Learning and living

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I'm a recently retired widow, and my husband always took care of most of our finances. We never had any debt, but after starting to learn a little bit about how money works, I'm worried that there may be too much of it invested in CDs (certificates of deposit). The total nest egg is a little over $1.5 million, with $300,000 of that in CDs. There's also a $317,000 annuity, a 403(b) and around $900,000 in IRA mutual funds. I also have two homes and a new car that are paid for. How do you think I should handle things going forward?


Dear Joan,

I'm really sorry to hear about your husband, but you two did a fantastic job with your finances. You're worth at least $1.5 million, and you have no debt. You're set for life, but you're wise to want to be careful.

The CDs give you some stability, but obviously they're not earning much of anything. I think of them as money kicked up in a hammock — it's not working for you. You both worked hard for that money, so personally I'd like to see it working hard for you now. If you've had good luck with a variable annuity, that's fine. You've also had very good luck with your mutual fund investing. So, with all this money in different areas, you're definitely diversified. It's just a matter of wrapping your arms around it all and developing a deeper understanding of things going forward.

At this point, I would urge you to find an investment professional in your area with the heart of a teacher — someone who's not trying to sell you stuff. You want to learn, Joan, and I'm really impressed by that. It's a smart and necessary thing. Every time you see an investment person, whoever it may be, your goal should be to leave the room smarter and with more understanding than you had before.


Buy the car?

Dear Dave,

My wife and I are 31 years old, and we have no debt except for our home. We also have an emergency fund and college savings in place for the kids. Over the last several months we've saved $22,000 for a newer car, but we're also worried about retirement. We've been putting 15 percent of our income toward retirement, and we're concerned that maybe we shouldn't spend the whole $22,000 on a car. We make around $100,000 annually and have $50,000 in our nest egg. What do you think, Dave?


Dear Brandon,

In your situation, a $22,000 car is not unreasonable at all. You guys are both 31 years old, and you're going to be in great shape for retirement if you just keep doing what you've been doing. On top of all that, you've got your emergency fund in place, in addition to a nest egg and car savings. If I'm in your shoes, I'd go out and find the best car $22,000 can buy.

You're doing all the right stuff. Your kids can go to school debt-free, and you're going to have the house paid off in no time. In short, you're going to retire multi-millionaires at the rate you're going — as long as you keep on keeping on!

Think about this, too. As a general trend, most people's incomes go up throughout their lifetimes. That being the case, chances are you're going to make and invest even more money in the years ahead. You and your wife could easily retire with $5 million to $10 million sitting there.

You've done a great job together, Brandon. Keep up the good work, and enjoy that car!


Steps in the process

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My wife and I are on Baby Step 3 of your plan, and we're about halfway to building our fully funded emergency fund. We don't like our current home very much, and we'd like to sell and move as soon as possible. We have a little over $30,000 equity in the place, so would selling the house be a viable option for funding Baby Step 3?


Dear Justin,

I wouldn't sell the house just to do Baby Step 3. That's usually a pretty easy Baby Step after you've gotten everything paid off except the house. As you know, a fully funded emergency fund means saving three to six months of expenses, so you shouldn't have to sell your home in order to accomplish that.

However, if you don't like the house anyway, and you're already planning on selling it, then yes, set some of the equity aside. I wouldn't put all of the equity into the next deal. I'd hold back my three to six months of expenses, so that when you move into another house you're debt-free with a fully funded emergency fund sitting there.

It sounds like there's nothing to prevent you from selling it today, if you're sure that's what you both want to do. Just hold on to enough so that you still have an emergency fund in place, and use the remainder for your down payment. So if that equation works for you, sell the house. If not, you may need to completely save up your emergency fund before you sell in order to make it work.

Regardless, when you move I want you to have an emergency fund and be debt-free in addition to your down payment. That's what we're after!


Don't cut your safety net

Dear Dave,

I make $25,000 a year, and I'm single. I expect my salary to increase to $35,000 next year, so can I get by with a $500 starter emergency fund instead of $1,000? I have about $38,000 in debt right now, including student loans, and I don't know how to keep up with bills and everything if I try saving a bigger emergency fund.


Dear Jane,

You really need a starter emergency fund of $1,000 if you're at a point in life where student loans are in the picture. It might seem like an impossible task right now, but that should be your first big goal. A written, monthly budget will go a long way toward helping you achieve that goal.

