Financial expert and author ("The Total Money Makeover") Dave Ramsey is a featured columnist with SevierCountynews.com. Here's the latest advice from Dave. Should you refinance to get a lower mortgage payment?

Dear Dave,
How do you feel about people refinancing their homes? Is it smart to refinance a house in order to have a lower mortgage payment?
Anonymous

Dear Anonymous,
No, it’s not. But it is smart to refinance a house to get a lower interest rate. By doing this, you pay off the home faster.
Think about this. Right now, with a 15-year fixed rate mortgage and one point paid, you can get an interest rate under four percent. That’s awesome! Let’s say you have a $300,000 mortgage, and you refinance from six percent to four percent. A two percent savings equals $6,000 a year, and that’s $500 a month in interest saved. In my book, that’s worth doing!

So, refinancing definitely makes sense in cases where you’re going to stay in the home a long time and you get a lower interest rate. Good question!

—Dave

Financial expert and author Dave Ramsey is a featured columnist with SevierCountyNews.com. Here's the latest advice from Dave. When should you go ahead and buy that shiny toy?

Dear Dave,
When is it okay to buy toys for the lake—things like boats and jet skis—when following your plan?
Anonymous

Dear Anonymous,
I’m a lake guy, too. So, you’ve hit a soft spot with me on this question. Still, you have to be an adult about these things, and here are a few rules.
First, you should be completely debt free except for your house. Second, you need to have your fully funded emergency fund—that’s three to six months of living expenses—in place. In other words, I want you to have completed the first three Baby Steps. And remember, no matter how shiny and cool it may look, buying a Sea-Doo is not an emergency! Save up and pay cash for your toys.
Remember this rule of thumb when it comes to toys. With the rare exception of collectibles, anything with an engine goes down in value. You should never have more than half of your annual income tied up in the total of all your vehicles. It would be pretty stupid to make $60,000 a year and have $40,000 tied up in cars, boats and other toys. That’s way too much money tied up in things that go down in value the wrong way.
Always make sure your family is well taken care of before you go out buying toys!
— Dave 
 
  
 
Dear Dave,
My wife and I are both active duty Marines. She’s planning to get out in a few months, but I’m staying in for the long haul. You recommend saving 15 percent for retirement, but how does that apply in my case when I’ll be getting a good pension after 20 years?
James

Dear James,
I’d like to see you do both. Just imagine the money you guys would have for retirement with your military pension and a big pile of cash from having saved 15 percent of your income over the years!
Having options is a great thing. Think about all the things you could do down the road if you save for retirement and have your pension in place. You could pay cash for a home, or even open a business when you retire from the military. And these are things you probably wouldn’t be able to do working with just your service pension.
You’ve got a great future if you’ll just keep plugging along and saving, James. Let the military do its thing, and you guys keep pumping 15 percent of your income into Roth IRAs and other pre-tax retirement plans. It’s going to be pretty cool!
— Dave 
  
 
Dear Dave,
What’s the best way to finance a business I want to buy?
Anonymous

Dear Anonymous,
When you borrow money to start a business you’re introducing a huge risk factor into the equation. I don’t borrow money, so I really can’t recommend that you go into debt. Saving up and paying cash is the best way to go.
The only other thing I would consider doing that would lower your risk would be an owner-financed deal. The current owner finances the transaction, and your pay to them is based on the profitability of the business. That way, if there’s no profitability you’re not bankrupt!
Some people will go out and borrow $500,000 or more to start a business. Then, if the business doesn’t do well and you can’t make the payments, you’re bankrupt. There’s really no in-between, and that’s a bad deal!
It’s just a dumb idea to do these “all or nothing” business deals. Even if owning a business is your wildest dream, there’s no point in taking risks like that. It’s just not necessary!
—Dave
* For more financial help please visit daveramsey.com.
 

Financial expert and author Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's the latest advice from Dave. Should you use retirement funds for college tuition?

Dear Dave,
My wife and I are getting close to retirement, and our 36-year old recently moved back in with us. His automotive restoration business went bankrupt, he hasn’t been able to find another job, and he has nowhere else to go. What can we do to help him?
John

Dear John,
You have to define what helping your son really means. In my mind, you haven’t helped him at all if he’s still squatting in your basement five years from now. That’s called being an enabler. But it’s not going to help him, either, if you toss him on the street and say “You’re 36. Be a man!” I think you should formulate a progressive plan somewhere between those two extremes—something that includes a move-out deadline, but will help him regain some dignity.
As part of living with you, I’d require him to do three or four things. One is that he abides by your household rules. If he’s going to live in your home, he should act the way you want him to act. Number two, he needs to be engaged in some kind of regular physical activity. Even if you have to pay for it, you could get a membership at a gym or buy some exercise equipment. Exercise stimulates the mind, and he needs that right now. It’ll also be great for his body. Getting beat up like he’s been can be tough at that age. It can lead to depression if you don’t engage in physical activity and goal setting.
Next, is to think about career steps. He could start with a part-time job to get some money in his pockets. Then, work on a long-term career goal. He knows how to turn a wrench, and he probably likes that kind of work. His mind works spatially, which means he can look at things and figure out how they operate. So, it might be a good idea to move in that direction. It doesn’t even have to be cars. He could learn to work on boats or aircraft.
You don’t want to beat the kid when he’s down, but you don’t want to participate in his sewage, either. Help him clean up his life, and get him out of there as fast as possible. It’s what’s best for everyone!
— Dave
  
