After listening to your show, I want to try to get control of my finances, but I’m afraid to open up the bills. I make about $60,000 a year, but it’s a real struggle just to keep my head above water financially. My checking account is always overdrawn, and I don’t know where to start in catching up. Can you help?
Trust me, I know it can be scary. But the easiest way to attack this thing is by taking one slow, sure step at a time. Try not to let worry consume you in the process, either.
First, sit down, take a deep breath, and open all the unopenedbills. Throw away any duplicates, and keep only the most recent statements and notices. The unknown is always scarier than the known, so facing the bills and cutting that stack in half right off the bat will help reduce a lot of your initial anxiety.
Next, let’s start a debt snowball. List all the debts you owe, from smallest to largest, making one column for the payoff balance, one column for the amount you need to get current on that debt, and one column for the single payment amount when you get current. Total each column — the payoff balance, the amount to get current, and the single payment. I promise it won’t be as bad as you think.
Finally, make a monthly budget. Prioritize your needs, starting with food, utilities, house payments and transportation. When it comes to your debts, pay as much as you can on the smallest one while making minimum payments on all the others.
You can do this, Gail. If you’ll follow my plan, I think you’ll see improvement in several areas of your life and you’ll feel good about the progress you’re making, too!
My mom is 73 years old, and she’s dealing with depression and a few other mental issues. Is it too late for her to get long-term care insurance?
It wouldn’t be a big problem if she were healthy. But given her age, and the other struggles you mentioned, I’d check with a good insurance broker to see what’s out there for her.
In the insurance world they call this “making a market.” Will they be able to find a company that will write her in that situation? I can’t give you an accurate answer off the top of my head, because this is a difficult thing. It would probably depend on things like the extent of her depression, how long it’s been manifested, and what it has done in her life.
That’s one of the reasons I’m advising you to see an insurance broker. A broker doesn’t represent just one company; they represent several companies. They can shop around in a given situation, and find someone to write something you might not get written otherwise. They can also shop around for the best possible price, and you get the efficiencies of the marketplace working for you.
God bless you both, Julie.
* 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 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.
Holidays 2015Courtesy of EveryDollar.com
Christmas is the best. You get to hang stockings, shop for your favorite people, and potluck like a champ. There’s no other time of the year quite like it. That’s why it’s so easy to get carried away with your seasonal shopping!
In fact, last year’s annual Gallup poll found that nearly a quarter of Americans anticipated spending $1,000 or more on Christmas. That’s a decent chunk of change for any budget. While it’s perfectly okay to spend extra money around the holidays, you don’t want to end up with the unwelcomed gift of credit card debt come Christmas morning.
Here’s how you can make your Christmas budget brighter:
1. Figure out how much you can spend on Christmas
Let’s go ahead and address the question on everyone’s mind: How do you figure out your Christmas budget? Start by figuring out how much you spend on your normal monthly expenses, like gas, utilities, insurance and groceries. Then take a closer look at your flexible spending budget groups like dining out and entertainment money.
If you typically spend $300 on restaurants in a month, why not cook a few extra meals at home and divert an extra $200 toward Christmas savings? Or if your personal money is partying it up at $150, why not hold off (temporarily) and put an extra $100 into your Christmas stash? Smart budgeting now can free up more money for what you want later—like Christmas presents!
2. Divide your Christmas budget into categories
Once you’ve figured out how much you can spend on Christmas, do some dividing. Take your number—let’s say $500—and think over your seasonal expenses. You’ll need money for travel ($50), tree and trimmings ($50), a few potlucks and parties ($50), and some extra giving ($50). Then there’s the Big Kahuna: Christmas gifts ($300).
As long as you plan where you money will go before you spend it, there’s no right or wrong way to split up your Christmas budget. Plus, if that Evergreen goes on sale, or you economize on your potluck groceries, that means more money to splurge on your loved ones.
3. Write down who you need to buy gifts for
Now that you know exactly how much you can spend on gifts, decide who gets what. Make a list of everyone you’ll buy for this year. And we mean everyone—coworkers, church friends, your parents, your kids, your grandkids. Next to each name (or category, if you’re budgeting a treat for the office), write a specific dollar amount.
If you don’t have enough money to cover everyone on your list, rethink how much you’ll spend on each person. Maybe you can agree to only buy for the kids. Or perhaps you can draw names, instead of buying for multiple families. And then there are always baked goods or homemade crafts! Who doesn’t love a gift that comes fresh out of the oven or straight from the heart?
