The Ramsey Show - App - Are Used Car Warranties a Good Idea? (Hour 3)

Episode Date: October 26, 2018

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🎵 Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. You jump in, we'll talk about your life and your money. It's a free call at 888-825-5225 that's 888-825-5225 you jump in we'll talk about your life and your money zach is with us in billings montana hi zach welcome to the dave ram. Hi. Thanks for taking my call. Sure. What's up? I'm a new listener, and I need some advice on if keeping my home will affect my wealth-building capabilities in the future and how I should attack upcoming student loan debt. I'm 31 years old right now.

What do you want to know? What is upcoming student loan debt? All right. So four years ago, to get a promotion at work, I decided to go back to school, and it did pay off. I landed the promotion two years ago, and now the loans are kicking in. And if I would have got a hold of your show earlier, I would have been paying them off sooner. But I am debt-free. Two years ago, we had a first child, and we used one.

No, you have student loan debt. Well, yeah. Okay, so I'm not debt-free now. So how much student loan debt do you have? $50,000 coming up in 17 months, I've got to start paying for. Okay. No, it's not coming up. It's there.

It's just whether you've got to pay it or when you have to pay it. So what's your household income? It went from $125,000 when we were both working to $75,000 now, my sole income. And how much of a promotion did you get in return for going into debt $50,000? Well, I was getting a lot of overtime in the past, so it was kind of a lateral move. But it showed on paper a 30% increase in my base pay. It didn't show on the paper called your check. Not yet, not yet.

Well, are you, I mean, so so far you've gotten nothing for your 50 grand. True, true. And I've always felt I'm pretty smart with money, so I have a positive net worth right now of $400,000 between my 401 big assets and home equity. So I'm not terrible, but I just want to know. What kind of big assets do you have that are not home equity or 401? I have $100,000 in vehicles thousand in vehicles fifth wheel toys like larger items worth more than ten fifteen thousand dollars that are all going down in value okay yeah okay and you make seventy five thousand dollars a year yeah yeah but i i'm 31 i've i got okay yeah i'm scared

about what you're going to say about my house. Yeah. So what is your house payment? My house payment is $1,350. It's got a balance of $230. And what's your take-home pay? Take-home pay is about $3,400 a month. That must be after 401k contributions or something. Yeah.

What's your take-home pay if we don't count 401k contributions? Oh, I would say I could get it up to $38.50. You said $38 a minute ago. Yeah.

Well, I'm just trying to do quick math. All right. So here's the thing. I don't want your house payment to be much more than a fourth of your take-home pay. It's about a third of your take-home pay today. But I think when I add my 401K back in, you're pretty healthily jamming on this 401K, it sounds like. So I'm going to temporarily stop the 401K. Your house is not the problem.

Your toys are your problem, and your student loan is your problem. $100,000 worth of toys when you make $75,000 a year is backward. Yeah. Because they're all going down in value. You shouldn't have toys, stuff with wheels and motors that add up to more than about 50% of your take-home pay, or 50% of your income. Now pay or 50% of your income. Now, you did just cut your income down substantially when Mama came home. I got that part.

But still, you were over. You were at 100% even when she was working. So you got too much tied up in things going down in value. That's a bigger problem than your house is. And you're staring down the barrel of a $50,000 debt that you need to clear. I would say you ought to clear that. And it's probably going to take you three years in this setting if you stop everything vacations eating out in 401ks and sell a toy or two it's probably still going to take well depending on which toy you sell but um you know i'm getting out of this

debt because it hasn't benefited you number one but number two i'm getting out of this debt because it hasn't benefited you, number one. But number two, I'm getting out of it. Even if it had benefited you, even if you got a $50,000 a year raise because of it, I'd use that $50,000 to clear that debt, the first thing, first order of business. But I really don't think your house is the problem. I probably would sell some toys. No, I know I would sell some toys, but I shouldn't say that so lightly. That's where your problem is.

You've got too much invested in depreciating assets. And your house is generally okay. I temporarily would stop my 401K, and I would beat on this debt with a hammer until it's gone. But I want your rolling stock and stuff with motors in it to be less than half your annual income. Now, if you see your income coming up very dramatically in a very short order and you want to hold a couple of these toys or something that's fine but still you need to keep it around 50 or less because you just got too much juice tied up and stuff that's going the wrong way it's all going down you look up in that hundred thousand dollars where stuff's going to be worth 50 000 in about a blink of an eye

and then scratch your head and wonder why you're broke, you know? You've got stuff going the wrong way. So, yeah, I think you probably got a pass on something that you thought we were going to sell, which was the house, and you got surprised by me selling your toys. But you do whatever you want. They're your toys, but that's what I would do if I woke up in your shoes. And, oh, by the way, I'm a boat and a car guy. I like anything with a motor in it, just about.

But the problem with all of it is it goes down in value. And so it needs to be a small percentage of your world. Rob is with us in Bend, Oregon. Hey, Rob, how are you? Great, Dave. Thank you so much for all the stuff you and your organization do. I've got a question. I have traveled the pathway of employment. I've gone from jobs where I had to wear a name tag to jobs that were possible careers to owning my own job.

