Dave Says - September 20, 2010

Dear Dave,
What’s your rule of thumb about how much your car should be worth in comparison with your income?
Madea

Dear Madea,
Great question! My rule of thumb is that all of your vehicles—I’m talking about cars, trucks, boats and their Sea-Doo sisters, motorcycles, and anything else like this—should not total more than half your annual income.

Why? It’s because all of these kinds of things go down in value. You never want half of your income going into things whose value is dropping like a rock. You don’t need a $20,000 car if you’re making $30,000 a year. That’s just stupid. Think about it this way. If you’re making that kind of money, and I walk up and tell you I’ve got an investment opportunity that will turn $20,000 of your hard-earned income into $12,000 in just three or four years, are you going to take me up on the offer? If you’ve got a brain in your head, the answer’s no!

Now, I’m okay with it if you make $300,000 a year and buy a $20,000 car if you pay cash. That’s like most people running out and buying a Happy Meal. It’s just not a big deal!
—Dave

Dear Dave,
Do you ever reach a point in your plan where you stop budgeting or using the envelope system?
Craig

Dear Craig,
I’ve been fortunate enough to build a net worth of several million dollars, and my wife and I never stopped doing either one. We still sit down together every month and plan out a written budget. Every dollar is spent on paper before the next month begins, and we follow it exactly. And I can promise that were you to look in my wife’s purse, you’d find one of our deluxe envelope systems, just like we sell in our office bookstore. She carries it with her everywhere!

We do these things because we’re responsible spiritually for handling that money well. Those of us who are Christians call that “stewardship.” We feel like we’re called to be good stewards—good managers—of God’s money. It’s not a freaky thing. It’s just a matter of following God’s good advice and common sense.

I want that money to behave, and these things are some of the best ways I’ve found to make it do what it’s supposed to do!
—Dave

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Dave Says - August 23, 2010

Dear Dave,
My wife and I are getting close to retirement, and our 36-year-old son recently moved back in with us. His automotive restoration business went bankrupt, he hasn’t been able to find another job, and he has nowhere else to go. What can we do to help him?
John

Dear John,
You have to define what helping your son really means. In my mind, you haven’t helped him at all if he’s still squatting in your basement five years from now. That’s called being an enabler. But it’s not going to help him, either, if you toss him on the street and say “You’re 36. Be a man!” I think you should formulate a progressive plan somewhere between those two extremes—something that includes a move-out deadline, but will help him regain some dignity.

As part of living with you, I’d require him to do three or four things. One is that he abides by your household rules. If he’s going to live in your home, he should act the way you want him to act. Number two, he needs to be engaged in some kind of regular physical activity. Even if you have to pay for it, you could get a membership at a gym or buy some exercise equipment. Exercise stimulates the mind, and he needs that right now. It’ll also be great for his body. Getting beat up like he’s been can be tough at that age. It can lead to depression if you don’t engage in physical activity and goal setting.

Next, is to think about career steps. He could start with a part-time job to get some money in his pockets. Then, work on a long-term career goal. He knows how to turn a wrench, and he probably likes that kind of work. His mind works spatially, which means he can look at things and figure out how they operate. So, it might be a good idea to move in that direction. It doesn’t even have to be cars. He could learn to work on boats or aircraft.

You don’t want to beat the kid when he’s down, but you don’t want to participate in his sewage, either. Help him clean up his life, and get him out of there as fast as possible. It’s what’s best for everyone!
— Dave

Dear Dave,
We live in Boston, and we’ve got three kids who are almost ready for college. My wife and I make about $114,000 a year combined, and that includes a $34,000 a year pension I receive. Should we use the pension money to pay for their tuition, or should we let them take out student loans?
Geoff

Dear Geoff,
There’s no way I’m going to send anyone into student loan debt, especially when the household income is in the six-figure range!

Now, that assumes the kids choose a college you can afford, but with your income you guys could handle tuition at most state colleges. And that means all the kiddos are going to have to pick a reasonably-priced school if they expect you to foot the bill. We’ve got to use a little common sense here. No champagne taste on a beer pocketbook!

You guys are doing okay, but you can’t afford to send these kids to $30,000 a year schools. All this will be hitting you at about the same time, so I want you to cash flow this thing, and pay as you go along. College is great, but you need to invest your money into something that fits your budget!
— Dave

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I Can't Wait to Lead My Own Class!

By Jenna Bowen
Adairsville, GA

My fiance and I just finished FPU tonight, and I am so excited about all that we have learned. Now that we have a plan to help attack our debt, I dont feel so overwhelmed. We are getting married soon, and I am certain that this class will have a huge impact on our first year of marriage. I have a great passion for FPU, and look forward to leading classes in the very near future!

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Online Potluck Highlights

Online Potluck Highlights

The Online Potluck on November 10 was a huge success!  Thank you to all the coordinators who participated.  Here are a few of the stories from the celebration for you to enjoy. You can read them all by signing into the Community and entering the Fellowship Hall.  Look for the Potluck Celebration folder and have fun. Feel free to add your ideas and stories!

