Pick Your Community: | Hopkins | Muhlenberg | Daviess | Christian | Fayette | Henderson | Lakes | McCracken | Warren | Webster

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.

In Other News...

'Another One Bites the 'Duct'

CENTRAL CITY, Ky. (8/19/14) — Central City's South Second Street overpass is no stranger to semi truck wrecks. For… Read More

'Run to Kingdom Come' Half Marathon set for Aug. 23

WHITESBURG, Ky. (8/18/14) — The 'Run to Kingdom Come' half-marathon will be held at 8 a.m., Aug. 23. The 13.1-mile race… Read More

Most Read This Week (Site-Wide)

August 15, 2014 4441

Muhlenberg Man Arrested for Hopkins Auto…

in Top Stories by Det. Otis Chamberlain
August 15, 2014 3041

Sixth Annual Lake Malone Car, Truck and…

in Top Stories by Paul McRee, SurfKY News
August 17, 2014 2949

Greenville Police Conducting Traffic…

in Top Stories by Wes Miller
August 16, 2014 2944

Pogue's Automotive Annual Picnic Brings…

in Top Stories by Charles W. Riley II, SurfKY News
August 15, 2014 2924

Owensboro Board of Commissioners Special…

in News by Beth Cecil

Most Read Stories from Hopkins County

August 18, 2014 2309

Madisonville Man Charged for Shoplifting,…

in Top Stories by Madisonville Police Department
August 15, 2014 2276

Sheriff's Office, PNTF Make Drug Arrest…

in Top Stories by Det. Shawn Bean
August 15, 2014 1416

Madisonville Introduces New Spray Park

in Top Stories by Gary Gates, SurfKY News
August 16, 2014 1371

Non-Partisan Offices Deadline Passes -…

in Top Stories by Keenan Ratliff
August 16, 2014 1181

Madisonville Police Conducting Sobriety…

in Top Stories by Lt. Charles Young II

Most Read Stories from Owensboro

August 15, 2014 2924

Owensboro Board of Commissioners Special…

in News by Beth Cecil
August 18, 2014 2173

Owensboro Board of Commissioners…

in News by Beth Cecil
August 18, 2014 2061

Unlawful Solicitation

in News by Sgt. J.D. Winkler
August 18, 2014 2030

RiverArtes Opening at OMFA

in News by Owensboro Museum of Fine Art
August 19, 2014 1257

Free Arthritis Exercise Program will be…

in News by Woody Maglinger

Most Read Stories from Muhlenberg County

August 15, 2014 3041

Sixth Annual Lake Malone Car, Truck and…

in Top Stories by Paul McRee, SurfKY News
August 17, 2014 2949

Greenville Police Conducting Traffic…

in Top Stories by Wes Miller
August 16, 2014 2944

Pogue's Automotive Annual Picnic Brings…

in Top Stories by Charles W. Riley II, SurfKY News
August 15, 2014 2789

Green River Firefighters' to Honor All…

in Top Stories by Charles W. Riley II, SurfKY News
August 18, 2014 2494

Man Injured in Early Morning WKP Accident

in Top Stories by Rita Dukes Smith, SurfKY News Director

SurfKY News Group, Inc. Central Office & Printing Division
1125 Nebo Rd.  •  Madisonville, KY 42431  •  270.452.2249 (fax)
Main Number: 270.452.2727 (phone)  •  Printing Division Direct Line: 270.821.8600 (phone)

SurfKY Owensboro News Bureau
920 Frederica St. / Suite 210  •  Owensboro, KY 42301  •  270.683-8060 (phone)


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

social 06social 21social 22social 04social 03