dave says2_300KENTUCKY (2/9/14) — This week Dave answers the million dollar question, offers advice on how to do fewer dumb things and suggests best bets for cash savings.

Dear Dave,

I’ve heard you say many times you shouldn’t buy a brand-new car unless you have a net worth of $1 million.

What’s so special about a million dollars?

Angela


Dear Angela,

In all honesty, there’s nothing particularly special about a million dollars.

A brand-new car will lose about 60 percent of its value in the first four years. So, if you’re going to turn a $30,000 investment into $12,000, you’ve got to have a bunch of money. You’ve got to be in pretty great financial shape in order to absorb the blow.

If your entire net worth is $100,000, and you put $30,000 of it into a vehicle that will lose 60 percent of its value, you’re just being financially and mathematically stupid.

Your income is your largest and most powerful wealth-building tool. If you’re buying things that go the wrong way in terms of value, you’re not gaining wealth; you’re losing wealth.

There’s really nothing special about $1 million.

I could have said $2 million or $900,000, but $1 million is easy to remember. Plus, it’s nothing to sneeze at in terms of an individual’s net worth.

When you lose a lot, and it’s a small percentage of a lot, you don’t have to worry so much. But when you lose a lot and you didn’t have much to begin with, that’s a recipe for financial disaster!

Dave


Dear Dave,

My parents co-signed on government loans so I could go to college.

Would my forbearance or non-payment affect their credit if I don’t pay?

Tiffany


Dear Tiffany,

Yes, it would.

I’m not trying to lay a guilt trip on you, kiddo, but you’ll be trashing your mom and dad’s credit if you don’t pay the bills on time. If they co-signed for you, they’ll start getting phone calls, too, if you don’t do the right thing and pay back these loans.

The truth is, your mom and dad shouldn’t have co-signed for you in the first place.

There’s only one reason lenders want a co-signer, and that’s because they’re afraid the person taking out the loan won’t be able to pay back what’s owed.

My goal here isn’t to beat you up, Tiffany. It’s to give you information that you—and your parents—need in order to make different, smarter decisions in the future.

We all do dumb things sometimes. In the past, I did some really dumb things with very large numbers attached. The goal is to grow, learn, and try to use what we learn in order to do fewer dumb things in the future.

Dave


Dear Dave,

I’m 26, and I just started a new job making $50,000. I’ve also been offered a 401(k) with no match.

Should I put money into the 401(k) or open a high-yield CD?

Crystal


Dear Crystal,

I’ve got another idea.

I’d open a Roth IRA with good growth stock mutual funds inside and fund it up to $5,500 a year. Make sure these mutual funds have been open at least five years—preferably 10 years or more—and have performed well.

Mathematically, this investment, growing tax-free, will be superior to a non-matching 401(k).

Then, if you want to invest more than $5,500, you could put some additional money into the 401(k) offered by your company.

Again, make sure you’re invested in good growth stock mutual funds with long, successful track records.

Congratulations, Crystal. And good luck!

Dave

* Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at DaveRamsey.com.

Disclaimer: The content supplied by columnists and letters to the Editor on this site does not in any way, shape or form, implied or otherwise, necessarily express or suggest endorsement or support of any of such content, statement, or opinions therein. SurfKY News does not necessarily adhere to or endorse content provided by outside non-staff sources.

e-max.it: your social media marketing partner

LIKE SurfKY on Facebook - Click here to LIKE us now.

© Copyright 2015 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story on social media.

Posted on 2/2/14
3/13 - 16
1 DOW 17,745.98
-5.41 (-0.03%)    
2 S&P 2,108.63
+0.06 (0.00%)    
3 NASDAQ 5,128.79
+17.05 (0.33%)    
3/13 - 16

Most Read This Week

July 27, 2015 5493

Death of Central City Man in Dawson Springs Under…

by SurfKY News
July 27, 2015 3701

School System Announces Free Lunch/Breakfast at…

by SurfKY News
July 29, 2015 2311

Miss Hopkins County Fair 2015 Chosen

by Tammy Holloway, SurfKY News
July 28, 2015 2294

Hanson, Owensboro, Bowling Green Youths Win at…

by Tammy Holloway, SurfKY News
July 27, 2015 2196

Family Needs Help in Paying 18-Year-Old's Funeral…

by SurfKY News

Most Read This Month

July 02, 2015 19668

Emergency Response Team on Scene of Standoff on…

by Doreen Dennis, SurfKY News
July 17, 2015 15901

Muhlenberg Most Wanted - Top 10

by SurfKY News

Stories Trending Now

July 29, 2015 2311

Miss Hopkins County Fair 2015 Chosen

by Tammy Holloway, SurfKY News
July 28, 2015 2028

Heavy Rains, Two Wrecks Impede WKP Travel

by Doreen Dennis, SurfKY News
July 29, 2015 2004

Crime Stoppers Top Most Wanted - July 29, 2015

by SurfKY News
July 30, 2015 1677

Webster Man Leads Police on Chase through Parts…

by SurfKY News
July 29, 2015 1445

PPD Warns Public: Beware of Facebook Scam

by SurfKY News
July 29, 2015 1297

24th Annual Miss Teen Hopkins County Fair Pageant…

by Tammy Holloway, SurfKY News
July 29, 2015 1183

Madisonville Police Arrest Reports Released -…

by SurfKY News
July 29, 2015 1047

Local Teen Cited on Charges for Alleged…

by SurfKY News
July 29, 2015 971

Hanson City Council Discusses Boundaries, Zoning

by Tammy Holloway, SurfKY News
July 29, 2015 743

Yeti Spotted at Hanson Pharmacy

by SurfKY News