 
 
Dear Dave,
We live in Boston, and we’ve got three kids who are almost ready for college. My wife and I make about $114,000 a year combined, and that includes a $34,000 a year pension I receive. Should we use the pension money to pay for their tuition, or should we let them take out student loans?
Geoff

Dear Geoff,
There’s no way I’m going to send anyone into student loan debt, especially when the household income is in the six-figure range!
Now, that assumes the kids choose a college you can afford, but with your income you guys could handle tuition at most state colleges. And that means all the kiddos are going to have to pick a reasonably-priced school if they expect you to foot the bill. We’ve got to use a little common sense here. No champagne taste on a beer pocketbook!
You guys are doing okay, but you can’t afford to send these kids to $30,000 a year schools. All this will be hitting you at about the same time, so I want you to cash flow this thing, and pay as you go along. College is great, but you need to invest your money into something that fits your budget!
— Dave
* For more financial help please visit www.daveramsey.com.

Financial expert and author Dave Ramsey is a featured columnist with SevierCountyNews.com. Here is this week's advice from Dave.

Dear Dave,
How early should I start teaching my kids about money? Also, how do you feel about giving kids an allowance?
Cathy

Dear Cathy,
I think you should start teaching kids about money as early as you start teaching them about sex—which is the first time they show any interest. Make sure you keep it age-appropriate, and don’t over-answer questions when they’re young.

Neither of these things will amount to a one-time talk, because they’re both just parts of life. That means they’re ongoing processes that will last for years. If you have one talk at an early age with your kids about money, then they’re probably not going to remember a lot of it as they get older. If you have just one talk with your kids about sex at an early age, you’re liable to wind up with a bunch of pregnant teenagers!    
To answer your second question, I hate the idea of an allowance for kids, because it makes the whole situation sound like welfare. We put our kids on commission at an early age. They had chores associated with certain dollar amounts, and if they worked, they got paid. If they didn’t work, they didn’t get paid. It was as simple as that. Then, they would split their money between three different envelopes—one for saving, one for spending, and one for giving—and we would teach them to do each one wisely.

Kids need to emotionally connect work to money at a young age. If you don’t teach them four major concepts—spending, saving, giving, and work—you’re going to have major problems by the time they’re 10 years old!
—Dave 
 
 
 
                                                                                                     
 
Dear Dave,
I’ve heard you talk to people about “gazelle intensity.” What exactly does this mean?
Del

Dear Del,
Basically, it means absolutely going crazy and doing whatever it takes for a little while to get out of debt. I’d much rather endure pain or discomfort for a short period of time and get it over with instead of living my whole life floundering around and accomplishing nothing in the process.

Some people probably think I’m using hyperbole when I give people advice on how to get out of debt, but I’m serious about it all. I’ve lived this stuff, man! There were literally stretches of years when we didn’t go on vacation or see the inside of a restaurant. If you want to get out of debt and get control of your money, you’ve got to be serious and intense enough to makes sacrifices on that level for a short period of time. We call it living like no one else, so that later you can live like no one else.

It’s not just dollars and cents we’re talking about here. It’s also about changing behaviors and mindsets. You don’t need to go to Disneyland every year. You don’t need to eat out every weekend. Until you’re willing to make temporary sacrifices like this—and become “gazelle intense” about taking control of yourself and your money—you’re never going to reach your goal of becoming debt-free!
—Dave

* For more financial help, please visit daveramsey.com.

Financial expert and author Dave Ramsey is a featured columnist on SevierCountyNews.com. Here's the latest advice from Dave. Should you use a mortgage payment accelerator plan?

Dear Dave,
How do you feel about mortgage accelerator plans? Can you please explain them?
Doug

Dear Doug,
Basically, there are two types of mortgage accelerator plans floating around out there. First, there’s the old bi-weekly mortgage where you make half of a payment every two weeks. This will drop the length of time you’ll pay on a 30-year mortgage down to about 22 years. Most companies will charge a fee to service these programs, but I think that’s ridiculous. There’s no way I’d pay someone to do this for me.
Think about it. There are 26 two-week periods in a year, and 26 half payments equals 13 whole payments. So, you’re making an extra payment each year. That’s why your mortgage gets paid off early. You can accomplish the same thing by writing a check for the principal only once a year. If you want to get really detailed, you can do the same thing each month by writing a check for one-twelfth of a payment.
The other kind of mortgage accelerator plan out there is a total rip-off. I’m talking about one where some companies will try to sell you a $3,500-piece of software tied in with a home equity line of credit, or HELOC. These things are often called money merge accounts. In this situation, you pay your bills out of the HELOC, and your paychecks are deposited against the HELOC. Then, they’ll apply whatever’s left against your mortgage, and it “magically” pays off your mortgage faster.
The problem is that no matter how many times you move the shell, the pea is still underneath. Whether you use a HELOC or just a yellow pad to make a budget, if you want to make extra principal payments on your first mortgage, you have to live on less than you make. And there’s no way I’m paying some rip-off company $3,500 for the privilege. Talk about stupid! You can do that on your own by making a decision to sit down every month with a pen and a piece of paper and write out your own monthly budget.
Now you know why I’m not a big fan of mortgage accelerator plans you have to buy. Here’s the truth, Doug. There’s no easy, magical formula when it comes to getting out of debt. It takes a lot of hard work and discipline. You can accelerate your own early mortgage payoff by living on less than you make and learning to control the person you see in the mirror every day!
—Dave
 
 
 
Dear Dave,
If I understand your budget plan, we’re supposed to allocate every dollar toward something. If we did that, it would leave our account balance at zero. What do you do if your bank requires you to maintain a minimum balance in your account and charges you a service fee if you don’t?
Kristina

Dear Kristina,
I think you misunderstood my plan. When doing a monthly budget, you should allocate every single dollar of monthly income, not every dollar in your account.
Your monthly budget should be based on income minus outgo. You always want to have a balance of some kind in your accounts. Otherwise, you’ll end up paying a visit to the land of bounced checks, kiddo. And that’s not fun for anyone except the bank, because they’ll charge you for the trip!
—Dave

* For more financial help, please visit www.daveramsey.com.