Making a budget for your money isn't rocket science. It's a simple, written planning process where you give a name and destination to every dollar you make before the month begins. Food, shelter, clothing, transportation and utilities are necessities, so they come first. After you've taken care of those, make sure you're current on your debts. Once all that is out of the way, put every spare dollar you can into your emergency fund.

If you do this with a sense of urgency, and limit spending to necessities, it won't take very long. You'll be surprised by how quickly it can happen, and you'll love the newfound sense of security you'll have in knowing $1,000 is sitting there ready to cover life's little emergencies!


Stay the course

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

Our daughter is a special needs child, who doctors say will live about half as long as the average adult. There's also a good chance she will be under our care her entire life. We just finished Baby Step 3 of your plan, so we have all of our debt paid off except for the house, and we have an emergency fund of three to six months of expenses saved. We have health insurance, too. However, we were wondering how the situation with our little girl affects retirement planning and college funding?


Dear Jonathan,

I know this may sound strange, but the situation with your daughter really doesn't affect things all that much. The only real difference is that it sounds like you'll be responsible for your sweet daughter for the foreseeable future — not just until she's 18 or 21.

If you don't already have it, you and your wife should both buy 10 to 12 times your annual incomes in term life insurance. Make sure the money from the policies is set up to go into a special needs trust that would be managed for her care. That way, your baby will be taken care of in the event something unexpected happens to you.

Otherwise, just keep following my plan. Baby Step 4 means you start putting 15 percent of your income into pre-tax retirement plans, like Roth IRAs and mutual funds. Baby Step 5 is college funding, if that's a consideration for her, followed by paying off your home early. Then, of course, the last Baby Step is building wealth and giving.

Financially speaking, you're looking at filling a need in the event of your deaths. This should be covered by life insurance or investments. If you reach a point where your investments are substantial, and money from those things can adequately cover her needs and the needs of your family, then you can always drop the insurance policies.

God bless you all, Jonathan.


Time to raise prices?

Dear Dave,

My husband has his own one-man painting business, and I help him with the books. We were wondering how you know when it's time to implement a price increase. Also, what should the increase be?


Dear Lauren,

I grew up in the real estate business, so I'll use the apartment-complex model as my example. If your building is completely full, then it's time to raise prices a little bit until you have a vacancy. In this type of scenario, you want a healthy level of vacancy, meaning you're always going to be losing some customers as you go up in prices.

In your husband's case, if he's booked through the end of the month, he's way underpriced. Just keep on turning in your bids, and don't make a big deal about things. It isn't like a tenant, in your case, where you're going back time and time again except in rare cases. You might start with a 10 percent increase, and see what happens for a while. If that goes well, wait a bit and raise them another 10 percent.

There are only so many hours in a day this guy can work, so the only other option is to take on staff. But before I start staffing, I'm going to raise prices and cut the number of customers that way. In most cases with the construction business, if you show up when you say you will, complete the job when you say you will, and you do high quality work, there's almost no ceiling on what you can make!


Snowball switch?

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

We're working the debt snowball, and together my husband and I make $93,000 a year. The amounts of our remaining three debts are so close we wonder if we should take interest rates into account. Two are student loans for $2,970 and $6,700, while the other is credit card debt in the amount of $4,750. I also got a recent bonus of $3,600. Should we put that toward our debt snowball?


Dear Robin,

In a strictly mathematical sense, my advice of paying off debt smallest to largest may be wrong, but it's still the correct advice. Besides, if people were so good at math they wouldn't have debt in the first place, would they?

If I'm in your shoes, I'd have that lowest student loan paid off in a heartbeat with the bonus you mentioned. I'd throw the remainder, along with your regular snowball payments, at the credit card and keep the debt snowball rolling just like I normally advise.

When you're pushing to get out of debt fast, interest rates don't really matter much when you add up actual dollars on interest spent. If you were going to keep debt around for six or seven years, then we'd have something to talk about. But when you knock out the little debt and immediately plow through the others with a vengeance, it gives a real sense of accomplishment and confidence. Remember, personal finance is 80 percent behavior and only 20 percent head knowledge.

So, mathematically speaking, the advice I'm giving you might be a few dollars wrong, but you'll benefit in other bigger, long-lasting ways by gaining a sense of closure on your debts, learning how to delay pleasure and staying on a plan!


It's not discrimination

Dear Dave,

I'm in the middle of a Chapter 13 bankruptcy. I've worked for years in the automotive industry, but lately I've been thinking about a different line of work. The problem is I'm afraid I will be discriminated against when applying for jobs because of the bankruptcy filing. I think the government has given businesses the permission to look at my financial history. Do you have any suggestions?


