Competency and integrity

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I've always heard that you shouldn't ask a family member to be the executor of your will. What are your feelings about this?


Dear Joyce,

I don't necessarily agree with this line of thinking. In my mind, a family member who is competent and has integrity can definitely be the executor. "Executor" just means they execute, thus the name. They're going to execute the wishes of the will. If the family member has the business acumen and trustworthiness to execute the wishes and directives in a will, then that's perfectly fine.

Just remember to use some common sense, too, when choosing an executor. If you have an extremely complicated estate, say 80 pieces of real estate with investments and everything, you probably don't want your 22-year-old niece, nephew or grandchild who just graduated college in charge of things. I would advise choosing someone with a little more life experience, and maybe some success in the real world.

The people who say family shouldn't do this are the same ones who say you shouldn't have family in your business. You can have family in both. You just have to have good boundaries, clear roles, and honest, mature people. Make sure you give clear instructions and explanations for your decisions, too. Sit down with your family, explain who the executor's going to be, and why, along with what the will says. It's also not a bad idea to have an initial reading of the will while you're still alive. This communicates your wishes personally and takes some of the pressure off of the executor.


Mixing the money

Dear Dave,

I'm getting married this summer, and I'm on Baby Step 4 of your plan while starting to invest for the first time. My fiancé is getting onboard with your advice, and he's currently in the process of paying down his student loan. Should I put my emergency fund money, minus $1,000, toward his student loan debt?


Dear Elizabeth,

Congratulations on your upcoming wedding! I'm really proud of you guys, too, for your mature behavior where money is concerned.

First, don't pay anything of his until after the wedding and you two are home from your honeymoon. At that point, "mine" and "his" becomes "ours," and you can realign your money situation to reflect your total money makeover as a couple. Make sure that "we" have an emergency fund of at least $1,000 in the bank at that point. Then, if you like, you can throw the rest of what you previously had in your emergency fund at the debt.

You can both also pile up cash between now and the big day, so that after you two are official you'll have even more cash on hand. Who knows, you might be able to knock out that student loan completely and begin your life together debt-free. That would be awesome!


Condos are fine, but do your research

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I know when it comes to investing you like mutual funds and paid-for real estate. What do you think about using condominiums as investment properties instead of single-family homes?


Dear Jason,

I don't really have a problem with condos as paid-for investments. I own a couple of them myself. When it comes to making this kind of investment for the first time, however, I would advise that you keep a few things in mind.

Based on equal price and equal neighborhood, the average single-family home will probably increase more in value over the years. Now, a nice, well-placed condo will obviously go up in value faster than a traditional house in a lesser neighborhood. So speaking in an overall sense, they're not bad investments if you do your homework.

You have to think about what you're getting into and also take into consideration a number of variables. What are the HOA dues or condo fees going to be? Is the condo association being managed well? That and the neighborhood are the two biggest concerns I have when buying a condo. A lot of condo associations are very poorly managed. And if they don't provide proper maintenance or keep a certain percentage of the complex owner-occupied versus rental, the condo association or complex can lose the ability to get normal permanent financing. If they can't get FHA, VA or conventional financing, the values are going to drop like a rock — because you've only got cash buyers and investment buyers at that point.

We are leading eyes upward.

Watch one of our Godmercials or Relevent Docs.

Research on these kinds of things doesn't take an awful lot of work. Just call the management company, and the realtor who's involved if it's listed, and ask for the documentation. Most of the time this sort of stuff is public information, so it's not hard to access. Some other questions you might ask are: What are the reserves for the roof? What are the reserves for paint and the parking lot? Are they collecting enough to pay their bills, and are they actually paying their bills?

Then you start looking at things from a buyer's perspective. Would I want to live in here and have my wife and children here? Would a normal, reasonable person want to live here? If the answers are yes, then you've probably got a good, solid condo complex.


The church's emergency fund

Dear Dave,

I pastor a small church that is debt-free. I'd like for us to save an emergency fund for the church, but I'm not sure what would be considered an expense. Can you help?


Dear David,

In terms of mathematics, I would advise looking at it the same way you would a small business. The goal, first and foremost, is to keep the doors open in case something bad happens. The secondary goal could be to pay bills on time for the sake of the church's reputation, and the third goal would be to do all this without putting a strain on the organization. In business, we would call this fund "retained earnings." Technically, a church doesn't have earnings, but they do have income. You'll want to retain some of that on a regular monthly basis.

