Dave Says

By Dave Ramsey
Author, The Total Money Makeover

CBNMoney.com – Finanacial guru Dave Ramsey answers questions about wise financial decision-making.

Separate Checking and Savings Accounts?

Dear Dave,
I currently have a money market account that I use as my checking and savings account. I get check writing privileges and a debit card with this account, in addition to a better interest rate on my money. Is this a good idea, or is it better to have separate checking and savings accounts?
-- Brad

Dear Brad,
It doesn’t sound like you have a bad deal there, but it’s always good to have a physical and emotional boundary between your savings and the money in your checking account. This is especially important when you’re talking about an emergency fund.

When everything is all pooled together, it’s easy for the line between savings and checking to become blurred and for you to start dipping into your emergency fund for things that aren’t emergencies – sometimes without even realizing what you’re doing!
If this happens, you defeat the purpose of having an emergency fund.
- Dave

How Much Life insurance on a Stay-at-Home Mom?

Dear Dave,
I’ve heard you recommend having seven to 10 times your income in life insurance. How much would you suggest having on a policy for a stay-at-home mom when there’s no direct income involved?
--Dale

Dear Dale,
I’d say somewhere in the $300,000 to $400,000 range, because financially-speaking it’s going to take $35,000 to $40,000 a year to replace all the things she does.

Your wife may not bring home an actual paycheck right now, but there’s a ton of personal and economic value attached to everything she does every day. This lady works hard, what she does is very important and would be VERY difficult to replace!
-- Dave

How Can Credit Counseling Companies be Non-Profit?

Dear Dave,
I was wondering about these credit counseling companies. How can they claim to be non-profit when they charge for their services and make so much money off people? Are they worth using at all?
-- Terry

Dear Terry,
All non-profit means is that they don’t make a profit. They can spend any extra money they make on advertising, salaries and other stuff to retain this status. Being listed as a non-profit also makes them more attractive to credit card companies than for-profit counseling services, because the credit shark can take a deduction for donating to such “charitable” organizations.

There are two good reasons why consumers shouldn’t use these non-profit, credit counseling services. One is that YOU need to learn how to handle your own money, and they don’t teach you that. Number two, if you use one of these services, you’ll be treated according to Fannie Mae underwriting guidelines as if you’d filed a bankruptcy!

Here’s the deal, Terry. Personal finance is 80 percent behavior and only 20 percent math. If you don’t learn how to change your behavior, your money will always control YOU instead of YOU controlling your money.

But here’s the good news. Once you get control, you free up the largest wealth-building tool you have – your income.
-- Dave

Dave Ramsey is a nationally-syndicated radio talk show host and author of the New York Times bestselling books, Financial Peace Revisited and The Total Money Makeover. His life-changing advice in the area of personal finance helps people get out of debt, stay out of debt and build wealth that will last a lifetime and beyond.