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Dear Dave, Can you please define “necessities� in today’s world while trying to get out of debt and live on a budget? Matthew Dear Matthew, Whether you’re talking about the world today or 50 years ago, necessities haven’t changed. Necessities are still food, shelter, clothing, transportation and utilities. We’re talking about needs versus wants. The problem is that many people were never taught that there’s a difference between the two—a big difference. Most people have enough food to eat and a decent place to live. Those are necessities. I’m not talking about eating out or having a big, fancy house....

Dear Dave, I’m a stay-at-home mom now, and my husband brings home $2,600 a month. We’re trying to get out of debt, but we need more money coming in. I want to go back to work, but emotionally part of me feels like I should stay home with our 2-year-old daughter. What do you think? Kayla Dear Kayla, I understand the feelings involved, especially if you’ve spent all of your time home with your child. But don’t make the mistake of blaming the debt if you simply want to go back to work. You’re not a bad person if you...

Dear Dave, My divorce will be final in a month, and I’ll have $100,000 when everything is over. I will also have $8,000 in credit card debt, and I’m currently unemployed. Do you have any suggestions to help me move forward? Meryl      Dear Meryl, The first thing I want you to do is raise your right hand and promise never to use credit cardsagain. Then, if you still have any of those awful things, I want you to cut them up and close out the accounts. The next step is for you to find some kind of income, whether it’s...

Dear Dave, I’m following your plan, and currently I have $14,000 in my emergency fund. What are essentials for three to six months of expenses? Brian Dear Brian, Basically, you should ask yourself this question: What would it take to operate my household for a month? There are several different things that could be classified as “essentials,� but if you take those things and multiply the number by three, four, five or six, you’ll see how much money you need to have a fully loaded emergency fundof three to six months of expenses. This is Baby Step 3 in my...

Dear Dave, I’ve been on medical leave from my job due to an injury. My doctor recently advised extending the leave another six months, but during this time I wouldn’t be paid. My husband makes $75,000 a year, and we owe $40,000 on our cars. This includes a $30,000 note on one of them. Should we take money out of our 401(k) to make it through the additional time off? Crystal Dear Crystal, Absolutely not! You guys have dug a hole for yourselves, and borrowing from one place to fix another will only make that hole deeper. In cases like...

Dear Dave, Is there ever a time you should dip into emergency fund savings in order to pay off your home early? Eric Dear Eric, The only time I would advise this is when your emergency fund is too big, and you have a very small amount left to pay on the house. Keep in mind that your emergency fund should be three to six months of expenses, not three to six months of income. Besides, paying off the house doesn’t fall into the category of an emergency. The fact that you have to pay for your house doesn’t catch...

Dear Dave, My younger sister moved to Atlanta, and she came to live with my husband and me a few months ago. She’s 19, has a job, and is attending a local college. But even though she’s working, she hasn’t said anything about helping out with utilities or paying rent. We don’t need the money, but do you think it’s time for us to push her out of the nest so she can start living as an adult? Molly Dear Molly, The way you’ve described your little sister makes me think she’s a pretty good kid. She’s doing all the...

Dear Dave, My daughter is 14, and she was recently offered a steady weekend modeling job. Do you have any advice on how to handle the money she earns? Cynthia Dear Cynthia, In terms of investing some of the money she’ll make, a Roth IRA would be pretty cool. You would have to oversee it, of course, and you’d have to file a tax return, but starting something like this when she’s 14 would help set her up for some serious money later. I think the biggest thing, however, is to make sure you create lots of teachable moments for...

Dear Dave, I want to buy an inexpensive car, and I was wondering what you think about salvage titles. Eric Dear Eric, It’s not impossible to find a decent salvage car. But I’d take extra precautions to find out exactly why it was salvaged. If it’s a salvage car because it was wrecked, I’d take a look at what kind of wreck caused the damage. Lots of people know how to repair and rebuild cars, so it might end up in better condition than before if you find the right mechanic. On the other hand, I’d probably walk away if...

Dear Dave, I’m 27 and married, and we have two kids. I make $90,000 a year, but we have $80,000 in consumer debt—$48,000 of which is in car loans. The rest is credit card debt. My wife’s parents have offered to let us move in with them so we can get out of debt faster. Do you think this is a good idea? Kevin Dear Kevin, If I were in your situation, I would not move in with the in-laws. You’ve got an absurd amount of money wrapped up in those cars. I’d sell the stupid things, start living on...

