Dave Says...

Dave Says: For the people and things you leave behind

Dear Dave, 

I don’t have any kids, and I’m not married. I’m 35 and have a good job, plus I’ve got $25,000 in an emergency fund, $50,000 in a separate savings account and almost $100,000 in a retirement account. Should I have life insurance, too?  

Angus 

Dear Angus, 

Basically, you only need life insurance to take care of the people and things you leave behind when you die. Someone in your situation, especially since you’ve been smart and saved up a nice chunk of cash, probably wouldn’t need a life insurance policy at all. I mean, an inexpensive policy might be in order if you have a little debt or something like that, but there’s a pretty good chance you already have a small policy built into an existing bank account. 

When it comes to life insurance, just think about anyone who might be left in a bad situation or harmed if you died. If you worked outside the home and were married and/or had kids, I’d recommend having 10 to 12 times your annual income in a good, level term life insurance policy.

Your family could never replace you if something tragic happened. But with a good life insurance policy, they at least would be able to replace the income you generated.

Good question, Angus!  

— Dave

Dave Says: Don’t let giving turn into debt

Dear Dave,

The church I attend encourages people to do their tithes through using credit cards and debit cards. How do you feel about this? 

Tae 

Dear Tae, 

As you may have heard, I’m against debt. So even when it comes to tithing at church, I’m not particularly fond of members being encouraged to contribute their tithes using a debt vehicle.

The Bible mentions debt several times. And every time it does, it’s always in a negative light. It’s not a salvation issue or anything like that, but the Bible basically says debt is a foolish thing.   

Now, I don’t have a problem with e-giving in general. That’s fine. But if I were the pastor or a member of the leadership board, and we had an e-giving process, I would strongly encourage folks to use debit cards—not credit cards. 

A lot of people like the ability to give online. I get that. It’s just more convenient. But I’d rather not see a giving situation at church turn into debt for you.

— Dave 

Dave Says: Debt is like a ball and chain

Dear Dave,

I’ve never had a credit card in my life. I do have a $600 monthly car payment right now, and it’s my only debt. I owe $10,000 on the vehicle. Currently, I have a six-month emergency fund saved, plus $25,000 in a regular savings account. I’m in sales, so my pay often fluctuates from month to month. Should I pay off the car from savings, or hang on to that money just in case things in my job take a downturn?

Mike

Dear Mike,

I’m proud of you for never caving in to the temptation of credit cards. That sets you apart from the vast majority of folks in America today. But I’m not letting you off the hook on the car payments.

I don’t care what anyone else says, debt is never a good thing. And it’s absolutely the last thing you want in your life when your job compensation structure is unpredictable. Now, it sounds to me like you’re in pretty good shape financially, except for the car payments. It may be the only debt you have, but it’s still like a ball and chain around your neck when it comes to your money.

I want you to take a moment, and think about all the great things you could do if you didn’t have that monthly payment flying out the door. I mean, an extra $600 in your pocket every month would be pretty cool, right? If I were in your shoes, I’d take $10,000 out of savings today, and pay off that car. You’d be completely debt-free in a heartbeat, plus you could rebuild your savings in no time with the money you’ll free up. On top of all that, you’d still have your emergency fund of six months of expenses sitting there untouched.

Debt always equals risk, Mike. Always. Write a check today, man, and pay off that car. You’ll be surprised at how much lighter and more comfortable you feel with no debt—or the potential consequences of debt—weighing you down!

— Dave

* Dave Ramsey is a nine-time national bestselling author, personal finance expert and host of The Ramsey Show. He has appeared on Good Morning America, CBS This Morning, Today, Fox News, CNN, Fox Business and many more. Since 1992, Dave has helped people take control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.