For a church, basic things like payroll, utilities, insurance and taxes would need to be covered under an emergency fund. Coffee and donuts, new hymnals, and mission trips aren't necessities. You should already be running a monthly and annual budget on the church, so separate the necessities per month and multiply that by a three to six month figure.

There's a huge level of wisdom involved in a church being debt-free, David. Congratulations!


Loan Converts to Scholarship

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I'm a senior in high school here in Arkansas, and I think I want to study business in college. I've gotten an unusual offer from a small, out-of-state school. It revolves around a $3,000 student loan program, where the loan converts to a scholarship if I maintain a grade point average of 3.3 or higher. Tuition at this college costs about $34,000 a year, so I was wondering what you think about the idea.


Dear Garrett,

I'm glad you're thinking about the future. But this is not my favorite idea, because you could end up with a loan.

In business, one of the things we look at is return on investment. If I can go to one place where tuition's $34,000 a year, but I could go to another place that's in-state for about $7,000, the question becomes this: Am I going to get a five times better education — or is my income going to be five times greater — by going to the expensive school? I think most of us who have been walking around a while would say no.

Your income will not be based on where you went to school, and it won't necessarily even be based on your grade point average. It will be based on your ability to take what you learned into the marketplace, kill something and drag it home. This has as much, if not more, to do with your initiative, your perseverance, character qualities and integrity as where you went to school.

One of the great jokes in America today is that where you go to school matters. Some places may have better programs in certain areas than others, but is this particular college — which I'm guessing isn't a prestige school, since you didn't mention the name — five times better than a solid in-state school like Arkansas State or the University of Arkansas? No, it's not.

I don't think you're going to get a return on your investment overall in this picture, Garrett. Add to that this little student loan nuance, and the fact that they're not giving you enough "free money" to make this a good deal, I would have to say don't do it.


When to buy a better car?

Dear Dave,

My wife and I are following your plan, and we're in the middle of the Baby Steps. Do we have to wait until Baby Step 7 to buy a new car?


Dear Alan,

No, you don't have to drive a beater until you pay off your house. My advice is to drive the minimum car you can until you get past the first three steps. Remember, Baby Step 1 is a beginner emergency fund of $1,000. Baby Step 2 is paying off all debt except for your house, then Baby Step 3 is fully funding your emergency fund with three to six months of expenses.

Once you've done all that, then you can move up to a nice car. I didn't say move up to a new car. I want you to save up cash a get a really nice, barely used car. I never advise buying a brand new car unless you have a net worth of at least $1 million. At that point, you've got enough assets in place to where you won't even feel the massive hit in depreciation that comes with buying a new vehicle.

But until then, drive good used cars. That's what the typical millionaire did, and I want you to model your financial behavior after people who are in the position you want to be in some day!


Talk About Boundaries

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My husband and I are just starting to get control of our finances, but we have a problem. My dad has a habit of expecting us to buy things for him. I know he has money, but anytime he knows we're going to the store, he gives us a list of things he wants. If he's with us, he just throws things in the cart and expects us to pay. He acts like we have an obligation to do all this for him. I love my dad, but this has become annoying. What can we do?


Dear Christina,

I know you love your dad, but he sounds like the kind of guy who doesn't really respect boundaries. And these kinds of folks, as a rule, don't like it when they're suddenly confronted with them. Regardless, you need to have a firm but loving talk with your dad.

Let him know how much he means to both of you, but remind him that you and your husband are working hard to get into better financial shape. This means you can't spend more than is absolutely necessary. If he's hungry, have him over for dinner. If he just needs one or two small things, that's not such a big deal. But you're not obligated to pay his way just because he's your dad.

Like I said, he may or may not like this conversation. He may fuss and throw a little fit, but at that point it becomes his problem, not yours. Chances are he'll come around in a week or so, and after he gets over the embarrassment of it all, everything will be all right again.

You aren't an unloving or ungrateful daughter for not letting him run all over you. Talk to him in a kind, respectful way. If you feel you can't stand up to him alone, ask your husband to lend support or put a voice to your wishes. It's important that you're both on the same page with this issue.


If it's paid for, do you sell it?

Dear Dave,

I'm debt-free except for my house. I make about $120,000 a year, and I have a truck that's worth around $33,000 and a car that's worth $28,000. I don't have an emergency fund, so I was wondering if I should sell the truck to establish my emergency savings.