Financial Straight Talk by Dave Ramsey. For more financial advice, visit www.daveramsey.com

Dear Dave,
My husband was laid off three months ago, and I’m afraid we’re about to lose our home. I’ve been working three part-time jobs to help keep our heads above water, but he says the economy’s bad, and he’s waiting for the “right” job. The bills are piling up, and I don’t know what to do.
Paula

Dear Paula,
 
When a guy loses a job it’s a devastating blow. Many guys are task oriented, and define themselves by what they do rather than who they are. That’s not a good thing.
When I went broke several years ago, I had to re-define myself my own mind. I lost my business, and in many ways I looked at that company as who I was. My identity was suddenly gone. Lots of guys go through that when they lose their jobs, and in the process they can lose the courage to go fight again.
I think you two should sit down with your pastor or a good marriage counselor, and talk through this thing. I also think your husband needs a good friend – someone he admires and respects – to verbally knock him around a little and put the fight back into his spirit. Three months of a guy sitting on his butt in this situation is unacceptable. I don’t want to hear a bunch of stuff about the economy, a career path, or that he’s overqualified. It doesn’t matter if you’re delivering pizzas or mowing yards, you’re never “overqualified” to be a man and take care of your responsibilities!
Sometimes people need a little time to get their heads together when something traumatic happens. I went through some of that, too. There were times when I was just no good to anyone. But at the end of the day I didn’t lose my home because I was sitting around doing nothing. Even when I lost all my confidence and felt like a dog, I still got out there and did stuff to put food on the table.
It’s time for your husband to get out and do something!
— Dave
 
 
 
Dear Dave,
Our son is 27, has two children, and now he’s getting divorced from the woman he’s been married to for seven years. Her parents gave them lots of money throughout their marriage, and now he’s coming to us for money. If we ask what the money is for, he tells us it’s none of our business. We know he’s going through a rough time right now, but we don’t have a lot of money. We’re not sure what to do.
Dee

Dear Dee,
How about just saying no? Then, if he asks why tell him it’s none of his business. 
Seriously, this is grown man we’re talking about. If he’s going to take on the lifestyle and actions of a grown-up he needs to act like one. I understand he’s hurting right now, but he’s acting pretty arrogant for someone who’s running back to mommy and daddy for money!
I think you need to cut off the cash supply before this gets any worse. Instead, you could offer to help with the kids, or let them all stay at your home for a few weeks while he works through this thing and gets his head and his life together. If he’s willing to get into some serious financial counseling, and start becoming accountable for his money, then you might look into helping him money-wise from time to time in the future. But at this point it’s like giving a drunk a drink.
Anyone can make a mistake, Dee. But it’s not your job to fund his arrogance or his irresponsibility!
— Dave
* For more financial help, please visit daveramsey.com.

Financial expert and author ("The Total Money Makeover") Dave Ramsey is a featured columnist with SevierCountyNews.com. Here's this week's financial advice from Dave on getting out of a car lease.

Dear Dave,
My mom filed bankruptcy about five years ago, and I thought that taught her a lesson. She’s on disability now, and makes only $600 a month. On top of all this, she’s piled up about $30,000 in credit card debt again. She’s even paid her utility bills and bought groceries with credit cards. I don’t know what to do.
Barbara

Dear Barbara,
She can’t file bankruptcy again, because it’s still too close to the date of her first filing. It sounds to me like she’s going to have to face up to what she’s done, and make some serious behavior changes. The kind of stuff she’s doing is not only addictive, it’s self-destructive. She’s trading a moment of pleasure for years of pain while that credit card bill grows into a monster!

Personal finance isn’t rocket science. It’s 80 percent behavior, and 20 percent math. Plus, there are plenty of agencies out there that help disabled people find jobs, and help them remain active and productive in the workplace. When it comes to work, disabled doesn’t always mean unable. It’s amazing what people with disabilities can do, but the hard truth is that she’s still going to have to find a way to get her income up and cut her outgoing money way down.
Sit down with her, and try to explain what’s happening and what she’s facing in a kind and loving way. Walk her through the process of making a monthly budget, too. You may run into some resistance, because parents often have a hard time accepting help from their kids. I call this “powdered butt syndrome.” Once someone has powdered your behind, they don’t always want to listen to your advice!
She can turn this thing around, Barbara. But it’s going to take some persistence on your part to help make it happen.
— Dave
 
 
Dear Dave,
I leased a car about two years ago, and I’m just now beginning to realize that it was big mistake. I’m throwing away tons of money. Is there any way to get out of a car lease?
Randy

Dear Randy,
Now you see why I call it “fleecing,” don’t you? Never do a lease! It’s the most expensive way to operate a vehicle.
Call the company and ask for the early buy-out or pay-off amount. Then, compare that figure with the value of the car. If the car is worth $19,000, and the early buy-out is $21,000, you’ll have to scrape together $2,000 to make up the difference.
If you don’t have that kind of cash sitting around, go to your local credit union or bank and get a small loan of $3,000 to $3,500. This will get you out of the “fleece,” and give you some cash left over to buy a little beater to drive for a while.
Get this done, and pay the loan back as quickly as possible. Then, you can start saving up to pay cash for a really good, used car later!
— Dave

* For more financial help, please visit www.daveramsey.com.

