By Dave Ramsey
Q. My mother-in-law has a serious credit card problem. She can’t afford stuff, but she shops anyway, acquires more credit and thinks she’ll pay for it all later somehow. Her husband has bailed her out a few times, but he’s unwilling to do it anymore. My wife and I and her sister, want to address this issue, but where do we start?
A. First of all, you need to stay out of the discussion. This is something for her daughters to handle, and her husband needs to be part of it, too. He’s closer to this and feels the effects more than anyone else in the family.
They need to sit down with her in a closed setting, where there are no interruptions, no television and no one else. Start with the fact that they love her and care about her deeply. This part is really important. But they also have to walk through what’s going on, and let her know they’re tired of watching her destroy herself and her marriage with this immature and irresponsible behavior.
Everyone involved should understand going in that they’re likely to receive a volatile, angry reaction from this lady. Sometimes people get ticked off when they hear the truth, especially when it’s connected to their own misbehavior. It may even be a good idea for your wife, her sister and your father-in-law to get some advice from a family counselor beforehand. What we’re really talking about here is an intervention.
If she were a drunk, you’d want to try and make her see how alcohol was hurting her and the relationships she has with her family. Basically, she has a credit card addiction, and it’s wreaking havoc on her marriage and their financial well-being. Show as much love and understanding as possible, but someone has to say something and draw a line in the sand. Otherwise, this behavior will eat everyone alive.
Q. I want to get out of my whole life policy. Should I formally close out the old policy, or just stop paying the premiums?
A. Close out the old policy once you have a good, term life insurance policy in place. I recommend 15- to 20-year level term insurance equal to 10 to 12 times your annual income. For instance, if you make $40,000 a year, you should have $400,000 to $500,000 in coverage.
Term life insurance is much less expensive than whole life. Plus, did you know that you lose the part of your whole life policy known as the “savings plan” or “cash value” when you die? Companies pay only the face amount of the policy. So, close it out and stop pumping money into that thing.
But don’t leave yourself uninsured. Make sure you have the proper coverage in a term policy first. There is never a good time to save money inside a rip-off, whole life, cash value insurance plan.
Follow Dave Ramsey on Twitter at @DaveRamsey and on the web at daveramsey.com.