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Dave Ramsey Says March 22 2018

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Two extremes

Dear Dave,

I’m about to graduate from college, and while I’ve been in school my mom has been handling most of my finances. Recently, I discovered she’s been taking my student loan money and spending it on herself. So far, it looks like she’s taken around $12,000, and I have a total of $25,000 in student loan debt. Since I realized this was happening, I’ve been reading your books and learning how to manage my own money. I don’t know how to deal with this situation with her, though. She admits she did wrong, but says she can’t pay it back. Can you help?

Alan

Dear Alan,

I hate hearing this. There’s no easy way to deal with these kinds of situations.

The first thing you need to do is take over complete and total control of all your finances. Shut down any accounts that have her name on them, and anything else financially-related that she can access. I know this sounds harsh, but she has proven she’s just not trustworthy. It’s a hard thing to hear about a parent, but at this point you’ve got to take steps to protect yourself. What she has been doing is theft, and financial child abuse.

One extreme is to press criminal charges. The other extreme is to just forget it, and pay it. In between is a promise from her to repay everything she has taken, but she’s already out of control. That’s a promise that wouldn’t be kept. The problem with prosecuting someone criminally for this type of action — other than the emotional toll, because she’s your mom — is the money’s already gone. It’s doesn’t make them magically have the money to repay you. On top of all this, you’d have a really hard time legally getting the student loans removed from your name due to theft.

Honestly, under the circumstances I think you’re probably going to end up eating this. But sit down, and try to have a calm, clear discussion about what has happened, and why it happened. Let her know first, without a doubt, that you will criminally prosecute her if she ever uses your name to put money into her own pocket again. Second, tell her you’re prepared to forgive her and forget about it — and she pays you back at some point, if she can — if she agrees to get some financial and emotional counseling.

Try to get her some help, and get her under control, Alan. If you don’t, I’m afraid things are only going downhill from here.

—Dave

 

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Says March 29 2018

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Access to my checking account?

Dear Dave,

Will paying my taxes online give the government electronic access to my checking account?

Ashley

Dear Ashley,

If you use your checking account, of course they will have the ability to withdraw that money from your account. I believe I know where you’re going with this question, and I think you may be a little confused about my stance on this sort of thing.

There’s nothing wrong with certain entities having access to your checking account. I use electronic bill pay for utilities, mutual fund contributions, and things like that all the time. The only time I warn people against giving electronic access to their bank accounts is when they’re dealing with collectors over a bad debt. The government — even the IRS — isn’t known for coming in and randomly taking money out of people’s accounts. Collectors, on the other hand, do it all the time.

You’re in a fight when you’re dealing with a debt collector. It’s an adversarial relationship. As a rule, no one in that industry should ever be given electronic access to any of your accounts. There may be a few decent debt collection companies out there, but many of them will lie, cheat, and steal to get your money.

I hope that clears things up, Ashley.

—Dave

Many already know

Dear Dave,

How can I convince my fellow millennials that government isn’t the solution to their problems?

Josh

Dear Josh,

I think you’re proceeding from a false assumption. Many millennials already understand it’s not the government’s job to take care of everyone and provide everything. The problem, I think, is there’s a group of people in every generation that wants someone else to take care of them.

The only thing I can suggest is that you try to be kind to everyone. It does no good to have a political discussion with a political neophyte. If you have friends like this, perhaps you could suggest they work to control and improve the variables in their lives they can actually control and make better — namely themselves.

You can’t control the variable of government, Josh. It’s not going to come to your rescue. It never has.

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven bestselling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Says April 5 2018

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Getting rid of the car

Dear Dave,

How do you sell a vehicle with a lien amount that’s higher than the actual value of the car?

Michael

Dear Michael,

First, you need to find a way to cover the difference between the amount of the lien and what you can get for the car. Let’s say the car is worth $12,000, and you owe $15,000. That would leave you $3,000 short.

The bank holds the title, so unless you give them the payoff amount of $15,000 you’re not getting the title. The easiest and simplest way would be if someone buys the car for $12,000, and you had $3,000 on hand to make up the difference. If you don’t have the money to make up the difference, you could go to a local bank or credit union and borrow the remaining $3,000.