Financial expert and author ("The Total Money Makeover") Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's the latest advice from Dave.

Dear Dave,
I have a friend with $30,000 in credit card debt, an $80,000 second mortgage, and a car loan. She makes about $70,000 a year, and is considering using a credit counseling service to help. They say they can negotiate her credit card debt down to almost half of what it is now, but there’s an 18 percent fee attached for their services. What are your feelings about this?
Frank

Dear Frank,
This is a bad idea for several reasons. For one thing, it will virtually destroy her credit with regard to buying a home. Almost every lending institution will look at using a credit counseling service as if she had filed Chapter 13 bankruptcy.
Here’s something else to think about. Some of these “counseling” companies withhold credit card payments until the account is three to six months past due. Then, they contact the lender and negotiate to settle the bad debt. See where I’m going? That’s how they get negotiated discounts on credit card debt. Card companies don’t settle on your debts when your payments are on time.
These services are always a bad idea, and sometimes they’re a complete scam. Some of them will go as far as to request power of attorney. Believe it or not, many people who are in debt are either naïve or desperate enough to sign this control over to them!
Your friend needs to handle this herself, and the best way to do that is by making her money behave, and creating and living on a monthly budget. Tell her to sell some stuff, or pick up an extra job on weekends. It would probably be a good idea to sell that car she’s financing, and find a cheap, little beater to drive around, too. Regardless, she’s got some tough decisions and hard work ahead if she wants to free up her cash flow, and clean up this mess the right way!
— Dave
 
Dear Dave,
A while back I field Chapter 7 bankruptcy. Then, not long ago I saw an article saying the best way to re-establish credit after a bankruptcy is to find a low-limit credit card, make small purchases, then pay it off early each month. I’d like to buy a home in a few years, so what do you think of this advice?
Kim

Dear Kim,
That’s just about the worst advice I’ve ever heard. People file bankruptcy because they got themselves so far into debt they couldn’t get out. If debt has already pushed you into bankruptcy, then don’t you think debt is something you should avoid? Whoever wrote that article is a real bozo!
First of all, don’t worry about re-establishing your credit. If you go three or four years after bankruptcy without borrowing a dime, then you’ll add no new entries to your credit bureau report. This will help show a potential mortgage lender that you learned from your mistakes the first time around. The definition of insanity is doing the same thing over and over and expecting different results. Getting another credit card after all you’ve been through would be really dumb.
You can’t borrow your way out of debt or into wealth, Kim. If you want to see different results you’ll have to change your behavior!

— Dave
* For more financial help, please visit www.daveramsey.com.

Financial expert and author ("The Total Money Makeover") Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's the latest advice from Dave.

Dear Dave,
A friend of mine loaned me some of your books, and even took me to one of your live events. Since then, I’ve been trying to work the Baby Steps, including building my emergency fund and creating a monthly budget. However, I’m having trouble transitioning to living on a budget. I get paid in the middle and end of each month, but my bills are due at different times. Can you help?
Brenda

Dear Brenda,
In your situation, I recommend using a two-column approach when you sit down each month to create your written budget. In it, one column would represent the first of the month, while the other represents the fifteenth. Place the income you’ll receive for each pay period at the top of each column, then work your way down spending every dollar on paper for that pay period, until all the money is gone.
If your cable bill is due on the tenth, then it would go under the first column. If your electric bill is due on the twenty-first, it would go in the second column. Once you’ve got this in place you can adjust the categories where you might have a little more flexibility. A good example of this might be clothing. You can budget for any new clothes you need in the pay period that has the fewest bills.
When you do this, you’re not just spending every dollar on paper before the month begins. You’re also spending every dollar on paper before the pay period arrives!
— Dave

Dear Dave,
I’m a single father with a 14-year-old daughter. I want to teach her to avoid the financial mistakes I’ve made. Do you think I should open a checking account with a debit card for her? I think the practice in dealing with money before she gets out on her own would be good for her.
Paul

Dear Paul,
Getting your daughter a checking account with a debit card is a good idea at some point. But I’d suggest that you first give her a year or two to deal solely with cold, hard cash.
Have her create four envelopes, one each for giving, saving, entertainment, and miscellaneous spending. Then, anytime she earns some money, she can divide it up and put some into each of the envelopes. Once she’s done this for a while and you’re both comfortable with the situation, then you can think about opening a checking account for her.
The problem with giving her a checking account right off the bat is that the money is all lumped together. There’s no division between the concepts of giving, saving, and spending. These are some pretty important things she needs to learn while she’s being educated about money. Also, when the time is right and she can handle the responsibility of a checking account, make sure you work with her every month in balancing her checkbook. Sit down with her, one on one, and help walk her through the process. This will reinforce the idea that it’s a necessary part of handling money properly. After a few months she’ll get the hang of it and be able to do it on her own. And it will also give you peace of mind that she’s taking care of her checking account the right way!
— Dave
* For more financial help, please visit daveramsey.com.

