Dear Dave, 

My wife and I are debt-free except for our mortgage and two Parent PLUS loans for our daughters’ college educations. One of the loans totals $18,078, and the other is for $41,500. Both girls want to pay them off using the new extended plan being offered, but I’m 59 1/2, and I’ve got about $500,000 in a 401(k) from a previous job along with $125,000 from a job I started five years ago. We’ve been thinking about just paying the loans off for the girls, but we wanted to know your thoughts.  

Mike 

Dear Mike, 

If I were in your shoes, I’d just go ahead and pay them off. Technically, you’re liable for the loans. They are not.  

The extended plan you’re talking about is garbage. In reality, it means the loans are never paid back. The extended plan is 30 years of not even making the principal payment. No interest is paid, and they don’t touch the principal. The whole thing works backward for 30 years, and it’s the very definition of a stupid government program.  

I really don’t think you want your daughters to be part of something like this. But that means you’re going to be stuck with paying off these loans. You might as well just own it and pay them off now.  

I want you to understand this, Mike. I don’t advise people to dip into their savings every time a problem comes up prior to retirement. But you’re 59 1/2, and at that point there’s no penalty. Plus, you’ve got $625,000 sitting there. You’re going to pull less than $60,000 out, plus a little in taxes, to make the problem go away. It’s not as bad as it could be, but I’m afraid you’re going to have to pay a little stupid tax on this one. I’m sure your girls didn’t know all this, but it’s a perfect example of what can happen when you put your faith in a stupid plan coming out of Washington, D.C.  

I hate it for you guys—and everyone else in America who took out a bunch of student loans—because you’re getting messed over by your own government. The first way they messed you over was to put a student loan program out there and then tell you the way to success was to borrow tens and hundreds of thousands of dollars for a degree in left-handed puppetry. And now, guess what? You’re a barista! Then, they start shouting they’re going to forgive it all. After that it’s, “No, we’re not. Yes, we are. No, we’re not. Yes, we are.”  

The fact is, they don’t intend to forgive it. It’s the biggest scam in history—mathematically speaking—perpetrated on the American public by our government.  

— Dave 

 *Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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 of Ramsey Solutions. 

Dear Dave, 

My husband and I have just $12,000 to pay off before we’re debt-free. We’ve paid off almost $70,000 in debt in the last two years, and we both just turned 50. We would like to buy a house soon, but we know we need an emergency fund. It would take us over a year to build up an emergency fund, so since we’re getting older, should we make adjustments to the Baby Steps? 

Debbie 

Dear Debbie, 

You’ve been making great progress, and you obviously have a good income to be able to pay off debt that quickly. But it shouldn’t take you two a year to build up an emergency fund, considering the rate at which you’ve been paying off debt.  

Yes, you need a fully funded emergency fund of three to six months of expenses set aside before you start saving a down payment for a home. Maybe in your case, you could lean a little more toward the three-month side with your emergency fund. Then, after you’re all moved in, you could revisit the emergency fund and beef it up to six months. 

Fifty isn’t old, Debbie. Just stay on course and stick with the plan. You two have plenty of time to get your finances in order and find a great home! 

—Dave 

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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. 

Dear Dave, 

Our daughter’s college education is pretty much paid for already through grants and scholarships, and my wife and I make good money. We just started your plan, so when we get to Baby Step 5, saving for college, can we substitute that with saving for a wedding? 

Benton 

Dear Benton, 

I’m glad you’re thinking ahead, buddy. And I don’t have a problem with your idea. It’s always a good plan to save for a wedding, if you have the financial resources to do so. 

Did you know the average wedding in America this year, according to Zola.com, ran around $29,000? Of course, you don’t have to pay anything close to that amount to make a wedding a beautiful and memorable occasion. Your household income, debt, savings and other factors will all play a part in how much you can legitimately afford

Sit down with your wife, crunch some numbers and see what makes sense in your situation. Just remember to pay cash for the wedding. If you have to go into debt to make it happen, you’re spending way too much!  

—Dave 

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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. 

Dear Dave,  

My husband and I want to do a live-in and flip real estate purchase. The idea is to buy a fixer-upper and rent out the basement to help with the mortgage payments. How do you feel about ideas like this?  

Erin  

Dear Erin,  

In a situation like this you need to do a basic business analysis. You’ve got to have a plan in place, and you’ve got to figure out the worst-case scenario. Part of this is determining whether you can survive if things fall apart. In this case, the worst case is that you can’t get a renter, and the house doesn’t sell. It puts your family in jeopardy, so to me it’s not an option.

Want my honest opinion? I think you’ve both got a case of house fever right now. The possibility I just mentioned isn’t a rare occurrence. Lots of people have had the same idea, with the best of intentions, and still wound up in a big mess. I love real estate. I mean I really love real estate. And I’ve flipped more than a few houses in my day. But the particulars of this deal make me a little nervous. If you and your husband are willing to accept the possibility of things not working out like you planned—and the fact you might have to take additional jobs for an unknown length of time just to make ends meet—then it might be a play. But for me? Nope. I don’t like putting myself into these kinds of situations.  

