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Dave Says - Aug. 10, 2014

dave says1KENTUCKY (8/10/14) — This week Dave discusses freezing your credit report and keeping motivation up.

Dear Dave,

Do you recommend a credit freeze in order to protect against identity theft?

Eric

Dear Eric,

I absolutely recommend doing that, especially if you’re not borrowing money anymore. However, putting a freeze on your credit report only provides partial protection against identity theft.

Identity theft is where someone, for example, signs up for a credit card in your name. If Joe Crook signs an application with your name and address, and the credit card company issues the card without checking —they blind-issue cards about seven out of 10 times — then the card will be issued to the thief. Having your credit frozen does nothing to stop that from happening. Still, if they check your credit and it’s frozen, chances are they won’t issue the card.

I’d also recommend having a good identity theft protection program in place. I have it on myself and all my team members at the office. If you don’t have this, and someone gets a card in your name, the credit card company will demand that you pay the bill. You can insist it’s not you, but that won’t do much good. Then, you’ll have to go through the hassle of filling out affidavits and police reports.

You may get out of paying for it in the end, but you’ll still have to spend dozens, if not hundreds, of hours dealing with the credit card company trying to get the whole mess straightened out!

—Dave

Dear Dave,

I make $30,000 a year. I’ve just started Baby Step 2 of your plan, and I’m paying off my debts from smallest to largest. I have $55,000 in debt, including $15,000 on a car loan. I recently picked up a part-time job to help pay down the debt, but sometimes I’m working 70 hours a week. Do you have any recommendation for staying motivated during this process?

Brandon

Dear Brandon,

I understand, man. We can all get tired and run short on motivation from time to time. There’s an old saying that fatigue makes cowards of us all. I know sometimes, when I’m traveling a lot, I can lose some boldness, strength or compassion when I get tired. So fatigue is a real issue if you’re working long hours and facing additional pressure.

The balance on your car is awfully high. My general rule is that you don’t want to own vehicles equaling half or more of your annual income. If I’m in your shoes, I’d sell that car and move down to a little beater for a while. I’m not talking about a rattletrap piece of junk, just something lots less expensive. You can find a decent used car to fit the bill, and that would get rid of a big chunk of debt in a hurry.

At this point, I think you just need to feel like you’re making some measureable progress. Sometimes, that means throwing a stick of dynamite into the middle of your life. Also, try keeping your debt snowball list where you’ll see it on a regular basis. I knew one lady who kept in on the fridge, so she could look at all the little red lines drawn through things she had paid off. It was a visual reminder of the progress she had made, and it provided motivation to keep working hard and become debt-free!

—Dave

Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books: "Financial Peace, More Than Enough," "The Total Money Makeover," "EntreLeadership and Smart Money Smart Kids." The Dave Ramsey Show is heard by more than 8 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

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