Dear Joe,

The government doesn't give businesses permission to look at your history. They had that right anyway. And it wouldn't be discrimination, because it's a part of their analysis as to whether or not they want you working for them. That kind of thing is perfectly reasonable. It's not discrimination.

A lot of this, however, depends on the job and how seriously the employer is considering you. If you'd be doing something where you have to be bonded, then you'll have trouble because the bankruptcy can prevent you from being bonded. If you would be handling large sums of money or be given access to large sums of money, the Chapter 13 bankruptcy would reflect poorly on you and make you a higher risk.

Just be honest and disclose it, Joe. If they ask questions, explain things truthfully and the reasons behind why it happened. Also, don't carry around a chip on your shoulder about the bankruptcy. We all make mistakes, and the smart ones among us learn from them. I wouldn't necessarily have an issue with someone just because they had filed bankruptcy in the past, but it would create problems if they tried to hide it from me.


It's for everyone

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My husband and I have seven kids. What parts of your program work best for large families?


Dear Karen,

My entire plan works for a large family. Larger families just have more expenses. What does change — and you already knew this — is that it can be a larger financial burden. This isn't criticism; it's just a mathematical fact.

When you kick things into overdrive like you folks have done, two things have happened. One, you've extended the time that you're going to be supporting the kids financially. Two, you've got a lot of baby birds to feed and clothe. Unless you have an astronomical income, it slows down the process of hitting financial goals like getting out of debt, because you've got a drain on the math side of things. It's a wonderful drain; it's a glorious drain; but mathematically speaking where the money is concerned, it's still a drain.

You really don't have any choice but to do a budget. Having seven kids doesn't give you an excuse to live out of control or mean that living out of control without a plan is the definition of success. You've got to set more emergency categories aside in your budget. You've got to budget heavier for food, medical, transportation and things like that, because you've got more things pulling at you — and your money!


Commonsense calculation

Dear Dave,

I make $80,000 a year, and I was wondering if there's an easy way to determine how much money a person would need to live comfortably after retirement.


Dear John,

A commonsense rule of thumb, if you've got your money invested in good growth stock mutual funds, is to pull from those funds at a rate that is lower than which they are growing. Otherwise, you'll destroy them, right?

I tell folks if they want to pull off six percent to eight percent — I'm comfortable doing eight percent — then you've got to decide exactly how much you want to live on and what that means for your nest egg. If you want to live on $80,000 a year, it means you have to have a $1 million nest egg. If you want to live on $40,000 a year, then you need a half-million dollar nest egg for what we're talking about here.

To get into that a little bit further, I would advise going to Chris Hogan's website. He's got a tool on there that takes just a few minutes, and it will give you exact numbers on what you need to do. It's ChrisHogan360.com, and the tool is called the R:IQ — your Retire Inspired Quotient.

You can walk through it, and in just a few minutes you'll know exactly what's going on and what needs to happen!


Baby Steps, Motivation, and Retirement

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I make $38,000 a year working in the trade show industry, and I'm about to start Baby Step 3. It took 14 months to pay off $8,000 in debt for Baby Step 2, so I'm wondering how long it should take to save up my three to six months of expenses. I've also not done a lot toward retirement. I'm 52, and I'm worried about that. How can I stay motivated in the Baby Steps and handle retirement worries?


Dear Donna,

The general time frame I look at for saving up a fully funded emergency fund is six months to a year. Your take-home pay should be about $3,000 a month, so three to six months of expenses will probably be in the neighborhood of $8,000 to $10,000. If it took you about a year to pay off that much in debt, then it should take about a year to accomplish this.

But if you start building retirement right now and have an emergency, you know what you'll use? You'll use your retirement. That's why the emergency fund comes before retirement in the Baby Steps. The average household income in America, which is often two incomes, is around $52,000. I would challenge you to think about and work toward what you could be doing at age 60 that will make you that much or even more.

You're probably working really hard for that $38,000. In your fifties, if you're starting over — or if you start making a lot more — we call that an "encore career." So I want you to start thinking fresh again. Don't quit today, but you're going to be making $38,000 eight years from now unless you start aiming at something else.

All this is as much an answer to your retirement fears as trying to leapfrog and start doing retirement without an emergency fund. Put your emergency fund in place over the next 12 months, and start doing some goal setting and thinking. Maybe you'd like to own a trade show or events company by that time.