When I was much younger, I was willing to do all kinds of dangerous stuff and ignore the risk. But going broke decades ago knocked that kind of thinking out of me in a hurry. Any deal that runs the risk of leaving you bankrupt, or the victim of a foreclosure, just isn’t worth it, Erin.  

—Dave  

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.  

Dear Dave,

My fiancée and I plan to get married in May, and we are preparing to buy a house. We both work in sales, and combined we bring home about $7,400 a month before commissions. Our average commissions usually boost that to $12,000 a month. I’m worried that the house we’re looking at doesn’t fit our budget, though. The home costs $350,000, and we’re looking at monthly payments of $2,840 with taxes and insurance figured in. Do you think this scenario will work for us?  

J.T.  

Dear J.T.,  

Are you doing this on a 15-year fixed-rate mortgage? If you’re not, you need to change that right away. That’s the only kind of mortgage loan I recommend. With the numbers you’ve given me, you two can afford that on the shorter terms I mentioned.  

Now, let’s move on to the next thing. You’re speaking about buying a home as if you’re already married, and you’re not. I will not advise you to buy a house with someone to whom you’re not married. You’re talking to a guy who’s been doing this for 35 years, and I’ve heard all the horror stories that go along with, “We bought the house together, but we didn’t make it to the altar together.” Talk about an ugly breakup!  

You two have a bad case of house fever right now. Believe it or not, you aren’t required by law to run out and buy a home just because you’re planning to get married. Please, wait until after the wedding to buy a home. And even then, wait another year or so. Buying a home is the biggest—and most expensive—life decision most people ever make. Take some time to just enjoy being married and getting to know each other even better for a while.  

Listen, if you’ve already jumped the gun, if you already have this house under contract or anything like that, I would not close the deal. I’d talk to the sellers and tell them they can keep my earnest money, but I’m walking away. And get ready, because if you do this, your fiancée is liable to look at you like you’ve got snakes coming out of your ears. Make sure to communicate with her about where you’re coming from and why you’re doing it. It’s the best, and smartest, thing you can do in the long run, J.T.  

I’m not predicting you two are going to break up or anything. I hope with all my heart nothing like that happens. But I’m begging you, buddy. Don’t buy a home with someone you’re not legally married to. The potential downside is just too great.  

— Dave  

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.  

Dear Dave,  

I read where you recommend saving 15% of your income for retirement. Should I count my employer’s contribution to my retirement plan as part of that 15%?  

Carlotta  

Dear Carlotta,  

That’s a great question. Employer contributions do not count toward the 15 percent I recommend setting aside for retirement. It’s great if you work for a company that offers perks like that, but I want you putting 15 percent of your money into retirement. Whatever your company matches, whatever its pension may be, or even having a military retirement package, none of that enters the equation. I want your money in your name.  

Baby Step 4 of my plan says to put 15 percent of your income into retirement accounts. The first thing you should put money into is a matching retirement account. If you’ve got a 401(k), a Roth 401(k) or a 403(b) and your employer offers a match, you should do that up to the match before anything else.  

Let’s say your employer will match three percent. Since the goal is 15 percent, that still leaves you with some work to do. You’ve got three percent of your own money already going into retirement, so then you could look at a Roth IRA. If the Roth, plus what you invested previously to get the match doesn’t equal 15 percent, then you could look at a 403(b), or go back to your 401(k) to hit the 15 percent mark.  

And remember, if you’re going to reach your retirement goals, you can’t do it alone. King Solomon, one of the wisest men who ever lived, wrote: “Where there is no counsel, the people fall; But in the multitude of counselors there is safety” (Proverbs 11:14 NKJV). That’s why you need a quality financial advisor—one with the heart of a teacher—to help you navigate complicated financial issues, and guide you toward the kind of retirement you want.  

Do you see what I’m saying here, Carlotta? I want you—not the company you work for—to control your financial destiny. I want you to be able to retire with dignity, and enjoy life after working hard and saving. The responsibility for making that happens falls to you!  

—Dave  

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.  

Dear Dave,  

My wife and I are both 36 years old, and we have two children. Our son is six, and our daughter will be four next month. We’ve been walking through the Baby Steps, and we should have our home paid off sometime next summer. We realized the other day the one thing missing from our financial picture is life insurance. We both work outside the home. She makes $60,000 a year, while I make $80,000 a year. At our age, and in our current situation, do you think we should we get 20-year or 30-year level term life insurance policies?  

Clay  

Dear Clay,  

You guys are doing a great job of getting control of your finances and planning for the future. Speaking of the future, do you plan on having more kids? If you do, you might want to go with 30-year policies. If you’ve decided two are enough, then based on your present situation I think 20-year policies would work out fine.  

