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Dave Ramsey Says November 15, 2018

By
Dave Ramsey
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Home warranties?

Dear Dave,

Are home warranties a waste of money if someone has been following your plan and already has six months of expenses set aside in an emergency fund, plus home insurance?

Andrea

Dear Andrea,

Home warranties are a waste of money even if you don’t have quite that

much set aside in an emergency fund. I recommend an emergency fund of three to six months of expenses to cover the unexpected things that life will throw at you. This amount of cash, sitting in a good money market account with check writing privileges, will give you easy access in the event of a financial emergency.

I don’t recommend extended warranties of any kind. They’re just not a good deal. You’re better off to self-insure against things breaking down, and putting what would have been profit and marketing dollars for the extended warranty company in your own pocket!

—Dave

Put retirement on hold temporarily

Dear Dave,

Should I stop making contributions to my 401(k) account for a year in order to save up an emergency fund? Thanks to you, I’m 33 and debt-free.

Blake
Dear Blake,

Congratulations on being debt-free at such a young age! I appreciate the credit, but the truth is I just pointed you in the right direction. You made the sacrifices and did all the hard work. I’m really proud of you!

Yes, my advice is to temporarily stop making contributions to your 401(k) until you save up an emergency fund of three to six months of expenses. It shouldn’t take a year, though, to set aside an emergency fund if you’re debt-free and making decent money at your job. Just make it part of your monthly budget plan, and get that emergency fund set up in a few months.

Here’s the way I look at it. If you don’t have an emergency fund, but you’re contributing to a 401(k), there’s a good chance you’ll end up cashing out your 401(k) if something happens that leaves you with a large, unexpected bill. When you cash out a 401(k) early, you get hit with a penalty plus your tax rate. That’s not a good plan!
And that’s just one of the reasons I tell people to have an emergency fund in place before they start investing.

—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 Says April 8, 2020

By
Dave Ramsey
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0

Responsibilities come first

Dear Dave,

My husband runs a small business that has never done very well. We have three kids, and I make $55,000 annually in my job. Part of what I make has been going into the business for over a year to help keep it afloat, and we don’t have a lot of money in savings. What do you think we should do?

Stephanie

Dear Stephanie,

If you’re putting other money into a business account, that’s a pretty good sign you’re not making money in the business. You and your husband need to sit down together, and do a household budget and a profit and loss statement on the business. You’ve got to get on the same page financially.

Put all his business expenses on the profit and loss statement in detail, and write out what it would take for him to break even each month.  But honestly, with everything that’s been going on with your finances, if he’s not at least breaking even at this point, then it’s time for him to do something else for a living full-time.

I’m an entrepreneur and business owner. Trust me, I totally understand the allure and excitement that goes with running your own business. But your own household and its immediate financial responsibilities come first. The only money that should go into the business account is income the business creates.

—Dave

No free passes

Dear Dave,

I own a small business, and recently a relative asked for a job with the company. I hate to say this, but I’ve got reservations about hiring her. She’s basically a good kid, but not the most reliable person in the world. Do you have any advice on how to handle a situation like this?

Bill

Dear Bill,

As an entrepreneur, you have the right and responsibility to do what’s best for your company. That means you shouldn’t hire anyone who isn’t a good fit—even a relative.

If a relative is qualified, and the kind of person who understands they’ll have to bring it every single day, performing at a level equal to or above your other team members, that can be a special and rewarding thing. But if that relative is the kind of person who expects special treatment or is a problem child, that kind of situation can be a nightmare for you, your company, and the whole family.

Would you hire this person because they’d make a good team member? Would you hire this person if they weren’t part of the family? If the answer to either of these questions is no, don’t hire them. It’s as simple as that.

The bottom line is you have to do what’s best for your business, your immediate family, and your team.

—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.

5 ways to hit reset on your financial goals

By
Dave Ramsey
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By Rachel Cruz

Summer is coming to an end, which means we are more than halfway through the year. What about those resolutions you made for 2018? If you’re like most people, they probably went out the window during summer vacations. We’ve all been there!

With the holidays right around the corner, now is the perfect time to hit reset on your financial goals. Before you know it, you’ll be busy booking holiday travel plans, buying gifts for loved ones and enjoying other festivities.

No matter how you’re doing, you have plenty of time to get back on track. Here are a few ways to reach your financial goals before 2018 comes to an end:

Make some adjustments

Maybe your New Year’s resolutions weren’t realistic, or you had something pop up that drained your emergency fund and slowed you down. Life happens, and it’s okay to adjust your goals. Look at where you are financially today and decide where you want to be by the end of the year. Don’t be afraid to set new goals for yourself, too. You can start making progress toward your future today. Just make sure you factor in the amount of time left in the year as you reset your goals to ensure they’re attainable.

