Mormon Life - Dave Says tag

Dave Says: How Do You Know It's Your Calling?

Tue, 20 Mar 2012 00:03:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: How do you know you've found your true calling when it comes to a career?

Dear Dave,

How do you know when you’ve found your true calling when it comes to your job or your career?

Matt

Dear Matt,

I’ve met a few people who’ve had a spiritual experience in this area. Something has happened, almost like they were struck by lightning, and they knew what they were supposed to do with their lives. This isn’t the normal way people come to realization about their futures, but it does happen from time to time.

Usually, I believe this kind of revelation starts out as a simple idea that gradually grows into a job and then into a career. Then, it evolves over time into a calling. That’s how I stepped into what I’m doing today. I can’t honestly tell you that when I started on radio, or began writing and teaching, that I knew it was God’s purpose for my life. But I felt the weight and the drawing of it, almost like a magnetic pull.

I’ve been doing it for 20 years, so it definitely evolved over time into what it is today. Still, I’m positive it’s the reason I’m on this planet!

—Dave

For more financial help, visit daveramsey.com.

Dave Says: Why the Need for a Fresh Monthly Budget?

Tue, 20 Mar 2012 00:02:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Why do you recommend a new budget every month if the same budget should work month to month?

Dear Dave,

I was wondering why you recommend doing a fresh budget every month. Once you’ve figured out your expenses and income, won’t the same budget work month to month?

Kara

Dear Kara,

I understand what you’re saying, but if you look closely at every month, you’ll see pretty quickly that they’re not all created equal in terms of expenses. On top of that, if you work a commission-based job, your monthly income will fluctuate throughout the year.

Now, there are some things that will remain pretty standard. A few things like your rent or mortgage payment will probably be the same month to month. But what about things like utilities and food? Chances are your electric or gas bills will be higher during certain months as you heat and cool your home depending on the weather. What about holidays and special occasions? It’s likely you’ll end up spending more on food, gifts and related items around Thanksgiving and Christmas or other months when family and friends have birthdays and other events.

These are just a few of the reasons it’s a good idea to customize your budget every month. A good, accurate monthly budget should always reflect your reality, Kara. Not only will this give you a more realistic idea of where your money is going, but the knowledge also helps you control your money instead of it controlling you!

—Dave

For more financial help, visit daveramsey.com.

Dave Says: Does Payment to Collectors End Debt?

Tue, 20 Mar 2012 00:02:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: When we pay the debt collector, is the original creditor satisfied as well?

Dear Dave,

One of my husband’s credit card bills was turned over to a collection agency. They’ve offered three different payment options. If we accept one of the options, does this mean the original creditor accepts the agreement as well?

Cheryl

Dear Cheryl,

In a situation like this, the collection agency either owns the debt outright or they’re directly representing the credit card company. This is pretty much standard operating procedure when someone has defaulted on a loan.

I’d go ahead with the deal they’ve offered that makes the most sense for you guys. You’ll have a ding on your credit report, showing settlement on a defaulted credit card, but it’s really no big deal since you’ve already got a mark against you for having it turned over to collections.

Want another piece of advice? Never use credit cards again!

—Dave

For more financial advice, visit daveramsey.com.

Dave Says: Question about Home's Value

Tue, 13 Mar 2012 00:03:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Is it legitimate for a law firm to offer protesting the value of our home in return for 50 percent of any tax savings? Dear Dave,

We keep getting offers in the mail from a law firm that offers to protest the assessed value of our home for property tax purposes. They say that we’ll pay them nothing if they can’t save us money, but if they do the fee is 50 percent of the property tax savings. Do you think it’s ethical to dispute these findings, and are these services legitimate?

Kristen

Dear Kristen,

There’s no real problem with this, so long as there are no up-front fees. The real question, though, is whether your assessment is accurate.

First, there would have be some kind of basis for the protest – like if your assessment is really out of line compared to similar homes in the neighborhood. Usually, they aren’t assessed at 100 percent. But if you discovered that a comparable home was assessed at 73 percent and yours was based on 82 percent, then you’d have both an ethical and legal right to protest the assessment.

I think one of two things will happen. If you talk to this firm, you’re either going to find out that there’s something going on with the tax base that makes them think they can actually reduce the numbers, or they’re going to try and hit you with a “processing fee” or some other kind of garbage.