Financial expert Dave Ramsey ("The Total Money Makeover") is a featured columnist for SevierCountyNews.com. Here's the latest advice from Dave.

Dear Dave,
Is it worth the trouble to sell my old car now and buy a hybrid or another car that gets better gas mileage? I’m getting mixed advice from my friends on this issue.
Ted

Dear Ted,
Hybrids are a really big deal now, aren’t they? Lots of people want to get rid of their $10,000 cars and buy these $25,000 cars so they can save on gas. Let’s take a closer look at this.
So, you’re going to spend $15,000 extra to save on gas. Did you ever think about how long it will take to get your money back? Let’s say you go from averaging 15 miles per gallon to 25 miles per gallon, and you drive 100 miles each week. That will save you about $10 a week at recent, average gas prices. That means it would take almost 29 years to get your money back in this deal. Does this make sense to you? It sure doesn’t to me!
Listen, I’m all about saving money on gas. But people have lost their minds if they think it makes sense to go $15,000 into debt—or spend $15,000 cash—to save $10 a week on this kind of deal. The truth is that a lot of people who do this kind of thing aren’t as worried about the environment or saving gas as they are about having that “I’m cool in a hybrid” feeling.
Hybrids are a really new technology and that means they’re going to improve rapidly. You don’t want to buy a first generation hybrid and then have to go through the pain of trying to sell the thing five years from now. Talk about something that’s going to go down in value like a rock!
Now, if you’re driving an $8,000 car that absolutely drinks gas, and you want to sell it and buy some little $8,000 gas sipper, I’m fine with that. But don’t use the gas argument to rationalize buying an expensive new car or even spending a dime more on a different car. Make a lateral move, or better yet a move down in price, and you’ll save money from day one!
— Dave
 
 
 
Dear Dave,
Should you skip vacations when you’re getting out of debt? Also, once you’re debt-free, is there a rule as to what percentage of your income you should use on vacations?
Carl

Dear Carl,
I think you should put vacations on hold while you’re trying to get out of debt. My family and I didn’t go on vacation for nearly 10 years while we were getting out of debt. Why? Because we had work to do! We had bills to pay and kids to feed. That’s just the way it goes sometimes.
I’m not sure that there’s a specific percentage involved on vacation spending. It definitely shouldn’t damage your financial foundation, or put you back into debt once you’ve worked your way out. You don’t touch your emergency fund to go on vacation, and you don’t stop funding your retirement or saving money so the kids can go to college. You just save up, and pay cash!
In most cases, this kind of plan will almost force your vacation spending to be a reasonable percentage of your income.
— Dave

* For more financial help, please visit www.daveramsey.com.

Financial expert and author ("The Total Money Makeover") Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's the latest advice from Dave.

Dear Dave,
What do you think about online bill payments or automatic monthly deductions to pay for everyday bills?
Jay

Dear Jay,
I love them, and I have tons of them. I’ve got mutual funds that automatically tap my checking account, and all of my utilities are set up to be automatically zapped. This way, I never miss the early payment discounts, and I don’t have to worry about payments being late. It’s like automatic discipline!

But never, ever allow anyone you’re fighting with—like a collector if you’re trying to settle a disputed credit card account—to have automatic access to your account. They’ll clean you out! I don’t have a problem with paying for things like your electric bill, water, cable television or investments this way, though. It’s just a good, consistent way to take of business!
—Dave 
 
Dear Dave,
My wife and I have accidental death and dismemberment insurance through our workplace. Do we also need level term life insurance policies?
Anonymous

Dear Anonymous,
You definitely need good level term life insurance policies. You do not need accidental death and dismemberment. Think about it, dude. You’re not more dead if you die by accident. Dead is dead! You need to make sure your family is taken care of in the best way possible, no matter how you die.

Don’t buy gimmick insurance. Stick with 15- to 20-year level term life insurance, and make sure you have coverage that’s separate from anything provided by your employer. You don’t want to suddenly lose your life insurance if you’re diagnosed with something awful like cancer and have to leave your place of work—and your life insurance—behind.

Each one of you needs about 10 times your yearly incomes wrapped up in your policies. That means if you make $40,000 a year, you need a $400,000 level term policy. The idea of life insurance is to take the place of income. If you died, then your wife could invest the $400,000, make 10 percent on that money over time, and replace your income.

Make sure you take care of your family. Term life insurance is very inexpensive. For next to nothing, you can ensure that your family will get a million bucks when you die.
—Dave    
  
 
Dear Dave,
Is a balanced mutual fund a good place to put your emergency fund?
Anonymous

Dear Anonymous,
Absolutely not! You should never put your emergency fund into anything that can go down in value. Also, never put it into anything that will charge you a penalty for early withdrawal, like a CD. Or as I like to call it, a Certificate of Depression.

I recommend putting your emergency fund into a good money market account with check-writing privileges. Your emergency fund is not an investment. It’s insurance, and the money you have sitting in it has one purpose—to protect you, your family, and your stuff when Murphy comes knocking.

That’s one of the reasons an emergency fund is so important. If you don’t have one, and something unexpected happens, you’ll end up borrowing the money from the bank or cashing out your 401(k) to fix things. So don’t worry about investing this money. Just park it, and think of it as an insurance policy against all the junk life will throw at you!

—Dave
* For more financial help, please visit www.daveramsey.com.

Financial expert and author ("The Total Money Makeover") Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's this week's advice from Dave.

