Ask Dave: Denied for life
Dear Dave: How do you make sure you don't spoil your child when you're wealthy? - Ryan
Dear Ryan: I know this will sound mean to some people, but you simply explain to them that they are not wealthy.
I remember a time years ago, after we'd gone broke, that we managed to scrimp and save and finally had a little bit of wealth. We bought a nice car, and my son piped up from the back seat, all smug and satisfied - "We're doing pretty good, huh?" I'll admit it was kind of funny, but it was also a teachable moment.
I looked at him and said, "I'm doing pretty good, but you're broke." That was a pretty consistent message around the Ramsey household as the kids were growing up. If you're not working and making your own way, you've got nothing.
The second thing we taught them, from a very young age, was to work. That can start with simple things like kids cleaning up their rooms or doing the dishes after dinner.
It should carry over to the teenage years as well. Every able-bodied child should be working and earning money - whether it's his or her own entrepreneurial idea, at a store in the mall or babysitting.
The third thing we did was based in our faith. As evangelical Christians, we taught our kids that we don't really own anything. It all belongs to God, and one of our jobs is to wisely manage the things He entrusts to us.
The first rule is to take care of your own household - the important stuff. After that, it's OK to have some nice things, but it's not all about pleasure. It's also about giving and extraordinary levels of generosity.
Teach them to work. Teach them to be givers. And gently remind them once in a while that they've got nothing until they go out and earn it.
Dear Dave: I have a townhouse I'm preparing to rent. Do you have any advice for evaluating potential tenants? - Chris
Dear Chris: The first thing I'd do is pull a credit bureau report. I'm not really worried about their credit score; I just want to see if they have a history of late or missed payments. Talk to some local property management firms and see who they use to pull these reports. I'd also recommend doing a background check on the potential renters. Talk to the owner of the last place they rented as well as the one before. I advise this because there are some dishonest landlords out there who will tell you that a bad tenant is wonderful just to get them out of their property.
A lot of things, though, are simply common sense measures. Have them fill out an application, which includes their income and a list of their debts. If they make $2,000 a month and have $2,500 a month in debt payments, you don't want them as tenants. In this scenario, a smile and "I promise I can pay it" won't work.
Spend some time just talking with them, too. Really listen to what they say and how they say it. Get a feel for what kind of people they are, and, if they have children, pay special attention to the kids. Are they well-behaved, or do they run around and act like a bunch of wild animals? If it's the latter, then they're going to tear up your house. And guess what? If the parents can't discipline their kids, there's a good chance they can't discipline themselves, either. You don't want to get mixed up with that. People who let kids run the household don't make good tenants.
Finally, remember to trust your gut instincts. If you get a weird vibe from someone or if things just feel strange, don't rent to them. Chances are, there's a reason you have those feelings.
Dear Dave: My husband was recently denied term life insurance because he has a criminal record from a long time ago. The good news is that, in a year, he'll be far enough removed from the incident that he'll be eligible for a policy. He has a whole life policy for $75,000 from before, which he doesn't plan to cancel. We have two small children, so is there another kind of policy he could get in the interim? - Dana
Dear Dana: If you can't get term life insurance, you can't get whole life. It's the same underwriting process. I only recommend term policies, but under these circumstances, I'd keep the whole life in place because he's basically uninsurable.
There are a couple of things you can do in this kind of situation. One thing is to get a mortgage life insurance policy. These are usually available without any kind of major inspection, and they pay off your mortgage, in full, in the event of death. It's about 10 times more expensive than regular term insurance, but at least it will pay off the house.
Another thing to look into is an automatic issue-type policy. Lots of banks offer these when you open an account. Usually, they'll send you an offer for a $10,000 life insurance policy. But if you pick up four or five of these, then he's got another $50,000 on top of the $75,000 already in place. It's still not enough, but it's better than nothing.
But I wouldn't spend a lot when he's only got a year left until he can get some good, proper coverage. I recommend people have eight to 10 times their annual income in life insurance coverage. So, if he makes $50,000 a year, he needs to have $400,000 to $500,000 in a good, level term policy. That's what you guys need to shoot for a year from now.
Dear Dave: My dad opened a credit card account in his name a few years ago to help with my college bills, and he made me an authorized user. Now, he's delinquent on the card, and I'm receiving collection calls and notices. Do I owe the credit card company money? - Steve
Dear Steve: No, an authorized user is not liable. The account is in your dad's name, and you didn't sign anything. He's the one legally responsible for the money owed.
I want you to be careful, though. Lots of credit card companies will badger people and use all kinds of pressure and guilt trips to try to collect money from people who don't owe them anything. They just want their money, and they really don't care who writes the check.
Get them to remove you as an authorized user today. Send them a letter demanding this via certified mail, return receipt requested, so you'll have proof.
Also, make sure they understand that you'll sue them for about $10 million if they don't comply immediately.
You shouldn't be reported to the credit bureaus for any of this, but companies can report just about anything - even inaccurate information - to the bureaus.
You have rights as a consumer, and you are not legally liable for credit card debt when you're just an authorized user. But make sure you check your credit report regularly in the future.
Some of these companies make a habit of repeatedly downloading misinformation to the bureaus in an effort to bother and bully people into paying debts they don't owe.
For financial help, visit daveramsey.com.