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

Started 11/8/2013
Started 11/8/2013
Started 11/8/2013
Started 11/8/2013
Started 11/8/2013
Started 11/8/2013

In Other News...

Owensboro Southern 11-Year-Olds Finish Runner-Up in State

BOWLING GREEN, Ky. (7/24/14) — The Owensboro 11-year-olds finished runner-up in the Little League State Baseball… Read More

Maintenance Scheduled at Fisher Park and Portion of the Greenbelt Trail

OWENSBORO, Ky. (7/24/14) — The practice field at Jack C. Fisher Park will be closed the week of July 28 through August… Read More
Started 11/8/2013
Started 11/8/2013

Most Read This Week (Site-Wide)

July 22, 2014 3894

Madisonville Woman Charged With…

in Top Stories by Madisonville Police Department
July 21, 2014 2741

Five Sent to Hospital After Two-Vehicle…

in Top Stories by Rita Dukes Smith, SurfKY News Director
July 21, 2014 2155

Business Spotlight - Painted Window Aims…

in Top Stories by Charles W. Riley II, SurfKY News
July 21, 2014 2067

Madisonville Police Arrest Reports - July…

in News by Madisonville Police Department
July 24, 2014 2030

Powderly Man Injured in Apparent Gun…

in Top Stories by Charles W. Riley II, SurfKY News

Most Read Stories from Hopkins County

July 22, 2014 3894

Madisonville Woman Charged With…

in Top Stories by Madisonville Police Department
July 23, 2014 1737

Crime Stoppers Top Most Wanted - July 23,…

in Top Stories by Crime Stoppers
July 24, 2014 1246

Madisonville Man Charged for Drugs,…

in Top Stories by Trooper Stu Recke
July 21, 2014 1197

Madisonville Fire Chief Announces…

in Top Stories by Rita Dukes Smith, SurfKY News Director
July 21, 2014 1149

Three Injured in Three-Vehicle Collision…

in Top Stories by Rita Dukes Smith, SurfKY News Director

Most Read Stories from Owensboro

July 21, 2014 1376

Portion of Southeastern Parkway Closed…

in News by Beth Cecil
July 22, 2014 1061

Alliance for a Drug Free Owensboro and…

in News by Carla Shelton
July 23, 2014 1003

Owensboro Neighborhood Alliance Meeting…

in News by Sherry Girten
July 22, 2014 999

Daviess County Traffic Advisory

in News by Keith Todd
July 23, 2014 793

Fall Baseball League Registrations

in News by Brittni Bunn

Most Read Stories from Muhlenberg County

July 21, 2014 2741

Five Sent to Hospital After Two-Vehicle…

in Top Stories by Rita Dukes Smith, SurfKY News Director
July 21, 2014 2155

Business Spotlight - Painted Window Aims…

in Top Stories by Charles W. Riley II, SurfKY News
July 24, 2014 2030

Powderly Man Injured in Apparent Gun…

in Top Stories by Charles W. Riley II, SurfKY News
July 23, 2014 1562

Greenville Family Loses Home, Possessions…

in Top Stories by Charles W. Riley II, SurfKY News
July 23, 2014 1203

Swinging for Sadie Raises $6,000 for…

in Top Stories by Paul McRee, SurfKY News

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