Dear Dave, I’m a general contractor, and I was recently offered some business by a large corporation. I’d need new equipment to handle the job, and the purchase would use most of my cash flow. I’m wondering if the opportunity is worth the risk. Wayne Dear Wayne, I’m glad you realize that, on the surface, not all growth is good growth. The number-one thing that causes small businesses to fail is accounting and cash-flow problems. The second biggest thing is that they grow too quickly and fall in on themselves. Owners are sometimes scared to turn down anything, so they...

Dear Dave, My wife and I make $140,000 a year, and we’re working on our debt snowball. We’re almost out of debt, but we still have two small car payments and some credit card debt. She wants to get rid of the credit card debt but doesn’t mind us having car payments. Can you help me understand this? Kelly Dear Kelly, I’m not sure I understand her thinking either. The car payments and the credit card debt are the same thing. They’re both debt payments, and you’re being charged interest on both of them. The only difference is that one...

Dear Dave, What do you think about the practice of credit card churning? Ethan Dear Ethan, I think it's a pretty dumb idea. The concept is to run up the balance on one card as high as you can, then flip the balance from card to card in order to get perks like airline miles. But if you want to go through all the trouble and hassle over such a small amount of money, be my guest. I've met thousands of millionaires, and none of them have ever credited their success to credit card churning. Think about it: With all...

Dear Dave, My mother-in-law has a serious credit card problem. She can’t afford stuff, but she shops anyway, acquires more and more credit and thinks she’ll pay for it all later somehow. Her husband has bailed her out a few times, but he’s unwilling to do it anymore. My wife and I, and her sister, want to address this issue, but where do we start? Jonathan Dear Jonathan, First of all, you need to stay out of the discussion. This is something for her daughters to handle, and her husband needs to be part of it, too. He’s closer to...

Our Valentine's Day tradition continues There are quite a few things in life that are more foolish and desperate than using the Dave Ramsey pickup lines to woo someone—taking an interest-only mortgage, going within 50 feet of a payday loan store, and buying lotto tickets, just to name a few. But while all of these actions are avoidable, February 14 is not. And if it’s Valentine’s Day, it must be time for Dave Ramsey … pickup lines, that is. So without further ado, here they are: the sixth-annual list of Dave Ramsey pickup lines. If I had a dollar for...

Dear Dave,I’m looking at buying term life insurance. Currently, I’m in medical school doing my last year of residency and making $35,000 a year. Should I base the amount of insurance coverage on what I’m making now or what I’ll make when I’ve finished medical school? AmandaDear Amanda,In most cases, I advise basing the amount of life insurance coverage on the income you’re earning at the moment. After all, that’s the amount your family is used to living on, right? However, if you’re finishing up your medical degree this year, it’s a virtual certainty you’ll earn lots more in 2014....

Dear Dave, My fiancée has a small photography business, and she wants to form a partnership with a college student who is majoring in business. I think this is a bad plan, but I’m pretty sure she’s not going to listen to me. What do you think about the idea?BruceDear Bruce,A partnership is always a bad idea. There’s absolutely no upside for her, and if you feel there’s nothing you can do to keep her from making such a ridiculously bad mistake, then you guys are going to have issues in your marriage, too. It sounds like she’s looking for...

Dear Dave, Recently, my husband had to quit his job due to an old back injury. We have $25,000 in debt, but I’ll be receiving a $38,000 inheritance in a couple of weeks. Should we use the money to pay off our debt, or hold on to it in case he needs surgery?KristenDear Kristen,Now is the time to keep the cash piled high. You’re in the middle of an emergency, and that means you push the pause button on your Total Money Makeover and stop paying extra on debt. Surgery is a possibility at this point, plus you may need...

Dear Dave, My daughter died. She was 32 years old and single, and she had lived with me for the last few years because she was recently disabled. I did not support her financially, and when she died she had no assets and no will. Is it my responsibility to pay the student loans and medical bills she left behind?JimDear Jim,I’m so sorry you’re experiencing this kind of grief. Losing a child is a heartbreaking experience, no matter their age.The short answer is this: If you didn’t sign for it, you’re not liable. If a friend were to move in...

Dear Dave, In your opinion, how do you know when a hobby officially becomes a business? Dan Dear Dan, This is a great question. But when it comes to something like this, my opinion doesn’t matter nearly as much as what the Internal Revenue Service says. According to the IRS, if you run a business for two years or more without making a profit, then it is not a business. You have to become profitable at some point. Otherwise, the IRS will declare your endeavor a hobby. Personally, I think that’s a pretty good marker. I mean, if you’re making...