I recommend folks have 10 to 12 times their annual income in life insurance coverage. That means you’d need between $800,000 and $960,000 in coverage, while your wife needs a policy in the $600,000 to $720,000 range. But let’s take a deeper dive into all this.  

Your kids will be in their mid-twenties in 20 years. Ideally, they both should have finished college by that time, or at the very least, be working and living on their own. If you continue to follow my plan, you and your wife will have paid off your home in a few months and be completely debt-free. And, you’ll have been saving 15% of your income for retirement over those 20 years. On average, that alone should give you more than a half-million dollars for retirement.  

Do you see where I’m going with this, Clay? Eventually, you two will become self-insured by getting out of debt, staying out of debt and piling up cash. So, if you’ve got $500,000 or more in a retirement fund, no debt and your children are grown and out of the house, even if you or your wife were to die unexpectedly at that point, the other would still be taken care of and in great shape financially.  

Keep up the good work!  

 —Dave  

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.  

Dear Dave,  

I’m 67, and I’ve been wondering what your position is on preplanning for a funeral versus prepaying. Is one a better idea than the other, or should you do both?  

Shannon  

Dear Shannon,  

This is a great question. I wish more folks would think about these kinds of things ahead of time.  

Preplanning a funeral is truly a gift to your family. But if you prepay, it’s a gift to the funeral home. Doing the legwork and setting things up ahead of time so your family doesn’t have to make a lot of financial decisions in the middle of an emotional situation shows them respect and consideration.  

When you buy a prepaid plan, you could be years or decades away from needing it. Plus the inflation rate on funerals is about 4%, so in essence, you’d be making 4% on your money. And, of course, you’re locked into everything at that point. If you took the cost of a funeral and invested it at age 30, instead of 4% on your money, you’d get an actual investment return. By the time you’re 80, you’d have about $600,000. So prepaying in your 30s or 40s is mathematically ridiculous. Now, if you’re in your 60s, like you and me, there aren’t as many years for that money to grow. You wouldn’t see a huge return on investment, but it would still provide for a nice service.  

Believe it or not, it took me a while to figure out that the funeral world is an industry—an extremely profitable industry. And like with many things, when you add on stuff like financing or prepayment to a purchase, you’re adding to their profits. Most funeral providers make as much money on prepayment plans as they do in actual margin on the goods and services that go along with this kind of thing.  

That being said, I’ve got no problem with a business or industry making money. If they treat their customers well, no one’s taken advantage of, and a quality product or service is provided, it’s all good. But when it comes to funerals, I tell people to preplan. Don’t prepay.  

— Dave  

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” 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.  

Dear Dave,

I’m currently on Baby Step 2, and I have about $7,000 in debt to pay off before I can move to bulking up my emergency fund in Baby Step 3. When you’re paying off debt, what do you recommend for 401(k) contributions?

Rae

Dear Rae,

I recommend putting a temporary stop to investing while you’re getting out of debt. Lots of people are shocked by this advice, and some disagree with it, because they’re afraid of missing out on their employer’s match or the wonders of compound interest. But before we go any further, let me emphasize one thing. The key word here is temporary.

Baby Step 1 is to save $1,000 as a starter emergency fund. Baby Step 2 is paying off all of your debt, except for your home, from smallest to largest using the debt snowball plan. During this time you’re attacking your debt with incredible intensity, and putting every penny you can scrape together toward paying it off.

Working my plan, the average person can pay off all their debt, except for their home, in 18 to 24 months. Some folks can do it faster, and for some it takes a little longer. But during this time I want your financial focus to be on nothing but getting out of debt. Once that’s done, you’ll find you have a lot more control over your biggest wealth-building tool—your income.

Trying to accomplish too many things at once diminishes the ability to focus. And when you spend all your time nickel-and-diming everything, the result is that nothing at all gets done very well. You need to really move the needle and see results, because personal finance is 80 percent behavior and only 20 percent head knowledge. It’s not so much a math issue, because if you’d been doing the math all along you wouldn’t have a bunch of debt.

That’s why, for a short period of time, I want you to concentrate with laser intensity on knocking out debt. Once that’s out of the way, you can pour even more money into investing, saving and giving!

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.

Dear Dave,

About a year ago, my husband and I offered an empty house we own to a young man at our church, who had lost his home and everything he owned in a fire. He has taken good care of the place, but has made no effort to pay rent. We don’t need the money, because we’re in good shape financially, and we were thinking about selling the other house, anyway. I’d like to simply write it off, and gift the home and title to this young man, but my husband feels he owes us something for putting a roof over his head all this time. What are your thoughts?

Penny

Dear Penny,

I think you and your husband have good hearts. I also think you handled this situation poorly.