Dear Eric,

A good rule of thumb is to never have more than half of your annual income tied up in things that go down in value. You're not quite there, but you're close. And I love your idea of wanting to immediately establish an emergency fund. You never know what life is going to unexpectedly throw at you, and an emergency fund is great insurance against that sort of thing.

Here's how I look at it. Nothing you've told me indicates that this truck represents anything being out of control. It's an expensive truck, but it's not like you make $30,000 a year and have a $33,000 truck. That kind of thing would be just plain stupid. But if you don't need or want the truck — and you're that passionate about having a big, instant emergency fund in place — then sell it!


Just be Honest

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I took a new job less than a month ago. Just the other day, I was recruited by a huge company for the same position that pays twice what I'm making now. I didn't apply for the job that was offered; they came directly to me. I didn't sign a contract or promise to work a certain length of time with my current employer, but they're good people and I want to do the right thing and handle things well. Do you have any advice?


Dear Jeff,

In situations like this I always try to put on the other person's shoes. Let's pretend you own the company and you just hired a young guy. A few weeks later, someone comes in out of the blue and offered him double what he's currently making. I can tell you what would happen here. I'd tell him to take it. I mean, I would. And as an employer I'm certainly not going to double his income that quickly.

I think you take the job. Just walk into your leader's or supervisor's office and tell the truth. Lay it all out there, and let them know that while you feel awful about the situation, you had no intention or misleading them or causing problems, but you simply can't pass up the opportunity. Be sure to show an extreme amount of gratitude, and promise to do everything possible to make the transition as easy as possible.

Truthfully, if an organization cares about its team members, and one of those has the ability to double their income and they're not breaking a promise in the process, this type of scenario is perfectly reasonable. It may be a little uncomfortable for you—and inconvenient for them for a while—but they can't realistically expect you to pass up the opportunity to double your salary.

You're a good man, Jeff. Congratulations!


Settlements for medical bills

Dear Dave,

Will hospitals take a settlement on past due medical bills, or is this a rare occurrence?


Dear Kristin,

It's not all that rare for hospitals to accept a settlement on past due bills. Most businesses will accept a settlement on past due accounts, and many hospitals will accept a deeply discounted settlement because they've usually gotten a big chunk of their money up front from the insurance company.

Let's say you had a $1,000 bill with a hospital you honestly haven't been able to pay for several months, or even two or three years. If you go to them and offer $300 or $400 as a settlement, there's a good chance you'll have a deal. Just make sure you get the agreement in writing before you hand anyone a check.

Remember, you have a moral and legal obligation to pay your debts in full if at all possible. But if you truly can't afford to pay, an agreed upon settlement between two parties can be an honorable and acceptable compromise.


Planning for college

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

We have two daughters, and we've started thinking about financial planning for college. What are the differences between an Education Savings Account and a 529 plan?


Dear John,

I'm glad you're thinking ahead and planning for the future. Here's a quick overview of the two.

The Education Savings Account (ESA) is limited to $2,000 per year, per child. It has complete flexibility, meaning you can invest it in whatever you like and you can move it—roll it over—to another one if you don't like that mutual fund, as an example. I use that example because I recommend using good growth stock mutual funds and that you do this for the first $2,000 invested per year.

There are several types of 529 plans, and there's only one that I would recommend. It's the kind that has complete flexibility, where you control the investments. Some states have 529 plans that are prepaid tuition, and I never recommend those. You don't want the state managing anything for you, because you won't get anywhere near the returns you'd get if you managed it yourself. Other types of 529s lock you into a certain kind of investment the whole time, or they move the investment based on the age of your kid. I don't want anybody doing that crap. I want you controlling your money.

Most of the 529s vary somewhat from state to state, but the majority have flexibility that allows you to control the investment while contributing up to $10,000 a year. Both those and the ESAs grow completely tax-free on the growth as long as they're used for higher education. They can also be transferred to a sibling if the kid doesn't go to school, so a little brother or sister can use the money. If they get scholarships, make sure you keep up with the value of these. You'll be allowed to withdraw that amount and refund yourself for the scholarship amount without penalty or taxes on the amount withdrawn.

In short, both the ESA and 529 are fine ways to save for college. Just make sure if you're doing a 529 that you choose the kind you control from top to bottom!


What causes overspending?

Dear Dave,

In your opinion, what causes overspending?


Dear Kristin,

Overspending is, 100 percent of the time, a choice. It's a decision. Most of the time it's linked to immaturity, although there can be other issues at play.

