time national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

How Many Years?

 

 

Dear Dave,

 

My husband and I are debt-free. We are in our mid-20s, we also have a full emergency fund and we each have 401(k) plans with our employers. Currently, we are looking at life insurance. We do not plan on having children, so what length term policies would you suggest for a couple in our situation?

 

Ashlie

 

Dear Ashlie,

 

I’d recommend you both find good 15- or 20-year, level term policies, with coverage amounts of 10 to 12 times your individual incomes. If you two have a change of heart, and decide you want kids later, I’d recommend converting those to 30-year term policies, still at 10 to 12 times your incomes. Why? You’d want the insurance to be there to protect everyone in the family until the kids are out on their own.

 

Between now and then, and in the years after, your continued saving and wealth building will lead you to a place where you guys are self-insured. And that’s a great place to be!

 

— Dave

* Dave Ramsey is an eight-time national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Don't Let Them Hook You

 

 

Dear Dave,

 

My wife and I just bought a new home, and we only need one or two more things to furnish the living room. Over the weekend, we found a couch and love seat set we both like for $3,000. The owner of the store said he would take 15% off the price if we get a store credit card and pay for it that way. We are in pretty good financial shape, and can afford to pay cash for the furniture, but what do you think about the idea of taking advantage of the 15% off offer, then paying off the card immediately and closing the account?

 

Jackson

 

 

Dear Jackson,

 

Playing with snakes is always a bad idea. Sooner or later, you’re going to get bitten.

 

Everyone thinks they’re the exception to the rule, or they’re somehow winning or getting rich by doing stuff like this. It doesn’t work that way. So, stop playing around with debt products. This guy’s just trying to hook you and make more money.

 

Your idea might sound good on the surface to a lot of folks, but the problem is the vast majority of those same people don’t have the discipline to follow through on a plan like this. Having that store account, even for a short period of time, would be too much of a temptation. Another issue is many places like this hit you with a fee when you pay off the card. They’ll fee you to death on other things, too, if you’re not careful, until you end up wishing you’d never even seen the place.

 

If it were me, I’d just talk to the owner again and let him know I’m taking my business elsewhere unless he discounts the furniture 15% on a cash purchase. There’s no way I’d take out a stupid credit card for a place like that whether I had the cash on hand or not!

 

— Dave

 

 

 * Dave Ramsey is an eight-time national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Which Is Best?

 

 

Dear Dave,

 

How do you know if a will or a trust is best for you?

 

Monica

 

 

Dear Monica,

 

This is a great question, especially since August is National Make-a-Will Month. The first thing you should do is take a serious look at your needs, your wishes and your overall life and financial circumstances.

 

If you’re like the average person with a couple of kids, a home and some savings, a will is all you need. There’s no reason to bring lawyers into the mix, unless there’s something complicated about your situation. In cases like this, you can even set one up online that’s perfectly legal in just a few minutes. 

 

If you’re older, your kids are grown and your estate is worth $1 million or more, a trust is the way to go. By doing this, you can avoid probate in a way that wills don’t allow. Now, if you have a large estate and dependents, having both a will and a trust is a good idea. And you don’t have to worry about the two bumping into each other. They’re separate legal instruments, and there’s generally no conflict between them. If there is a legitimate, legal conflict between them, the trust usually overrides the will.


Simply put, everyone needs a will. But not everyone needs a trust. Trusts can be more than you need, but they can also be a great tool if you have a larger estate. So, if you’re in the vast majority of folks who don’t need a trust, just get yourself a will. You’ll spend a lot less money and feel so much better knowing your stuff will go to the right people—and that your family will be taken care of!

 

— Dave

 

 

* Dave Ramsey is an eight-time national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Pay Off The Mortgages? Not So Fast...