Ask yourself, "What would I do if I could do anything?" Because you know what? You can do anything!


Generosity or overspending?

Dear Dave,

I've heard you talk about the importance of giving using the phrase "outrageous generosity." But at what point does outrageous generosity become foolish overspending?


Dear Josiah,

This is a good question. Your first mandate is to take care of your own household. The Bible says if you don't do this, you're worse than an unbeliever. So start with your own family. Are you able to take care of the basic lifestyle and needs of your family? The pursuit of giving shouldn't interrupt the food on your own family's table.

The Bible also says in the house of the wise there are stores of choice food and oil, but a foolish man devours all he has. You need to be saving, too, in order to be biblically wise. If you spend everything you make, or, for that matter, if you gave away everything you make on an ongoing basis, it would be foolish.

There are individual times where people may be called to give in an extreme way, but I'm talking about a pattern of living or way of life over an extended period of time. If you just say you're going to give away your whole income and let the government support you at the expense of your family, that's not biblical. And it's not a wise way to live your life.


You're Self-insured

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My husband and I are retired, we both receive nice pensions, and we owe $46,000 on our home. This is our only debt. I'm 65, he is 82, and we have more than $800,000 in variable annuities, along with substantial cash in savings. We also have $200,000 combined in life insurance coverage. If we cancel these two policies we can pay down an extra $10,000 a year on the house. Should we cancel the life insurance policies?


Dear Anna,

At 82 and 65, you probably won't be able to get any more insurance at a decent price. If you get rid of it, you're going to be without it. The good news is that you have enough money through your pensions, investments, and savings to be what is known as "self-insured."

If I'm in your situation, I'd drop the life insurance policies and pay off the house as quickly as possible. Make sure you keep a good health insurance policy in place, because a hospital stay can eat your savings alive. I hope you have long-term care insurance, too.

Good question, Anna. You guys have done a great job with your money!


Becoming a holder

Dear Dave,

In 15 months I'll be able to buy in as a shareholder of my firm, about 1.5 percent of the company. I make $100,000 annually, and it will cost me three times my income, but it could increase my income by as much as $40,000 a year. I know that you discourage single-stock investing, but do you think this is a good idea?


Dear Mark,

This sounds more akin to a partnership than a stock. Basically, you'd be a minority shareholder in the business. That means zero power. Whatever money you put up could be lost, because the people running this business could decide to close up shop and you'd be powerless to stop it.

To me, this is way too scary. You'd be making a $300,000 investment that has no liquidity and that you can't sell on the open market. I'd want to see at least 30-percent return on my capital in a situation like this, so I wouldn't risk my money.

Keep your good job, but politely decline this shareholder offer. That's my advice.


Display a Kind Spirit

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My mom and dad filed bankruptcy recently and are on a fixed income of $2,200 a month. They gave up their house, and my wife and I helped them find an apartment. We're also trying to give them other help while they're getting back on their feet. The problem is, we're paying off debt and trying to get our own finances in better shape. I think my sister should help out some, too, but I'm not sure how to approach her about this.


Dear Randy,

It's not out of line to ask her to help and then gauge her interest and willingness. I mean, it's your parents we're talking about. Still, you can't force someone to do something they can't do or simply don't want to do.

Before you approach your sister, you might try working up a monthly budget on your parents. It doesn't have to be complicated — just a one-page document showing their situation. Let her see that mom and dad are struggling right now, and suggest that you both chip in a little each month until they're back on their feet financially.

Don't point fingers or make accusations, because that will ruin things in a hurry. Family should always try to pull together in times like this, Randy. In most cases, things like this work out fine and family bonds become even stronger.


An ounce of prevention

Dear Dave,

Our son is 16, and he just got his first paycheck. He asked us about the best way to manage it, and we're not sure what to tell him. Do you have any advice?


Dear Anonymous,

Congratulations on a big moment in your son's life! I'm sure he's proud, and I'm glad he has parents who want to teach him how to grow into a financially responsible young man.

I think giving is a really big deal at this age. I'd recommend putting 10 percent toward your church or a good, local charity. It's very important to teach kids about the spiritual and financial benefits of being a giver. The remaining 90 percent you might split evenly between savings and spending in the beginning. You can always go a little heavier on the savings portion if there's a concrete goal, like college or a car, in mind. The process of thinking ahead and setting goals is always a good exercise, too.

