Dave Says

Evaluating insurance needs
Dear Dave,
Last year I got a divorce. I’m 32, a teacher and a single mom. I’m on Baby Step 2 right now, and I was wondering about life insurance. My son is only two, and if something happened to me, he would go to his father. His dad is in good shape financially and responsible with money, so how much life insurance should I have?
Christian
Dear Christian,
Well, you probably don’t need the full 10 to 12 times your income like I recommend for most people. The only dependent you have is also dependent upon his dad. And from what you said, his father seems perfectly able to take care of him.
I’d get a good term life policy equal to the amount that you’d like to supplement your son’s care. The good news is you can get a couple hundred thousand in life insurance at your age for practically nothing.
If you get life insurance, make sure his dad—your ex—is not the beneficiary. The beneficiary should be a family trust, formed upon your death, and the money would go into that trust for the benefit of your child. You set the terms of the trust. It should not be controlled by your ex. In a divorce situation, I would never name someone I’m not willing to be married to the trustee of my money on behalf of my child.
I’m so glad you’re thinking about these things, Christian. It shows you’re an intentional lady, a fine mom, and a good planner. Those traits will serve you and your son well!
—Dave
 
Are utilities included?
Dear Dave,
I just received a formal job offer in law enforcement. I’m debt-free, single, and I’d like to move out of a roommate situation and into my own apartment. I’ll be starting out at $34,000 a year, then moving up to $38,000 after my probationary period. You have a rule that says to make sure rent or house payments are 25 percent or less of your take home pay. If I can find a place where utilities are included, do they figure into that amount?
Josh
Dear Josh,
It’s really more of a guideline than a rule. The point of not letting your housing cost eat up more than 25 percent of your take home pay is to make sure you have money left over for other important things. It’s hard to save and invest for the future when a huge chunk of your money is eaten up by rent or a mortgage payment each month. But no, utilities are not part of the one-fourth of your take home pay guideline.
At this point, it doesn’t sound like you need anything fancy. Try to find a safe, quiet place to call home—somewhere you can relax and decompress when you’re off duty. And thanks for entering law enforcement. A lot of folks are leaving your line of work, and we need good men and women in that profession right now.
—Dave
* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books. The 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.