 

 

Dear Dave,

 

My husband and I are retired. I receive a small pension, and we are both on Medicare and Social Security. We have about $25,000 left to pay on our mortgage, along with a second mortgage of $18,000. These are our only debts. We also have a nest egg of $30,000 set aside, and a small annuity that’s worth about $20,000. Would you recommend paying off our mortgages with our savings?

 

Jane

 

 

Dear Jane,

 

If you know me at all, you understand how much I’d love to see everyone in control of their finances and living debt-free. But being broke, even in a house that’s paid for, isn’t a good idea. Believe me, I understand. The idea of paying off the house and everything is awfully tempting. But if you two did that, you’d be left with very little. To me, that’s a scary thought when your small pension—along with Social Insecurity and Medicare—are all you have coming in.

 

No offense, but your nest egg is kind of small to begin with, so I don’t think I’d be raiding it right now. On the other hand, if you’d told me you had $400,000 or $500,000 saved up, I’d tell you pay off the house and second mortgage today.

 

If you’re not doing this already, I’d advise you two to start making and living on a regular monthly budget. Give every dollar a name on paper before the month begins, because if you don’t, your money will control you instead of you controlling it. Make sure you’re living on less than what’s coming in, and hopefully you can devise a plan to have the house and other debt paid off in a few years.

 

God bless you two!

 

— Dave

 

 

* Dave Ramsey is an eight-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

A Different Kind Of Creditor?

 

 

Dear Dave,

 

My wife and I have plans to enter the mission field as soon as we have paid off our debt and get a full emergency fund in place. We only have about $12,000 in credit card debt left, and we don’t own a home, but my father does not want this debt to stand in our way. He has offered to pay off the credit cards, and make it a loan where we would pay him back over time. It is a tempting offer, but we both feel strange about accepting it. What do you think we should do?

 

Brandon

 

 

Dear Brandon,

 

Your dad sounds like a generous, good-hearted man. But considering the goal you and your wife have, I want you to think for a minute about the spiritual implications of a situation like this.

 

Proverbs 22:7 says the borrower is slave to the lender. Now, the Bible doesn’t say debt is a sin, but it definitely discourages debt, and it teaches us to live our lives differently than the rest of the world. That’s the case when it comes to handling money, too.

If you do this, you’d be turning your dad into your creditor in a very real sense. That’s going to make family dinners taste different, because you’ll be eating with your lender instead of just good old dad. Money has a way of changing the family dynamic, and it’s almost never for the good. Suddenly, you’re getting raised eyebrows if you buy something for yourself, because even the nicest, most generous folks have opinions.

 

If it were me, I’d say thanks, but no thanks. There’s no way I’d be in financial debt to my dad.

 

Now, if he were to offer to make paying off your debt a gift—one that was given with no strings attached to help you two get into the mission field quicker—I’d be okay with that and I’d be deeply grateful and honored.

 

But I would never tell you to go into debt to a parent. Your dad is probably thinking it’s better for you to be in debt to him rather than some uncaring bank or credit card company. But I just wouldn’t want to do anything that might jeopardize your relationship.   

 

— Dave

 

 

Dave Ramsey is an eight-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Help Them...And Help Them Get Help

 

 

Dear Dave,

 

I finished college a couple of years ago, and I have a good job making $65,000 a year. The only debt I have is about $5,000 remaining on a car loan, and I am paying that off as quickly as possible. At the same time, my mom and dad need repairs on their small house, and I am not sure they can afford to fix things. They both work hard, but they don’t make a lot of money. Plus, they have some debt. I have enough saved to pay for fixing their roof, with plenty left over. What do you think about the idea of pausing paying off my car to help them? 

 

Samantha

 

 

Dear Samantha,

 

You’re a caring young lady with a great heart, who’s also making good money. There’s no reason you can’t do both things. Help your mom and dad with the roof, then turn around and finish knocking out that car payment and re-build your savings. From what you’ve said, it won’t put you in a financial bind, right? I’m really proud of you for wanting to help your folks this way.