Get back to budgeting

A budget is the most important thing when it comes to winning with money. If you don’t tell your money where to go, you’ll wonder where it went! Assess how you’ve spent your money over the past few months. Look for areas where you can cut back (dining out, groceries, new clothes), and put that money toward your goals. Trust me, you’ll feel less stressed.

Plan ahead

It’s September, which means we’ll be decking the halls before you know it. At this point, you can count how many paychecks you have left until the holidays. The last thing you want to do is spend money you don’t have. In 2017, roughly 74 percent of Americans said they failed to budget properly for the holidays and racked up an average of $1,054 in debt. Plan ahead by adding a line item to your budget for holiday spending. Aside from gifts, don’t forget to factor in travel expenses, charitable giving, and parties. Start setting this money aside now so you can enjoy the holiday season guilt-free.

Stay motivated by tracking your progress

You’ve got your budget, so now you just have to make sure that you stick to it and stay motivated. Tracking your progress can be one of the most helpful ways to do this. When you can visualize your progress, you’ll be excited by those quick wins, you’ll be less tempted to spend what you don’t have, and you’ll be motivated to keep going. I’ve created a free goal tracker that you can download at www.rachelcruze.com to make this part easy and fun!

Focus on what matters

Sometimes we want things so badly they start to feel more like needs. Do you really need the newest iPhone? Do you really need to replace your outdated computer? These things are nice to have, but they’re not must-haves. With social media today, keeping up with the Joneses is harder than ever. And who would want to anyway? Don’t compare your life to someone else’s highlight reel. Focus on your goals and the things that really matter in life.

You don’t have to wait for a new year to set new goals, or make progress toward the goals you’ve already set. In order to win with your money later, you must be intentional today!

 

 

About Rachel Cruze:

As a #1 New York Times best-selling author and host of The Rachel Cruze Show, Rachel helps people learn the proper ways to handle money and stay out of debt. She’s authored three best-selling books, including Love Your Life, Not Theirs and Smart Money Smart Kids, which she co-wrote with her father, Dave Ramsey. You can follow Cruze on Twitter and Instagram at @RachelCruze and online at rachelcruze.com,youtube.com/rachelcruze or facebook.com/rachelramseycruze.

Dave Ramsey Says

By
Dave Ramsey
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0

Budgeting for car repair costs

Dear Dave,

I am following your plan, and recently became debt-free, but I have a question. When doing a monthly budget, should I figure in a specific category for car repairs and maintenance, or just use my emergency fund?

Ashleigh

Dear Ashleigh,

Congratulations on becoming debt-free! You know, new cars, old cars and in-between cars all have one thing in common — they’ll need repairs at some point. Fixing your car is just a basic part of car ownership, and something every car owner should be prepared for.

When life happens, to your vehicle or anything else, an emergency fund acts like an airbag. Only instead of keeping your face from hitting the dashboard, it keeps your finances from getting smashed up. When it comes to car repair costs, I advise creating a sinking fund in your budget. A sinking fund is a special place in your budget where you save up money for specific, big ticket items — like car repairs.

I know, stuffing money into a sinking fund each month sounds about as enjoyable as waiting in line at the DMV. But look at it this way, if you had a car loan like most people, you’d be putting hundreds toward that debt each month. Instead, you’re one of the smart ones who doesn’t have any debt and can easily create a repair fund for your car by setting aside less than the averagecar payment each month. Even “reliable” cars need repairs and maintenance, and a sinking fund within your budget for this sort of thing means you’re ready to handle virtually any auto issues that pop up.

You know you’ll need to pay for repairs and maintenance. It’s a thing with all cars. And when you know something’s coming, that’s not an emergency fund situation. Great question, Ashleigh!

— 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 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.

Dave Ramsey Says

By
Dave Ramsey
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0

Live like the money isn’t there

Dear Dave,

I’m 24, single, and I make $60,000 a year. I’m also debt-free and live in an apartment, plus I have about $550,000 in a brokerage account that’s made up of 75 percent mutual funds and 25 percent single stocks. The money in the brokerage account was originally an inheritance of $280,000 that has grown since I received it in 2007. Am I putting my money toward the best investment possibilities right now?

Drew

Dear Drew,

You’re in a nice place! I’m glad you’re taking your finances and your future so seriously.

First of all, I don’t play around with single stocks. There’s just too much risk there for me. Since I don’t invest in single stocks, I don’t recommend others do it, either. I look at two things when it comes to investing—real estate and mutual funds.

I always pay cash for income-producing real estate. And when it comes to mutual funds, I invest in good, growth stock mutual funds with a solid track record of at least 10 years. Now, I don’t get mad at people if they want to dabble in single stocks a little, but I wouldn’t recommend having more than 10 percent of your investment portfolio wrapped up in them. The numbers on playing single stocks are just not that good for the individual, and besides that, I don’t like losing money!