Dear Dave, My wife and I are 70, and we have $950,000 in annuities in the market, plus $68,000 in our emergency fund. The only debt we have is our mortgage. I’m considering converting our stocks to a money market account to lower the risk. What do you think?HowardDear Howard,There are two sides to this. One is the asset allocation method, where as you grow older you move away from equities like mutual funds toward safer, more conservative investments like money markets, bonds and certificates of deposit. This is standard financial planning theory.I disagree with that theory, and here’s why....

Dear Dave, I’m trying to help my son and daughter-in-law by encouraging them to get out of debt and live on a budget. It hasn’t been a problem to give them money when they’ve asked in the past, but I’m afraid they’re still in a mess. How can I make sure I’m doing the right thing?MargaretDear Margaret,The first thing you need to do is sit down and have a serious, loving talk with them. If they’ve asked for money before, and it has become something of a trend, you have a right to know more about their circumstances. In addition,...

When Cherie and Brian Lowe of suburban Indianapolis threw a party last spring, 150 well-wishers came bearing casseroles. This was no birthday or anniversary bash. Mr. Lowe, a lawyer, and Ms. Lowe, a stay-at-home mom, both 36 years old, were celebrating an accomplishment: paying off $127,482.30 in debt, mainly student loans. Partygoers came from as far as 200 miles away. Some had never met the Lowes but followed their quest through a blog called Queen of Free. Guests won prizes such as personal-finance books, museum passes and homemade cleaning supplies. One friend sang "Sallie Mae Is Not My Lender" to...

Dear Dave, We’re debt-free except for our house, and that’s on a 15-year, fixed-rate mortgage. We also have an emergency fund in place. We’d like to give back this year, and do some Secret Santa things and a little extra giving. At what point should we start giving over and above what we tithe?JeremyDear Jeremy,My advice would be to wait until you finish Baby Step 3, which it sounds like you’ve done. That way, you’ve paid off all of your debt, except the house, plus you have a fully-funded emergency fund of three to six months of expenses.You mentioned tithing,...

Dear Dave, Our son is graduating from high school next spring. We’ve saved cash to pay for his first year of college, and we have enough in mutual funds to pay for another semester. When should we pull out the money to use for his education? Denise Dear Denise, I wouldn’t touch the money until right before you write the checks. However, I don’t want you to follow my advice just because I said so. My mutual funds have made a little more than 16 percent this year. If they stay at that pace, or if they make just 10...

Don’t you just love Christmas movies? Few things can get us in the Christmas spirit like a good film, whether it’s a cheesy love story, holiday musical or a comedy. There’s just something about this time of year that makes movie watching so fun. With that in mind, we thought we would take a look at some of the more memorable characters from Christmas movies and ask the question: What can they teach us about money and success? Oh, you don’t think you can learn anything from Buddy the Elf? Think again! Buddy the Elf (Elf) Famous Quote: “Smiling is...

Dear Dave, I’m in a very fortunate position when it comes to my finances. I’m 25, and I make $50,000 a year. I’m also completely debt-free. In your opinion, when is it appropriate to let someone you’re dating know about your financial situation? Anonymous Dear Anonymous, Wow, you are in a great position for someone so young. I’m not sure how you got there, but it certainly wasn’t by being dumb or immature. I think it’s only natural in a dating situation to reveal more about oneself as time passes and the relationship gets deeper and more serious. In my...

Dear Dave,My brother asked me to put his name on my credit card as an authorized user. He said it will help improve his credit score. Is this true, and would it help my score in any way?AnnaDear Anna,Your brother is wrong. It will not improve his credit score at all. As an authorized user, he is not the owner of the debt. There’s a high likelihood that it will affect your credit score in a negative way, though, because there’s a good chance he’ll do some dumb things with your card. Look at it this way. Why would someone...

Dear Dave, I recently got engaged. Is it okay for us to go ahead and combine finances and start working on a budget before we get married?AdamDear Adam,No, it is not okay to combine finances with anyone to whom you’re not married. And by “okay,” I mean wise. I’m happy that you’ve found love, but all kinds of things can happen before the rings are slipped onto your fingers.I’m not wishing bad things on you, but what if you spend time paying off her debt, or vice versa, and then the relationship doesn’t work out? Bringing finances into that kind...

Dear Dave,I recently got engaged. Is it okay for us to go ahead and combine finances and start working on a budget before we get married?AdamDear Adam,No, it is not okay to combine finances with anyone to whom you’re not married. And by “okay,” I mean wise. I’m happy that you’ve found love, but all kinds of things can happen before the rings are slipped onto your fingers. I’m not wishing bad things on you, but what if you spend time paying off her debt, or vice versa, and then the relationship doesn’t work out? Bringing finances into that kind...