 

I know your mom and dad work hard. And they’re obviously good people to have raised a daughter like you. But I want you to think about one thing. If you make a habit of fixing their lives without them having a hand in fixing their lives, this scenario could become a nightmare for everyone.

 

I’d go ahead and help them, but the only way I’d do it is if they promise to let you help them address the reasons they don’t have any money—and if they agree to get financial counseling. I can tell you love your mom and dad a lot. And I’m sure they work too hard to be broke. I’m not talking about fussing at them or shaming them, I’m talking about sitting down and having a loving discussion about the issues and what they can do to start making positive financial changes in their lives.

 

The fact that your folks have worked their entire lives, and can’t come up with money for roof repairs on a small home, tells me something’s wrong. The fact that they don’t have any money is the symptom. The problem is they’ve made poor decisions and mishandled the dollars they earned. Even if you don’t make a lot, you can still have a little cash set aside for emergencies if you manage it well.

 

— Dave

* Dave Ramsey is an eight-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

'You' Have To Change

 

 

Dear Dave,

 

Is debt consolidation a good way to get out of debt?

 

Erikah

 

 

Dear Erikah,

 

No, it’s not. Debt consolidation companies try to position themselves that way, but they don’t even come close to addressing or solving the real problem.

 

Here’s the big reason debt consolidation isn’t a good idea. It makes you feel like you truly did something to change your whole financial outlook when you didn’t. When you move things around, or suddenly have a lower payment each month, you end up thinking you’re making real progress. The thing is you didn’t do anything to address the actual problem—which is you.

 

I meet people and talk to folks on my radio show all the time who don’t quite grasp this. They’ll tell me they paid off all their debt by using a debt consolidation company or taking out a second mortgage on their homes. Well, the truth is they’re not debt-free. They didn’t do anything but shuffle the same old debt around.

 

Personal finance is 80% behavior, Erikah. When it comes to getting out of debt, staying out of debt and getting your finances into shape, you have to change your habits and behaviors with money. Interest rates aren’t the problem, and the number of payments you’re facing aren’t the problem. The problem is the person you see in the mirror every morning.

 

Until you change that person, and start living on a strict, written monthly budget and decide to kick debt out of your life once and for all, you’ll never make any real progress toward gaining control of your money!

 

— Dave

 

  * Dave Ramsey is an eight-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

There's a Process Here...And It Works!

 

 

Dear Dave,

 

My husband and I have a beginner emergency fund set aside, and we’re working on paying off $30,000 in credit card debt and two cars in Baby Step 2. He would also like us to start putting money aside for a couple of trips and a few other things we have always wanted. This makes me nervous, because we have made so much progress over the last year in getting control of our finances, paying off debt and living on a budget. I understand wanting something to look forward to, but I would hate to see us slow down when we are doing so well. How do you feel about this?

 

Marie

 

 

Dear Marie,

Okay, so you have two car payments hanging over your heads, plus a bunch of credit card debt, and your husband wants to throw saving for toys and vacations into the mix? I’m sure he’s a good guy, and he has obviously been on-board with your financial overhaul so far, but I wouldn’t recommend doing this.

 

The reason people are successful following my plan is because I teach common sense methods, wrapped up in unbridled, scorched-earth intensity. There’s a process here. There’s an idea combined with passion. And when you plug into it full force, you’re going to move in a positive direction so quickly it’ll make your head spin.

 

You know how I say personal finance is 80% behavior and only 20% head knowledge? It’s true. Behaviors have to change. The more dramatically they change, the better the results and the faster you progress. But if you don’t plug into it, you’ll fall back into the same old things.

 

It’s okay to save up for a trip or buy some fun stuff in the general philosophy of life. But getting out of debt, and having control of your finances should come first. Remember when you were a kid, and you had to finish your dinner or clean up your room before going out to play? That’s what I teach. Work first, play later.

 

Trust me. It’ll pay off in the long run!  

