Commentary

DAVE SAYS

Financial roulette
Dave Ramsey

Dear Dave,

My wife and I are debtfree except for our home. She travels one week per month and charges her expenses to a personal credit card for reimbursement later. I’d rather we open a checking account with debit card privileges just for these expenses. What do you think?

Dustin Dear Dustin,

I like your idea better. The problem you’re both facing now is this: if her company ever shuts down, there’s a good chance you guys are stuck with credit card debt.

Years ago I had a client who was working for a company, and he’d run up travel and business expenses on his American Express card.

Like your wife’s situation, his company would then reimburse him for expenses.

Then, he made a business trip to Europe, and, while he was there, his company asked him to pick up some computer equipment.

The cost of the trip and equipment was about $22,000.

When he returned to the office with all the computer stuff in tow, the front door was padlocked.

The IRS had shut them down, and they went into bankruptcy. And guess what else? He never got the $22,000 from the company!

Never take personal responsibility for company expenses.

—Dave

Emergency funding

Dear Dave,

How long should it take someone to fully fund their emergency fund?

Chris Dear Chris,

On average, building an emergency fund takes six months to a year. It takes about 18 to 24 months for most people to pay off all of their debt, except for the house. That’s if they’re gazelle intense, and have no life other than getting control of their finances.

Baby Step 1 is saving $1,000, and not paying extra on your debts until you have that money in the bank.

Once you’ve got a $1,000 starter emergency fund, then you list all of your debts except the house from smallest to largest and attack them with a vengeance. All you do is work and pay off debt until you clean up the mess.

Once that’s done, you move on to the next Baby Step, which is adding to your emergency fund until you have three to six months of expenses set aside.

Most people can accomplish that in six months to a year. ­— Dave


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