People who habitually overspend are saying that they're unwilling to act like a mature adult, and delay pleasure in order to win with money. This kind of thing is made even worse, because we live in a culture fueled by extreme debt marketing. And when things like credit card offers are constantly in the face of immature people, those two things can combine to make a real mess.

Good question, Kristin!


No Arguments

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My dad and I have been having arguments over real estate and money. My wife and I are 33, and we have a rental property. We were trying to decide whether or not to sell the rental in order to pay down on our home. My dad has been very vocal about what he thinks we should do, and it's starting to cause problems in our relationship. The two homes are our only debt, and we make $110,000 a year. We owe $132,000 on our residence and $80,000 on the rental. We could sell the rental for around $160,000. What do you think we should do?


Dear Ricky,

I wouldn't sell the rental today, but it's definitely a strong consideration in the future. You wouldn't realize enough from its sale to pay off it and your home at this point, so work aggressively toward paying down the mortgage on your home. Then, when you get far enough down that the sale of the rental would pay it off, go for it if that's what you both want. You're doing really well financially for a couple your age in San Diego.

Now, let's talk about something else for a moment. I would love for you to listen to your dad for advice, but I would not be arguing with him about what you are going to do with your money. You're a man. I don't know if you just used the incorrect word there for how the discussion went down, but if not, I wanted to correct that as a boundary issue in your family.

Keep up the good work, Ricky!


Staying away from scams

Dear Dave,

I've always wanted to work from home. How can I separate the scams online and on television from the real jobs where I can make money?


Dear Randy,

The vast majority of things you see in late-night infomercials and online—except of course for legitimate job hunter sites—are scams. I'm talking about the business-in-a-box kind of stuff and everything else. And I know you've seen the postings online that go something like, "My sister-in-law makes $50 an hour from home, and you can, too!" These scammers are the worst of the worst. Don't waste a second of your time on that garbage.

My biggest worry is that you're looking at your career the wrong way. Just making money shouldn't be the measuring stick of success in your professional life. Whether you're going to start a home business or work in an office for someone else, your work should engage you in doing something you know about and love.

You spend too many hours of your life at work to be miserable in what you do. Shuffling day after day through a job you don't like—even one with a big paycheck attached—is also a bad idea. Sooner or later the fact that you don't like your work is going to catch up with you on the job and at home.

Think of something you love to do, then get creative and find a way to make money at it. It may mean turning a hobby into a part-time gig nights and weekends for starters. Who knows, with a lot of hard work and a little creativity, you could be your own boss in no time!


Is it six months of paychecks?

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

Do I set aside six months' worth of paychecks or the amount of my bills for six months when it's time to save up my fully funded emergency fund?


Dear Steve,

In my plan, Baby Step 3 is when I advise people to save up three to six months of expenses in a fully loaded emergency fund. This is set aside and not touched for any reason other than a true emergency. It's not a Bahamas fund or a new living room furniture fund. It's an emergency fund. It's not an investment or fun money; it's insurance. Think of your emergency fund as a protective barrier that keeps you from going into debt or cashing out investments when life throws bad things your way.

How do you decide where to land in the three to six month range of expenses? That depends on how much risk your household has. If there's only one income in the equation, you have more risk, so you should skew things toward six months. Being self-employed or a commissioned salesperson is also a situation where this would be true. If there are two incomes, and both come from steady, dependable sources, you could fall into the middle of that range or even more toward the three-month side.

Make sure your emergency fund is easily accessible too. A simple money market account with check-writing privileges works fine. You want to make sure you can get your money quickly when the need arises!


Never take an adjustable rate mortgage

Dear Dave,

Should I ever consider a 5/1 adjustable loan if I'm buying a house and plan to pay it off in five years?


Dear Anonymous,

No! The reason is you can never be assured that you're going to pay it off in five years. If you go into it with that mindset, then you're basically saying you can predict the future will be exactly how you want it to be. That's pretty naïve. Your future will never be what you think it will be. It's either going to be better or worse, but your future will never turn out exactly the way you plan for it to be.

If you can't buy a home with cash, you need the stability of a 15-year, fixed rate mortgage in your life. We're living in the lowest mortgage interest rate environment in about 50 years. I saw a 3.02 percent 15-year fixed rate mortgage just the other day.

For those of you who have not refinanced, if you're staying in your home or you're sitting on an adjustable rate, this is a great time to change that. Still, people are sitting around yawning like these kinds of rates are going to be around forever. It's gone on for a while now, but don't let that fool you into thinking those kinds of rates are normal. They're not going to last forever.