And now I'm at a point where I'm starting a business and I want it to be employee-based. But my question is, for that, do... What is an employee-based business? Well, that's one where I don't do all the work, but I have people doing the work for me. Cool. That's better than you just doing all the work and owning your job. I got you. Okay.

Right. Very good. That's a good plan. Work on your business, not just in it. Okay. Good. Right. Very good. That's a good plan. Now I hope to own it. Work on your business, not just in it. Okay, good. Right. And so when it comes to compensation for the employees, is it better to give them more money or more benefits, or how do you balance that?

Well, when you're brand new and small, you don't have a lot of choices. The benefits are ridiculously expensive. And so, you know, like, for instance, health insurance. When you have less than 10 people, they can buy health insurance cheaper than you can for them. Okay. And so I'd rather just give them more money and let them do what they want to with it. Or they buy health insurance through their spouse's work or something, right? Attach it to that policy, that kind of thing. So benefits are very difficult for the business without that are 20 people or less.

But you can give them other benefits that are not corporate type benefits, like treating them good, like treating them like family, like being there when their baby is born or going to their grandma's funeral or sending flowers for their grandma's funeral. You can treat them like human beings. They don't get treated that way with corporate America. This is the Dave Ramsey Show. Why in the world would you trust some random guy in a cube when getting your mortgage? Do you really think he cares about your long-term money goals? Well, he doesn't. Those companies care about getting you into whatever home loan program they're pushing that week. When it comes to ordering a cheeseburger, the meal deal works fine. But let's get real,

people. We're talking about the largest investment you'll probably ever make, so don't be naive and trust an order taker who pressures you into a pre-packaged loan. My friends at Churchill Mortgage have been helping my listeners for over 25 years. Call Churchill Mortgage and get custom solutions from an expert within 10 minutes. It's simple. They'll shoot straight with you and quickly show you the real way to save money. Call 888-LOAN-200. That's 888-LOAN-200.

Or visit ChurchillMortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard. Redwood, Tennessee 37027. Thanks for joining us, America. We are glad you are with us.

Open phones at 888-825-5225. Andy and Trish are in the lobby of Ramsey Solutions. Just stopped by because they were in the neighborhood from Anchorage, Alaska. Not really, but thanks for coming by, guys. How are you? Thanks for having us. Excellent. Absolutely.

So you guys have a question. We do. We have a question about insurance as it relates to a nonprofit. Trish and I have about two and a half years to go. Then we're going to retire from our jobs in Alaska, relocate to Missouri, and set up a law enforcement retreat camp for officers that just need a place to go and reconnect with their family. What we're wondering is what kind of insurance should we have to protect ourselves from potential liability?

The camp will be, the operations of the camp will be done by the nonprofit. The land that it is on will be rented or owned? We currently own that property. You currently own that property. And we'll be living on it also. Okay. And I would suggest you keep that separate from the nonprofit. Let the nonprofit rent from you for a dollar or whatever. And then you would carry general liability on your land in case something happened with

the renter, which happens to be your nonprofit. And then the nonprofit, you would sit down and talk about what kind of, you know, you need to get with an insurance broker and what kind of insurance is appropriate then for a camp setting. Liability would be the main thing I would be concerned about, that if somebody fell and hurt themselves or something like that, who are they going to sue? Well, they could sue the landlord or they could sell the tenant. They could sell the nonprofit or you, either one. And so I want to structure that real carefully on the liability side.

I'm probably more concerned about that. And then if the structures on the property, they would be owned by you individually or you and a company separate from the nonprofit. That company would carry or that individual would carry the insurance on the structures, more like homeowner's insurance or if you owned a farm or something, and you would keep that because a renter can't insure things that they don't own. You don't have an insurable interest. And I really would not put the land in the name of the nonprofit.

I would keep it separate from a risk standpoint. And, you know, in case something changes with the nonprofit, you're not stuck with land in a nonprofit. That can get real sticky if you want to do something. Let's say you shut it down and you want to sell the land. You know, you've got a mess on your hands if the land is owned by the non-profit. You see what I'm saying? Yes. So you keep that separate. And so treat the, you know, the landlord can only insure the buildings. The business, so to speak, of operating the camp would be insured by the non-profit, which would include the liability associated with that.

And any of the things that the, if you're a tenant, for instance, in a house, you can get contents insurance. You insure your stuff that's in that landlord's house. You see what I'm saying? And so treat these things separately in your mind that way. But an insurance broker can walk you through how to do that. And I'm not an expert on camp insurance by any stretch, but insurance brokers are the type of insurance people that shop several

different companies to get you the best deal and for instance i've got a friend that owns an airplane okay and so you don't go to state farm and get airplane insurance okay they don't sell it they might but you wouldn't want to buy it there even if they did so you instead you would go to an insurance broker and they shop five different companies that write airplane insurance and then they come back and tell you how that how the liability works on that and how the different you would go to an insurance broker and they shop five different companies that write airplane insurance. And then they come back and tell you how the liability works on that and how the different, you know, and if there's a crash, what would happen? And the same kind of thing here.

