Advice on personal finances from popular radio personality, live event speaker, and best-selling author, Dave Ramsey.
Dear Dave, I’m 10 years away from retirement and just now starting to invest. I know you recommend mutual funds and spreading your money evenly across growth, growth and income, aggressive growth, and international. Considering what’s happened with the market recently, should I adopt a more conservative approach? N
Dear N, I don’t think so. I think you just need to enjoy this ride the market’s on right now, because it’s coming back up.
Now, I’m not saying that the market is going to rise dramatically every day. Things just don’t work that way. But overall, is the market coming back up? You bet it is! Don’t you wish you’d invested $1 million back on March 9? If you had, you’d be sitting on about $2 million right now!
The truth is, I don’t know where the bottom is, and neither does anyone else out there. That’s why I keep investing with a steady, long-term mindset, and it’s what I advise you to do, as well! Dave
Dear Dave, What are the areas do you think couples should be in agreement on before marriage? Tommy
Dear Tommy, We’ve worked with several marriage counselors and thousands of couples over the years, and in the process we’ve learned that fights over money and the resulting problems are probably the biggest cause of divorce in North America. That’s why I believe detailed, in-depth pre-marital counseling is an absolute must. I’m not talking about one meeting, a high-five with the preacher as you walk out the door, and everything’s cool. You wouldn’t undertake an important work project or try to run a marathon without adequate preparation, right? So why on earth would you promise yourself to someone else, and enter what is supposed to be a life-long commitment without preparing yourselves?
It’s been our experience that couples have a high probability of having a successful marriage if they can agree in detail on four things before they walk down the aisle: money, religion, kids, and in-laws. When it comes to money find out who is the spender and who’s the saver. Get all your cards out on the table, no secrets allowed, and construct a game plan for your finances. You don’t want to get married only to wake up to a bum who’s irresponsible, won’t work, and spends everything they make!
Next, be in agreement on religion. Statistically speaking, two people from the same faith have a much better chance of making a marriage work. With kids, the big question is do you want them or not? If so, how many and when? Are you going to let them run around like wild Indians, or are you going to make them behave? And when it comes to your future in-laws you really need to learn what you’re getting into. What are they really like, and where are the boundaries when it comes to their influence in your lives?
Everyone has a past and opinions, and all of these issues should be talked about, dealt with, and agreed upon before the rings go on the fingers. Otherwise, you’re liable to get yourselves into a real mess! Dave
Dear Dave, I’ve got auto insurance, but can you tell me what other kinds of insurance are good to have? Chris
Dear Chris, The purpose of insurance is to transfer risk. Specifically, I’m talking about risk that you can’t afford to take. Most people can’t afford to have a heart attack and triple bypass surgery. Having to pay for something like that completely out of pocket would bankrupt just about anyone. That’s why health insurance is a vital part of any good financial plan.
It’s also important to have auto and homeowner’s insurance. If you don’t own a home, make sure you have renter’s insurance instead. Don’t forget about life insurance, either. If you’re married or have kids, you should carry eight to 10 times your yearly income in a good, 15- or 20-year level term life insurance policy. This means if you make $40,000, you should have about $400,000 wrapped up in life insurance.
Long-term disability insurance is vital. The cheapest way to get this is in a group. If you buy it yourself, out on the open market, you’ll find that the rates are based more on your occupation than your age or health. So, if you fly a desk, it’ll be a lot cheaper than if you work with your hands.
And don’t forget long-term care insurance. You need “nursing home insurance” if you’re 60 or older. It will also take care of you in your own home. The statistical probability of needing it before age 60 is about one percent, so wait until then to buy long-term care insurance. This kind of insurance can make sure you get the kind of care you want in your declining years. Plus, it can keep your nest egg with you and your family and out of the hands of the nursing home! Dave
Dear Dave, We’ve been getting on track financially using your plan, but now my husband’s parents wants us to co-sign on a new car. I think it’s a bad idea, and have asked him to not do this. We’re just on Baby Step 2, so any catastrophe would really set us back. What if my husband does this anyway? Do you have any tips on grace, or what do besides the “I told you so” lecture? Genevieve
Dear Genevieve, You’re right about one thing. Co-signing for that car would be a very bad idea.
But I’m not sure this is the time for grace and understanding. I think this is one of those times when you stand in the driveway, and don’t let him leave. Just tell him no! I understand that we’re talking about family, and that makes it more difficult for him. But this guy needs to understand that he’s putting your relationship in jeopardy if he completely goes against your wishes on something that you are adamantly against.
I’m serious about this. If the deal falls through, and there’s a pretty good chance it will, it’s not going to be just a setback or inconvenience for you guys. This kind of thing could potentially bankrupt your family. It could also cause big-time problems between your husband and his parents.
Do you know why banks want co-signers? It’s because they don’t think the people who want the loan will pay the bill! You’re basically being asked to stick your head in the noose so the bank can hang you when they don’t pay up!