 

— Dave

 

 

* Dave Ramsey is an eight-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Dad Already Made The Decision

 

 

Dear Dave,

 

My father-in-law passed away earlier this year. Since then, my wife and I have faced a dilemma because of the inheritance. Her dad had several life insurance policies, and he left one to her and one to each of her siblings. The one he left my wife was bigger than the ones he left to the others, and now her sister who received the smallest settlement is angry about the situation. She wants more, and it’s causing a real dilemma within the family. I told my wife I am okay with doing what she feels is best. What are your thoughts?  

 

Daniel

 

 

Dear Daniel,

 

So, your wife’s sister feels like she’s entitled to something their dad didn’t want her to have? The arrogance of your sister-in-law is appalling. If their dad had wanted her sister to have a different policy, he would’ve put her name on the other policy. I mean, it was his decision, not hers.

 

Giving someone money because you think it will enhance or save a relationship is a really bad idea. A relationship that’s purchased isn’t a real relationship—it’s prostitution. If giving this sister money is the only way she’ll act right or ever speak to you guys again, then she ain’t worth having. That’s no longer someone you should feel the need to impress, and it’s not on you guys if she decides to pitch a fit or sever the relationship.

 

This is a heart decision, a conscience decision. I would advise you and your wife to make it together and be in full agreement. I’m sorry you two are going through this, but the idea her sister deserves more just because she wants more? Sounds like their dad already made his feelings known on that subject.    

 

— Dave

 

 

  Dave Ramsey is an eight-time #1 national bestselling author, personal finance expert, and host of The Ramsey Show, heard by more than 20 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people take control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

It May Be Time To Sell The Car

 

 

Dear Dave,

 

We have a 2008 Honda Accord that needs a new timing chain. Our mechanic says the repair will cost about $2,200. The car is worth about $4,500. Is it time to get another car, or should we have it repaired?

 

Susan

 

 

Dear Susan,

 

That sounds a little high for a timing chain fix to me. Maybe I’m wrong about that, but let’s look at the math of your situation.

 

You say the value of the car is $4,500 if fixed and running properly. Let’s say for the sake of argument the value of the car if you sell it as-is—basically salvage—is $1,500. If you take the value of the car as-is, plus the repair, and the number you come up with is more than the value of the car after it’s fixed, you don’t repair the car.

 

So, if this car is actually worth $1,500, the idea of fixing it is very questionable. If you can get $1,500 for this thing as-is, I’d sell it and put the $2,200 I would’ve thrown into fixing that old thing toward a better car.

 

You’re talking about a big repair on an old car, Susan. If the repair price you got is right, and it was from an honest mechanic—not some padded, overblown quote from a dealer—I think it’s time for that old beater to go!

 

— Dave

 

 

 * Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Doesn't Sound Like Fun To Me!

 

 

Dear Dave,

 

Sometimes on vacation trips I like to check out casinos. I always account for the money I wager in my budget, and I never spend more than I’ve allotted. How do you feel about gambling at a casino, as long as you limit your spending this way?

 

Carson

 

 

Dear Carson,

 

Ok, I’m going to be honest about this. When someone tells me they gamble for fun or recreation, my first thought is they’re crazy—crazy enough to think they’ll actually come out ahead. I mean, you might see a news story once in a while about someone winning big money in a casino, but that almost never happens. Think, too, about how much cash those folks flushed down the toilet previously while gambling. In reality, there’s a strong chance they didn’t really “win” anything. They probably just recouped a small portion of their previous, substantial losses.

 

I know, all this probably makes me sound old and out of touch. But I just don’t get the concept of gambling “for fun.” I don’t find it thrilling or exciting to lose money I’ve worked hard to earn, even if there’s flashing lights and a party going on. Don’t get me wrong, my wife and I include “fun money” in our budget every month and do things we enjoy. But, to each his own, I guess.

