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Spending on tech can fast become a financial black hole | Dave Ramsey

Dear Dave,

I’m debt-free except for my home, and I have a small business with revenues of around $100,000 annually. About half of that is profit, and I typically pay myself 40 percent of the bi-weekly revenue. I’m in the media business, and I need to upgrade some equipment. At what point do I put back a little more money, or pay myself a little less, to make this happen?

—Luke

Dear Luke,

I know what you mean, man. We’re in the media business, too, and around my office it seems like we buy more and newer technology every day. Really, it’s like a black hole. You could throw money into it the rest of your life, because practically the very moment you open the box it’s obsolete.

We finally decided to designate a percentage of our revenues to equipment replacement. Something is always being replaced, but this way we’ve got a limit and we’ve got something set aside to make our technology needs happen. It’s like the envelope system. If the envelope’s empty, we have to stop buying and put off whatever it is until the cash is available again.

daveramseynew
Dave Ramsey

I hope this helps!

Dave

This insurance is a rip-off

Dear Dave,

I’m thinking about signing up for a return of premium life insurance policy. It costs more per month than other policies, but it allows you to get all your money back after 30 years assuming you live that long. Is this too good to be true?

Tommy

Dear Tommy,

It’s not too good to be true, but it is a rip off. Never buy a return of premium life insurance policy.

You said it costs more than other policies, right? Well, if you were to take that extra money you’d be paying and put it into a good mutual fund, you’d get all the cost of your policy back after 30 years 100 percent of the time. Return of premium policies are just a gimmick.

When it comes to life insurance, always go with a good, 15- to 20-year level term policy. And always stay away from that return of premium garbage!

Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover, and he hosts The Dave Ramsey Show on radio. @DaveRamsey.

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