If this is the case, you should just walk away.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Lost Job, Might Move

Tue, 13 Mar 2012 00:03:00 -0600

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I have two job offers with varying pros and cons, including one with a move. What do you think? Dear Dave,

The job I have currently is about to be phased out, and I’m looking at two other offers. The pay for both is the same. One is short-term, nine months to a year, and it has a per diem so I wouldn’t have to move. The other job would last much longer, but I’d have to move and that would throw me about $3,500 further into debt. This company acts like it doesn’t want to help with the moving expenses, but I think I’d like the job better. What do you think I should do?

Michael

Dear Michael,

I’d move. And I’d also try to negotiate the heck out of this company and get them to foot some of the bill for the move.

If you’re valuable enough, and they like you enough to want you on their team, then I’d use that as a negotiating point before accepting the position. Tell them that you really want the job and you’re excited about it, but the only thing holding you back is $3,500 in moving costs.

You never know until you ask. And at that point they may see the wisdom of kicking in some cash to make it easier for you to decide!

—Dave

For more financial advice please visit daveramsey.com.

Dave Says: Single Again . . .

Tue, 06 Mar 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: I've recently been through a divorce, but I'm in good financial shape. Should I be investing? Dear Dave,

I got divorced recently, and have custody of our children who are 12 and 17. I’m lucky enough to be debt-free, and I own the house we’re living in, which is worth about $350,000. I also have $160,000 in savings, and we receive $1,200 in child support every month. People are all telling me I should be investing, but each one tells me to do a different kind of investing. What do you suggest?

Mary

Dear Mary,

I know going through a divorce has got to be hard on you and your kids. Make sure you spend lots of time hugging on them and letting them know they’re loved. Fortunately, things are still pretty good in your world in a financial sense. Your net worth is a half-million dollars, plus you have no debt. Most ladies don’t find themselves as lucky money-wise after a divorce.

Don’t do too much with the $160,000 right now. Just park $100,000 of it in a CD for a year until you get over the shock of everything that has happened. You won’t make much money, but you won’t lose anything, either. Then, take the remaining $60,000, and invest it in good growth stock mutual funds – ones that are very conservative and have at least a 10-year track record of success.

You’ve also got to take a look down the road and decide what you want to do with the rest of your life. You’re going to be an empty-nester is a few years. Do you want to go back to school or maybe start your own business? You’ve got a little learning to do about investing, too. Taking a year or so will allow for education and thinking about what you want out of life. Knowledge has a way of erasing fear. Plus, you’ve got a responsibility to your kids to invest this money wisely.

When everything settles down a bit, just take your time, find a good investment professional with the heart of a teacher, and make sure you don’t put money into anything you don’t understand. Spend lots of time loving on your kids, too. That’ll help with the healing process as much as anything.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Sell the Bike?

Tue, 06 Mar 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: My husband and I disagree about selling our motorcycle to help with debt. What should I do? Dear Dave,

My husband and I have been through Financial Peace University. I’ve always been the numbers nerd, although he’s catching on and doing pretty well. He has a motorcycle he bought a few years ago before we got married, and still owes $7,000 on it. My common sense says we need to sell it, but he doesn’t want to, even though we haven’t been riding in over a year. What should I do?

Gina

Dear Gina,

It sounds like he’s making progress, so we don’t want to ruin that. Here’s the question: if you win the bike battle, do you lose relationship war? In other words, if you force him to give up the motorcycle, will it damage the marriage and the progress he’s made toward getting out of debt and learning how to handle money?

If I were you, I’d first sit down with him and tell him how proud I am for the way he’s trying to improve the financial situation in your home. Then, I’d suggest that the motorcycle is a stumbling block to your shared financial goals. Ask him what he’d be willing to do to get the motorcycle paid off more quickly. Would he pick up a part-time job, or maybe sacrifice something else he’s spending money on?

But let him know the motorcycle isn’t really the issue. The issue is that you guys need a plan to get this $7,000 debt out of your life!

—Dave

For more financial help, please visit davesays.com.

Dave Says: Get Your Priorities Straight

Tue, 28 Feb 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: My husband might get laid off, and all his job options are out of town. Should we use our savings to make our house more sellable?

