Dear Dave,
How do you feel about taking money out of savings to pay off credit cards?
Peggy
Dear Peggy,
I’m okay with this under two conditions. One is that you cut up the credit cards, close the accounts, and never use those things again. The second is that you don’t wipe out your savings in the process. Leave something in there, so you’re covered in the event of an emergency. Then, rebuild your savings as fast as possible once the debt is out of your way.
You have to understand, too, that credit cards aren’t the problem. The credit card debt isn’t the problem, either. They are just symptoms of buying things you don’t need, with money you don’t have, in order to impress people.
Take a long look in the mirror, Peggy, because the person who’s looking back at you is the problem. Overspending, disorganization, not earning enough … whatever label you want to slap on this situation, you are the reason for the problem. Once you understand and accept that, and you start living on a budget and staying away from debt, you’ll have taken your first real steps toward financial peace!
—Dave
Dear Dave,
I’m 35, single, and I have no dependents. Do I need a life insurance policy?
Larry
Dear Larry,
In your situation, if you have enough cash saved up to pay your final expenses — and you don’t have any debt — there’s no reason for you to carry a life insurance policy. No one will be harmed financially by your death, and no one would be deprived of the income that would be lost if something unexpected happened to you. Even if you have a mortgage on a home, the house will normally sell for enough to pay off the mortgage.
However, if you have debt, or if you don’t have some money stashed away in savings, you might want to consider an inexpensive term life insurance policy. At your age, if you’re healthy, you can get $100,000 worth of coverage for just $10 to $15 a month.
Remember, you don’t buy insurance to leave an inheritance. You buy life insurance is to make sure there’s enough money to take care of your family and final expenses. You wouldn’t want your parents or someone else having to foot the bill!
—Dave
* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 14 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.