Funeral directors plot to make you pre-pay

Dear Dave,

My wife passed away last year, and she was just 43 years old. I paid cash for the funeral and all the arrangements. Now, I'm getting solicitations from the funeral home, wanting me to prepay my own funeral. I'm 45 years old. Is this a good idea?

Dave

Dear Dave,

God bless you and your family. I'm so sorry you have to go through this, but I'm glad to hear you were in good enough shape financially to handle the burden. That means you were both very wise with your money.

My advice is to pre-plan, but don't prepay. As you discovered, having to make important decisions in the midst of that kind of grief is a hard thing to do. Sometimes, people are so emotional during times like these that they make bad decisions. So, pre-planning and making selections ahead of time is a great idea.

But it's never a good idea to prepay for this kind of thing, and here's why. If you live to an average age, for what you'd prepay today at age 45, you could invest the amount, be self-insured for that kind of thing, and in all likelihood have a ton of money sitting there when your time comes.

Events like this make you realize the need for proper planning, but don't ever prepay them. Lots of people in the funeral industry don't like me for this stance, but that's just because they make lots of money on prepayment plans.

-Dave

Dave Ramsey is America's trusted voice on money and business. He has authored five New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover, EntreLeadership and Smart Money Smart Kids. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.