Dear Dave,
My wife passed away last year, and she was just 43-years old. I paid cash for the funeral and all the arrangements. Now, I’m getting solicitations from the funeral home, wanting me to prepay my own funeral. I’m 45-years-old. Is this a good idea?
Dave
Dear Dave,
God bless you and your family. I’m so sorry you have to go through this, but I’m glad to hear you were in good enough shape financially to handle the burden. That means you were both very wise with your money.
My advice is to pre-plan, but don’t prepay. As you discovered, having to make important decisions in the midst of that kind of grief is a hard thing to do. Sometimes, people are so emotional during times like these that they make bad decisions. So, pre-planning and making selections ahead of time is a great idea.
But it’s never a good idea to prepay for this kind of thing, and here’s why. If you live to an average age, for what you’d prepay today at age 45, you could invest the amount, be self-insured for that kind of thing, and in all likelihood have a ton of money sitting there when your time comes.
Events like this make you realize the need for proper planning, but don’t ever prepay them. Lots of people in the funeral industry don’t like me for this stance, but that’s just because they make lots of money on prepayment plans.
Serious about getting out of debt?
Dear Dave,
Should you budget for mad money, or just carrying around cash, when you’re trying to get out of debt?
Aurora
Dear Aurora,
What really matters is the amount of mad money you allow yourself to have. Everyone needs a little pocket money. It’s probably not going to throw you off too much if you put $10 or $20 in there. But $100 or $200? That’s a bit much when you’re scrimping, saving and supposedly working hard to get out of debt.
Think of it as a safety valve, Aurora. Everyone needs a break and a little fun now and then. Whether it’s grabbing lunch out, or going to a movie once in a while, you need to relax and let off little steam.
Just make it part of your regular monthly budget, and stick to the amount. Little things like this will help keep your total money makeover moving in the right direction without wearing you out.
• Dave Ramsey is America’s trusted voice on money and business. He has authored five New York Times best-selling books, including Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 8.5 million listeners each week on more than 550 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.