No, I would never under any circumstances take an adjustable rate mortgage. Was that unclear? I hope not!


Talk to Mom and Dad

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My boyfriend is wondering if he should buy life insurance for his mom and dad. They're both in their seventies, and they're no longer married to each other. His mom is disabled and remarried, and she doesn't have any life insurance coverage. The only coverage his dad may have would be through his employer. He's afraid he would have to pay funeral expenses if one of them died, and he's not in good enough shape financially to do that right now. What's your advice?


Dear Cherie,

If the only insurance his dad may have is furnished through his employer, then yeah, when he stops working he probably won't have life insurance anymore. It would be fine if he wanted to buy them each a small policy, but it's going to be very expensive at their age. He would have to get them to sign off on it, and they'd also have to be healthy enough to have a policy issued.

This isn't a good long-term plan, however. As a long-term plan, I'd tell your boyfriend that he needs to build up his own wealth. If he had $15,000 to $20,000 in savings, that's more than enough to bury two people. I don't mean to sound insensitive, but we're talking about the economics involved in this kind of situation. You can have a nice funeral for as little as $5,000.

The other thing I'd do if I were him is I'd have a discussion with mom as to whether or not the stepfather has the funds to handle this sort of thing. When it comes right down to it that would be his responsibility, not the son's. Then, he should have a similar discussion with his dad. If his dad's got insurance through work, and the stepdad is ready to pay for his mom's burial, then I wouldn't buy insurance on them. They're covered for the immediate future.

So I wouldn't do it unless they absolutely don't have this sort of thing covered. Even then I'd prefer you just cover it with cash, because all we're talking about is just enough to cover burial costs. Nothing needs to be elaborate.

I hope this helps, Cherie!


Pausing the Baby Steps to celebrate?

Dear Dave,

My wife and I are in Baby Step 2 of your plan, and we've got our twentieth wedding anniversary coming up in a few months. We had always planned on taking a 10-day luxury trip to celebrate, but now that we're trying to get out of debt it seems pretty unrealistic. Should we pause the Baby Steps and celebrate like we originally planned, or would it be better to concentrate on paying off debt?


Dear Don,

If it were me, I'd want to pause and celebrate in a smaller way. Then, in a year or two when you've reached your goal of being debt-free, you could have a big double celebration — for your anniversary and for gaining control of your finances.

Think about it. Why isn't the twenty-first, twenty-second or twenty-third anniversary just as big as the twentieth? No reason really. It's just an arbitrary milestone we as human beings decided on and created. But you can "undecide" stuff like that anytime you want.

If you two, as a couple, are in agreement on that point, then it suddenly becomes easier to delay pleasure in order to win. And trust me, when you agree on things like that, the celebrations become even sweeter!


Should retirees move investments to a CD?

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

My wife and I are in our early 70s, and we're retired. We have about $136,000 in corporate bonds and $200,000 in mutual funds. Considering our age, should we move the investments into a CD?


Dear Kurt,

There's always a chance you'll lose money if you leave it in mutual funds and bonds. That's the nature of the market. But there's another kind of risk based on what you're proposing, and that's risk of value due to inflation.

Assuming you two are in good health, you could expect to live another 10 to 20 years. Most current CD rates are less than 1 percent. Even if they rise to 2 or 3 percent in the future, do you really want to see that kind of return when inflation is likely to rise 4 percent annually? That's in itself a type of risk, so I would urge you to keep that in mind.

No, I wouldn't advise moving all of your money to CDs. If I were in your shoes, I'd live off the income generated by my mutual fund investments. As for the corporate bonds, I'm not a big fan of those. They entail almost as much risk as mutual funds without the good returns (on average) over a long period of time.

If you're concerned about stability, I'm okay with you taking a little money from your bonds and putting it into a CD right now. But I wouldn't touch the mutual funds.


Her birthday money is symbolic

Dear Dave,

My wife received $100 from her parents for her birthday. When I asked what she planned to do with it, she said she was going to add it to her spending money. I think she should put it toward us paying off debt, but I bit my tongue and didn't say anything. We're in pretty good shape financially, so should I mention it or just let it go?


Dear Charles,

I'm sure you're a smart man, so you'll understand when I tell you — for the sake of your marriage and mental health — to let this one go. Seriously, is $100 going to move the needle that much? It's her birthday, and it was a gift designed to let her do something nice for herself. There's absolutely nothing wrong with her spending a little bit on herself on her special day.