From the sound of things, you put him there originally on a charity basis, and now your husband wants to change the deal. You didn’t set up any kind of rental agreement, but your husband feels you two are owed something? I’m sorry, but no. That’s on you.

At this point, you have some big 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 young man experienced a terrible tragedy. But at the same time, I’m not hearing lots of evidence that he’s putting his life back together. If after this long the guy’s not back on his feet and out on his own, you may be enabling bad behavior on his part.

Now, if you want to gift him the house, that’s your decision. If you want to approach him with a rental agreement or sale proposal to which all parties are amicable, that’s okay, too. If neither of these ideas are in the cards, I’d make sure to sit down with this young man and have a gentle—but firm—talk. I’d let him know I had been happy to help him over the last several months, but that he needs to start moving forward with his life. I’d set a very reasonable and patient timeline for a move-out date, and let him know once that time is up, I’ll be selling the house.

That’s fair to everyone concerned.

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.

Dear Dave,

My girlfriend’s parents are divorced, and they’re both in their early seventies. We talked the other night, and she’s thinking about buying them each life insurance policies. The only coverage her dad has is through his employer. Her mom has remarried, and she doesn’t have any life insurance at all. On top of this, her dad is worried he might have to pay her mom’s funeral expenses if she died, and he’s not in good enough shape financially to do that. Do you have any advice?

Joshua

Dear Joshua, 

If the only life insurance her dad has is furnished through his employer, then he probably won’t have it anymore once he stops working. I suppose it’s fine if she wants to buy them each a small policy, but it’s liable to be pretty expensive at their age.

Now, she can do this, but I don’t think it would be a good long-term plan. I’d tell your girlfriend she needs to start saving money and building up her own wealth. If she had just $20,000 in savings, that’d be more than enough to bury two people. Please understand, I don’t mean to sound insensitive. We’re talking solely about the economics involved in this kind of situation.

The other thing your girlfriend should do is have a discussion with her mom to find out if the stepfather has the money to handle that kind of thing. When it comes right down to it, any final expenses for her mom would be his responsibility now—not her dad’s. She should have a discussion with her dad about preparing for things, too. But if her dad’s got insurance through work, and the stepdad is ready to pay for her mom’s burial, then they’re covered for the immediate future.

In short, I wouldn’t do it unless they absolutely don’t have this sort of thing covered. Even then, I’d prefer she just covered it with cash, because all we’re talking about is enough to cover burial costs. No matter what anyone else says, Joshua, a nice funeral doesn’t have to be crazy expensive.

— Dave

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.

Dear Dave,

My car was declared totaled because of hail damage, and my insurance company says I have two options. One is to take a higher total loss settlement check of $19,000 and use it toward the purchase of another car. The insurance company would then take possession of the car. The other option is to accept a check for $13,000 and have the car on a salvage title. The car is worth $15,000, and I have 20% car replacement assistance on my policy that increases the total loss settlement to the $19,000 amount I mentioned earlier. I’m on Baby Step 3 of your plan, and I owe nothing on the car. What should I do?

— Meagan

Dear Meagan,

Take the bigger check! That’s a quick and easy decision, but give me a minute to explain why. It’s not about being greedy—it’s a little more complicated than that.

If you had $19,000 in your pocket, would you go buy a $6,000 hail-damaged, salvage-title vehicle for everyday driving? Of course, you wouldn’t do that! The insurance company is probably hoping you’ll overlook the $19,000 offer and essentially pay $6,000 for this beat-up car. No. Thank. You. I’ll pass on that deal.

With $19,000, you’ll have plenty of cash to rent a car for a couple of weeks and take time to find a great-quality used car at a good price. You might even be able to negotiate with the insurance company to give you a little time to look for another ride before they come pick up the old one.

But no, you don’t want that messed up, old car. Why would you? That thing probably looks like a kid with a bad case of acne right now. Go find yourself a nice car, hon. There are plenty of affordable, slightly used vehicles on the market right now. There’s no reason for you to drive around in something that’s all beat up if you don’t have to.

Best of luck, Meagan!

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” 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.

Dear Dave,

My wife and I have been very fortunate in our careers. We both have six-figure incomes, and as a result we have a little over $2 million in savings and investments. With this in mind, do you have any advice on how to make sure your kids aren’t spoiled as they grow up in a family that’s doing well financially?

Gary

Dear Gary,

First, don’t spoil them! Teach them to work, and teach them to be givers. Oh, and gently remind them every so often that it’s you and your wife who are wealthy—not them. Yeah, I know. This probably sounds mean to some folks, but I’m talking about simply explaining to them how you and their mom have worked hard, been smart with your money, and that’s why you’re in the position you’re in.

We taught all our kids, from a very young age, just how important it is to work. Work equals money. When you do that, and kids see it in their parents’ attitudes and actions, it makes a big impression. With little kids, it can start with simple things like cleaning up their rooms or clearing the table after dinner. And it should carry over into their teenage years, as well. Every able-bodied child should be working and earning money, whether it’s their own entrepreneurial idea, at a fast food joint or babysitting.

