Posted on 2/2/14

dave ramsey turq 300KENTUCKY (10/13/13) – This week Dave discusses 'How much term do I need? and 'Budgeted fun'
Dear Dave,
Should term life insurance be purchased based on your current earnings or future, projected earnings? - Dan

Dear Dan,
I usually recommend people have 10 to 12 times their current annual income in a good, level term life insurance policy. However, if you have a solid reason to project your income jumping significantly in the near future, there’s nothing wrong with basing your amount of life insurance coverage on that figure—as long as you can afford it.

Now, when I say a solid reason, I’m not talking about having an attitude of, “I’m smart. So, I’m going to make tons more money soon.” That’s ego, not reason. But if you’re in a residency finishing your medical degree, you can realistically look at making $40,000 to $50,000 for another year or two then making the jump to $200,000. That’s the kind of logical thinking and planning I’m talking about. In that scenario, a huge jump in income is almost assured. There’s nothing wrong with going ahead and getting more coverage.

The purpose of life insurance is to take care of your family if something unexpected should happen to you. You don’t want to go nuts and buy too much unnecessarily, but you should have enough to ensure that they’re well taken care of when you’re not around. - Dave
Dear Dave,
My husband and I are debt-free except for our house. I’ve been having a discussion with a coworker over how much money to allow for fun in your budget. I think $100 for a bottle of wine is okay, but she says something like that is unreasonable. What do you think? - Elizabeth

Dear Elizabeth,
It depends entirely on your financial situation. Paying $100 for a bottle of wine is pretty dumb if you make only $20,000 a year. But what if you make $200,000 a year? Quit worrying and buy the wine! When you have a great income-to-asset ratio—and you’re living debt-free, have control of your money, and are saving and investing for the future—that’s the time to relax and enjoy a few things.

You’ve got to take the whole picture into account. Otherwise, you’ll get caught up in the whole envy and jealousy thing. I know a guy who makes $15 million a year, and recently he bought a $400,000 car. Now, I grew up in a small town in Tennessee. I can’t wrap my head around the idea of a $400,000 automobile. But as a ratio, that’s a very small part of his income. It would be like someone who makes $150,000 a year buying a $400 car.

That’s a good rule of thumb for determining if something constitutes an outrageous purchase. If it’s a big-enough percentage of your income to rock your world and mess with your finances, then you’re spending too much. But to say that a certain item is too expensive or an irresponsible purchase based on price alone, that’s kind of silly. - 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

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. 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.

Weather Sponsored by

1 DOW 17,813.39
+1.20 (0.01%)    
2 S&P 2,088.87
-0.27 (-0.01%)    
3 NASDAQ 5,116.14
+13.33 (0.26%)    

Stock Report Sponsored by


Most Read This Week

November 20, 2015 9540

Dispatchers Overhear Drug Activity during…

by SurfKY News
November 24, 2015 8850

Distillery to Operate in Old Graham School…

by SurfKY News
November 21, 2015 8507

Injuries Result from Beulah Road Accident

by Doreen Dennis, SurfKY News
November 23, 2015 7180

Relative Charged with Murder, Arson in Deaths of…

by SurfKY News
November 20, 2015 4049

Dawson Springs Woman Dies in House Fire

by SurfKY News

Most Read This Month

November 17, 2015 14667

Ohio County Most Wanted - Top 10 - November 17

by SurfKY News
November 18, 2015 14169

Runaway Teen Returns on His Own

by SurfKY News

Stories Trending Now

November 24, 2015 8850

Distillery to Operate in Old Graham School…

by SurfKY News
November 24, 2015 3917

Ohio County Most Wanted - Top 10 - November 24

by SurfKY News
November 24, 2015 2831

Man Injured When Vehicle Collides with Deer

by SurfKY News
November 24, 2015 1726

New Information on String of Break-ins, Thefts

by SurfKY News
November 24, 2015 1320

Wet/Dry Petition for Beaver Dam Submitted

by Lee Bratcher, SurfKY News
November 24, 2015 1310

Madisonville Police Reports Released

by SurfKY News
November 24, 2015 991

Beshear Signs Executive Order Restoring Some…

by SurfKY News
November 23, 2015 972

Providence Police Reports Released

by SurfKY News
November 25, 2015 918

Hopkins County Crime Stoppers Top Most Wanted -…

by SurfKY News
November 24, 2015 699

House Republican Leader Takes Issue with…

by SurfKY News