Dear Dave,
My wife and I are trying to pay down our debt. We’ve got a long way to go, and it’s pretty scary sometimes. We’ve also started thinking that we’d like to have another child. We’re not getting any younger, but we know this would prolong the time it would take us to get out of debt. Do you think we should wait until we’re out of debt, or until we have most of it paid off?
Holland

Dear Holland,
The only time I tell people to let their financial situation dictate when to have children is when it’s an extreme case. I mean, if you’ve got six kids and you want 20, I’d probably tell you to slow down and get control of your money first. Or, if you’re sitting square in the middle of bankruptcy, it might be a good idea to wait a year or two while you straighten things out and get back on solid ground financially.

If everything else is within reason, and you’re talking about a normal number of kids and a normal income, the idea that children will cause you to go broke is simply not true. It might slow things down a little if you’re trying to get out of debt, but chances are it won’t be anything earth shaking.
Generally speaking, I guess what I’m saying is when God wants you to have a kid, have a kid!
—Dave   
 
 
 
Dear Dave,
I’m 18, and I have a job making $30,000 a year. I’ve also got about $40,000 in stocks and $10,000 in savings. I want to buy a house in the near future. Should I pay cash and buy it outright, or is a 15-year mortgage okay?
Sam

Dear Sam,
I love the idea of paying cash for a house, but I’m even more impressed that you’ve got $50,000 you could put toward a house and a job making $30,000 a year at age 18. Man, you’re really kicking it!

It’s a great time to buy a house. Interest rates are low, and prices are great. But the thing that keeps sticking in my mind is that you’re still just 18 years old. Now, there’s nothing wrong with being 18, but there’s also nothing wrong with waiting a few years and getting a little more life experience under your belt before you saddle up with a mortgage.
At times like this, I think about what I’d tell my own 18-year-old son. And honestly, I think I’d advise him to wait and let life happen for a while. I’m not putting you down because you’re 18. You’ve done some amazing things. But I think the best thing would be to keep piling up cash, then take a look and see how you feel and what your life is like in two or three years.

You’ve got lots of time and a huge head start already. Plus, there will still be plenty of properties out there. Then, when the time is right, either pay cash or do a 15-year, fixed-rate mortgage. And if you take out a mortgage, make sure the monthly payments are no more than 25 percent of your take-home pay!
Great job, Sam!
—Dave
* For more financial help, please visit www.daveramsey.com.

Financial expert and author of "The Total Money Makeover" Dave Ramsey is a featured columnist on SevierCountyNews.com. Here's this week's advice from Dave.

Dear Dave,
Why is it that some people have enough money for pizza, lottery tickets, cable television and cigarettes, but they don’t buy something as inexpensive as renter’s insurance, and then they expect someone else to bail them out when a fire destroys their home?
Keith

Dear Keith,
This kind of behavior falls into the Stupid Tax category. It’s an aggravating thing, but at the same time there’s something about fire that elicits sympathy from me. Even if there’s stupidity involved in what happened, it’s such an emotionally devastating event. But I think it’s important to talk about what you’ve brought up.
Let’s put it another way. Why are there people who get mad at others for building wealth, or expect other people to bail them out after they’ve behaved irresponsibly? Ninety percent of America’s millionaires are first-generation rich. They started with nothing, and instead of buying lottery tickets and smokes, they saved money and bought things like renter’s insurance. They kept things like car insurance and health insurance in place, so that if they totaled their car or had to have an operation, they could pay for it instead of filing bankruptcy!

In other words, they were responsible. They stayed out of debt because they were mature enough and responsible enough to delay pleasure, and then after years of living this way, they looked up and discovered they were millionaires. That’s how it happens. You delay bits and pieces of fleeting pleasure for a quality life in the future. Now, you don’t trade away all momentary pleasures. You don’t have to completely give up fun to win with money, but you trade impulsive, immature decisions and purchases for the reward of a better life later.

Most poor people delay none of the pleasures. They live only in the moment, and that’s why they stay poor. If they want a better washer and dryer, they’ll rent-to-own instead of saving up for a little while and buying a decent, used combo in the classifieds. I understand that bad things sometimes happen to good people, and you can end up broke that way, too. But I firmly believe that in most cases, it’s not that they don’t have the money, it’s more a case of they don’t have a vision for the future. They surrender a great life down the road for “Thank God it’s Friday. Oh God, it’s Monday!”
—Dave
 
* For more financial help, please visit www.daveramsey.com.
 

Financial expert and author of "The Total Money Makeover: Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's this week's advice from Dave.

Dear Dave,
Our daughter is 24, engaged to be married, and we can’t afford to pay for the kind of wedding she wants. My husband and I have had some financial difficulty over the last few years, and we are finally beginning to slowly dig our way out. On top of this, we’re still paying on her student loan from college. Should we let her know the situation up front, and how can we keep from feeling guilty about things?
Gina

Dear Gina,
The big thing is that first you and your husband should be on the same page. You need to come to a decision about exactly what you’re willing and able to do. It doesn’t sound like it will be much, though. Especially if you’re trying to get your own finances in order and still paying on her student loan.

Now, how do you not feel guilty about all this? I think that’s a personal journey you’ll both have to take. A wedding is a wonderful thing, but it’s not any less wonderful when it doesn’t cost an arm and a leg. It also doesn’t make you child abusers or bad parents just because you’re not willing to go $20,000 into debt to throw a fancy wedding!