Dear Dave,

My husband’s company recently told everyone that massive layoffs are coming, and they should start looking for other jobs. Right now, all of his options are out-of-town. A real estate agent told us we’d have to remodel our kitchen in order to sell the house. We’ve got $3,500, but remodeling would take about $2,000. Should we get a second mortgage to get the work done?

Pamela

Dear Pamela,

You might want to get another opinion. Sure, a new kitchen would be nice, but is that the end-all, be-all? Either way, there’s no way I’d go into debt to make this happen. Your house isn’t even on the market yet. There’s no reason to fix up a house that’s not for sale, especially when you only have $3,500 to your name!

There is, for sure, a financial storm brewing on your horizon. Start right now living on rice and beans and saving up piles of cash to build a bigger umbrella.

Wait until he actually lands another job before you make any big decisions. What if something pops up where you are? If you end up moving, then you might take $2,000 from savings to fix up the kitchen and get the house sold. Don’t do it unless you’re going to pay cash, though! You don’t want a second mortgage hanging over your heads, making everything even more difficult.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Leave the 401(k) Alone!

Tue, 28 Feb 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Should we borrow against our 401(k) to help pay mortgages and other debt?

Dear Dave,

My husband has been transferred again in his job. Right now, we have three houses and about $60,000 in other debts. He just found out that he can borrow against his 401(k) without hardship at the beginning of the year. Is this a good idea?

Yvonne

Dear Yvonne,

Three houses? Do you buy a new house every time you move? You guys need to stop doing that. The “other debt” isn’t the problem. It’s those houses that are killing you!

I would never recommend that someone borrow against their 401(k) just to pay bills. It might be a different story if you were facing foreclosure or about to file bankruptcy, but that doesn’t sound like the case here. I think you’ve just made some really bad decisions, and these decisions are following you around and messing up everything else.

Most of the time in situations like this I have to say: “Sell the car!” In your case, it’s: “Sell the houses!” I know the market isn’t great in some areas, but these things are eating you guys alive. You’ve got to put some effort into getting rid of them. Then, start living on a really tight budget and clean up the other debt!

—Dave

For more financial advice please visit daveramsey.com.

Dave Says: Take Your Time with This One . . .

Tue, 21 Feb 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: My boyfriend thinks it will be easier for him to pay his debts if we're married. What do you think?

Dear Dave,

My boyfriend has a lot of debt. The other day a creditor called, and he wouldn’t answer the phone. Then, he told me it would be easier for him to pay off his debts if we were married because I could act as his accountability partner. I don’t want to be the money cop, and I wonder if he would truly be more motivated. What do you think?

Janine

Dear Janine,

Someone who isn’t making any headway in getting out of debt while they’re single probably isn’t going to do a complete turnaround just because they get married. You can act as his accountability partner if you want, but you don’t have to get married to help him. In fact, dating is probably a better way to do this, because you can determine whether he’s really changing, or if he’s just trying to get you on board to help pay the bills!

Don’t misunderstand, Janine. Debt, in itself, doesn’t keep someone from being marriage material. But you’re definitely not marriage material if you don’t work, you’re irresponsible, you haven’t taken control of your life, have no character or can’t manage your own behaviors. These kinds of people are going to stay in debt and not be able to pay their bills for the rest of their lives.

I’d say date this guy a little longer, just to see if he’s serious about changing. But don’t get engaged yet, and don’t pay one penny of his bills for him!

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: What's in a Name?

Tue, 21 Feb 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: What should I tell my son if he wants to transfer to an expensive college?

Dear Dave,

My son is a sophomore at a local college, and he wants to transfer to a very prestigious university. If he did this he would incur more than $100,000 in student loan debt, and that’s with us picking up half of the cost. What do you think I should tell him?

Will

Dear Will,

I’d have a hard time telling anybody that one school is $100,000 more valuable than another one. The fact is unless he has $100,000 lying around somewhere, he shouldn’t go to that other school for one very simple reason – he can’t afford it!

We hire people every week at my company, and where they attended college is a very minor deal. There will always be a few corporate types out there who play games and try to turn the office into some kind of snooty country club, but the fact is most employers don’t care where you went to college.