I really hate debt, but being $3,000 in the hole is a lot better than being $15,000 in the hole. Then, you could turn around and quickly pay back the $3,000 you borrowed.

You’d give the total amount owed to the bank, they would give you the title, and you would sign it over to the new owner. Hope this helps!

—Dave

Stop spending completely?

Dear Dave,

My mom and dad are following your advice, and they are working hard to get out of debt. I was wondering, is it okay to buy things while you’re paying off the debt you already have?

Leslie

Dear Leslie,

I’m glad you’re paying attention to the finances around your house. Of course, there are some things you must have. We call these “necessities.” Most things are not necessities, though. If your air conditioning breaks down, or you have car repairs, those are things you must spend money on to fix. Things like new furniture, vacations, and eating at restaurants are not necessities. They’re things you might want, but they’re not necessary — especially when you’re trying to pay off debt.

I always recommend people take a hard look at their priorities, and remember there’s a difference between wanting something and needing something to survive. It can be hard, and it may mean everyone has to go without a few things they want for a while. But if your parents are serious about getting out of debt, they’ll do it. And it really won’t take all that long.

Great question, Leslie!

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Says May 22 2018

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It takes two

Dear Dave,

My husband has an old car that has become a real sticking point between us. He bought it for $2,400, and it needs about $4,000 in repairs and restoration. Together, we bring home $50,000 a year, and I feel like this car is interfering with our ability to save money and pay off $35,000 in debt. We already have two decent cars we drive to work, so what should I do about this?

Stacy

Dear Stacy,

There are lots of guys out there who like shiny toys — especially cars. I get it, because I’m one of them. But these kinds of things are luxuries, and stuff like this should wait until the household and finances are in order. The family should always come first.

Dumping money into this while you two are struggling financially doesn’t make sense. On top of that, it’s causing problems between you two on a deeper level. I’m sure your husband isn’t a bad guy, so try sitting down with him and explaining how it makes you feel. Let him know what it’s doing to your finances and your marriage. You might even write the financial side down, so he can see exactly what kind of shape you two are in and where the money is going.

Once you do this in a kind, but concerned, manner, it may be a real eye-opener for him. On top of that, you might consider giving him a little incentive to get on board with the idea of getting your finances in order. Suggest that once the debt is gone, and you’ve got some savings in place, there might be a little extra cash on hand to help get that car up and running.

Good luck, Stacy!

—Dave

Postpone the marriage?

Dear Dave,

My fiancé and I are planning to be married in less than a year. We’ve both been through your class at church, and the other night we started wondering if we should wait to have the wedding until we’re both completely debt-free. Would you give us your opinion?

Michelle

Dear Michelle,

Congratulations! I hope you two will have long and happy lives together.

To answer your question, I don’t think there’s a reason to wait. When two people know they really love each other, they should get married whenever they feel in their hearts the time is right.

At this point, you shouldn’t be thinking about money as anything except an indicator of where you’re going. It doesn’t matter who got into debt or how, because everyone makes mistakes. But if you’re both serious about getting out of debt, living on less than you make, and are in agreement about how the dollars are going to be handled, then — where money is concerned — you’re ready to be married.

Many relationship experts say if a couple can agree on four important things — kids, money, religion, and how to handle the in-laws — they have a great statistical chance of a happy marriage. I believe this, too. And make sure you meet with your pastor for some good, pre-marital counseling before the big day. With all this going for you, I think you two will be okay.

God bless you both!

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Says June 7 2018

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Take care of the basics

Dear Dave,

I just graduated from college, and I’ll be starting my first real job soon. What can young adults, who are just getting started, do to avoid money problems now and in the future?

Ben

Dear Ben,

Congratulations! I’m glad you realize the importance of being responsible with your money and planning for things down the road.

There are three or four important things a recent college graduate — or anyone, really — can do to make the most of their money and protect themselves financially. The first is to always live on budget. When you write down a budget on paper, and give every dollar a name before the month begins, it helps you know what your money is doing instead of leaving you in a situation where you’re wondering where it went.

Two more important practices are saving money and staying out of debt. Your income is your biggest wealth-building tool. When you’re saddled with debt, your money goes to creditors instead of into your pocket. Saving money prepares you for all the things life will throw at you — both good and bad.