 

Still, my advice would be don’t waste your time and money on that stuff. One way or another, the house always wins. It’s your money, and you can what you want with it, Carson. But think about this: Why do most of the folks sitting at slot machines and card tables look like they can’t afford to lose money? The majority look desperate, some even angry, and that’s sad. I don’t know, maybe it’s the lighting or some other strange coincidence.

 

Yeah, I don’t think so.

 

— Dave

 

  Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

 

Be Vigilant About Insurance

 

 

Dear Dave,

 

My wife and I are on Baby Step 3, and we were talking the other day about how our home, travel trailer and cars have appreciated recently. Everything is paid for except the home, but we were wondering if we should increase the amount of insurance coverage on these items since they have skyrocketed in value.

 

Dale

 

 

Dear Dale,

 

Yes! And you should make it a habit to review all your insurance coverage once a year.

 

With most homeowners insurance policies you have a stated amount of coverage. Some policies have a “cheat” that allows you an extra five or 10 percent, maybe even 20 percent in some cases. But if you’ve got a $300,000 policy on a house you bought five years ago, and it has appreciated to $450,000 then burns to the ground, you’re screwed. The only thing dumber than not having enough insurance to replace belongings like that is having no insurance at all.

 

Lots of times, in the old days, if you bought a car or homeowners policy, it covered your car or home regardless—even if they had gone up in value. Then, when some insurance companies got absolutely hammered after some events like Hurricane Katrina, they stopped doing that. They stopped covering actual replacement value, and started covering only the specified amount on the policy. Today, it can be tough to even find replacement value coverage on houses. And if you do, it’s crazy expensive.

 

When it comes to your home especially, you need to have a policy equal to the value of the home, and you should revisit your coverage and your home’s value every single year. You have to be vigilant about things like that, Dale, because your insurance company won’t be!

 

— Dave

  * Dave Ramsey is a eight-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people take control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

What Do You Want To Do?

 

 

Dear Dave,

 

My husband and I are in our mid-twenties, and we are expecting our first baby this year. We are also debt-free, except for our mortgage, and we expect to have it paid off in about four years. It has always been our dream for me to stay home with our kids, and maybe even homeschool them, when the time was right. My husband makes more than enough for us to live on, so we have always put the paychecks from my human resources job toward paying off the house. What do you think, Dave? I kind of hate to give up the income, but I want to do what is best for my family.   

 

Ann

 

 

Dear Ann,

 

First, congratulations on expecting a new baby! I know it’s an exciting time in your lives. It sounds like you two have been killing it financially as well. You’ve both worked hard to set yourselves up for a great future.

 

Honestly, there’s no wrong answer here. Under the circumstances, the big question is what do you want to do? Of course, the final decision should be made by you and your husband together, but you’re doing the smart thing by analyzing the trade-off. By that, I mean comparing the ideas of continuing to bring extra cash to the household or being at home with your baby.

 

If you love your job and want to continue those duties full-time, it doesn’t make you a bad mom. It just makes you a working mom. But if you’re in a season of life where you don’t need a career income or workplace identity to be fulfilled, or if you just want to be home with your child, that’s a really cool thing, too. And hey, if you like your job, there’s no reason you couldn’t perform some HR functions from home on a contract basis, like 20 to 25 hours a week while the little one’s napping, with minimal strain on motherhood.

 

Even if you quit today and it takes a couple more years for you guys to pay off your house, so what? It’s still not a bad choice. The bad thing is, lots of ladies end up with mom-guilt no matter what they do. They feel guilty if they’re not staying home with the little one, and they feel guilty if they aren’t generating an income. Society wants you to be everything, and when you choose to be one or the other, it doesn’t know what to do with you—and lots of times becomes really judgey.

 

You’re blessed to be in a unique financial situation, Ann. So, do what you and your husband feel in your hearts is best for you and your family. Sit down together and talk about it, then make a plan and don’t worry about what the world thinks. God bless you guys!  