Another thing we did was based in our faith. As Christians, we taught our kids that we don’t really own anything. It all belongs to God, and one of our jobs is to wisely manage the things He entrusts to us. The first rule is to take care of your own household—the important stuff. After that, it’s okay to have some nice things, but it’s not all about fun. It’s also about thoughtful giving and being generous.

As a parent, your job isn’t to be a buddy to your kids. It’s not to give them every little thing they want, and make sure they’re running around carefree and playing every hour of the day. Your job is to teach them about the important things in life, and over time, mold them into mature, responsible human beings who can survive—and succeed—in the real world. 

— Dave

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.

Dear Dave,

I just discovered you and your teachings a couple of weeks ago. I’m already on Baby Step 2, and I was wondering if I should buy life insurance now or wait until I’ve finished paying off debt. I’m single with no children, and I owe a total of $44,700. I have a $25,000 company-funded life insurance policy through my employer. What do you think I should do?

— Elizabeth

Dear Elizabeth,

If you have a life insurance need, it’s not a Baby Step. It’s a necessity in your budget and something you need to put in place as soon as possible. But from what you’ve told me, you don’t have a great need for life insurance at this point. No one, except you, is depending on your income, and the $25,000 policy you have through your employer is more than enough to take care of any final expenses if something happened to you.

The main purpose of life insurance is to take care of those you leave behind when you die. If someone is financially dependent on your income, I recommend having 10 to 12 times your annual income wrapped up in a good level term life insurance policy. That means if you make $80,000 a year, you should have a policy worth anywhere from $800,000 to $960,000.

If I were you, I wouldn’t buy another life insurance policy at all right now. If you get married or have kids somewhere down the road, then buy it immediately. In that case, both you and your spouse should have 15- to 20-year level term policies of 10 to 12 times your individual incomes.

And never buy anything except level term life insurance. The reason? That covers you until you’re out of debt—should a spouse bring some into the picture—and the two of you have so much cash piled up that you don’t need to pay for a life insurance policy anymore. It’s called being self-insured, and that’s a great place to be.

Good question, Elizabeth!

— Dave

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” 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.

Dear Dave,

I’ve heard you talk about paying for college for your kids. Why is this a requirement? I’m not trying to shirk my responsibility, but I worked my way through college and so did my parents. My wife and I have talked about paying for their books and maybe rent. Am I missing something here?

— Thomas

Dear Thomas,

First, I don’t believe it’s a requirement that all parents pay for college for their kids. It’s not a moral issue, and you’re not an immoral person if you don’t or can’t do it. I’ve told plenty of single moms, single dads and parents who don’t earn a big income that their kids need to apply for as many scholarships as possible, learn how to work, and choose an inexpensive school if they want to continue their education.

As a parent, one of your biggest jobs is to give your kids a moral compass and the tools they’ll need to succeed in the real world. And one of the keys to being a successful adult is engaging in a lifetime of learning. If the last time you read a book was when you were in high school or college, and you’ve never done training of any other kind since, you’re probably not very successful. Never. Stop. Learning. If I’d stopped learning after getting my bachelor’s degree, do you think I would’ve been able to build Ramsey Solutions? Absolutely not!

Do you see where I’m going with this, Thomas? As an adult, learning is your job. An entire lifetime of learning is your job. And if you can encourage that in your kids with some level of help, financial or otherwise, then it’s your obligation to help them. You can’t expect a 17-year-old to figure it all out. They don’t have the tools yet.

The point is this: You don’t have a moral responsibility to pay for your kids’ college education. You do, however, have a moral responsibility to highlight the importance of knowledge, share what you have, and show them how to get more. If you can’t afford to help with money, do everything else you can. There are plenty of more important things than cash. If you want to help financially, that’s fine too.

Just don’t use debt to make it happen!

— Dave

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” 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 the company Ramsey Solutions.

Dear Dave,

Is there any flexibility in your rule about not spending more than 25% of your take-home pay on rent or monthly mortgage payments? I live downtown in Washington, D.C., and I’m finding it’s pretty hard to do here. I make about $90,000 a year, but I’m spending a little over $2,000 a month in rent. Rent is my largest expense by far, and I don’t spend a lot of other money, so I’m still able to save a little and do other things. Can you give me your opinion about this approach?

— Tanner

Dear Tanner,

True, I advise people to spend no more than 25% of their take-home pay on housing. Math still works in every city and state in the country. You don’t get a pass on math just because you live in Washington, D.C., even though Congress and a lot of other people there think you do.

