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 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.

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.

3/13 - 16

In Other News...

MPD Officers Rescue Man from Apartment Fire

MURRAY, Ky. (3/27/15) — According to a Murray Police Department report, on March 26, 2015, at approximately 7 a.m. MPD… Read More

Utility Tax Petition Signatures Put Choice before Voters; Board to Wait for November Election

GREENVILLE, Ky. (3/27/15) — The Muhlenberg County Clerk's office has completed the certification of Muhlenberg County… Read More
3/13 - 16

Most Read This Week

March 25, 2015 5099

Fazoli's, Roses Coming to Madisonville

by Amber Averitt, SurfKY News
March 24, 2015 4959

One Dies, Another Injured in Mortons Gap Traffic…

by Deputy Heath Owens
March 25, 2015 4879

Grand Jury Finds No Criminal Wrongdoing in Bean…

by Doreen Dennis, SurfKY News
March 27, 2015 4445

Three Arrested during Execution of Search…

by Madisonville Police Department/Hopkins County Detention Center
March 24, 2015 4090

UPDATE: One Injured in Hopkinsville Road Accident

by Doreen Dennis, SurfKY News
March 25, 2015 3811

Madisonville Man's Living Room Leap Lands Him in…

by Madisonville Police Department / Hopkins County Detention Center

Most Read This Month

March 09, 2015 13061

Multi-Agency Drug Bust Results in $1 Million Meth…

by KSP DESI
March 02, 2015 11425

Madisonville Teen Faces Numerous Drug Charges

by Madisonville Police Department/Hopkins County Detention Center

Stories Trending Today

March 27, 2015 4445

Three Arrested during Execution of Search…

by Madisonville Police Department/Hopkins County Detention Center
March 27, 2015 1814

MPD Searching for Man Accused of Nearly Running…

by Madisonville Police Department
March 27, 2015 1286

Family Loses Possessions, Dog in Sugg Street Fire

by Doreen Dennis, SurfKY News
March 27, 2015 967

Rehabber Explains Her Mission; Efforts Filmed by…

by Ron Sanders
March 27, 2015 923

Hopkins Grand Jury Indictments Handed Down

by Karen McKnight
March 27, 2015 837

Hopkins County Health Department Food Scores Thru…

by Barry Franklin
March 27, 2015 708

Sheriff Explains Numerous Duties of Office,…

by Ron Sanders
March 27, 2015 656

Madisonville Police Arrest Reports - March 27,…

by Madisonville Police Department
March 27, 2015 638

Work Continues on Madisonville's Downtown Plaza

by Rita Dukes Smith, SurfKY News Director
March 27, 2015 524

Utility Tax Petition Signatures Put Choice before…

by Charles W. Riley II, SurfKY News