Don’t do it, Genevieve. Don’t you ever co-sign for anyone, and don’t let this happen. In the Contemporary English Version of Scripture Proverbs 17:18 reads, “It’s stupid to guarantee someone else’s loan.” That’s not me speaking. That’s God’s word! Dave
Dear Dave, I’m shopping around for a new bank, because my current big bank has gone fee-crazy. They want $15 to tell me my mortgage payoff amount. Besides asking about fees, do you have any other advice when it comes to looking for a good bank? Jim
Dear Jim, I learned to stay away from the mega-banks a long time ago. It seems to me that somewhere along the line they forgot how to treat their customers like human beings.
That’s why I stick with community and regional banks. I love local credit unions, too. These are the kinds of places where you can go in and talk to the branch manager if they go fee-crazy. They have the power to waive fees, or fix situations if something gets out of whack or is just plain stupid! Dave
Dear Dave, I own a moving business, and I have a good, smart employee, who is currently my general manager, and he wants to invest in the company. We’re growing and doing pretty well right now, but we could still use the money. How would you suggest that I structure things? Daniel
Dear Daniel, You’re not going to like my answer, because I wouldn’t do this deal. You’ve got a nice company right now that’s making money and growing. Just be patient and let it grow. Don’t rush things.
If you bring in a partner it’s liable to complicate everything. This person is going to develop a whole new set of opinions on how things should be done. I’ve got a close friend, who is older and wiser than I am, and he’s got a great saying: “The only ship that won’t sail is a partnership.” I tend to agree with that, because when you take on a partner you end up being joined at hip. You’re not just getting the business side of the guy. You’ll be stuck with all the personal baggage and problems that could interfere with the business, too!
Let’s separate this into two issues. On one hand you’ve got a quality employee, and you’d like him to help you carry the load. So, maybe it’s time for you to build your first layer of leadership. That means it’s time to delegate. This guy is obviously responsible and someone you trust. Take it to the next level and develop the relationship even more. You want to be on the same page about everything with him, even to the point that he can finish your sentences and know what you want done in every situation. You could even reward him for this by cutting him in on the profits. That way, you give him the emotional ownership and desire to carry the load with you.
The second issue is all about how to grow, and the word to remember is slowly. Buy used equipment, pay cash for everything, and stay away from debt. You’re probably going to see some good things happen if you just stay calm and run this thing lean and clean. Then, set aside a percentage of your profits each year for additional trucks, new crew members and things like that. You won’t be an overnight success, but you’d rather be the tortoise than the hare. Remember that story? The tortoise wins every time! Dave
Dear Dave, My husband and I are looking at getting a second vehicle. We found one we like, and it’s in great shape, but they’re asking more than we can afford to pay. Do you have any suggestions on how to make a low offer without insulting someone? Angela
Dear Angela, This is a really good question, and I think you’re smart to want to stay on the seller’s good side. You want to be classy and diplomatic. Never point out the bad things about an item someone’s selling just to drive down the price. You’re liable to blow the whole deal right off the bat if you insult their merchandise or insinuate the price is unfair.
What if you try something like this? Tell them it’s a fine vehicle, and their price is fair, but the amount they’re asking is outside your budget. Let them know that you want to work out a deal, and in order for it to fit into your lifestyle, you can only pay a certain amount. You might throw in that a lot of people are selling things right now because of the economy, and you’re just looking for the best deal.
Who knows? Maybe that and letting them know you’re standing there with money in hand will help swing this thing in your favor! Dave
Dear Dave, I have a small business with 17 people in the main office and another 44 mobile techs in the field. We had a merger last year, and although we’ve overcome rivalries and other difficulties, gossip is a huge issue in the office. How can we solve this problem and still maintain morale? Chad
Dear Chad, I have a zero-tolerance policy for gossip. Gossip will absolutely destroy an organization, and most places that have gossip running rampant are just cesspools. I can’t imagine wanting to be a part of a situation like that. Gossip is small-minded, it shuts down everyone involved, and the worst gossip of all is when workers gossip about the person who pays them!
It’s really simple at my place. My team knows they need to go to someone in leadership if they’ve got a problem or something’s bothering them. They know better than to stand around and complain to the receptionist about something someone in another department did or said. Negatives go up, and positives go down. If you’ve got a problem, you take it to someone who can fix the problem.
If I walked into the kind of mess you’re talking about, I’d call a staff meeting, and we’d definitely cut that cancer out. I’d have no problem telling them if they want to keep their jobs they’d better stop the gossip and quit acting like a bunch of teenage drama queens. I’m not talking about being a bully. I’m talking about being clear and blunt about what will and will not be tolerated in your organization.
You may have to be a tough guy for a while and fire a few people. That’s okay, because there are lots of folks out there looking for work who can take their places. But as a result, you’ll be left with people who want to work there, who want to be responsible, mature team members, and a culture that defends itself against gossip! Dave
* For more financial help, please visit daveramsey.com.