Dear Dave, My husband was laid off a few months ago. He has a degree in graphic design, and has been doing that ever since to make money. He made $6,000 during his best month, but only $300 during his worst. I’m working with him on marketing now to get more clients, but in the meantime we’re not sure if we should also get part-time jobs, or push extra hard to make this business a success.  Sharon Dear Sharon,From what you’ve told me, I think your best bet is to get out there and work yourselves silly to find more...

Dear Dave, I got married in May, and my wife brought student loan debt into the marriage. I had some savings before the wedding, and I could pay this off immediately without putting us in a bind. But is this “her” debt, or should I look at it as “our” debt? Ernest Dear Ernest, Absolutely, you should view it as “our” debt. It came with the territory when you two walked down the aisle. A lot of people don’t use the old-fashioned marriage vows anymore, but The Book of Common Prayer reads, “… for richer, for poorer, in sickness and...

Dear Dave,I have some bad marks on my credit report. What’s the best way to handle them?PatriciaDear Patricia,There can be three types of nasty items on your credit report. There are errors, which shouldn’t be there at all. There are old payments that you paid late, and really, these are just a report of history. Then there are debts that have gone bad. This means you didn’t pay them. If these are the types of items you’re talking about, you’ll have to go back and clean them up. This will mean either making payment in full or settling them at...

Dear Dave,When it comes to taking control of your money and living on a budget, what’s the biggest thing a family can live without?WillDear Will,There are always the shiny things people can do without. Sometimes people sell a fancy car or boat and get rid of a $600-a-month payment right off the bat. But on a regular, day-to-day basis, I think maybe the biggest and best thing you can amputate from your life is eating out.I love a good restaurant, and I’ve got nothing against the industry. The problem, though, is that people are struggling to pay their bills or...

Dear Dave, I’m in college with a full scholarship. I work part time and should be able to graduate with no debt. What can I do now to best utilize the money I make?TylerDear Tyler,You’re in a fantastic position right now. First, I think your main goal is to study hard and be 100 percent certain you’re graduating on time with no money issues. The next thing is to make sure you have plenty of cash on hand to make the transition to the real world. In a case like this, transition can mean anything from moving to a new...

Dear Dave, I’m going through a divorce, and I’m about to buy a $600,000 life insurance policy. My 9-year-old daughter would be the beneficiary. I need a trustee, but how do I pick a good one?MarieDear Marie,First, your daughter wouldn’t be the beneficiary. You would leave it in a trust for her benefit. And I’m not sure I’d depend on an ex-husband to handle something that requires this much integrity. You’d be better off hiring a good attorney to execute the trust upon your death, or you can look for a bank that has a trust department.Once you decide on...

In one traditional form of pornography, from the Victorian “A Man With a Maid” to the more recent “Fifty Shades of Grey,” a young woman is initiated — sometimes uncomfortably — into the mysteries of adult sexuality. In the end she is, at some level at least, grateful for the new horizons that’ve opened up to her. Well, we still have that. But let’s face it — porn has gotten pretty boring. The sex lives of many average Americans today would shock Grandma. And the depiction of sex in popular media has reached the numbing-point. A 2012 issue of Cosmo...

Dear Dave, I’m an accountant, and my company is experiencing layoffs. I just learned that I’ll be losing my job in four weeks. I’ll receive a severance check, but I have no other savings set aside. Should I use some of the severance to pay off debt, or hold on to that money as long as I can? Frank Dear Frank, I’d hang on to that money and pile up as much other cash as I possibly could. Right now, the most important worries are food, lights, water and shelter. Debt is not on the list. We need to take...

Dear Dave, One of my relatives just discovered she has cancer. She’s a single mom with two young kids, and I’m not sure if she’s prepared to face something like this. What are the best steps she can take financially at this point?ShannonDear Shannon,I’m really sorry to hear about this. I know cancer is a scary thing to hear, but please remember to pray and be there for her all you can. God willing, things can still turn out okay.When people ask if a person has their affairs in order, they’re usually asking a couple of different questions. Are you...

Dear Dave, I made the mistake of leasing a car a while back, and the lease is up in about nine months. Should I save up the money between now and then to buy it, or save as much as I can to pay down my student loans? Aaron Dear Aaron, At the end of a lease the price for which you can purchase the car is called the residual value. This amount is preset when you lease the vehicle. So the big question right now is, what’s the car actually worth? If the company thought it would be worth...

