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Dave Says May 22 2018

By
Dave Ramsey
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0

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 Ramsey Says February 22 2018

By
Dave Ramsey
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0

Debt and income crisis

Dear Dave,

I received a call the other day from a company saying it could negotiate the balance on my credit cards to a lesser amount. The caller also said they could get me a zero-percent interest rate until the debts were paid off, and then the accounts would be closed. I’m kind of starting over again financially, because I sold a company I had run for almost 15 years, then got into real estate and lost almost everything. I’m making just enough to squeeze by, and my credit card debt totals $40,000. Would this be a good idea?

Bill

Dear Bill,

No, this is not a good idea. You’re looking at two major problems with a company such as this one. One, they will absolutely destroy whatever credit you may have. Their plan is to take your cash, and spend some time beating down the credit card companies until they agree to accept a lesser amount. Then, they use your cash to settle loans you will have — by that time —defaulted on. This will put you in a situation very similar to if you had filed Chapter 13 bankruptcy. Stay away from these people.

You have an income crisis, in addition to a debt crisis, at this point. For starters, I want you to start living on a tight, written, monthly budget. I’m talking rice and beans, no vacations, and no eating out until you pay off this debt. Where your income is concerned, maybe you should consider getting back into the kind of business you ran previously for a while. Look for a managerial or supervisory position in that area, at least until you’re able to get back on your feet and save some cash.

Finally, cut up the credit cards, close the accounts, and put as much money as you can spare toward paying off that debt using the debt snowball system. Never go back into debt again!

—Dave

Pay off house first?

Dear Dave,

My husband and I are in our forties. We have no children, and we bring home $95,000 a year combined. We’re also debt-free except for our home. We owe just $10,000 on the house, and can take care of that in a few months. Would it be okay to rearrange the Baby Steps a bit, and pay off our home before getting serious about saving for retirement?

Nan

Dear Nan,

I don’t usually give folks any wiggle room when it comes to sticking with the proper order of the Baby Steps. But if you’re that close to being completely debt-free, I don’t see anything wrong with paying off the house first.

Most people I talk to still have anywhere from $100,000 to $300,000 left on their mortgages. This is a little bit different story, however, and you two are obviously managing your money well.

Knock out that mortgage, and start pouring at least 15 percent of your income intoretirement. You’re going to love the feeling — and the freedom — that comes with being completely debt-free!

—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.

Starting off on the right path together

By
Dave Ramsey
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0

Dear Dave,

I’m getting married next summer. My fiancé and I are in agreement about how to handle money, and we both follow your plan. Do you recommend pre-marital counseling? If so, what do you feel are some of the important areas of agreement for couples before they get married?

Allison

Dear Allison,

Congratulations! I’m glad you’re both on the same page with your finances, too.

I’ve worked with thousands of couples and numerous marriage counselors over the years. In that time, I’ve learned fights over money—and the resulting problems from those disagreements—are probably the biggest cause of divorce in America. In my opinion, in-depth pre-marital counseling is an absolute must. The idea of entering into something that’s supposed to be a lifelong commitment, without thoroughly addressing all the issues—and potential issues—is a really bad idea.

With that said, it’s been my experience that couples have a high probability of a successful marriage if they agree on four things, in detail, before the big day—kids, money, religion, and in-laws. With kids, the big question is do you want them? If so, how many and when? Are you going to let them run wild, or are you going to provide structure and make them behave?

When it comes to money, something it sounds like you two are already in agreement on, get all your cards out on the table, and construct an intelligent game plan for your finances that you both agree on. Staying away from debt, living on a written, monthly budget, and saving for the future are important parts of this. 

Also, be in agreement on religion. Statistically speaking, two people from the same faith have a better chance of making a marriage work. And finally, when it comes to your future in-laws, you need to learn who they are and what you’re getting into. What are they really like? What are the boundaries when it comes to their influence on your lives?

All these topics should be discussed at length, dealt with, and agreed upon before the rings are exchanged. God bless you two, Allison!

—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 16 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Ramsey Says November 29 2018

By
Dave Ramsey
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0

Do what’s best for you

Dear Dave,

I’ll be graduating from college with no debt in a couple of weeks, and I have a good job waiting for me in January. During the last few years, I’ve managed to save almost $25,000 from my part-time jobs while in school. My car is pretty beaten up and old, so I’ve been shopping at a couple of car dealerships recently. Every time I talk to a salesperson, they tell me I should finance something new instead of paying cash for a used car. What should I do?

