Dave Says

Thursday, February 14, 2008 at 2:17am

Dear Dave,

The payments on our new car are $336 a month over four and a half years, and we still owe a total of $12,000. We’ve cleaned up our other debts, so the car is the only thing hanging over our heads. We’ve also managed to put $10,000 away into savings. Should we pay off the car early, sell it or what?

— Alicia

Dear Alicia,

It sounds like you’ve discovered that it’s virtually impossible to build wealth with stuff like car payments hanging around your neck. Congratulations on that and on putting a nice chunk of money into savings!

When you’re serious about getting out of debt, my rule of thumb is to sell anything you can’t pay off in 18 months or less. With a balance of $12,000 still owed on the car, that means you’d have to write a check for about $700 a month to pay it off in that amount of time. If you can afford it without going hungry, that’s one way.

Selling the car is an option, too, but don’t go to a dealer for this. Lots of times selling a car is as easy as putting a sign in the windshield or taking out an ad in the local paper. Chances are you’ll come away with a lot more money in your pocket this way, too.

Once you get the car sold, pay it off quickly. Then use about $3,000 from your savings to buy a dependable, used car. You’ll be out of debt, and you’ll still have the bulk of your savings in place.

Plus, you’ll have the income available to refuel that savings account in a hurry.

— Dave

Dear Dave,

My sister’s fiancé will be bringing a lot of debt into their marriage. He has several credit cards that are all maxed out, a $30,000 mortgage and lots of medical bills. She’s quit college to work full-time and help him pay it all off. Is this a good idea?

— Heather

Dear Heather,

This is a very bad idea. Those bills will become her joint responsibility soon enough — like AFTER they’re married and not one second sooner. I mean, what if something bad happens and they break up?

Once you get married, there’s no “yours” and “mine” anymore. It’s all OURS, and that’s when you should pay everything together. Marrying someone who is in debt is okay, too. But you need to make sure the habits that caused the debt have been broken, and that you’re both in complete agreement from that point on about how the money will be handled.

Your sister’s biggest responsibilities right now are making sure she really loves this guy, and that they’re in agreement on financial issues before taking the trip to the altar. I’ve seen too many people come into our offices for counseling who were broke because they paid the bills for someone who left them before the big day.

NEVER pay your fiancé’s bills before you get married.

— Dave

Dear Dave,

What are your views about having life insurance on small children?

— Winfred

Dear Winfred,

I think it’s a total waste of money. The only exception may be a small rider on your term insurance policy — just enough to take care of a child’s funeral expenses — in the event that something awful happened. I did that for years, just a little $15,000 rider, before I decided to self-insure on that issue.

Life insurance policies should never be used for things that this situation represents. Number one, they should never be used as an investment. They’re garbage as investment vehicles.

The second reason most people buy life insurance on kids is because they’re scared the child may get really sick later on and become uninsurable. The likelihood of that happening is almost zero. That’s why it’s so inexpensive.

The only people with a real need for life insurance are those who have others depending on them for their livelihood. These folks should carry about 10 times their annual income on a good, 20-year level term life insurance policy.

— Dave

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Filed under: City Business
By: NewYorker1 on 12/31/69 at 6:00

Heather darling, please tell your sister not to marry this man until he has met ALL of the following criteria:1. He has a college degree2. He is completely debt free3. He has a credit score of 800 or higher and nothing less.4. He has no drama from any past relationships. 5. He has a nest egg of at least 50 thousand.6. He has a good bill of health from his doctor, no diseases. 7. He does not smoke or do any type of drugs.8. He works out on a regular basis.9. His waist size in nothing over 33 or 34 and 34 is pushing it.10. His income is at least $80 thousand.If this man doesn't meet all ten of these requirements, then Miss. Thing needs to stay single.

By: slzy on 12/31/69 at 6:00

Dave,how is it government finances can be so different than personal finance?

By: mccullochd on 12/31/69 at 6:00

NewYorker, that is quite a list to live up to. How many single guys do you know that meet all of the criteria?

By: Idahoser on 12/31/69 at 6:00

$80 grand huh? I've been married 24 years and I don't make that. Where in the world are you going to find somebody that fits all this and still needs you?

By: jwk6179 on 12/31/69 at 6:00

I think I read these same LETTERS several years ago when your column ran in the Tennessean. The letters were the same, only the names have been changed to protect the innocent.

By: chino on 12/31/69 at 6:00

You are likely to find the person that meets most of New Yorker criteria at your local gay bar. Minus the drama from past relationships. :)

By: NewYorker1 on 12/31/69 at 6:00

I meet all of those requirements. That's why they are my requirements. Why should I settle for anything less? This is why most relationships fail, because people need to recognize what they are bringing to the table and expect the same from their partner or else it's doomed from the beginning. By the way, I am gay, but don't do the bars. The only differences between me and the list are: my lowest credit score is 820. My net egg is a six figures and I have two college degrees.

By: gdiafante on 12/31/69 at 6:00

Excuse me, would someone please pat NY1 on the back?

By: NewYorker1 on 12/31/69 at 6:00

LOL... I'm sorry, but I come from a family that sets standards. It's not bragging or anything like that, but those are my requirements to be in a relationship. My dad is a doctor and my mother owns her own business in New York and they always surrounded themselves with like minded people and so do I. Should I be ashamed of it? No, I don't think I should.

By: gdiafante on 12/31/69 at 6:00

My requirements for being in a relationship?Being attracted to the other person.

By: NewYorker1 on 12/31/69 at 6:00

I know a lot of guys that meet all ten requirements and yes all of them are gay. That's funny, now that I think about it. I'm sure there are some straight men that meet all ten requirements.gdiafante, what happens when the physical attraction fades? Let's face it, we will always see someone prettier and in better physical condition, so you should ask yourself, what other qualities should a person have to make you happy. Should she enjoy the same music or sports. The physical part of a relationship is the first thing to fade out. I, personally, am not into the physical as much as I am into the mental. How can someone stimulate me mentally. I'm a busy body and enjoy doing different things and if someone is not on the same page, then we will not make it. I love theater, art, architecture, traveling, reading, sports, and the list goes on and on for me. I don't like lazy people. People who accept life for what it is and not constantly improving in SOME way.

By: gdiafante on 12/31/69 at 6:00

I said "attracted

By: MFO on 12/31/69 at 6:00

I'm sorry but a regular question and answer series from Dave Ramsey doesn't constitute a business section. Nor does the one speculative story per day per section constitute a real in the full newspaper. This used to be better than the Tennessean in my oppinion. What happened???

By: Blanketnazi2 on 12/31/69 at 6:00

I have to agree with you again, gdiafante. sorry folks, honest opinion - not a "cyber high-five" LOL!

By: NewYorker1 on 12/31/69 at 6:00

I understand, and it's not about meeting a certain financial status. For me, it's about compatibility. I know I'm not compatible with someone who makes $5000 a year. The reason is, I enjoy doing too many things, eating out on a regular basis, traveling, etc. A person who makes $5000 a year would not be able to afford to do the things I enjoy doing. Sure, I will pay the tab some of the time, but after a while, I think being the one to pay all the time would get old really fast.