Business
Dave Says – September 4, 2011
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Each Sunday on VicksburgDailyNews.com we bring you special pearls of wisdom from Dave Ramsey with the syndicated column called “Dave Says.” Dave Says is a weekly column carried by more than 300 publishers, with a total, combined circulation of more than 14 million! Featuring the financial advice of nationally syndicated radio host Dave Ramsey, the Dave Says column is filled with timely, relevant questions and answers taken from actual letters and calls on Ramsey’s radio program, The Dave Ramsey Show.
A Parent’s Last Days Dear Dave, I need advice on how to handle things where my mom is concerned. She was diagnosed with ALS (Lou Gehrig’s disease) a year ago, and now she wants our family to do things together that we can’t afford. Last summer, we took a trip to Norway, and mom paid half, but it still made things hard on us financially. What can I do? Emily Dear Emily, I’m really sorry to hear about your mom. I know that’s tough on everyone in more than just a financial sense. What you’re facing is very sad, and I understand that you want to spend as much time with her as possible. At the same time, though, you can’t bankrupt your family, either. I think you need to sit down with her and gently explain that while you love her and want to spend as much time with her as possible, you can’t put your family in financial danger to help her with a bucket list. You have to balance your love for your mom and this awful situation with what’s best for your own household. Make reasonable decisions on what you can and can’t do with her. Can you stretch yourself to do a few special things? Sure, but stretching is one thing; breaking is another. If she’s leaving you insurance money, you could stretch a little bit, then put that back into your funds later. But don’t go into debt to make these things happen. That will just start a cycle of borrowing that you can’t afford and leave you with a pile of payments later on top of your grief. Your family has enough to worry about right now. Don’t put a bunch of debt on the list, too. That’s going too far. God bless you, Emily. Dave
The Meaning of Diversification Dear Dave, What exactly do you mean when you talk about diversifying your investments? Sharon Dear Sharon, When it comes to investing, diversification simply means spreading your money around. This helps reduce risk, because you’re not putting all of your money into one company. This way, you won’t lose everything if that one company goes broke. It’s also why I tell people not to put all of their money into their own company’s stock. I have lots of mutual funds with one or two mutual fund companies. Within those two companies they’re called fund families. Think of it like a brand of soup. Campbell’s® is a brand, but they have all kinds of different soup. I also have money in different banks and in different money market accounts, and I have money in different types of real estate. So, I’ve got several different kinds of investments, but not a million different things running around out there. If I listed them all out they wouldn’t even take up an entire page. I like to keep things fairly clean and simple, and I encourage you to do the same! Dave
A Down Payment is Not an Investment Dear Dave, I’m saving up money to buy a house in the next couple of years. How should I invest this money before I actually buy something? Candace Dear Candace, The problem is that you’re not really investing; you’re just saving. Investing means you aren’t going to touch the money for five years or more. If you may use the cash to buy something within five years, you’re really just kind of “parking” the money for a little while. If it were me, I’d put it in a money market account. It’s basically just going to sit there and not earn much, but you won’t lose anything, either. If you’re lucky, you might see one percent interest in the short term, but that’s about all you can expect considering the low-interest rate environment we’re in these days. Dave
Prepping For an Emergency Dear Dave, My husband needs a liver transplant within the next two years, because he has Hepatitis C. We make about $70,000 a year, but we have $25,000 in debt. He’s still able to work right now, and we have health insurance, but how can we prepare for the operation and medical bills? Nikki Dear Nikki, God bless you guys. It’s going to be tough, because you’re going to face a lengthy loss of income, and sky-high medical bills even if everything goes well. I’m really sorry you have to go through this. Life can be hard enough without major health issues knocking you for a loop. The good news is that there’s something you can do about all this, and it all starts with saving. First, set aside an emergency fund of three to six months of expenses as quickly as you can. In your case, I’d recommend leaning toward the six month side. Second, you guys need to have no life for the next year or two, and get very serious about paying off as much debt as possible after you get your emergency fund in place. I’m talking about following a very strict budget, and living on rice and beans. Bottom line? The less debt you have, the better off you’ll be. Wouldn’t you love to be debt-free and have six months of expenses in the bank before they perform this operation? You can do it, if it becomes important enough to make it priority one! Dave
Who’s Liable? Dear Dave, I attend a small church with about 100 members. There is a $97,000 mortgage at 8.75 percent on the building, and the note was signed only by the pastor. In the event of default, are the members of the congregation liable? Charlene Dear Charlene, Unless you signed the note, you are not liable. If the pastor signed the note personally, or on behalf of the congregation, it would actually depend on the wording in the note as to who is liable in case of default. But this whole situation is kind of silly, and I’ll tell you why. If everyone in the congregation gave an extra $83 a month in their tithe – that’s only about $20 more every Sunday – you could have this mortgage knocked out in a year! There’s absolutely no reason for your church to be in debt 12 months from now. This is a prime example of what happens when a church adopts the same mentality as the rest of the world. The Bible itself warns us that the borrower is slave to the lender! Dave
I want to open a franchise, but … Dear Dave, I’ve always been intrigued by the restaurant business and wanted to open one of my own. Recently, the opportunity presented itself to open a McDonald’s franchise. I really want to do this, but it would take years for me to save up the money. Is it okay to borrow money to start a business? Jim Dear Jim, It will take longer to save up the money and open the business debt-free, but that’s exactly what you should do. Most small businesses fail within the first five years. One of the main reasons for these failures is the struggle to repay debt. If you’re into restaurants, try starting small with a catering business out of your home. This will give you a taste of managing your own food service business, and let you know if you really like that kind of work. It will also give you the opportunity to make and save some money. That way, when your restaurant dream becomes a reality you can honestly say that you own the business instead of it owning you! Dave
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