It’s what you learn and being able to use that knowledge in the marketplace that’s really valuable, Will. Knowledge is king, and we live in a knowledge-based economy. If you can’t retain and apply what they’re teaching, then the only thing more worthless than a college degree is a college pedigree!

—Dave

For more financial help please visit daveramsey.com.

Dave Says: A Place for Everything

Tue, 14 Feb 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: What is the "legacy drawer" you talk about?

Dear Dave,

I’ve heard you talk about something you call the Legacy Drawer. What exactly is this, and what goes into it?

Lisa

Dear Lisa,

One of the best ways I know to tell your family how much you love them is by having your financial act together and organized in a central location. The Legacy Drawer is a collection of your essential financial documents in a safe place where they can find them when you die, or if you’re sick or disabled.

All of the pieces of your financial life should be in this drawer. I’m talking about your will, living will, estate plan, investment statements, insurance policies, and property deeds. You should also include stuff like power of attorney statements, access information to lock boxes, and other instructions to family and loved ones.

Make sure it’s really well-organized, too. It should be laid out simply enough that anyone who can read could open it up and find exactly what’s needed in just a few minutes. The stress of having a loved one die or become seriously ill is bad enough. You don’t want to make it any harder on them by leaving your finances in a mess!

—Dave

For more financial help please visit daveramsey.com.

Dave Says: Don't Fall for "Same As Cash" Offers

Tue, 14 Feb 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: We made a mistake with the length of our same-as-cash plan. Now we're paying 30 percent interest. What can we do?

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. They’re designed to mess 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 daveramsey.com.

Dave Says: Land Investment

Tue, 07 Feb 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: How much of our savings should we put toward land investment?

Dear Dave,

My wife and I make about $85,000 a year. We’re debt-free, and we have no kids. We’d like to start saving money to buy some land in the near future. What percentage of our savings should we put toward this?

Dennis

Dear Dennis,

I don’t know if there’s necessarily a specific percentage for this kind of thing. Since you guys are already debt-free you need to make sure that you’ve got a fully-loaded emergency fund of three to six months of expenses in place, along with retirement funding. In your case, anything else you have sitting around is simply wealth.

If you’ve got $50,000 sitting in a savings account in addition to these things, and you’d rather have $50,000 worth of dirt instead of a bank account, I’m cool with that. It’s really more a matter of ratios than percentages.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Insurance Necessities

Tue, 07 Feb 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Besides auto insurance, what insurance is useful?

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 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, which you do, and homeowner’s insurance, too. 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” the moment you turn 60. 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 I’d 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

For more financial help, please visit daveramsey.com.

Dave Says: Let Someone Else Make the Decisions?

Tue, 31 Jan 2012 00:04:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Is there a point at which it's good to let someone else manage my investments?

Dear Dave,

I’ve never heard you discuss at what point it’s advisable to let someone else make and manage your investments. Also, is there a point at which it’s good to go with a fee-only financial planner?

Anonymous

Dear Anonymous,

I think it’s always a good idea to do it yourself. And to be honest, I never recommend fee-only planners.

Don’t just turn everything over to someone else – no matter how many letters they have after their name – and let them manage it all or make all the decisions for you. You’re the one who made the money, so you should take care of your own stuff. In lots of cases people looking for this kind of help have a greater net worth than the bozos dishing out advice and wanting to “handle” it all.

None of this stuff, investing, personal finance, or saving, is rocket science. You need to be in control of your money. Now, can you have counselors in your life? You bet! Everyone needs the benefit of people around them who have wisdom and experience.

But it’s never a good idea to just blindly trust someone. If you do, you might end up like an old, washed up boxer – no money and no teeth!

—Dave

For more financial help please visit daveramsey.com.

Dave Ramsey: What's Your Emergency Fund Range

Tue, 31 Jan 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: How do we determine whether to save on the high or low end of the emergency range?

Dear Dave,

In your plan, you talk about Baby Step 3 as saving enough to have three to six months of expenses in your emergency fund. My husband and I were wondering how you can determine whether you need to be on the low end or high end of that range?