One more thing I’d include is investing. I know you’re young, but you still need to think about life after retirement. If you start investing just a little bit each month now in good mutual funds, you could easily retire a millionaire.

These are all very simple, basic things, Ben. But they’ll make a huge difference in your financial situation now and in the years to come!

—Dave

Creativity is the key

Dear Dave,

How do you have a wedding without debt?

Brooklyn

Dear Brooklyn,

It’s pretty simple. To have a wedding without debt you must be creative and think within your budget. In other words, you pay for a wedding with the money you have.

There’s absolutely nothing wrong with a small, inexpensive wedding. Once you realize and understand that fact, and start thinking about things with a budget in mind, you’ll realize you can scrimp and save and still have a great small wedding. Lots of people have beautiful ceremonies, and even small receptions, for well under $1,000.

Sure, you can go into debt by renting the fanciest venue, and buying a $9,000 wedding dress to wear for just a few hours on one day. Or, you can realize it’s not the place and the clothes that make a wedding special. What about an outdoor wedding at a friend or family member’s house? When it comes to a dress you can opt for something simple and inexpensive, or even one that has been worn once, for just a few hundred dollars. If you think that’s awful, let me tell you something that’s worse — going tens of thousands of dollars into debt for an event that lasts just a few hours!

Most people don’t have lavish, expensive weddings, and guess what? Years down the road they’re still happily married, very much in love, and they look back on their wedding as the best day of their lives.

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Ramsey Says March 8 2018

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Layoff insurance?

Some of the people I work with have been buying into a new kind of supplemental insurance that protects against layoffs. It costs about $30 a month per person, and the full payout if you’re laid off is $9,000. It seems to me you would have to be paying in for a long time to see that kind of return, so I wanted to see how you feel about this kind of thing.

Steve

Dear Steve,

Anytime insurance is there for something you could cover yourself, it’s a good idea to stop and remember that every insurance company is still a business. They must cover all the costs of operation, plus make a profit. Believe me, that takes a lot of money.

Statistically speaking, if lots of people cashed in on a policy like this an insurance company would go out of business. We’re talking about only $30 a month to cover $9,000. That alone tells you not many people cash in. It’s gimmick insurance.

On average, you’re losing money when you buy insurance of any kind. Again, on average, over the scope of your lifetime you’d be better off simply saving money and self-insuring against things like this. The only things I recommend buying insurance for are things you can’t afford to cover personally. But you can afford to cover a layoff by saving an emergency fund of three to six months of expenses.

If I’m in your shoes, Steve, I’m not buying that stuff.

—Dave

Dear Dave,

Keep it in your own pocket!

I just filed taxes, and it looks like I’ll get a pretty big refund this year. A friend of mine told me I should adjust my withholding, so I don’t get a refund. This seems pretty dumb to me. Why would I change my withholdings when I’m getting money back?

James

Dear James,

The only reason you’re getting a refund is because you had too much taken out of your paychecks in 2017.

Let’s say your refund is $3,500. Basically, you loaned the government $3,500 of your own money, interest-free. A refund isn’t a gift or reward, James. It’s your own cash that you get back because you paid in too much during the previous year. In your case, that adds up to almost $300 a month!

Instead of loaning the government money that you worked hard to earn, wouldn’t it be a better idea to keep it in your own pocket?

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

 

Dave Says June 14 2018

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No obligation here

Dear Dave,

My father died recently. He walked out of my life 25 years ago when I was a teenager, and he never wanted anything to do with me after that. His brothers, who have already paid for some of his final expenses, asked if I wanted to pay to have his body cremated. They didn’t ask for money, they just offered it as a chance to be part of things. I’m in good shape financially, and I could easily afford the cost. Morally, I wonder if I have a responsibility to help with things. Do you feel I’m obligated in any way?

Julie

Dear Julie,

I’m sorry for your loss. I’m sorry, too, about what happened with your father. I can’t imagine the mixed emotions you must have in your heart.

