Dave Says Here Are the Necessities

Townhall.com ^ | May 7, 2013 | Dave Ramsey

[Kaslin]

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. Those are wants. Most people also have enough clothes in the closet and a way to get around town. They may not have designer clothes or a fancy foreign sports car, but again, those are wants, not needs. Keeping the lights on and the house warm in winter and cool during the summer? Utilities are a need. But no one needs a $300 super-deluxe cable television package.

Now, there are some important wants. I want you to have life insurance to protect your family. I also want you to have a will and health insurance. I want you to have some other nice things, too, like a better car or a nicer house. There’s nothing wrong, at some point, with having a few toys or eating at a good restaurant once in a while. But again, these things are wants, not needs.

Believe it or not, very few Americans struggle with basic necessities. Sure, there are hungry people and homeless people in America. Those of us who have been financially blessed should want to help the less fortunate in ways that allow them to get back on their feet and start providing for themselves again. But most folks in this country have nothing to whine about. There’s nothing wrong with having a few wants, but you should define them correctly—and never, ever put them ahead of your needs!

—Dave

Dear Dave,

I’d like to start investing in mutual funds, but I have no idea how they work. Could you explain about them please?

Jennifer

Dear Jennifer,

First of all, don’t rely solely on my answer here. You should never invest in anything you don’t fully understand. Before you do anything else, sit down with a good mutual fund broker, someone who has the heart of a teacher, who will help you find what’s best for you and your specific situation and goals.

Simply put, a mutual fund—if it’s a stock mutual fund—is a group of 90–200 stocks. If it’s a growth stock mutual fund, then it’s a group of 90–200 growth stocks. Analysts buy the stocks they think will increase in price and sell the stocks they feel will go down in price. When the analysts buy growth stocks, it turns it into a growth stock mutual fund. If they buy bonds instead, it becomes a bond mutual fund. Several people put money into these groups, and that’s where you get the name “mutual fund.” They’re mutually funded.

These types of investments are much safer than single stock investing because your money is spread across several different stocks. Plus, you’ve got people who know what they’re doing picking the stocks. My advice would be to take a hard look at mutual funds that have been out there for 10 to 20 years and have a good track record for a long period of time. I have one that has been open since 1934, and that kind of longevity and stability gives me confidence that over time they’ll be just fine!

—Dave

[Aevery_Freeman]

ping

[bicyclerepair]

I want a Ruger 10/22 and a bunch of mags.

[Glennb51]

That’s a need!

[upchuck]

I want a Ruger 10/22 and a bunch of mags.

Hope you never need that.

[BobL]

A 1000 calorie meal can cost a person $0.50 to $50.00. In both cases, the person will get what he needs to not be hungry. It is up to the person, each person, to decide if the high-end price is worth it, in the context of other priorities (like saving for retirement, paying utilities, etc.).

Likewise, a cup of coffee can cost $0.10 to $2.00. Again, it is up to the person, each person, to match cost to priorities.

Note that all of the numbers above are not that large...but there are 365 days in a year (220 or so days in a work year), so the numbers add up, VERY QUICKLY.

[Eepsy]

AAAUUUUUUGGGHHHH!!! If I have to hear Dave Ramsey go on about Mutual Fund brokers one more time I will

I know how to save you $200+ in "broker fees".

It goes AGE-10=Bond Allocation. You take that percentage of your available money and invest it in the lowest fee Total Bond Market fund you can buy (preferably in a tax sheltered vehicle). Put the rest of your cash in the lowest fee Total Stock Market fund you can find. Don't fiddle with the d*mn thing more than twice a year, and only to bring it back to the proper allocation. Once you hit sixty or so move 5 years worth of living expenses from stocks to the lowest fee Short Term Bond fund you can find.

There. You're done. And Dave Ramsey can stick it- with gazelle like focus!

[jimsin]

Dave does have his boring side but ....a lot of church boards buy and use Dave's cd's to hold money mgmt. seminars for newlyweds young and old in order to teach them how to budget. I think he calls it 'Financial Peace University' cd's. Something like that can be nothing but good for unskilled folks clueless in this important part of life. Clearly, sadly they've never being taught money mgmt skills in our whiz-bang school systems. ARRRRGH! I also think I've read his audience numbers are topped only by messrs. Rush and Sean. Pretty good company, eh wot?

http://www.talkers.com/top-talk-radio-audiences/

A GOOD TURN MR. RAMSEY, IS PROVIDING!

[Kaslin]

I used to post Dave Ramsey’s articles from the Townhall.com finance section in the News/Activity section, until the Admin moderator sort of convinced me that it belongs in chat. It has a Business and Economy topic which I can use and I use advise, which is what he gives readers as keyword

[jimsin]

yep i’ve never been in any of his courses but from what i’ve heard the boards who’ve purchased them and the folks who teach from his tapes and the class members are pretty happy with em...so....