But there’s really nothing magical about 25%. The purpose behind it is, I don’t want you to be house poor. If you find yourself still able to save and invest because you keep other financial aspects of your lifestyle so low, then you’re okay. The problem with most people starts when they’ve got a high cost of housing, and those payments put a real squeeze on their budgets. It doesn’t leave them enough room to save up to buy the next car, so that car becomes debt. The same thing happens with Christmas and vacations and everything else. They don’t have enough extra money to save for things because a huge chunk of their income is flying out the door every month wrapped up in rent or a house payment.

Now, you’re telling me your situation works for you because you’ve made room in your budget and live a very frugal lifestyle by choice. That’s cool. I’m not mad at you about that. But here’s the thing: Whatever you spend on rent disappears. And the more money you burn, the less you’ve got on hand for other things.

I’m not exactly sure how you adjust that in your situation. Maybe you move outside the city and commute, or perhaps you add a roommate into the equation. Or, maybe you’re fine with how things are and that’s the way you want to live. That’s okay too. But my reasoning behind the 25% figure—which is actually more of a guideline than a rule—is so you don’t become house poor. I want you to be able to save, invest and give generously. Plus, I want you to own your own home one day. 

And you won’t be able to do that if everything you make is going toward big payments!

— Dave

Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” 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 the company Ramsey Solutions.

Dear Dave,

My husband recently opened his own commercial painting company. We know he will have three months or so every year when he’s making very little, if any, income. We also started following your plan recently, too, and have $1,000 set aside for our starter emergency fund. We were ready to begin paying off all our debt except our home in Baby Step 2, but now he wants to skip that, and move to Baby Step 3 to build a fully funded emergency fund of three to six months of expenses. I think I know why he feels this way, but would you give me your thoughts?

Crystal

Dear Crystal,

Your husband’s excited about the new business. I get that. And in his own way, it sounds like he’s trying to make sure there’s extra money on hand for the down months he may experience as a commercial painter. But I wouldn’t advise this approach, not for his business, and not for your family’s finances.

Baby Step 3 is an emergency fund of three to six months of expenses. The scenario he wants to plan for, however, isn’t an emergency. He knows it’s coming. It’s the same with things like Christmas, birthdays and stuff like that. You know they’re coming, and you even know which months and days. Things like that aren’t emergencies, and they don’t catch anyone by surprise. They’re things you plan for—and budget for—ahead of time.

But the first thing your husband needs to do is re-work his business model. He needs something to do during the down months, so that his income doesn’t dry up completely. Setting money aside in a business for an expected down time is smart, but it’s not a Baby Step 3 issue. It would be a line in the budget where you set money aside because you know something’s coming.

Again, if it’s something predictable, something that happens at the same time every year, it is not an emergency. If you want to budget some household money for the down time, that’s fine. But do you know what would be even smarter? Figuring out a plan for this time, based on his skill set, which will allow him to keep earning money! 

— Dave

Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.

Dear Dave,

My husband and I are having arguments about money where our children are concerned. They are both 16, and I think they should have part-time jobs and be learning the value of work. He feels they’re only young once and wants them to enjoy being teenagers. He also gives them money anytime they ask. I want our kids to have fun, too, but this is beginning to cause tension in our relationship. I’d love your advice.

Kaytee

Dear Kaytee,

I understand your concern. I’m sure your husband has a good heart, but by doing this he’s acting like a friend instead of a parent. In the process, he’s allowing them to be nothing but takers and consumers. He’s setting them both up for lifetimes of helplessness and ridiculous expectations without realizing it.

But yes, kids should absolutely learn to work, make money and manage it wisely from an early age. My wife and I gave nice gifts to our kids from time to time, but they also worked and made money for themselves. And the nicer gifts we gave them were for special occasions. Even then we didn’t go crazy with things.

Still, the biggest problem you and your husband are experiencing is a communication breakdown. Your husband should stop being so impulsive, and grow a backbone where the kids are concerned. You’ve recognized this—and you’re right about it—so it’s up to you to take the first step in finding a solution.

Try sitting down with him, just the two of you, and sincerely explaining your feelings. Let him know you love him and how generous he is. But let him know, too, you’re worried this is having a negative impact on your children and why. Talk it out, openly and honestly, and try to agree on some changes together. There’s a middle ground here, but it’s going to take some time and effort from both of you to reach it.

Most of all, it means you two will have to communicate with each other like mature, caring adults, and pull together for the sake of your kids. It might be difficult at first, but it’ll be worth it in the long run. For you and them.

Thanks, Kaytee!

— Dave

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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.

Dear Dave,

I’m a widow, and I retired recently. My husband took care of most of our finances. We never had any debt, but after my husband died and I started learning a little bit more about how money works, I’m concerned too much of it may be invested in CDs. The total nest egg is a little over $1.5 million, with $300,000 of that in CDs. There’s also a $317,000 annuity, a 403(b) and around $900,000 in IRA mutual funds. I want to learn even more about financial matters, so how do you think I should handle things going forward?