When someone asks me a question like this, I try to put myself in their shoes. Under the circumstances, I don’t think you have any obligation whatsoever — morally or legally — to help pay for anything. If you want to help, and you can afford to do so, then follow your heart. At the same time, I don’t think you should lose one wink of sleep over this if you decide not to contribute.

Twenty-five years is long, long time. I don’t know your dad, and I have no clue about his situation or state of mind back then and in the time since. I can’t imagine doing that to a child of any age, though.

Do what you feel in your heart is best. But in my opinion, there’s no obligation here. God bless you, Julie.

—Dave

Step by step

Dear Dave,

When is the right time to buy a house when someone is following your Baby Steps plan?

Samuel

Dear Samuel,

That’s a good question. Let’s start by going over the first few Baby Steps.

Baby Step 1 is saving $1,000 for a beginner emergency fund. Baby Step 2 is paying off all consumer debt, from smallest to largest, using the debt snowball. Baby Step 3 is where you increase your emergency fund to the point where you have three to six months of expenses set aside.

Once you’ve done all that you can begin saving for a home. I’ll call it Baby Step 3b. For folks looking to buy a house, I advise saving enough money for a down payment of at least 20 percent. I don’t beat people up over mortgage debt, but I do advise them to get a 15-year, fixed rate loan, where the payments are no more than 25 percent of their monthly take-home pay.

Doing it this way may take a little more time, and delay your dream of becoming a homeowner a bit, but buying a house when you’re broke is the quickest way I know to turn something that should be a blessing into a burden!

—Dave

*Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Ramsey Says February 8, 2018

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Quit job for school?

Dear Dave,

My wife and I have $72,000 in debt from student loans and a car loan. We’re trying to pay off our debt using the debt snowball system, and we each make about $45,000 a year. She’s a teacher, and she’s planning on going back to school for her master’s degree, but she’s thinking about quitting her job to do this. She’ll be able to make more money with the additional education, and she would only be unemployed for two years. The degree program will cost us $2,000 out of pocket per semester for two years. Does this sound like a good idea?

Chris

Dear Chris,

There’s no reason for your wife to quit her job to make this happen. Lots of people — especially teachers — hold down their jobs and go back to school to further their education. I’m not sure trying to make it on one income when you’re that deep in debt is a good idea.

Whatever you do, don’t borrow more money to make this happen. Cash flow it, or don’t do it. We’re talking about $8,000 total, and you’ve got $72,000 in debt hanging over your heads already. My advice would be to wait until you’ve got the other debt knocked out, then save up and pay cash for school. You could slow down your debt snowball, and use some of that to pay for school, but I’d hate to see you lose the momentum you have when it comes to getting out of debt.

The choice is yours, but don’t tack on anymore student loan debt. I know her income will go up with a master’s degree, so from that standpoint it’s a good thing to do. But if you do a good thing a dumb way, it ends up being dumb!

—Dave

Pre-planning explained

Dear Dave,

My grandmother passed away a week ago. She was 98, and I know both she and my grandfather had pre-paid for their funerals in 2004. However, there were outstanding costs of $1,500 with the funeral services we had to pay out of pocket, because she had outlived the insurance policy attached to the pre-payment plan. I know you say it’s always better to pre-plan, not pre-pay, for a funeral. Can you refresh my understanding of this?

Rebecca

Dear Rebecca,

Let’s use a round figure, and say the cost of a funeral is $10,000. What would $10,000 grow to 25 years from now if it were invested in a good mutual fund? Now, juxtapose that number with the increase in the cost of a funeral over that time. The average inflation rate of consumer-purchased items is around four percent. So, the cost of funerals, on average, has risen about four percent a year. By comparison, you could’ve invested that money, and it would’ve grown at 10 or 12 percent in a good mutual fund.

Now understand, I’m not knocking folks who are in the funeral business. But lots of businesses that provide these services realize more margin in selling pre-paid policies than they do in caskets. In other words, they don’t make as much money selling the casket as they do selling a pre-paid policy on the casket.

Do you understand my reasoning? If we knew the exact date she pre-paid, and how much she pre-paid, that figure invested in a good mutual fund would be a whole lot more than the cost of a reasonable funeral. It’s the same principle behind the reason I advise folks to not pre-pay college, or just about anything else, that’s likely far into the future. The money you could’ve made on the investment is a lot more than the value of pre-paying. Pre-planning, on the other hand, is a great idea for many things — including funerals.