The goal here, in addition to teaching him the value and benefits or work, is to build the muscles of his character. Financially speaking, as parents, we should want our children to grow to be givers, savers and wise, careful spenders. If they become all three of these when they're young, they won't be financially irresponsible adults later!


Invest in Chandler

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I'm 19 years old, and I'm putting myself through college debt-free. I usually work part time during the semesters, but right now I'm working full time. I have about $2,000 in mutual funds, and I was wondering if I should add my full-time work income to that or save it all to help pay for school.


Dear Chandler,

Wow! Great job, man! I appreciate that you're looking toward the future with your investment, but right now I want you to invest in you. I want you to make sure, first and foremost, that you graduate college debt-free. So, if I'm in your shoes, I'm piling up the cash to pay for school.

You're in a season of your life where things are more hectic than you probably ever dreamed they could be. My advice is to keep that money liquid. Keep it available and on hand, and don't tie it up in mutual funds at the moment. You'll have plenty of time to continue investing once you graduate.

It's best for you to concentrate on finishing school, then landing a job and finding a place to live after college. Even if you end up living in the same place for a while, starting life in the real world takes money, so let's make sure you can make that happen. In other words, Chandler, as long as you do something with your education and that education is in an area that's useable, you are a better investment than mutual funds right now!


A free ride?

Dear Dave,

My son is going off to college soon, but he's never had a job. His uncle has offered him a really nice, low mileage used car for $3,000. My husband doesn't want us to give him money for the car, but I think this deal is just too good to pass up. What do you think?


Dear Tonya,

Unless there's some sort of disability that's prevented your son from working part time over the last few years, I've got to agree with your husband on this. Your son needs a car, but he also needs to get off his butt and work for it. If you get this car for him, you're just teaching him that mommy and uncle will take care of everything. That's not a good lesson for any child to learn, and it's an especially bad thing for a teenager.

When you and your husband first started out in life, I'm guessing you didn't start out rich. Am I right? It's not really the car deal that's the problem here; it's the lesson that will be learned. At his age, it's silly for him not to want to work for a car, and you and your husband need to be up in his face about that. Then, if he chooses not to work for a car, he can walk. He shouldn't be rewarded for showing no desire to go earn things and make stuff happen.

When my son was around that age and wanting a car, he was working his tail off around my office packing boxes and painting stairwells. That's how you learn about the benefits of hard work. If you don't teach your son how to work now, he'll be living with you when he's 30 years old and doing exactly what he's doing now – which is nothing.

This automobile deal is a bad deal, because it doesn't teach your son to work for it.


Insurance for Young Couple

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My wife and I are both in our early 20s, we're debt-free, and we're just a couple of months away from having a fully loaded emergency fund of six months of expenses. We both also have 401(k) plans at work, and we're looking forward to starting additional investments later this year. Right now, we're trying to decide on which life insurance policies to buy. I know you always recommend term insurance, but how long should the coverage last? Would you suggest 15-, 20- or 30-year policies?


Dear Anonymous,

Wow, it sounds like you two are starting your lives together on the right foot. Congratulations on being super smart with your money!

I recommend 15- or 20-year level term policies, unless you have children. I'm assuming kids are not in the picture, since you didn't mention any. Then, if you decide to grow your family at some point down the road, I'd advise converting those to 30-year term policies. The idea behind this is you want the insurance to be there to protect everyone in the family until the kids are out on their own and established.

In the meantime and in the years after, your continued saving and wealth building will lead you to a place where you and your wife are self-insured.

Way to go, guys. I'm proud of you!


How much house?

Dear Dave,

Based on your annual income, how do you determine how much house you can afford?


Dear Ryan,

I always tell folks never get a home loan where the monthly payment is more than a fourth of your take home pay. I'm talking about basing this on a 15-year, fixed-rate mortgage. Twenty-five percent of your monthly take home pay is the absolute most you should have going out the door toward a mortgage payment.

I realize that's a pretty conservative number in most people's minds. You can actually, technically qualify for almost twice that figure. But I think having that much of your paycheck going toward house payments is pretty dumb. Your shortest, quickest path to wealth is being debt-free. And when most of your money isn't flying out the door to make payments on stuff, it's easy to build wealth and increase your level of generosity!


It's okay to take control

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My husband is a recovering heroin addict. He's been clean for two years, but I still feel we shouldn't keep cash in the house or give him unsupervised access to a bank account. He agrees with these precautions, even though he does need a little pocket money from time to time. We've also started your plan to try and get control of our finances, so how would you suggest handling a situation like this?


