Dave Ramsey Week 5 & 6

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.