Ethan

Dear Ethan,

I hope you’ll keep one very important thing in mind. This is your purchase, not theirs. The only reason they want you to finance something is so they’ll make a lot more money off the deal. Forget what they want. You need to do what’s best for you.

You’ve been a hard-working, smart guy over the last few years. The fact that you’ve been able to save nearly $25,000 is proof of that. I don’t think you want to throw a big chunk of your savings—or your new income—into something that’s going to go down in value like a rock. New cars lose about 60 percent of their value during the first four years of ownership. That means a $28,000 car would be worth around $11,000 after that period. That’s not a smart investment.

If I were you, I’d shop around and pay cash for a nice, slightly used $10,000 car. You can get a great automobile for that kind of money, plus you’ll still have the majority of your savings.

Congratulations, young man. You’ve done a great job!

—Dave

Retirement contributions

Dear Dave,

As part of your Baby Steps plan, you always advise people to put 15 percent of their income toward retirement. Would you explain the details of this, please?

Mallory

Dear Mallory,

For starters, Baby Step 4 of my plan involves saving 15 percent of your gross annual pay for retirement. You don’t have to be a complete nerd about this figure. I mean, you probably won’t end up in the poor house if you set aside 12 to 14 percent. The bottom line is you should be able to save $7,500 a year if you make $50,000 annually. That’s just a little over $600 a month.

However, the only way you can do this is by giving up stupid things like credit cards and car payments. When you get out of debt, it’s easy to set aside an emergency fund of three to six months of expenses—which is Baby Step 3—and start throwing 15 percent at retirement during Baby Step 4.

Did you know you can retire a millionaire if you save 15 percent of a $50,000 a year income, and invest it in good growth stock mutual funds starting at age 30? Sounds worth it to me!

—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 600 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

By
Dave Ramsey
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0

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

By
Dave Ramsey
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0

The zero-based budget

Dear Dave,

I have a good job and make pretty good money, but I’m tired of always worrying about my finances and being strapped for cash at the end of the month. I’ve heard you talk about getting out of debt and living on a zero-based budget, but what exactly is a zero-based budget?

Edward

Dear Edward,

The concept of a zero-based budget is simple: income minus outgo equals zero. If you bring home $4,000 a month, you want everything you spend, save, give and invest to equal $4,000. That way, you know where every one of your dollars is going. Not knowing where the money’s going is what kills lots of people’s financial dreams. They think they know how much they’re spending and where it’s going, but they really don’t.

Here’s how you do it. List all your income sources for the month. Your income should include paychecks, small-business income, side jobs, residual income, child support and so on. If it’s money that comes into your household’s bank account, write it down and add it up.

Next, list every single expense you have each month. Rent, food, cable, phones and everything in between. Your expenses vary from one month to the next, and this is why you make a new budget each month. Your giving budget might be high in December when Christmas rolls around. The car budget will spike during months when you pay insurance or renew your tags. Focus on one month at a time.

Now, subtract your expenses from your income. Ideally, this number will be zero. It might take a few months of practice, so don’t worry if it doesn’t balance out immediately. If it doesn’t, it just means you need to do something to bring one of the numbers up, the other one down—or both. If you’re spending more than you make, you need to make some cuts in your spending. If you need to generate more money, get apart-time job or sell a bunch of stuff.

The deal with a zero-based budget is this: every dollar must have a name. That means every dollar has a designated job to do. If you fill out every item in your budget and come out $100 ahead—meaning you have nothing for that $100 to do—you haven’t finished your budget. You have to find a job for that $100. It’s your decision what it does, but if you don’t give it a name and purpose, you’ll end up blowing it and wondering where it went.

Good luck, Edward!

* 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. Hehas 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.

Dave Ramsey Says

By
Dave Ramsey
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0

Evaluating insurance needs

Dear Dave,

Last year I got a divorce. I’m 32, a teacher and a single mom. I’m on Baby Step 2 right now, and I was wondering about life insurance. My son is only two, and if something happened to me, he would go to his father. His dad is in good shape financially and responsible with money, so how much life insurance should I have?

Christian

Dear Christian,

Well, you probably don’t need the full 10 to 12 times your income like I recommend for most people. The only dependent you have is also dependent upon his dad. And from what you said, his father seems perfectly able to take care of him.

I’d get a good term life policy equal to the amount that you’d like to supplement your son’s care. The good news is you can get a couple hundred thousand in life insurance at your age for practically nothing.