Give yourself the freedom to enjoy
You probably have a lot of great ideas on how to spend your money this season. When you start with a plan, you’ll be in control of your Christmas budget long before setting foot into the mall. All you have to do is set up your monthly budget, categorize your Christmas savings, and make your detailed gift list. After that, enjoy your Christmas shopping—because your budget said you could!
*EveryDollar is a simple, online budgeting tool that helps users set a monthly budget and seamlessly track expenses. For more information, go to www.everydollar.com.
January 26, 2015
I’ve been following your plan, and I’d like to find a way to make a little more money on the side. Do you have any ideas for generating some passive income?
First, I want to make sure you’re not getting involved with some get-rich-quick scheme, like a nothing-down real estate seminar. “Passive income” is a term that’s sometimes attached to those sorts of things.
Passive income is pretty simple; it’s income off of investments. In other words, it’s money you set aside that makes you money. There’s not any other income that is real passive income.
If you wrote a book and got royalties from the sales, some people would call that passive income. I get royalties from the books I’ve written over the years, but the people who would call that “passive income” didn’t follow me around while I was working my tail off to write and sell those things. To me, it wasn’t passive income at all; it was a business. Technically, the government would call it passive income. But they don’t have anything to do with reality.
When it comes to passive income, I only invest in two things — real estate, for which I pay cash, and good growth stock mutual funds. Active income usually takes the form of a small business idea or your career. That’s income that you, yourself, are literally creating.
But that’s how I look at that stuff. Some people may have a different view on it, but I like to keep things simple.
I’m following your plan and trying to find different ways to save money. What’s a good way to decide whether or not you need full-coverage insurance on an automobile?
I think you should look at a couple of things. First, you need full-coverage or collision if you don’t have a lot of money, because you’ll end up walking if the car gets totaled. You need this coverage even if it’s a $2,000 car. You might keep the deductible a little high to save on premiums and then, if something unexpected happens, you can cover the out-of-pocket expense with your emergency fund.
Let’s say you have $50,000 in savings. You’re driving a $5,000 car, and you decide to drop collision coverage because you’re thinking if you total it you can just write a check and replace the car. You can, but then you have to look at the other side of the coin. What does this collision coverage cost per year versus the $5,000 risk you’re taking?
I’ve run those numbers a few times, and generally I find collision insurance to be a pretty smart buy!
* Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 8.5 million listeners each week on more than 550 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
Busting the Myths of Leadership
The great statesman Benjamin Franklin once said, “When you are finished changing, you’re finished.” And even though it’s been 200-plus years since he uttered those famous words, they still hold true — especially in today’s business world.
Long standing ideas about how to lead a team are no longer viable. Workers won’t stick around for a bad boss these days, no matter how much they’re paid. They want to be motivated and inspired. So, how can you ensure that you’re functioning as an awesome leader? Start by avoiding these common, but mistaken, leadership beliefs.
The Myth: They’re inspired by their paycheck. As the owner of your company, you have the power to change lives. After all, you’re the person signing the paychecks. Everyone should be happy, and even grateful, to do their jobs with no questions asked.
The Truth: Great leaders know that power comes from persuasion, not position. Simply offering a paycheck, or intimidating workers by holding their jobs over their heads will not make them more productive or creative. Leaders who take the time to communicate, support and encourage earn loyalty and respect from their teams.
The Myth: No news is good news. Your team doesn’t need to know when something bad happens. If sales are down, they’re going to become scared and maybe even leave. As a matter of fact, they can’t be trusted with any sensitive news — good or bad.
The Truth: Winning organizations have a culture of communication. Your team wants to know what’s happening and why. Sure, there’s some information you can’t share. But when you have the right team members on board, you can trust them with almost anything. Make a habit of over-communicating. Your team will respect you for it even more.
The Myth: You can’t find good workers anymore. Today’s generation doesn’t listen. They lack initiative, and they never show up on time. They want the world handed to them.
The Truth: You’re probably not good at finding and recognizing talented, responsible workers. Think there are no young people who are willing to do an awesome job? Look at Chick-fil-A. The company has thousands of them. Part of being a good leader is knowing how to hire. You have to be willing to wait for the perfect person — one who shares your values and work ethic. At Dave Ramsey’s company, team members are interviewed four to six times, and the process can take three or four months.
Becoming a great leader is not easy. It’s a skill that needs to be developed, and it’s one that takes time, patience and a willingness to learn and improve one’s self. But if you’re willing to put in the hard work, you’ll find yourself with a team full of talented, passionate people — a team willing and able to slay dragons right alongside you, and do whatever it takes to win.
It’s definitely worth the wait!
*Dave Ramsey is America’s trusted voice on business and money. He has authored five New York Times best-selling books, including EntreLeadership. The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on the web at www.entreleadership.com.