 

— Dave

  * Dave Ramsey is an eight-time #1 national bestselling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people take control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

 

It's Really About Giving and Putting Others First

 

 

Dear Dave,

 

My wife and I have always attended church, and we have always tithed. Over the last few months, we have come to the decision it is time for us to find a place to worship that is a little more involved in the community. If we are actively looking for a new church, should we continue to tithe to our current church? Would giving our tithe money to a charity be better? We both agree it feels strange to continue giving to our current church when we would rather be somewhere else.

 

Brad

 

 

Dear Brad,

 

There’s nothing wrong with continuing to tithe to your current place of worship until you find a new church home. It would probably be alright, too, if you gave your tithe to one of the places you visit while you’re looking. When it comes right down to it, it’s all about learning to be a giver and putting others first.

 

I can tell you two are taking this situation very seriously. But I mean, it’s not like He needs the money, you know? Tithing isn’t about making a deposit into God’s bank account, or building up spiritual brownie points. It isn’t a salvation issue, either. It’s all about changing our hearts and our minds. It’s about being a little less selfish, and a little more Christ-like. I believe it makes God smile when we put other people’s needs ahead of our own wants.

 

There are some pretty strong indications in scripture that a tithe—which is a tenth of your income—should go to your local church. I have no problem with giving to responsible charitable organizations, too, but when it comes to tithing, I’m not sure a generic charity is the answer.

 

My wife and I have had times in our lives when we changed churches, and in the periods when we didn’t have a home church, we’d write out the checks just like normal, but leave the “pay to the order of” portion blank. That way, the money was already accounted for in our minds and in our checkbook. Then, when we found a place that really spoke to us, we’d complete the checks and give them to that church.

 

I hope this helps a little, Brad. God bless you two!

 

— Dave

 

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Teach Them, Don't Enable Them

 

 

Dear Dave,

 

My younger brother and his wife did their taxes last month and learned they owe $15,000 to the IRS. I love them both, but they are extremely irresponsible with money. I know they have a lot of credit card debt, too. I am debt-free, including my home after following your plan, and would like to help them. I was thinking about taking out a one-time loan from the bank to help cover what they owe the IRS, because my emergency fund is a little low after a recent car accident. Under the circumstances, would this be okay?

 

Carson

 

 

Dear Carson,

 

In my mind, “help” would be aiding them in changing their ways with money. I don’t say this to be sarcastic or mean, but it’s the truth about where they are in life right now. They both need to be educated, not enabled, when it comes to their behavior with money. This doesn’t mean they’re bad people, but it does mean you don’t need to be a party to, or a temporary fix for, their bad financial decisions.

 

Some people might say taking this attitude would mean you don’t love and care about your brother and his wife. Those people would be wrong. You’ve already told me they won’t behave with money, so at this point it would kind of be like giving a drunk a drink. You don’t give more money to people who won’t behave with it. That solves nothing, and in most cases it just reinforces the negative behavior.

 

This might be a good opportunity to sit down with your brother and his wife, and have a firm—but gentle—talk about their situation. Maybe you could offer to teach them the things that worked for you when it comes to finances, using the Baby Steps as your guide. And, make sure they get in touch with the IRS about a payment plan.

 

I know you love them, but you can’t fix this for them. In some cases, the best thing you can give someone is the understanding that they need to change their behavior. Hopefully, with you as their inspiration and support, they can learn how to manage their finances wisely.

 

Good luck, and God bless you all, Carson!

 

— Dave

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

You Can Have More Than One

 

 

Dear Dave,

 

A relative of mine recently mentioned she had two life insurance policies. Is it okay for a person to have more than one life insurance policy? If so, why would someone do that?

 

Victoria

 

 

Dear Victoria,

 

There aren’t any rules against having more than one life insurance policy. The only real problem is it might complicate your life a little in terms of having multiple premium withdrawals, checks or possibly additional policy fees to worry about every month. It’s cheaper just to have just one policy, generally speaking, but regardless of whether you have one or more, I always recommend having 10 to 12 times your annual income wrapped up in a good, level term life insurance policy.