Naomi

Dear Naomi,

Well, the CDs (Certificates of Deposit) give you stability, if nothing else. They’re generally considered a safe, low-risk investment, but they don’t really give you the best bang for your bucks. If you’ve had good luck with a variable annuity, that’s fine, too. It sounds like you’ve also been very fortunate with your mutual fund investing. So, with all this money in different areas, you’re definitely diversified.

In my mind, it’s just a matter now of wrapping your arms around it all and developing a deeper understanding of things going forward. I’d urge you to find an investment professional in your area with the heart of a teacher. I’m talking about someone who wants to help people, and is interested in more than just making money off fees or commissions.

It sounds like you understand the value of learning about this stuff, and I’m really impressed by that. It’s a smart and necessary thing. From here on out, every time you see an investment person—whoever it may be—your goal should be to leave the room smarter, and with more financial understanding, than you had before.

Naomi, I’m truly sorry about your husband. But you two did an amazing job with your finances over the years. You’re worth well over $1.5 million, and you have no debt. So, you’re basically set for life.

Be wise, and be careful, Naomi. God bless you.

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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 the company Ramsey Solutions.

Dear Dave,

I graduated from college six years ago with a business degree. Currently, I’m in data analytics making about $40,000 a year and have $155,000 in student loan debt. Do you have any recommendations as far as refinancing my student loans and getting the interest rates and monthly payments down?

Austin

Dear Austin,

I’m not trying to be mean here, but what in the world are you doing in data analytics that pays so poorly? Most of the folks I know in that area make a ton more. And you’re going to need to start making a whole lot more to pay off $155,000 in student loans.

For starters, you shouldn’t be looking at this from a what-can-I-do-to-make-this-manageable perspective. You don’t want to give this Sallie Mae nightmare a haircut, then tell her to sit in the corner all nice and pretty. You want her to leave! Now, there’s nothing inherently wrong with refinancing to get a lower interest rate, or lower payments, if you do it the right way. But in most cases that translates into keeping the debt around forever. You need a better plan.

Instead, let’s shift the main goal from that to paying this thing off as fast as possible. That means big, hairy chunks of payments on the principal. And that’ll probably mean picking up an extra job or two, because right now you’ve got what I call a shovel-to-hole ratio problem. The hole you’re in is a big one—a $155,000 one. And you’re working with a $40,000 shovel. You need a bigger shovel, and a lot of extra work, instead of trying to keep these loans around like they’re pets. What can you do—for a short period of time—that’s legal, moral and will make you the most money the fastest?

On the day job side of things, you may want to consider looking for a position with a different company, Austin. You’re way underpaid if you’re in data analytics and making just $40,000 a year.

Good luck!

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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 the company Ramsey Solutions.

— Dave

Dear Dave,

My husband was recently told layoffs are about to happen at his company, and that it might be a good idea for him to start looking for another job. He has found a couple of good possibilities, but the jobs are located 100 miles away. In preparation for a possible move, we spoke with a real estate agent who told us we’d have to remodel our kitchen to sell the house. We’ve got about $4,000 in savings, but the agent said remodeling would take between $2,500 and $3,000. Should we get a second mortgage to pay for the work?

Natalie

Dear Natalie,

For starters, I’d suggest cutting expenses any way you can, living on a strict budget and saving as much cash as possible. But taking out a second mortgage? No! You don’t want that hanging over your heads.

You might want to get another opinion on the kitchen remodel, too. Sure, a new kitchen would be nice, but would it be a make-or-break kind of thing if you decide to sell your home? Probably not, unless it’s in really terrible shape right now. Regardless, there’s no way I’d go into debt to make this happen. I mean, your house isn’t even on the market yet. There’s no reason to fix up a house that’s not for sale, especially when you’ve got just $4,000 to your names.

My advice is to wait and see how the whole job situation plays out before making any big decisions. Then if you end up selling the house and moving, you might take $500 or so from savings to freshen up the kitchen a little bit.

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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 the company Ramsey Solutions.

Dear Dave,

Should I cash in my 401(k) to pay off my car? I have just enough in the account to pay off the car and free up money in my budget.

Marina

Dear Marina,

If I were in your shoes, and I could pay off the car in 18 months or less, I’d live on rice and beans—plus a very strict monthly budget—and just push through until that car payment was out of my life. If that wasn’t realistic, then I’d take out ads online and in the local paper, and sell the car as fast as possible.

Cashing out your retirement plan to make this happen isn’t a good idea. I love that you want to get rid of your car payment, but if you use your 401(k) they’ll charge you a 10% penalty, plus your tax rate. That means you’ll lose anywhere from 30 to 50 percent of it to the government.

I don’t know about you, Marina, but I think those guys get way too much of our money already!

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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 the company Ramsey Solutions.

