Pick Your Community: | Hopkins | Muhlenberg | Daviess | Christian | Henderson | Lakes | McCracken | 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.

Posted on 2/2/14
2/6/2014 - posted
3/13 - 16
button coupons
2/6/2014 - posted
3/13 - 16
2/6/2014 - posted
3/13 - 16
button classifieds
2/6/2014 - posted
3/13 - 16

Most Read This Week

December 24, 2014 12727

Christmas Eve Bloody Brawl Erupts on Dulin Street

in Local (Hopkins) Top News by Doreen Dennis
December 25, 2014 8778

Gift Returns Done Right

in General News For All Sites by SurfKY News
December 25, 2014 6270

Arrests Made After Dulin Avenue Christmas Eve…

in Local (Hopkins) Top News by Officer C.P. Haynie
December 25, 2014 4416

Crime Stoppers Top Most Wanted - December 25, 2014

in Video by Crime Stoppers
December 23, 2014 4160

Couple's Alleged Dispute over Blanket Leads to…

in Local (Hopkins) Top News by Madisonville Police Department
December 22, 2014 4017

Madisonville Police Arrest Reports - Dec. 22, 2014

in Hopkins News by Madisonville Police Department
December 23, 2014 3623

Alleged Theft at Walmart Sends Two to Jail

in Local (Hopkins) Top News by Madisonville Police Department
December 23, 2014 3241

Disturbance Results in Vehicle, Foot Pursuit,…

in Local (Hopkins) Top News by Officer Tyler Russell
December 23, 2014 3032

Hopkins County Grand Jury Indictments

in Local (Hopkins) Top News by Karen McKnight
December 26, 2014 3014

5-Year-Old Boy Kills Buck/Doe

in Local (Muhlenberg) Top News by Randy Adams

Stories Trending Today

December 27, 2014 2090

John Prine to be Recognized at Grammy Awards

in Top News For All Sites by Paul McRee, SurfKY News
December 27, 2014 1591

2014 Concludes with Record Investments for…

in Top News For All Sites by Angela Blank
December 26, 2014 1167

Simple Ways to Maintain Your Mental Acuity

in General News For All Sites by SurfKY News
December 27, 2014 1089

Four Time Management Tips for the New Year by…

in General News For All Sites by David Taylor
December 27, 2014 1007

How to Live as a One Income Family

in General News For All Sites by SurfKY News
December 27, 2014 939

The Dangers of Belly Fat

in General News For All Sites by SurfKY News
December 27, 2014 934

What to Look for in An Investment Property

in General News For All Sites by SurfKY News
December 27, 2014 932

Women's Heart Attack Symptoms Can Differ from…

in General News For All Sites by SurfKY News
December 27, 2014 878

Hooked on Science - 'Water Bottle Egg'

in General News For All Sites by Jason Lindsey
December 27, 2014 864

Keeping the Faith - 'The Puzzles of the Past'

in General News For All Sites by Ronnie McBrayer

SurfKY News Group, Inc.
Corporate Office & Studio
1125 Nebo Rd.  •  Madisonville, KY 42431
270.452.2727 (phone)
  •  270.452.2249 (fax)


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

social fbsocial twsocial yt
social gpsocial flrsocial rss