Highlights from the Dave Ramsey Show

Question: Dennis in Nashville says his wife works as a bank teller. She's gotten word there's an opening in the loan department. However, with their feelings about debt, she isn't sure about taking this position. Dave tells Dennis he couldn't do it, but he offers Dennis some ways to look at this.

Dave Ramsey's advice: I think the key word was the last word: misbehave. Certainly, I can't. I couldn't even consider it. I've posted my whole life on this subject, so it would be very hypocritical in my case. In your case, it's not your public stand on everything. It's just how you've chosen to live your life. I don't borrow money, and I tell people not to borrow money and tell them to cut up their credit cards, so for me to take credit cards in our bookstore would be hypocritical beyond belief. That's where I am.

In your case, I think the trick is this bank that is going to try to get her to make loan quotas to the point that she literally is selling loans to people who should not be borrowing. If it is a major national bank, that's probably going to be the case. You would be enabling misbehavior then.

The truth is, she is encouraging customers to do things she wouldn't do, but it's not in a way that's putting someone in jeopardy. She wouldn't go borrow money on a car, but if someone comes in and has a good down payment with a good job and a good credit score and she makes them a car loan, I don't think she's an immoral person. There's a line here in the motivation behind the bank and the spirit of how they operate.

I endorse credit unions, and I endorse small town and small community banks. I'm well aware that those banks make loans. But I don't tell people to go there to get a loan. I'm comfortable with the quality of people who operate in those kinds of environments. That's what you have to ascertain. In other words, if she's working for Bank of America, it ain't going to work out, dude. It's going to be a problem.

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Question: Amy on Twitter asks how Dave feels about warranties on electronics. Dave says he doesn't believe in any extended warranties.

Dave Ramsey's advice: I don't believe in extended warranties at all—on cars, electronics, anything. I've done the research, and I've seen the math. The math says that—depending on the item—about 75–85% of the amount you pay for the warranty is for marketing and commissions. If you pay $1,000 for a warranty, $750 of it is going to the dealership and to the salesman who sold it to you.

Electronics stores, for example, work on such slim margins, and they make their money on the financing and extended warranties. That's why every single time you do a purchase there, you have to explain that you really don't want an extended warranty on your chewing gum. It's ridiculous, isn't it? They're going to peddle it because that's where the room is.

About 12% is actually statistically the amount of money that it takes to insure the item against breakage, meaning that out of $1,000—if you paid for an extended warranty on a car—$120 would have covered your breakdown on average. Basically, you're getting $120 worth of coverage and paying $1,000 for it. Or you're paying $100 for it and getting $12 of coverage. It depends on how much the extended warranty is.

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Question: Jeannie in North Carolina says her 20th wedding anniversary is coming up, and she wants to do something really special. However, her husband is still worried about the economy and hesitant to do it. They're making about $60,000 a year right now. Dave thinks a $4,000 or $5,000 cruise is fine in their scenario.

Dave Ramsey's advice: I think a $4,000 or $5,000 cruise is in order. Tell ol' tightwad to loosen up. He's done a great job. I'm making fun of him, but you guys together have done a great job. You're so weird, I wish you were running Congress. You have $60,000 in the bank. Take $5,000 and go see Alaska.

It's a matter of ratios. If you called me up and wanted to spend $70,000, now I've got to pause. That's a lot of money out of your world. But basically $5,000 in your world is 1% of your net worth. It kind of falls under the heading of "shut up." This is living like no one else, and then at the end of that, you don't want to forget to live like no one else. That doesn't mean you go crazy and spend like a nutburger and go broke because you just suddenly become impulsive. That's not the discussion we're having. We're talking about a very reasonable purchase. I would put in the budget $5,000 for this trip, and you guys go do something nice.

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