Dear Dave,

I bought a house about a year ago. Currently, I have $45,000 sitting in an account with a money manager. I’ve had this account for a little over three years, and the investment hasn’t grown much, if at all. Under the circumstances, and being single, too, would it be better to pull the money out of that investment and put it toward my mortgage?

Johnny

Dear Johnny,

I recommend putting 100% of any non-retirement savings, above your emergency fund, toward paying off your mortgage until the mortgage is paid off. I’d still tell you to pay down the house, even if you were making 20% on your money. Just make sure you’re following the Baby Steps, and you’re already putting 15% of your income into good retirement investments before attacking the house. Paying down your mortgage is not an expenditure that’s just lost money. The cash is sitting there, you’re just banking it in your home and land. And on a side note, with all the craziness in the market over the last three years, you might come to realize breaking even over that time wasn’t so bad after all.

Johnny, the shortest distance between where you are and your first $1 million to $5 million in net worth is getting your house paid off. After that, load 15% to 20% of your income into a serious retirement plan. And by that, I don’t mean playing financial footsie with some little brokerage account. Investing in good, growth stock mutual funds with a proven track record of at least 10 years is a proven way to build wealth the right way.

I’m sure you can find someone on TikTok telling you to do the exact opposite of what I’m suggesting. But you won’t find that kind of advice coming from real millionaires.

— Dave

 * Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” 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 the company Ramsey Solutions.

Dear Dave,

I’ve been struggling for about a year, ever since I made a stupid new-college-graduate decision to finance a car. It’s a 2018 Jeep Compass, and I owe $21,000 on it. The trade-in value is about $11,000, so I really got stung on the sticker price and everything else. I also have $85,000 in student loan debt and around $7,500 on credit cards. The good news is, I make $63,000 at my job, and that should increase to $75,000 by January of next year. My girlfriend and I are renting an apartment and engaged to be married in 2025. How do I clean all this up before then?

Austin

Dear Austin,

Well, the good news is, you have the rest of your life to never make this kind of mistake again. I’m really sorry you’re going through all this, son. What a horrible thing to experience right after college.

So, you’re $10,000 upside down on a vehicle you owe $21,000 on, right? The truth is, you’re kind of stuck. If you’re serious about getting out of this mess and not repeating the same mistakes twice, you’re going to be working like a dog for the next year or two. Right now, you need a serious side job nights and weekends—maybe two. And I’m talking bare-bones living. No vacations, and no eating out for a while. You don’t need to see the inside of a restaurant unless you’re working there. Get what I’m saying? No unnecessary spending. Period. On top of all this, you’ve got to start living on a strict, written monthly budget.

Now, about your fiancée. I get the desire to fix things before you get married. But married people work together on this kind of stuff all the time. Believe it or not, there’s no perfect time to get married. I mean, it sounds like you two have already decided to go there and figured out neither one of you are perfect. That’s just called being human. So, there’s really no reason to wait on tying the knot at this point. And the truth is, the two of you can whip your finances into shape faster and much more efficiently working on it together—as a married couple.

Austin, I want you tear into this debt like your life depends on it. Because guess what, dude? It does!

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of “The Ramsey Show.” He has appeared on “Good Morning America,” “CBS This Morning,” “Today,” 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 the company Ramsey Solutions.

Dear Dave,

My employer offers an employee stock purchase plan at a 15% discount. I’m usually the kind of guy who buys stocks and holds on to them forever. But when it comes to an opportunity like this, should I buy it and wait for a year to sell it, or should I buy it and sell right away?

John

Dear John,

Generally, I don’t recommend buying single stocks at all. Single stocks are way too risky, and a 15% discount is nothing special in this kind of scenario. Virtually every single company out there that has an employee stock option plan offers a 15% discount.

In most situations like this, if you pull up a 52-week chart on the stock’s performance, you’ll find a variance of as much as 15% in those 52 weeks. In other words, you could lose any or all of that discount in one move of the stock. Plus, it’s not like 15% is a big discount to begin with. Fifteen percent off a single stock, considering how volatile they are, is no big deal. But hey, if you love your company that much, they have a great track record, and the stock has a good history, go ahead. Just don’t allow single stocks as a category to make up more than 10% of your net worth.

The core issue here is a lack of diversification. When you put all your eggs in one basket, there’s always some clown twirling the basket. The first time I ran into that was a long time ago with a lady who was 70 years old. She had worked for a large company for 40 years. On top of that, she invested all her 401(k), all her wealth—$800,000 total—in that one company. Well, this company experienced a crisis. It lost nearly half of its value, and her $800,000 was suddenly worth about $400,000. She left herself vulnerable with a high-risk play, John.

I’ll say it again. Don’t bet the farm on one horse, and don’t have more than 10% of your net worth wrapped up in single stocks. Hundreds of research projects have been done that show individuals who buy individual stocks and think they know what they’re doing actually lose money much more often than they make money. 

— Dave

* Dave Ramsey is an eight-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, 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 the company Ramsey Solutions.