If I woke up in your shoes, I’d move the 25 percent you have in single stocks into good mutual funds. And I wouldn’t use a brokerage account. I’d stick with a quality financial advisor, one who has the heart of a teacher. I think you’ll end up doing better with your money in the long haul this way. It might be a little boring, but boring is good when it comes to stuff like this. Exciting means you stand a good chance of losing a lot of money.

You’ve got a good income, especially for a single guy who’s 24, so I’d make those adjustments and live like the inheritance money wasn’t there. Stay away from debt, live on a reasonable budget, and make sure you’re putting 15 percent of your income away for retirement. Then, when it’s time a few years down the road, use some of that inheritance money to pay cash for a nice home.

If you can manage to do all that, the money you inherited—even with buying a home—will likely grow to millions of dollars by the time you’re ready to retire. Pretty cool situation, Drew!   

—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 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 Says

By
Dave Ramsey
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0

A calling or a job?

Dear Dave,

When it comes to your career and profession, how can you tell if you’ve truly found your calling in life?

Tony

Dear Tony,

I don’t think it’s common for most folks to feel like they’ve experienced some kind of grand revelation, and suddenly they know what they’re supposed to do with their lives. Personally, I believe this kind of thing usually starts out as an activity or ideaconnected to something they enjoy and want others to experience. Often, that can grow into a job, and then maybe into a career—or even a business.

I think it takes a lot of time, reflection, insight, and self-evaluation before anything can be termed a calling. I know this is true insome cases, because that’s how it happened with me. I can’t honestly tell you that when I first started on radio, or began formally teaching and writing I knew it was God’s plan for my life. I knew early on I was drawn to it, and felt there was a need for it, but it took a while for me to understand and accept that it was what I was really meant to do.

I hope this helps a little bit, Tony. Just be honest with yourself, think about it, and pray about it a lot, too. God wants what’s best for you, so make sure you include Him in everything. It worked for me. I’ve been doing what I do for nearly three decades now, and I still love it. I’m convinced that it is God’s calling on my life.

—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 June 7 2018

By
Dave Ramsey
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0

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 Says February 4, 2020

By
Dave Ramsey
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0

Tighten up!

Dear Dave,

I’m beginning to think we got in over our heads with our house. My wife and I make about $125,000 a year combined, but we’ve never been able to put anything aside for an emergency fund. Our mortgage payment is 35 percent of our take home pay each month. We have two young children, so we eat out a lot, but we have no debt other than our house. Do you think we should refinance our home?

Jeff

Dear Jeff,

You two are making good money, and you’re debt-free except for your home. You can’t tighten up your budget enough to save up an emergency fund? Stay out of restaurants, dude! There’s no law stating you have to eat out a lot just because there are kids in the house. I mean, you’ve got no emergency fund. That’s a pretty basic thing.

You guys need to get on a written, detailed plan, and start hitting your goals. I’m talking about a strict, monthly budget. Now, I’ll admit your mortgage payment isn’t exactly what I would’ve signed you up for. Your house payments, or rent, should be no more than 25 percent of your monthly take home pay. But your house payment isn’t what’s holding you two back. What’s holding you two back is the fact that you haven’t been willing to tighten up the finances in other areas of your life to offset biting off more than you could chew in terms of a home.

No, I wouldn’t refinance. You’re fairly close where the mortgage payments are concerned, so I think you can make it through this by looking at ways to increase your income and selling stuff you don’t need to build an emergency fund. You two have been smarter than some, but you’re really going to have to buckle down and rearrange your priorities to make this happen!

—Dave

Cash out my Roth IRA?

Dear Dave,

I have around $15,000 in a Roth IRA. I just recently started studying your advice, and I was wondering if it would be a good idea to cash it out and put the money toward debt.

Sarah

Dear Sarah,

I teach people to stop investing temporarily while they attack their debt. So, I wouldn’t add anything to it at this point, but the worst thing you could do is cash it out. If you do, taxes and penalties will steal a huge chunk of that cash. The only time I take money out of a retirement account to pay off debt is to avoid bankruptcy or foreclosure. 

Start working the Baby Steps from the beginning. Baby Step 1 is saving up $1,000 for a starter emergency fund. Baby Step 2 is paying off all debts from smallest to largest, except for your home, using the debt snowball method. This will free up a ton of money! Then you’re ready for Baby Step 3, which is increasing your beginner emergency fund to a fully-loaded emergency fund of three to six months of expenses.

Now you’re ready for Baby Step 4, which is 15 percent of your income going into retirement!

—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.

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