 

Different people have different personal and business financial situations, so there could be many reasons to have more than one life insurance policy. I have lots of insurance connected to our estate plan, our business and different kinds of things. Most life insurance companies will only write so much in coverage for one person, so when this has been the case, I just went to another carrier for additional coverage.

 

Also, some people buy more than one life insurance policy just to feel secure from a provider standpoint. If one insurance company goes out of business, they’ll still have another policy—or more—in place. That’s not usually a big problem, though, since the majority of insurance companies have insurance to back them up with the state, or are very financially stable.

 

I hope this helps, Victoria!

 

— Dave

 

 * Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

The Idea's The Same

 

 

Dear Dave,

 

I own a small business. How much should I have in a business emergency fund when my annual sales are around $100,000? Currently, I have two months of expenses set aside.

 

Theresa

 

 

Dear Theresa,

 

Generally, I like the idea of small businesses having about six months of expenses on hand. That kind of cushion usually eliminates the need for borrowing money. It also provides peace of mind. And if you’ve been an entrepreneur very long, you know that’s an invaluable thing.

 

Having a personal emergency fund set aside is a little different than having one in place for your business. When it comes to personal finance, I recommend having three to six months of expenses set aside. The basic idea is the same, though. A fully-funded emergency fund gives you an option—besides debt—when unexpected things happen!

 

— Dave

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

 

I Wouldn't Go That Far

 

 

Dear Dave,

 

Our son is in high school, and he has a part-time job. He makes good grades, and we have always tried to teach him how to save and handle money according to your advice. He has even managed to set aside a few thousand dollars for college. My wife and I were talking the other night, and I brought up the idea of charging him a small amount for rent, maybe just $20 or $25 a month, to help him be even better prepared for the real world. What do you think about this?

 

Keith

 

 

Dear Keith,

 

I appreciate the fact that you’re looking for teachable moments. But making a high school kid pay rent? No, that’s a little over the top.

 

Listen, you and your wife are already way ahead of a lot of parents. Teaching him financial responsibility and the importance of education are great things. It sounds like your son is a bright, motivated young man, too.

 

I talk to adults all the time who are decades older, but still don’t grasp the concepts of maturity and responsibility like this kid does already. With the kind of start you’re giving him, I think he’s going to grow up to be a very successful adult. Keep up the good work, and let that young man know how proud you both are of him!

 

— Dave

* Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Follow The Plan, and Make Stuff Happen!

 

 

Dear Dave,

 

I just started Baby Step 3 of your plan. It took me about 12 months to pay off $8,000 in debt during Baby Step 2. I am 50, and I work in the printing industry making about $38,000 a year in a city with no local or state income tax. I have not done a lot about retirement yet, and that worries me now that I am learning to manage money in a smarter way. How can I stay on track with the Baby Steps and still do something about retirement?

 

Blake

 

 

Dear Blake,

 

I generally look at a timeframe of six months to a year for saving a fully funded emergency fund. So, if it took you about a year to pay off $10,000 in debt, you’re probably looking at about the same length of time—or less, since the debt is gone—to save up an emergency fund. Keep in mind that an emergency fund is three to six months of expenses, not income.

 

But here’s the thing. If you start building retirement right now and have an emergency, do you know what you’ll use? Yep, you’ll use your retirement. That’s why an emergency fund comes before retirement in the Baby Steps.

 

The median household income in America is around $68,000, and that’s often two incomes. You’re probably working pretty hard for that $38,000, so I would challenge you to think about and work toward something you could be doing in the near future to make that much money or more.

 

I want you to open your mind and imagination, and start thinking fresh again. Don’t do something silly like quit your job today, but if you’re going to be making $38,000 five or 10 years from now it’s time to aim at something else.