If she had asked me about this, I would have told her it was fine. If she had asked me about putting it toward debt, I would have said that's fine, too. It's not a big deal for someone to have a little fun once in a while. But it's a bad plan for you to try to get at her gift. Just let it go, and do your part to make sure she knows that you love her and that she has a great birthday!


Ethical Dilemma

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

I work an extra job part-time for a retail store chain while I'm getting out of debt. I like my job, except for having to pitch the store's credit card to customers. Like you, I believe debt is a bad thing. Still, my bosses are putting more and more pressure on me to sell the cards. It's been bothering me a lot lately, and I was wondering if you have any advice for my ethical dilemma?


Dear Evette,

If you've been in the business for very long, I guess you've discovered that most retail stores make more money on credit than the sale of merchandise. In my mind, you've got two types of integrity that are pulling at you. Your personal integrity wants you to do a good job for yourself and your employer, but it's also telling you that credit cards are bad products. That makes you feel like you've signed up to sell something that you don't believe in.

You wouldn't want someone working for you who wouldn't follow your instructions, and I wouldn't want someone working for me who doesn't believe in what they've been hired to do. For the sake of your own integrity, I would suggest that you find another part-time job. If you feel this strongly about the issue, sooner or later it will start to affect your performance and attitude—both at work and at home.

Hang on long enough to land another job before you quit. Then, be professional when you turn in your notice. Despite what lots of people say these days, there are plenty of part-time jobs out there!


Raising the rent

Dear Dave,

I have two small duplexes in Idaho that I rent for $400 a month, each on one-year leases. The rent is about $50 to $75 below similar units in the area. The tenants in all four places are great, so how do you know when—or if—you should raise the rent? If you raise the rent, how do you keep good relationships with your tenants?


Dear Teresa,

My advice with rental properties is to raise the rent a little bit each year. You want to be fair and affordable for your tenants, but you don't want them thinking the rate is locked in forever. As a business owner, if you don't have small, manageable increases on a regular basis, you'll look up in four or five years and realize you're losing money because your rent is way below market value. Then, if you implement a big rate hike out of nowhere your tenants will have a fit. After that, you could be looking at empty properties.

When it comes time to renew the leases, try explaining to them that you've looked around in the market and other very comparable units are going for $450 or more, but that you appreciate them and what good tenants they are. Then, propose signing the new lease at $410 or $420. Don't raise it to full market value. In most cases, this kind of approach will keep both parties happy.

As a landlord, you'll be able to retain quality tenants and make more money. As a renter, you'll have the comfort of knowing you rent isn't going to suddenly jump sky-high. It's a win-win!


Don't Tithe with Credit Cards

Written by Dave Ramsey on . Posted in Finance

davernewDear Dave,

What is your opinion of churches encouraging members to do e-giving with credit cards and debit cards?


Dear Melissa,

I'm against debt, so I'm not particularly fond of churches asking people to use a debt vehicle to pay their tithes. I realize that few businesses and organizations distinguish between debit cards and credit cards when accepting payment. However, this practice bothers me a lot when it comes to churches. The Bible mentions debt several times in Scripture, and every time it does, it's always in a negative light. It's not a salvation issue or anything like that, but the Bible basically says debt is a foolish thing.

Now, I think e-giving in itself is fine. But if I were the pastor or on the leadership board, and we had an e-giving process, I would strongly encourage people to use debit cards and not credit cards. There's nothing wrong with a draft or an ACH kind of thing. A lot of people do that and like the ability to give online.

But I don't want a giving situation to your church turn into debt to you. And it does just that when it's a credit card!


Don't insure cell phones

Dear Dave,

I just bought a new smartphone, and the company I'm with offers insurance for the device. Do you think it would be wise or foolish to do this?


Dear Lisa,

The purpose of insurance is to transfer a risk that you can't afford to take. When it comes to things like cars or houses, I absolutely recommend that people have insurance. Most folks couldn't just write a check for another car if the one they drive were totaled. It's the same with a house. If your home is destroyed, the insurance takes care of things instead of putting you in the position of having to pull tens or hundreds of thousands of dollars out of your own pocket for a new home—also something most people can't do.

No, I don't insure inexpensive things like smartphones. And if a smartphone is an expensive item to you, then you probably shouldn't have that phone. I mean, there's nothing wrong with having a cell phone if you can afford it. But if you tear up a phone or it breaks down and you can't afford to replace it out of your own pocket, then you've got too much phone!


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