Amanda

Dear Amanda,

Lots of times in a marriage you’ll have a situation where one person wants to save more, while the other is excited to move on toward investing. Technically, neither is wrong. So, the emergency fund really deals with someone’s own personal level of peace. Remember Murphy’s Law, and how it says that says if something can go wrong it will go wrong? Your emergency fund is Murphy Repellant. Some people just want to make sure he doesn’t knock on the door, while others make sure he stays in the next county!

There are always practical considerations you can use to determine the amount of your emergency fund. If you both have very stable jobs, you’ll probably be okay saving up three or four months of expenses. But if just one of you works outside the home, or if one is self-employed or on commission, leaning toward the six month side is probably a good idea.

Of course, you can always compromise. Start out with three months, but add a little every once in a while until you reach a point where you’re both comfortable.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Finding Foreclosure Homes

Tue, 31 Jan 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: What are your suggestions for finding a good repo home?

Dear Dave,

We’ll be completely out of debt in September and looking to buy a home in the next year or two. We’re thinking of buying a repo home. Do you have any suggestions on where to find these?

Levi

Dear Levi,

One way is to buy the home from the owners before the sale happens. It’s better for them because they realize some money and it stops the foreclosure. It’s better for you, too, because you won’t find yourself in a bidding war later on the courthouse steps!

You can also find listing in your local newspaper under the legal notices section, and if you live in a metropolitan area it’s not hard to find a legal newspaper that lists incorporations, real estate transactions and foreclosures.

—Dave

For more financial help, please visit daveramsey.com.

Dave Says: Lay the Foundation First

Tue, 24 Jan 2012 00:03:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: What should we do next to become more financially secure?

Dear Dave,

We’ve read about your plan, and we’re in pretty good shape financially, but we don’t know what to do next. We have $400,000 in a 401(k) for retirement, but we don’t have an emergency fund or any other savings. The only debt we have is our house. What should we do about Baby Steps 4 and 6?

Mary

Dear Mary,

You guys have done a great job of saving for retirement and staying out of debt. Let’s go over the Baby Steps you mentioned. Baby Step 4 is putting 15 percent of your income into Roth IRAs and pre-tax retirement plans. Baby Step 6 is paying off your home early.

The thing that worries me is you’ve completely skipped Baby Step 3, which is having three to six months of expenses in an emergency fund. This is money set aside strictly for emergencies, not vacations, toys or a new car. The problem right now is if you have a real emergency, you’ll have to cash out your 401(k). If you do that, the government’s going to penalize you 10 percent, plus your tax rate. That’s about a 40-percent kick in the teeth just because you didn’t do things in the right order!

Again, you’re in pretty good shape overall, but in building your financial house you’ve put the roof on before you’ve laid the foundation. If I’m you, I’m going to temporarily stop my 401(k) contributions until I get my emergency fund fully loaded. By temporarily, I mean six months at most. That way, you’ll be covered when life happens without having to sacrifice your retirement savings!

—Dave

For more financial help, please visit davesays.com.

Dave Says: Just What She Needs

Tue, 24 Jan 2012 00:02:00 -0700

by Dave Ramsey
source: MormonLife.com

Mormon Life says: Should my daughter use a financial windfall to pay off student loans or invest in a Roth IRA?

Dear Dave,

My daughter is a student and has $13,000 in student loan debt. Recently, her grandparents dissolved an LLC, and they want to give her a gift of $12,500. Should she use this money to pay off the loans, or invest it in a Roth IRA and keep working to pay off the student loans herself?

Meg

Dear Meg,

Let’s look at it this way. Pretend she didn’t have any student loan debt. Would it be wise for her to borrow money on a student loan in order to invest in a Roth IRA? Of course not. If you don’t pay off the loans, and invest it instead, it’s just like you borrowed money to invest. That’s not a good plan.

Your daughter needs to get her student loan mess cleaned up, and this is the perfect opportunity to do just that. And I think it’s pretty cool that God gave her what she needs to fix things. Besides, she can’t do a Roth IRA, except to the point that she has an earned income, anyway.

The last thing this girl needs is a pile of debt waiting on her when she gets out of school. She’s not in a position to be an investor right now. The minute she pays off her student loans, she should get to work on saving a pile of money for an emergency fund so she can complete her studies without racking up more debt!

—Dave

For more financial help, please visit daveramsey.com.