I’m truly sorry for your loss, Rebecca. God bless you all.

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Ramsey Says Column: “Is Rent to Own OK?”

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Is Rent to Own OK?

Dear Dave,

Is it okay to buy something using a rent-to-own plan?

Josh

Dear Josh,

I advise against rent-to-own deals. Rent-to-own places get people in the door with promises of low monthly or weekly payments. But when it comes to rent-to-own furniture, washer and dryer sets, and that kind of thing, you’ll end up paying much, much more than if you saved up and bought item outright. The amount you’ll pay out of pocket is even more ridiculous if you compare it to buying the same item, slightly used, somewhere else.

I don’t recommend rent-to-own scenarios when it comes to buying a home, either. Most of those offerings are listed at full retail price and then some. Plus, the contracts are tilted toward the seller’s side of the equation. And very few people who sign a rent-to-own home deal follow through and become homeowners.

When it comes to real estate deals, the only thing I would consider — other than an outright cash purchase — is leasing with an option to buy. That’s different than rent-to-own, because in a rent-to-own situation you’ve committed to purchase. On a lease with an option to buy deal, you have the right to purchase, but not the obligation.

Josh, most of the people who use rent-to-own deals are not in good financial shape. They’re deeply in debt, and they have no money. Rent-to-own ensures they’ll stay there.

—Dave

Disability insurance elimination period?

Dear Dave,

I’m looking at long-term disability insurance policies. What does the term “elimination period” mean?

Glen

Dear Glen,

The elimination period is, by definition, the time from the point you’re declared disabled by a doctor until you begin receiving payments from the insurance company. If you have a 90-day elimination period, it will be about that long from the time you’re officially declared disabled until you see your first check.

I recommend 90- to 180-day elimination periods, depending on what kind of financial shape you’re in, and how much money you have stashed away in savings, investments, and your emergency fund. If you have a fully-loaded emergency fund of three to six months of expenses — and you have little or no debt, plus other money stashed away — you should be able to carry a policy with a longer elimination period.

And remember, the longer the elimination period, the lower your premiums will be. Hope this helps, Glen!

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Ramsey Says February 15 2018

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Your retirement, your money

Dear Dave,

I’ve been following your plan, and I’m ready to start investing. Do employer contributions count toward the 15 percent you recommend putting into retirement?

Brenda

Dear Brenda,

Investing 15 percent of your income in retirement accounts is Baby Step 4 of my plan. That means you’ve already paid off all your debt, except for your home, and you’ve increased your $1,000 beginner’s emergency fund to a fully-funded emergency fund of three to six months of expenses. Way to go!

I want you to control your destiny, so employer contributions do not count toward the 15 percent I recommend setting aside for retirement. The first thing you should put money into is a matching retirement account. If you’ve got access to a 401(k) — and your employer offers a match — you should do that up to the match before anything else.

It’s nice if your company will match up to a certain point, but chances are that will still mean you’ve got some work to do. To make up the remainder, you could look at a Roth IRA. Then if the Roth, plus what you invested previously to get the match doesn’t equal 15 percent, you could see about a 403(b) or go back to your 401(k) to complete the 15 percent.

You’re doing great, Brenda. Keep up the good work!

—Dave

Precisely detailed

Dear Dave,

My mother wants everything, except for her home, left to my brother and I when she dies. She would like her long-time boyfriend to have her house. We don’t have a problem with this, but it has not been written into her will. Her mind is still sound, so does she need to officially update the will?

Dawn

Dear Dawn,

Yes, the will needs to be changed to reflect her wishes where the house is concerned. Since she’s still able to make decisions independently, the will should be legally updated to reflectexactly what she wants to have happen with every piece of her estate.

It’s fine if she wants to give her boyfriend the house. It’s your mom’s will, and her estate, so she can do pretty much whatever she wants. She could also leave what’s called a life estate that says her boyfriend gets use of the home while he’s alive. Technically, in this kind of situation the house would be left to you, but he would legally have use of it during his life. Upon his death, the home could then revert to you or your brother.

—Dave

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

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