I think, too, that you owe this kid some straightforward and honest communication. Most 24-year-olds don’t have a firm grasp on reality. Even at that age, they don’t think about where the money’s coming from. They’re just bopping along and assuming Mom and Dad will pull thousands of dollars out of the air for a big Barbie and Ken wedding. She needs to know that things just aren’t like that in the real world.

Let her know that you love her and want to help, but you’re going to be very limited on what you can do financially. Besides, you can have a great wedding without throwing around lots of cash. A marriage is about love, not dollar signs. And when it comes to the money, a wedding is like anything else you’d buy. My rule of thumb is pay cash or don’t do it!
—Dave 
 
  
 
Dear Dave,
I recently heard someone on television say it was a good idea to cancel the collision and comprehensive portions of your auto insurance coverage if you want to save money. What do you think about this? My husband and I are trying to follow your plan. We have $1,000 in our emergency fund, and we drive a couple of old, used cars. Would this idea work for us?
Anonymous

Dear Anonymous,
Obviously you’ll save money if you’re not paying out as much to the insurance company. But I don’t think dropping that coverage is a good idea. Let’s say you don’t have much money saved up, and then you total your car. How’re you going to get to work or to the grocery store? It would leave you in a bad situation, wouldn’t it?
If you’re driving a couple of beaters, the insurance doesn’t cost that much. Cheap cars mean cheap insurance. Self-insuring is a good idea sometimes with some things, but I don’t believe in it when you’re talking about your cars and you’re broke! In my case, I’ve got enough money to just write a check and buy another car if something happens to mine. But when I added up what the car costs versus what they charge me for insurance, it looks like a decent deal to me. I’m just not willing to take the risk with that much money. The purpose of insurance is to protect you from risks that you are unwilling or unable to take yourself. That’s why I still have full coverage on my car. The cost benefit analysis told me it was a good idea. I suggest you keep it, too!
—Dave

* For more financial help please visit www.daveramsey.com.

Financial expert and author of "The Total Money Makeover" Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's this week's advice from Dave.

Dear Dave,
I want to buy a foreclosure. How do I go about it, and where do I look? I’m having a hard time making anything happen, because it seems like the real estate brokers are buying them up before I know they’re available or have a chance to look at them.
Jeff

Dear Jeff,
I used to buy and sell foreclosures for a living, and for a while I ran into the same trouble you’re having now. It didn’t take long for me to realize that you need to be the first one to talk to the person who’s suffering the foreclosure. It can almost be a first-come, first-served situation, and you need to beat a path to the person’s door in a hurry if you want a chance to make a deal!

Another problem I noticed was that a lot of the people who were being foreclosed on owed lots more on the house than I was ever willing to pay. Plus, it’s really tough to get a short sale worked out in the two or three weeks before the foreclosure actually occurs. So, I started looking for houses that had some decent equity in them. I’d leave it alone if the house was worth $110,000 and there was still $100,000 owed. But if you’ve got a situation where they owe $100,000 and it’s worth $300,000, then we’ve got something to talk about! 

Once you find some good possibilities, cut them out of the local newspaper or legal publication, then go to the courthouse and look up how much each one of them owed. That culls about 90 percent of them. After that, I’d just drive over and talk to the 10 percent that are left. I found lots of good deals just talking to the owner before the foreclosure sale took place!
—Dave
 
 
Dear Dave,
My wife and I bought some furniture a while back on what we thought was a 24-months-same-as-cash plan. The original purchase price was $1,600. The other day, I got a call from a collector saying that it was actually a 12-month plan, and the balance is now $2,800. We looked at the contract, and it was our mistake on the length of the plan. Still, that makes the interest rate about 30 percent. Is there anything we can do about this?
Robert

Dear Robert,
This is one of the reasons I tell people to stay away from “same as cash” agreements. You may not have agreed to a specific percentage rate, and I’ll bet it’s something less when you factor in the time before and after the 12-month period ended. Still, I’m pretty sure that when you signed the contract you did agree to have this thing convert to a financed contract if you didn’t pay it off in 12 months. These kinds of deals are really scummy. Not only have they charged you interest since the 12-month period ended, they’ve also back-charged you interest for the entire length of the contract!

These same-as-cash contracts are a bear trap, Robert. They’re designed to screw you over big time. You can try to dispute it, but I’ve got a feeling you’ll lose and have to pay about $1,200 in stupid tax on this one. Lots of people think they can pull one over on a company with the “same as cash” deal, but stuff almost always comes up—even if you don’t misread the contract. I’ve said it a million times, Robert. If you play with snakes, you will be bitten!
—Dave
 
* For more financial help, please visit www.daveramsey.com.

Financial expert and author of "The Total Money Makeover" Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's this week's advice from Dave.

Dear Dave,
I’ve always been interested in real estate, but the only experience I have has come through owning my own home here in Atlanta. I’m not sure I’m enough of a handyman to fix up houses to sell, but I’ve never thought of myself as a landlord, either. What advice can you give me? 
Mark
 