Dear Meghan,

First of all, congratulations on his being clean for two years. That's awesome! The longer he stays clean, the more he'll begin to normalize his mechanical activities with things like money.

I agree with not putting him in charge of large sums of money just yet. However, we work with addicts all the time at my company, and I don't agree that you can't have any money in the house when he has been clean for two years. You might not want a big pile of cash lying around, but there's no reason you can't run the envelope system out of your purse. I mean, at this point if you can't trust him to stay out of your purse, then you've got other major issues in your marriage.

I think you need to be on a debit card and the envelope system. I also think you need to be controlling about 98 percent of the money for now. For what he's doing, I'd work daily cash allowances and expand that to weekly when you're comfortable with it. Also, ask for some accountability from him as to where the pocket money goes. Ask him to keep receipts, and turn them in as if he were working for a company and taking a petty cash withdrawal. That holds him accountable for spending it on what he said he was spending it on, and it's healthy for someone who's a recovering addict.

When someone's fresh recovering from being an addict, and especially because heroin is so addicting, I probably wouldn't let him legally have access to the household account for a while longer. He can look at it, and you two can make financial decisions together, but you are in control of it. I wouldn't want it where he can just reach over and clean out the account if he has a relapse.

Obviously, this guy has gotten some healing and I'm very proud of you both. Heroin is a big deal and a hard habit to kick. The fact that he has done it this long is awesome!


Pause the debt snowball

Dear Dave,

I'm going through a divorce that's about to become final in two weeks. I moved in with my parents temporarily while I save up money to get my own place and start over. I make $30,000 a year, and it looks like I'll have around $43,000 in debt when the divorce is finalized. Should I pause my debt snowball in order to financially get back on my feet again?


Dear Adam,

Yeah, that's what I would do. There are reasons to pause the debt snowball, and one of those can be going through a divorce. Not only are there expenses, but you may end up with payments you don't even expect.

I think the motivation and the heart behind the debt snowball is that you gain momentum and traction, and you do it quickly when you're in a positive emotional position. You may not have that right now, so I think pressing pause and building up for expenses that may come — plus getting your own place — is a good idea.

Just rent the cheapest spot you can as soon as possible. Then, once you get in there and get your life in operational mode again, you'll be ready to rock on!


Can I Negotiate?

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I've had a judgment filed against me for an old, unpaid medical bill. The original amount was $2,500, but now it has increased to $3,200. Can I negotiate this with the lawyer? I've asked him for a detailed statement of the account several times, but all I've gotten is a payment booklet.


Dear Bill,

When it comes to paying off bills or debt, you should always pay what's owed if you have the money. There's a moral, as well as legal, responsibility involved. That being said, if you don't have $3,200, offer him whatever you've got—$2,000 or the original $2,500 as a settlement. Make sure he understands that you're not offering to pay the amount you have on the debt, but that it's being offered as settlement in full if the debt is cleared.

The reason you haven't gotten what you've asked for so far is you may have been talking to some low-level staffer or paralegal. If you have been talking directly to the lawyer, then he's probably running a small debt collections or debt lawsuit machine. That means you're just one of dozens of widgets coming down the line. To you, this is very personal. But to him, you're just another account. You might have to do something to get his attention and wake him up.

If this is the case, he probably gets a piece of whatever he collects. So, if he gets a third of $2,000 or $2,500 it might make his house payment this month. You could also talk to the hospital administrator, too, and let them know you'll bring a couple thousand down there today if they'll accept it as payment in full. At this point, you've just got to do something to get off the conveyor belt!


Annuities for long-term retirement?

Dear Dave,

Are annuities good for long-term retirement?


Dear Quincy,

The short answer is no. There might be a rare exception when I'd use a variable annuity — which is a mutual fund inside of an annuity — but as a rule I don't use annuities. And I certainly don't use fixed annuities for anything, because they're just crap. Basically, they're a CD with a huge set of fees. It's just an insurance agent's product, really.

The place for variable annuities might be when you've got everything else maxed out and your house is paid off. If you've reached that point, you can talk to your advisor about some of the possible benefits of a variable annuity. You can leave a beneficiary on it, so that it passes outside of probate, and you've got some principle guarantees and return guarantees that are decent. The returns are a little lower, though, because you'll get hit with both the annuity fee and the mutual fund fee.

So, by and large the answer is no for most people, because they don't have their house paid off and aren't maxing out all other retirement options. If you're doing all that, and you want to do something in this area, then I might think about it.


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