Thursday, July 31, 2014

Dave Ramsey says: Don't take personal responsibility for company expenses

By Dave Ramsey

Published: Tue, April 1 7:19 p.m. MDT

 Credit card companies don't care about the circumstances. They want their money, period. Never take personal responsibility for company expenses.

Credit card companies don't care about the circumstances. They want their money, period. Never take personal responsibility for company expenses.

(Shutterstock)

Dear Dave,

My wife and I are debt-free except for our home. She travels one week per month and charges her expenses to a personal credit card for reimbursement later. I’d rather we open a checking account with debit card privileges just for these expenses. What do you think?

— Dustin

Dear Dustin,

I’ve got to say I like your idea better. The problem you’re both facing now is this: If her company ever shuts down, there’s a good chance you guys are stuck with credit card debt.

Years ago, I had a client who was working for a company, and he’d run up travel and business expenses on his American Express card. Like your wife’s situation, his company would then reimburse him for expenses. Then he made a business trip to Europe, and, while he was there, his company asked him to pick up some computer equipment. The cost of the trip and equipment was about $22,000. When he returned to the office with all the computer stuff in tow, the front door was padlocked. The IRS had shut them down, and they went into bankruptcy. And guess what else? He never got the $22,000 from the company!

Credit card companies don’t care about the circumstances. They want their money, period. You guys have done pretty well if you’re debt-free except for your home. But your wife is playing a game called Financial Russian Roulette, and it could backfire on both of you at any time.

Never take personal responsibility for company expenses.

— Dave

Dear Dave,

I’m considering a career change and becoming a financial adviser. It would mean a 45 percent cut in salary for three to four years, and I’d have to take on debt in order to survive the cut. Is this a smart move?

— Travis

Dear Travis,

No, it’s not. You didn’t give me a lot of details about what kind of “financial adviser” you’re thinking about becoming, but there are all kinds of people who put themselves in the category of financial adviser. A little voice in my head tells me you’re actually talking about life insurance sales. If that’s the case, then there are some things you need to understand. One, you wouldn’t be a financial adviser; you’d be an insurance salesman. And two, there’s about an 80 percent fallout in that world. Eighty percent of the people who start as insurance salesmen don’t make it in that line of work.

Now, you could be making $200,000 right now. And if that were the case, you’d still be making good money while this new career takes root. Still, I’m not going to send you into debt for a career change. There’s got to be a way around that, whether it’s delivering pizzas at night or beginning your career change on a part-time basis before making the jump.

Travis, I want you to live your dream. I also have no qualms about you going into the financial world if it’s what you really want to do with your life. But I’m not going to tell you it’s okay to go tens of thousands — maybe even hundreds of thousands — of dollars into debt to make it happen. Going deeply into debt to become a financial adviser sounds pretty "oxymoronic" to me. Doesn’t it to you?

Don’t do something really dumb with money in the name of advising other people on their finances. That just seems wrong.

— Dave

Follow Dave on Twitter at DaveRamsey and on the web at daveramsey.com.

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1. The Final Word
Alpine, UT,
April 1, 2014

At least with using your credit card you havea policy and the premise of getting reimbursed.

I work for a fortune 500 company with over 70 thousand employees and travel at least 6-10 days a month for work and have responsibility for a portion of Operations in 14 States. Get this, they give me $0 reimbursement every month for using my cell phone for work purposes. Zero.

This is all part of the new BYOD (bring your own device) trend in healthcare they say. Nonetheless they expect me to have Corporate email on my device and answer my cell phone for business Operations purposes.

Needless to say I am now listening to the recruiters who have been calling. With any luck this company won't have access to my expertise much longer.

10 years and never missed my numbers (100's of millions in revenue during that span) yet they think they will be "saving" money by not paying me $75/month for my cell phone. Wow.

I believe the saying is (slightly modified for my purposes)....penny wise and pound stupid.

Most companies don't give employees much choice with expense policies. Carry the debt or someone else will.

2. Janet
Ontario, OR,
April 1, 2014

Has Dave Ramsey taken a vacation and left a high-school intern to answer his mail? If the employee uses a debit card, the money is gone from her personal account immediately; it is impossible to dispute charges (unless the debit card is stolen and she reports it immediately); and she is taking more direct responsibility for the company's expenses! Some debit purchases require no ID. Her company should issue a credit card for her authorized use so that expenses are charged directly to the company. If the company won't do that, she may have to choose to continue the current practice or get another job.

3. Area 52
Tooele, UT,
April 1, 2014

Actually, Dave is correct with his statements.

The debit card would be used only for her traveling expenses and is not tied in with her and her's husbands main checking account. You can still look up the transactions and charges from the debit cart account like you would with any checking or credit card account. But like Dave said, this is not the best idea.

4. Solutions not Stones
Spanish Fork, UT,
April 1, 2014

"Never take personal responsibility for company expenses."

I enjoy occasionally listening to Dave...I agree with most of what he says. Unfortunately, from what I have seen, being issued a company card is almost a thing of the past...and in this economy no one is willing to put their job on the line to fight this battle with their company.

5. ezrhino
Lehi, UT,
April 2, 2014

@ The Final Word: I'm assuming when you travel you get reimbursed for your expenses? Does the company get all of your credit card rewards, airline miles, and hotel rewards? Of course not, you do. Do you have unlimited minutes / texts on your cell phone plan? Most likely. I would bet the vast majority of your use on your cell phone is personal, not work...get over it.
Also, if you are willing to leave a good job over a 75 dollar a month cell phone plan, they are probably not going to miss you terribly. Get over the entitlement, I am guessing they pay you well.
BTW, I am a recruiter in UT and would think it very weird if a candidate made a career decision over a cell phone plan. You being bugged at a cell phone cost is likely a symptom of a bigger problem.