 

I’m trying to speak to your retirement fears, as well as warn you against addressing retirement without having an emergency fund in place. Save up a solid emergency fund over the next year, while at the same time doing some serious thinking and goal setting.

 

Maybe you’d like to do something completely different, or even own a printing company by that time. Who knows? The cool thing is you can make it happen, and the choice is all yours!

  Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Don't Sell Yourself Short

 

 

Dear Dave,

 

What is the best way to invest a one-time lump sum of $2,500? My plan is to leave the money alone and let it grow for a long time.

 

Karole

 

 

Dear Karole,

 

Some people play single stocks on one-time investments like this, but I don’t like that idea. Single stock investments don’t consistently generate the kind of returns over long periods of time that a good mutual fund will. Why sell yourself short?

 

When it comes to investing, I consider 10 years or more to be a long time. That being the case, I’d suggest a growth stock or growth and income mutual fund with a solid track record of 10 to 20 years.

 

I hope this helps!

 

— Dave

   *Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

Choosing an Executor Is a Vital Part of the Estate Planning Process

 

 

Dear Dave,

 

What exactly is an executor, and what part do they play in someone’s will?

 

Gabe

 

 

Dear Gabe,

 

Simply put, an executor manages the last will and testament of someone who dies. Acting as an executor is an honor and a huge responsibility. As the designated representative of the deceased, executors are responsible for making sure the deceased’s assets are distributed according to the will. Executors deal with probate court, tell everyone who needs to know about the death, pay outstanding debt, distribute assets, and generally represent the deceased person whenever needed.

 

Think of someone you know who is trustworthy, conscientious and good at talking to people. This person also needs to be mature, capable of handling life events with a level head and have an honest heart. You need to think about where your potential executor lives, too, because they could end up spending a lot of time working with the courts in your area. If you already have someone in mind who has all the right personal qualities, but lives out of state, research your state’s requirements for an executor’s location. Virtual meetings could be a possibility.

 

The amount of time needed for an executor to handle your affairs when you’re gone could be enormous. Depending on the complexity of your estate, it could take months—or even years. Once you settle on someone as executor, be honest with them about all the responsibilities that come with the job. And if you’re unable to find someone appropriate, you can always hire a professional executor.

 

Great question!

 

— Dave

   *Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

These Debt Reduction Strategies Are Bad Ideas

 

 

Dear Dave,

 

I’ve been seeing lots of ads lately for debt consolidation companies, debt settlement companies and the HELOC. Are any of these methods for reducing debt a good idea?

 

Brent

 

 

Dear Brent,

 

No. These are all bad ideas when it comes to getting out of debt. There’s a lot of buzz these days surrounding all the “quick” and “easy” ways to clean up debt and get control of your finances. But the truth is neither one is ever easy. If something sounds too good to be true, it probably is.

 

Debt consolidation is basically a loan that combines all your debts into one single payment. Sounds like a great idea at first, right? But then you find out the lifespan of your loans increase, and that means you’ll stay in debt even longer than before. The low interest rate that looks so appealing in the beginning usually goes up over time, too. Stretching out the amount of time you’re paying off debt, plus adding interest, is just dumb.

 

Debt settlement companies are awful. These crummy outfits will charge you a fee, then promise to negotiate with your creditors to reduce what you owe. In most cases, they take your money up front, do a bad job “negotiating” your debt and leave you responsible for what’s left.

 

A home equity line of credit (HELOC) is also a bad idea. With a HELOC, you’re borrowing against your home. On top of that, you risk losing your house if you can’t pay it back on time. All these plans are really just gimmicks that only treat the symptoms of your money problems. They never help you address the root issue of why you landed there in the first place. Personal finance is always 80% behavior, and 20% head knowledge. You have to change your behavior if you want to make a lasting, positive impact on your finances!

 

— Dave

   * Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 18 million listeners each week. He has appeared on Good Morning America, CBS This Morning, Today Show, Fox News, CNN, Fox Business, and many more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.

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