Once
again, I apologize for my absence. Life
has been a little chaotic lately and I haven’t had much time to dedicate to the
blog, but I definitely wanted to get you guys an update on our Dave Ramsey
class. These last couple weeks have been
really good & I’m excited to share with you.
Week
5 was Buyer Beware. In this class we had
to define what a “major purchase” was.
Dave defines a major purchase as anything over $300, but that is really
up to each person individually. I’d say
for us $300 is a good amount. If we’re
spending this much it’s always on something that we are discussing prior to purchase
anyway (unless it was a gift) so this wasn’t really much different for us. Recently we bought hand railings for our
front porch which was a $380 purchase.
We discussed it several times and we waited until we had the CASH to pay
for them. I also recently bought a
treadmill that cost around $300. We discussed
this for a while before we purchased it and also waited until I received my
bonus before buying it.
Dave
really stresses the power of marketing techniques in this class. He had everyone in his audience saying
slogans & singing jingles that have been around for years. Like “melts in your mouth, not in your hand”
& the theme song to The Beverly Hillbillies, everyone knows them & they’ve
been around for years. He talked a lot
about Apple and how well they market their products. It was a really interesting class and very
eye opening to how much marketing plays a role in how we purchase. For me, I don’t have cable TV so I don’t see
commercials, but with being on Facebook & Instagram, I always see cute Etsy
shops, clothing boutiques, etc. that are tempting for me. I try to unfollow those kinds of ads from my
feed which definitely helps!
Week
6 was an even better week. It focused
mainly on insurance and what kind of coverage you should have and which you
shouldn’t based on your situation. For
vehicle insurance Dave recommends $500,000 worth of coverage, it seems like a
lot, but you can easily rack up with much in medical bills and vehicle
replacements depending on the severity of the accident. He also recommends $500,000 for your
homeowners insurance (unless your house is worth more than that
obviously). He said most insurance will
cover the value of the house plus 20-70% more if it’s a total loss. Dave recommends going straight to the half a
million in coverage. I looked into this
and it would cost me an additional $25 a month (so $75 x month) which really
isn’t that bad for almost 2x the coverage.
Dave
also recommends Long Term Disability, but not Short Term because any short term
illness/disability should be covered with the money from your 3-6 month
emergency fund. He also recommends
identity theft insurance which is something I don’t have but I’d like to. For health insurance he covered your typical
PPO and your HSA coverages. It was a
really good lesson and I think there are a lot of people who don’t know what
kind of coverage that they have. For us
just building a house I knew exactly what our homeowners was & with going
through infertility treatment I could read you my health insurance coverage in
my sleep.
Probably
the most important one Dave talks about is life insurance. TERM insurance is the only insurance that is
worth having. Anything that is called “cash
value” where you get a certain amount of money back at age 65 is a terrible
investment. He said it’s best to have
around $500,000 worth of coverage. The
way he breaks it down is pretty amazing.
What you’d pay per month for a cash value plan, you could pay a fraction
of for a term-life and invest the difference between the two premiums into a
mutual fund with 12% growth and make a significant amount of more money. So if a cash value policy costs $150 a month
for 250,000, you could get a term life policy for $500,000 for around $45 x
month and the difference of $105 you could put into a mutual fund and make a
lot more money on. I don’t explain it as
well as Dave, but he is 100% correct on that.
Joe
and I both have $500,000 in term life insurance. We got it through our Edward Jones financial
advisor and the insurance comes from Pacific Life. We pay an annual premium of $1100 a year
which equals out to about $91 x a month (for both of us) which we put into a
sinking fund each month so that when it’s time for our policy renewal in July,
we have the money. It’s dirt cheap for
so much coverage. Before we had this Joe
had fallen for the “cash value” plan and ended up getting only $250,000 in
coverage for $93 a month just for him!
We were paying almost exactly what we pay now for 2 people & we get
4x the coverage!
Only
3 more weeks left! I’m really enjoying
the classes a lot and I definitely am seeing a change in our spending. I feel like I’m a little less impulsive and I
think through my purchases before I make them.
I’ve been trying to use the envelope system as best as I can, I’ve of
course taken cash from my gas envelope and had to use it for my restaurants
budget, but ya know, food vs. gas!? I
mean who that seems pretty obvious!
Totally kidding, I replaced the cash that I “borrowed” from my gas
envelope. I hope this helps anyone or
encourages someone to take his class because it really is a life changer.
Super interesting on the 500k for house insurance and life insurance, we are going to have to check into that! Thanks for posting about all of this!
ReplyDeleteThose classes are so helpful. I went to a financial class recently and he touched on the life insurance too. I hate dealing with insurance but it is good to have. I am going to have to check my car insurance to see what my coverage is. It's been so long, I don't remember.
ReplyDeleteI have never actually looked into life insurance anything. I have a small policy through work for STD, LTD, and life, but probably should start looking into a term life policy like you stated! Ha!! One thing at a time, I guess!
ReplyDeleteThis is all very interesting. The one thing I disagree with is the short term disability, but it highly depends on the situation/circumstances of the individual. For me, I was able to use my short term disability for maternity leave, which was really helpful. My company does not have paid leave so it was nice to have some type of income instead of having to draw on savings. But again, it all depends... :)
ReplyDeletewow. i have never looked into life insurance and that is very eye opening. as for big purchases, KC and I have a $100 limit, anything over that needs to be talked about, though we talk about most purchases (except for my shopping here and there, oops).
ReplyDeleteVery interesting about the short term insurance. Not quite sure I understand (heck I have been paying for maternity leave for 4 years), but I'll have to do more research on it! Once again, I love this recap
ReplyDeleteWe neeeed to get on the term life insurance train. Interesting information.
ReplyDeleteThis is so interesting! Thanks for sharing this-sounds like a class I should definitely look into!
ReplyDeleteThanks for sharing this info your learning! I think it's interesting! I've learned that maybe Michael and I aren't so bad at our financial budgeting and decisions as I thought! No CC debts, emergency fund, proper life insurance, and definitely practice the buyer beware thing. It's the little things that we buy that we think is fine and adds up! Ugh! Such a bad habit!
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