If you get life insurance, make sure his dad—your ex—is not the beneficiary. The beneficiary should be a family trust, formed upon your death, and the money would go into that trust for the benefit of your child. You set the terms of the trust. It should not be controlled by your ex. In a divorce situation, I would never name someone I’m not willing to be married to the trustee of my money on behalf of my child. 

I’m so glad you’re thinking about these things, Christian. It shows you’re an intentional lady, a fine mom, and a good planner. Those traits will serve you and your son well!  

—Dave

Are utilities included?

Dear Dave,

I just received a formal job offer in law enforcement. I’m debt-free, single, and I’d like to move out of a roommate situation and into my own apartment. I’ll be starting out at $34,000 a year, then moving up to $38,000 after my probationary period. You have a rule that says to make sure rent or house payments are 25% or less of your take home pay. If I can find a place where utilities are included, do they figure into that amount? 

Josh

Dear Josh,

It’s really more of a guideline than a rule. The point of not letting your housing cost eat up more than 25% of your take home pay is to make sure you have money left over for other important things. It’s hard to save and invest for the future when a huge chunk of your money is eaten up by rent or a mortgage payment each month. But no, utilities are not part of the one-fourth of your take home pay guideline.

At this point, it doesn’t sound like you need anything fancy. Try to find a safe, quiet place to call home—somewhere you can relax and decompress when you’re off duty. And thanks for entering law enforcement. A lot of folks are leaving your line of work, and we need good men and women in that profession right now.

—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 16 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Dave Says

By
Dave Ramsey
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0

Protect against inflation?

Dear Dave,

All the talk on the news about inflation is a little scary. Is there any way to protect yourself against it on a day-to-day basis?

Garret

Dear Garret,

When people start talking about inflation, it seems like there are always some who want to start collecting gold, fill every container they own with gasoline and stick their cash under their mattresses. But listen, you can prepare for inflation and address the results without being panicked.

You are still in control of your money, inflation or not. You’ll be able to make sure your money is going toward the right things, while being able to find places where you can cut spending, if you’re living on a written, monthly budget. If you’re noticing the prices of things like food and gas rising in your area, you’ll need to adjust your budget to account for this. That way, you’ll know exactly what you’re working with, and it will help you avoid any nasty surprises.

If you’re really feeling the pinch and want to save even more, look for specific ways to lower your grocery bill or save money on gas. Maybe it’s time you switched to generic brands, or started a carpool into work. If you find great deals on canned food and things you can stock your pantry with—I’m talking about stuff you’ll actually use—go ahead and buy a little extra. Just make sure you’ve budgeted for it before heading to the grocery store. You’ll want to already know exactly what you’re going to spend, so you don’t get swept up into impulse buying.

Like it or not, inflation is a thing. If you plan on retiring one day, it’s pretty much guaranteed that the cost of a loaf of bread, a tank of gas and even a cup of coffee will have gone up by then. The best way to protect yourself against inflation that’s bound to happen is to invest your money—and the sooner the better. But remember, if you still have debt other than your mortgage, and don’t have an emergency fund of three to six months of expenses, you need to take care of those things first!

— 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. Hehas 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.

Dave Says April 5 2018

By
Dave Ramsey
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0

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 8 2018

By
Curtis Plant
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0

Help them help themselves

Dear Dave,

My parents have always been bad with money, and recently they lost their home to foreclosure. They found another place to live, and they both work, but since the foreclosure my dad has been asking me for money on a regular basis. He tries to make me feel guilty, and he calls or asks me to come over to talk about it when my mom isn’t home. He even asked for half of the bonus I received at work the other day. I know they need help, but I’m not sure what to do.

Eli

Dear Eli,

I can tell you love your parents, because you’re looking for the best way to help them. I think your brain knows what to do, but your heart is having a hard time doing it.

The first thing you’re going to have to accept is your father is being very manipulative right now. Put an end to these private meetings and phone calls once and for all. If he wants to talk, make sure he understands it will only happen with your mom in the room.

Second, understand there’s nothing wrong with helping your folks get back on their feet. However, any financial help you give them should be temporary in nature, and it should be a gift. Don’t get involved in giving them money every month just because they raised you. That’s not how this works. When you permanently subsidize someone, you take away their dignity. You also change their status, and compromise their ability to stand on their own two feet.

In return, you should let them know you expect them to work toward changing their financial behaviors with the help of a quality financial counselor — one with the heart of a teacher. It’s often difficult for parents to accept advice and suggestions from their ownchildren, but it’s for their own good. Sit down with them, and gently let them know how much you care, and how much you want better, happier lives for them.

God bless you all, Eli.

—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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