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.

In Other News...

WKCTC Students to Receive Honors April 30

PADUCAH, Ky. (4/25/15) — Heather Vandiver and Cassandra Grace will be among 93 students to be recognized at West… Read More

Probation and Parole Violators - April 24, 2015

Probation and Parole has issued a new list of their top most wanted. Read More
1 DOW 18,080.14
+21.45 (0.12%)    
2 S&P 2,117.69
+4.76 (0.23%)    
3 NASDAQ 5,092.08
+36.02 (0.71%)    

Most Read This Week

April 17, 2015 11670

An Open Letter from an Addict

by Olivia Kirks
April 23, 2015 7277

Man Charged with Sodomy, Incest/Victim under 12

by SurfKY News
April 18, 2015 5728

Man Charged with Attempting to Coerce Minor for…

by Madisonville Police Department
April 20, 2015 4835

Nortonville Woman Charged with Meth Possession at…

by Madisonville Police Department
April 22, 2015 3971

Crime Stoppers Fugitive of the Week – April 22,…

by Hopkinsville – Christian County Crime Stoppers

Most Read This Month

April 17, 2015 11670

An Open Letter from an Addict

by Olivia Kirks
April 02, 2015 8781

UPDATE: Madisonville Man Injured in Head-on…

by Doreen Dennis, SurfKY News

Stories Trending Now

April 24, 2015 3814

UPDATE: Police Can't Substantiate Injured Man…

by Doreen Dennis, SurfKY News
April 24, 2015 777

Hopkins District Court Fines Handed Down

by Karen McKnight
April 23, 2015 765

Regional Eighth Grade Math Contest Held

by Joyce Riggs
April 24, 2015 762

Madisonville Police Arrest Reports Released -…

by SurfKY News
April 24, 2015 710

Probation and Parole Violators - April 24, 2015

by Gary Gates, SurfKY News
April 24, 2015 651

Career Fair Provides Students Information about…

by Tammy Holloway, SurfKY News
April 24, 2015 640

Baptist Health Holds ‘Walk in the Park’ as Part…

by Tammy Holloway, SurfKY News
April 24, 2015 623

Muhlenberg District Court Fines Handed Down

by Charles W. Riley II, SurfKY News
April 24, 2015 606

Hopkins County Sheriff's Reports Released

by SurfKY News
April 25, 2015 526

Above and Beyond: Wade Simons

by Gary Gates, SurfKY News