Humor
The coordinators from the class that we went through were newly married when they went through FPU. He bought her a BMW as a wedding gift. During the class they sold it and got her a Kia. - Linduck  

Idea
In trying to keep up gazelle intensity (and helping make it easy for people to not have excuses!) we did a GROUP GARAGE SALE and it was not only helpful to the families that participated, but SO MUCH FUN! We used our church property and tables and UNLOADED some STUFF to pay off debt!! Another plus was that people wanted to know who we were and WHY were we doing this?!?! Great opportunity to share FPU with a stranger in the community! - hdwilliams65
Testimonial
I wanted to start FPU after using Dave's principles from his book Financial Peace. As we started seeing changes in our lives, we wanted to share it with others. Basically, I CAN'T stop talking about Dave Ramsey and being debt-free! My brother is on board now and has since gotten a better job. My sister is as well and paid cash for her current car. My husband and I have all debt paid but our house and we refinanced it for 10 years. We owe about 8 more years. Our snowball has slowed, though, due to a wedding this spring (paid cash) and second daughter starting to college in the fall. We just paid cash for a 5-year-old van. Our family tree is definitely changing!

My 24-year-old daughter and her husband have shaved their heads and drunk the Kool-Aid! She is the most motivated of our first class. She is anticipating the day when she can share with our congregation that they are debt free! They paid cash for both of their vehicles and live by their budget. She had checks stolen about a month ago, and she said having her emergency fund turned a potential crisis into merely a nuisance. - Gritsy

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Dave Says - August 2, 2010

Dear Dave,
I’m about to complete Baby Step 3. I’ve been very intense about following your plan, but I was wondering if there’s ever any kind of frustration or letdown after you’ve come this far.
Rasheed

Dear Rasheed,
You’re right. The beginning three Baby Steps are very intense. First, you get $1,000 in the bank—$500 if you make less than $20,000 a year—for a beginner emergency fund as fast as you can. Then, pay off all your debts, except the house, from smallest to largest, and after that you finish out your emergency fund with three to six months of expenses. This is a real whirlwind of activity because everything should be wrapped up in an aggressive, we’ve-got-to-get-this-done kind of attitude.

I guess if there’s a letdown it could come from the feeling that once you’re out of debt except for your house, things should kick into overdrive and you’ll become instantaneously wealthy. That just isn’t realistic. But it does remove a ton of stress from your life, and you’ll experience a sense of freedom that you’ve never felt before. Just think about it. Try to imagine how it would feel to have no payments on anything except your home. There’ll be no more credit card bills and no more car payments. How great is that?

As for frustrations, they’ll be fewer because a huge cause of stress and frustration will disappear after you gain control of your money and get out of debt. You may feel like things aren’t moving fast enough, but things never seem to move fast enough when you’re intense and really into what you’re doing!
—Dave

Dear Dave,
What’s the best financial gift for young grandchildren?
Anonymous

Dear Anonymous,
Well, it’s definitely not savings bonds. You get nothing in the way of a return from those things. I get mad just looking at them! I’d suggest opening up an Educational Savings Account (ESA) in a mutual fund in the child’s name. You can put up to $2,000 a year, per child, into these, and they grow tax-free.

If you started when your grandchild was born, and set aside $2,000 a year for 18 years, you’d have saved $36,000. But if you go the ESA route, and figure 12 percent average growth over that time, the kid could have about $126,000 waiting when it comes time for college. That’s a pretty sweet gift!
—Dave

Dear Dave,
Where is the best place for me to put my savings?
Anonymous

Dear Anonymous,
Saving and investing are two things I talk about a lot. Investing is when you’re going to leave the money alone for five years or more. I’m talking about things like retirement, college planning or saving up to buy a house. For these things, I recommend good, growth-stock mutual funds. Make sure you’re looking at mutual funds that have stable track records of five to 10 years, and then spread your money across these four categories: growth, growth and income, aggressive growth, and international.

Now, when it comes to savings, I’m not really concerned with making money. Things like setting money aside for vacations, Christmas, or even an emergency fund fall into this category. One and one-half percent would be an incredible rate on a savings account right now, so you’re not going to get rich off anything like this. The idea is to park this money in a safe place, and keep it separate from the rest of your money so it doesn’t get spent on the wrong thing!
—Dave

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Starting off right

Companies Dave Trusts

Dave doesn't endorse just anyone. These are the best.

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I Committed My Life to 2 Things

By Rick Butler

Two years ago I was in pity party mode. While separated from my wife and family, my sister gave me some Dave Ramsey cassette tapes. Months went by, and one night while on my knees praying, I decided to listen to the tapes. Since then I have committed my life to two things: Christ and becoming debt free. I went off the deep end, as my friends say, and paid off $7,500 in debt and saved $8,500 in a couple of years.

I do not miss cable, cell phones, etc. in my life. Now my life is simple and stress-free. Because of the small changes I made, I feel great! I am in the military, and I have been the FPU coordinator in one class. I am currently facilitating FPU at my church.

The Lord has gotten my attention through a divorce (I pray daily of being a family again; I think the Lord is working on it), and Dave has got my attention through FPU.

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