Dear Dave, My old car has been having lots of problems lately. Do you have any advice on how to decide when it’s best to just fix an old car or get a newer one instead?KristinDear Kristin,This is a good question! Mathematically, the first thing to look at is the car’s worth if you don’t make repairs. Should you spend $1,000 to increase the value of the vehicle $500? Dumb question, right? At that point, you sell the car as-is and put the $1,000 it would take to fix it toward something newer.On the other hand, let’s say you’ve got...

Dear Dave, I’ve been working the Baby Steps and doing a budget most months. But how does someone who is single stay motivated and focused with something like this? It feels sometimes like it would be easier if I had someone holding me accountable. Rick Dear Rick, The first thing is to make sure you do a written budget each month. Not once in a while, not most months—every single month. If you don’t draw the out-of-bounds markers, there’s no way to know when you’ve stepped over the line, right? A monthly, written budget becomes your self-accountability tool, especially when...

Dear Dave, Is it worth the time and effort to use coupons, or are they just a waste of time and a ploy to get you to buy things? Tammy Dear Tammy, Coupons are definitely a ploy to entice you to buy something you may not have purchased otherwise. But that doesn’t mean they’re bad things. The practical and sensible application of coupons can definitely help you save money. The main things to watch out for when using coupons are overbuying and spending your money on things you don’t really need. Seriously, you don’t need to hit Sam’s or Costco...

<p>Anyone that has been in Cool Springs TN lately, has most likely seen Dave Ramsey’s new house. The ‘pay with cash’ financial guru, radio host, bestselling author and founder of Financial Peace University has constructed a palatial home next door to Lee Ann Rimes house on King Richard’s Court in the Cool Springs Franklin area.</p>

Dear Dave, My 27-year-old brother-in-law moved in with us some time ago. He doesn’t have a job or contribute anything in terms of helping around the house or with bills. I think he needs to move out, but my wife isn’t so sure. She complains about the situation to me, but if I say anything, it makes me the bad guy with her family. How can I convince her? Chuck Dear Chuck, I think you need to sit down with your wife, not all the other players, and gently explain to her that you’re just enabling his bad behavior by...

Dear Dave, I own a small business, and I pay my people on straight commission. We’ve started growing a bit, and I’m having trouble finding good, new reps who want to work under this kind of compensation structure. Does your team work on commission, and if so, how do you do it? Gary Dear Gary, I love commission plans that rely heavily on incentives. I just plain love the idea of commissions. I mean, I’d put my receptionist on straight commission if I could figure out how to make it work. But honestly, there’s hardly anyone on my team that...

Dear Dave, My wife and I are on Baby Step 2 of your plan, and we’re paying off our debt. I’ve been trying to sell my motorcycle and listed it for $5,000 on Craigslist. The other day, a guy offered me $2,000 cash and a boat for the bike. I’ve always really wanted a boat, but I’m not sure this is the time. And the money would only make a small dent in our debt. Would this kind of deal be legal in the Dave Ramsey universe?MattDear Matt,It’s an interesting deal, but at this stage of the game I think...

Dear Dave, My son is 22 and about to enter the Navy as an officer. He’s been offered a Career Starter Loan. His plan is to invest the money and let it grow while he’s in the service. I’m not sure this is a good idea. What do you think about it?MaryDear Mary,The Career Starter Loan is just another form of debt, so it’s something I can’t recommend. Basically, it’s the military trying to do a nice thing for its men and women. The problem is that it’s still a loan that has to be repaid. It’s not a signing...

Dear Dave, My niece just graduated from college with $20,000 in student loan debt. Her boyfriend graduated as well, and they’re talking about getting married. He has $115,000 in loan debt and wants to go to graduate school. They both want to be teachers, and she’s currently job hunting. The idea of all this debt hanging over their heads bothers her. Do you have any advice on how she can come to peace with the situation?DeniseDear Denise,This is a really interesting question. In a way, I’m glad she’s conflicted about the situation. At the same time, I wouldn’t want it...

Dear Dave, I’m about to graduate from college, and I’m following your plan and trying to focus on my future financial situation. Is the current down economy a cyclical thing and just part of life?DJDear DJ,It is. There are always cycles in the economy. I know you hear all this talk about this is the worst recession since the Great Depression, but that’s a bunch of bull. It was worse in 1982, when the Jimmy Carter era came to a close. We had double-digit inflation, double-digit unemployment and home interest rates were at 17 percent.The current situation has been kind...