Dear Mark,
Anytime you own real estate you’re going to have to deal with repairs, whether it’s fixing up a house to sell, a rental property or your own home. If you’re not the handyman type, then you’ll need to know some repairmen and have other connections in the building industry. I mean, if the house needs extensive work, or the central unit or water heater goes out, it’s your job to make things right!
There are a few things you can count on when it comes to rental properties. We just talked about repairs, and that’s a big one. Another one is a formula that goes something like this: on average, the cheaper the rent, the bigger the “character” you’ll have to deal with as a renter. Now, if you run too high on the rent, you’ll discover a different type of character. This type thinks you work for them, and it’s never good to have confusion on this issue.
A good, solid, middle-of-the-road house in your area would probably cost about $150,000 to $200,000. A lot of people will tell you to take on debt to buy the place, but I want you to pay cash on this trip. It may mean a less expensive house and dealing with low-income renters to start with, and that can be a headache. The good thing is that you’d learn how to be a landlord from the bottom up. You’ll learn how to be firm, but fair, and how to be gentle in the midst of a crisis. Believe me, you’ll have a crisis or two—or 10 or 12—if you stay in the landlord business very long! You’ll also learn how to handle evictions. But once you get some experience under your belt, you won’t be intimidated by other, bigger, rental situations in the future.
So, either you’ll be a landlord, or you’ll be a person who buys and flips properties. Either way, make sure you do it with cash. Don’t go into debt to make this happen!
—Dave  
 
 
 
Dear Dave,
I’m employed, and I’ve maxed out my Roth IRA. I also have a small business on the side, so can I do a SEP as well?
Bill

Dear Bill,
Sure you can! If you want, you can do a SEP (Self Employed Pension plan) along with a Roth IRA and a 401(k). There’s no limitation to how many of these things you can have working for you.
The only limitations you’re looking at would be in terms of income. If your annual household income is more than $154,000, and you’re married, filing jointly, you’re going to run into issues with a Roth IRA. When it comes to a SEP, you have to provide it for any full-time employees who have been with you for three of the last five years at the same percentage of their income.
Good question, Bill!
—Dave
* For more financial advice, please visit daveramsey.com.

Financial expert and author of "The Total Money Makeover" Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's this week's advice from Dave.

Dear Dave,
I’m 17, and my personal finance class at high school has been watching your course. I want to begin investing early to take advantage of compound interest, so I want to start a Roth IRA. Which mutual funds would you advise investing in while I’m still trying to save for college?
Jeff

Dear Jeff,
I love the fact that you’re thinking ahead, but I want you to save for college before you worry about investing. The best investment you’ll ever make is an investment in you, and that’s exactly what college is all about.
Now, if having money for college isn’t a big issue, you can go ahead and begin putting a little bit of money into a Roth IRA. You can put as much as $5,000 a year into one, but the great thing is that you don’t have to put that much into one. It would probably be pretty hard for you to invest to that extent while you’re still in college, anyway.
When it comes to a first mutual fund, I’d suggest a simple growth-stock mutual fund. They’re pretty calm, and they will do some great things if you can find one with a good, long track record of success!
—Dave
 
 
 
Dear Dave,
I’m looking at allocations for my mutual funds. What’s the difference between mid-cap growth and mid-cap value?
Jason

Dear Jason,
For purposes of allocating, a mid-cap is a medium-sized company. Generally, these fall into the growth stock mutual fund category. Try thinking of value funds this way: Let’s say you buy an expensive home in a good neighborhood. It’s okay that you paid a little more, because it’s a good area, and you’re just going to wait things out. It’s that kind of value mentality versus bargain hunting and trying to get a great deal.
When it comes right down to it, the differences in the two types are small. I’d go with whichever one has the best track record and rate of return. Regardless, always remember to spread your money across these four types of mutual funds: growth, growth and income, aggressive growth, and international.
—Dave  

 
Dear Dave,
How do you buy a surprise gift for your spouse when you both see the budget and handle the checkbook?
Anonymous

Dear Anonymous,
Start by having a gift-giving category as part of your budget. This works both ways, one for each of you. That way, you’ll both know how much goes into that category, but you won’t know where something was purchased or what was bought.
I think the gift category is the best and most fair way to give you both input and control over the budget. The idea that you’re going to sneak up on your wife or husband with a $10,000 gift is pretty unrealistic if you’re working on your finances together!
—Dave

* For more financial help, please visit www.daveramsey.com.
 

Financial expert and author of "The Total Money Makeover" Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's this week's advice from Dave.

Dear Dave,
I’ve never had a credit card or a bank loan, so I really don’t have any established credit. What should I do when it comes to a cell phone contract or establishing utility service? Also, what will happen if I try to get a mortgage loan at some point?
Matthew

Dear Matthew,
There’s usually no exception on cell phone contracts or utility service. Chances are you’ll have to put up the deposit, and you’ll probably get it back in six months or maybe a year from now. I still run into this kind of thing from time to time. It’s almost like you don’t exist if you don’t have debt and a credit rating.
The mortgage lending rules are changing almost daily at this point. Under the current rules, there are two ways to be in a great position to get a home loan. One is to have credit running out of your ears and a huge FICO score. This is pretty stupid when you think about it, but it will get you a home loan almost instantly. The second is to have no credit whatsoever. So, it’s really the people in the middle who are feeling the pinch.
When you have no credit, the lender has to do the underwriting themselves. It’s something banks used to do, back when they actually had some sense when it came to making loans. They take a look to see if you have a stable job and a decent income. They’ll probably want some kind of proof that you pay your bills on time, and this could be as simple as showing them a few electric bills and other receipts to show that you honor your financial commitments.
— Dave

For more financial advice, visit www.daveramsey.com

Financial expert and author of "The Total Money Makeover" Dave Ramsey is a featured columnist for SevierCountyNews.com. Here's this week's advice from 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,

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

* For more financial help, please visit www.daveramsey.com.

Financial expert and author of "The Total Money Makeover" Dave Ramsey is a featured columnist on SevierCountyNews.com. Here's this week's advice from 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.