Dave Says: Insurance above and beyond?

Dear Dave,

When it comes to buying life insurance, should the coverage amount be based solely on current earnings? I have good reason to believe my income is going to increase significantly soon.

Wesley

Dear Wesley,

The purpose of life insurance is to take care of your family if something unexpected happens to you. You don’t want to buy too much, but you should have enough to ensure that they’re well taken care of when you’re not here any longer.

I usually recommend people have 10 to 12 times their annual income in a good, level term life insurance policy. However, if you have a solid reason to believe your income will be jumping significantly soon, there’s nothing wrong with basing your coverage amount on that figure—if you can afford it, of course.

Understand that when I say, “solid reason,” I’m not talking about a hopeful attitude. I’m talking about something along the lines of finishing a medical residency, then making the jump to a six-figure income. That’s the kind of logical thinking and planning I’m working with here. In that scenario, or something similar, a huge jump in income is virtually assured.

Great question, Wesley!

—Dave

 

* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money MakeoverThe Dave Ramsey Show is heard by more than 16 million listeners each week on 600 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.

Blogs

Regaining Momentum to Finish the Year Strong

Regaining Momentum to Finish the Year Strong

Regaining Momentum to Finish the Year Strong By Christy Wright Can you believe there are only three months left in 2019? It feels like just yesterday I was picking up my boys from their last day of school before summer break. Now, suddenly, we’re in the middle of holidays-are-just-around-the-corner craziness! I think the hardest part…

Dave Says: How much emergency fund?

Dave Says: How much emergency fund?

Dear Dave, I know you talk about having an emergency fund of three to six months of expenses set aside. My husband and I are having a difficult time agreeing on exactly how much we should set aside for emergencies. How do you determine the exact amount? Erin   Dear Erin, The exact you amount…

Dave Says: Understand your investments completely

Dave Says: Understand your investments completely

Dear Dave, I’m new to investing, and recently I began putting money into growth stock mutual funds inside a Roth IRA. On my last statement, it said that my investment had grown. Can you explain how it grew? Matt   Dear Matt, In most cases, you’ll have anywhere from 90 to 200 different company’s stocks…

Here’s why you need a will, and how to get one

Here’s why you need a will, and how to get one

Here’s why you need a will, and how to get one By Chris Hogan We all want to do nice things for our loved ones. We go on family trips and celebrate life’s wins together. It’s sometimes difficult for us to consider the bad things that can happen in life, but we still have to…