Pick Your Community: | Hopkins | Muhlenberg | Daviess | Christian | Fayette | Henderson | Lakes | McCracken | Warren | Webster
Davis Motor Sales banner ad

Dave Says – Nov. 3, 2013

dave says1KENTUCKY (11/3/13) – This week Dave discusses 'When do I need umbrella insurance?' and 'Debt snowball and rental property'

Dear Dave,
At what level of net worth should someone consider umbrella insurance? - Matt

Dear Matt,
I think it’s something you should consider if you have a net worth of $500,000 or greater. But first you should be clear on what net worth really means.

Net worth is what you own minus what you owe. So the fact that you make a million dollars a year is not the determining factor in whether or not you’re a millionaire. The only people who use that definition are the financially uninformed and politicians who twist things around and throw out catch phrases designed to further their own agendas.

That being said, I would get umbrella insurance, which is extra liability insurance, when you reach the half-million mark in net worth. Prior to that I’d suggest carrying $500,000 worth of liability on your homeowner’s, car insurance and any other policies that have liability attached to them. Once you reach and cross that $500,000 threshold in net worth, however, I’d advise picking up another $1 million in liability insurance, called an umbrella policy, that attaches to the top of that and covers everything for an additional $1 million.

It’s a great buy, Matt. You can get it for about $200 a year in most states. - Dave

Dear Dave,
Should rental property debt be included in the debt snowball? - Matthew

Dear Matthew,
No, it should not. The debt snowball is Baby Step 2 in my plan, where you stop saving and pay off all debt except for your home—and I would include rental properties in there—from smallest to largest. Prior to this, you should start with Baby Step 1, which is saving up a starter emergency fund of $1,000.

As a reminder, Baby Step 3 is going back and fully funding your emergency fund with three to six months of expenses. Notice that I said expenses, not income. After that, Baby Step 4 is investing 15 percent of your household income in Roth IRAs and other pre-tax retirement plans, and Baby Step 5 means setting aside college money for the kids.

Baby Step 6 is where you pay off your home, and Baby Step 7 is when you relax, build wealth, and give. Again, Baby Step 6 would include any rental properties that weren’t bought and paid for with cash. My advice would be to pay off your home before taking care of the rental properties, and that’s simply a risk management perspective. Now, if you owe just $30,000 on your rental properties but still have a $3 million mortgage hanging over your head, you might go ahead and knock out the rental properties first.

Think about it this way, Matthew. Which would you rather lose in a worst-case scenario: your home or your rental properties? If they’re in the same general range of debt, I’m going to pay off the home first and the rental properties last. - 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.

© Copyright 2014 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 by using one of the social media links below.

In Other News...

Madisonville Police Reports April 18, 2014

MADISONVILLE, Ky. (4/18/14) - The Madisonville Police Department released the following arrest reports Friday, April… Read More

WKCTC Students Win Business Awards at State Competition

PADUCAH, Ky., (4/19/14) — Four West Kentucky Community and Technical College Phi Beta Lambda students came home with… Read More

Most Read This Week (Site-Wide)

April 16, 2014 19270

UPDATE- Sheriff's Office Following Leads…

in Top Stories by Taylor Riley, SurfKY News Reporter
April 17, 2014 4238

KSP Nabs St. Charles Man Wanted by U.S.…

in Top Stories by Trooper Stu Recke
April 15, 2014 3138

Police Searching for Sureway's 'Baby…

in Top Stories by Taylor Riley, SurfKY News Reporter
April 16, 2014 3063

Sheriff's Deputies Nab Central City…

in Top Stories by Sheriff Curtis McGehee
April 15, 2014 2779

Multi-Agency Investigation Leads to Drug…

in Top Stories by Lori Blakeley

Most Read Stories from Hopkins County

April 17, 2014 4238

KSP Nabs St. Charles Man Wanted by U.S.…

in Top Stories by Trooper Stu Recke
April 15, 2014 3138

Police Searching for Sureway's 'Baby…

in Top Stories by Taylor Riley, SurfKY News Reporter
April 15, 2014 2779

Multi-Agency Investigation Leads to Drug…

in Top Stories by Lori Blakeley
April 15, 2014 1076

State Approves $500K for Hopkins Archery…

in Top Stories by Rebecca Hanchett
April 18, 2014 963

Talking Teen Trashed Telephone Pole,…

in Top Stories by MPD

Most Read Stories from Owensboro

April 15, 2014 1716

Owensboro Police Investigate Auto Accident

in News by Michael Hathaway
April 15, 2014 1365

Owensboro Parks Offers Tennis Lessons

in News by Britni Bunn
April 15, 2014 1025

Happenings and Meetings Owensboro

in News by Dennis Beard, SurfKY News
April 16, 2014 835

New Home Health Care Opens in Owensboro

in News by Dennis Beard, SurfKY News
April 15, 2014 761

OPD’s Annual 5K Run and Police Awareness…

in News by Owensboro Police Department

Most Read Stories from Muhlenberg County

April 16, 2014 3063

Sheriff's Deputies Nab Central City…

in Top Stories by Sheriff Curtis McGehee
April 15, 2014 2031

'Walk Right Back' An Everly Brother's…

in Top Stories by Paul McRee, SurfKY News Reporter
April 15, 2014 1866

Local MCHS Students Train at Job Corps

in Top Stories by Karen Robinson
April 15, 2014 1523

Thumbpickers Unite at Mose Rager Day

in Top Stories by Paul McRee, SurfKY News Reporter
April 16, 2014 1160

South Carrollton Woman Injured in Head-on…

in Top Stories by Trooper Stu Recke

SurfKY News Group, Inc. Central Office & Printing Division
1125 Nebo Rd.  •  Madisonville, KY 42431  •  270.452.2249 (fax)
Main Number: 270.452.2727 (phone)  •  Printing Division Direct Line: 270.821.8600 (phone)

SurfKY Owensboro News Bureau
920 Frederica St. / Suite 210  •  Owensboro, KY 42301  •  270.683-8060 (phone)


Contact a member of our staff: www.surfky.com/contact
Copyright © 2014 SurfKY News Group, Inc.  •  Terms of Use  •  Site Map

social 06social 21social 22social 04social 03