They would find five different companies that write camp insurance for families or adult camps or retreats or whatever. I'm sure there's companies out there that have specific products associated, insurance products associated with this. And they would make a market. That means in the insurance world, they find somebody that will write you a policy or two or three. And then you compare them. Well, this company covers this thing, and it costs this much. And this company covers the same stuff, except it doesn't have that one thing, and it costs this much. And you start to compare and decide, you know, what's the best type of insurance for your nonprofit and for you individually.

The individual part will be a lot cleaner because it's basically insurance on a farm or insurance on a farm plus a few cabins. You know, almost like that kind of stuff. So you're covering the structure. That's a lot cleaner. But the other stuff, you'll just get somebody that can, you know, go into that little bit of a specialized type of insurance is what I'd be looking for if I were in your shoes. But the main thing you want is liability. Do hold harmless agreements carry any weight in any of this? No. Yeah, they carry weight, but there are no agreements that keep someone from – you cannot contract away liability.

Okay? So let's say that a floor was rotten in one of the cabins. Okay? And that's a liability that's your fault regardless of if they signed a hold harmless. You are liable for that. You're standing in my building. If you slip and fall because we didn't properly install the floors or there was a hole in the floor and we forgot about it or something,

then we're liable for that regardless of if we had you sign a hold harmless before you walked in here. So you cannot contract away certain kinds of liability. So you need insurance anyway, and you need to keep stuff separate in ownership like we were talking about anyway. Those moves are risk management moves. You're managing your risk. But hold harmless, what that does is it's like a lot of contracts. It keeps honest people honest.

It's like, dude, you were walking across the dadgum floor. You fell on your face because you tripped, you know, and you signed a hold harmless agreement. And, you know, then you're going to call him out just on his honor, you know. If he doesn't have any, the insurance company's lawyer is going to call him out on his honor and the fact that he signed this. And it helps them win their case to not have to write him a check. But you need the backup in case you were to lose that. And it'd be proven that you were liable regardless of the hold harmless. But I would have them sign them in those cases for sure.

When you register, you're going to be here for a week, and it's a wilderness experience, and have an attorney draw up a little simple one-page thing. But if you're on a four-wheeler expedition on vacation, and you go and get on people's four-wheelers or on their Jeeps or on their snowmobiles, you know, you sign these two-page documents that are all fine print about how if you die, they're not liable. They're still liable. They'll still lose. So, I mean, they may not lose as easily, but they'll still lose.

So does that make sense to you? It does. Hey, thanks for the call. Thank you. Appreciate you joining us. Open phones at 888-825- 5225. You jump in. We'll talk about your life and your money. jump in and we'll talk.

888-825- 5225. Alright, Lindsay is with us in Tulsa, Oklahoma. Hi, Lindsay. How are you? I'm good, Dave. How are you?

Better than I deserve. What's up? Okay. I have a question, and I'm a new listener, so I apologize if this is something that you've touched on a lot. So I'm new to the Baby Steps, and I know step number one is to save the $1,000 emergency fund. My question is, do you ever suggest saving more than that? And the reason I ask that is my husband works in the oil and gas industry, and getting laid off isn't really an uncommon thing to happen.

And I stay at home with our kids. So I'm just wondering um how you think we should prepare generally i do not suggest more than that until you get back to baby step three but here's what i would do okay he's in an unstable environment with his job is what you're saying and i agree with you okay but um that's one level of quote worry i'm not going to raise it based on that level of worry but what i would do is stop the baby steps and pile up cash if we get wind that he's really going to get laid off how much notice do they usually give him if he's laid off? Um, I don't, it's never, he's only been working for three years. Oh, okay.

And it's never happened to us. We've gotten really lucky. We've never been laid off. Okay, good. But the people who have been, they get sent home pretty quick. I mean, within a couple weeks. Okay, so you'd have a couple weeks to do something. And he's going to work, find something to do when he comes home,

if he did get laid off. So, you know, if he looks up and five of his buddies were laid off last week i would push pause on the whole told him when he make over baby step thing and just pile up cash but just generally worried about it no generally worried about it is what we all have and that's why we get out of that that. Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has debt and a struggle to make ends meet, but they're starting to make headway with their budgets and smarter decisions with money. They have dreams and plans, and the only real difference is that one family has the right amount of term life insurance,

and the other doesn't. Big difference. If one of the parents die, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is. Be the family that takes those deliberate steps to be different and responsible.

It really does make you the hero of your story, and it puts you on course for better things ahead. Thank you for joining us, America. We're glad you are here. Open phones at 888-825-5225. Dharmesh is with us on Facebook. Dave, we've got a whole life policy on all our family members. I'm in the process of switching my wife and I to term insurance. Smart.

What do we do with our three kids' whole life policies? Should we keep it as is, change it to term, or cancel it altogether? Cancel it altogether. If you need life insurance on a child, it would only be enough for what we call final expenses. God forbid a funeral and 10 15 20 000 bucks as a child rider on your term policy would cover that if you want to cover that if you've got an emergency fund with 10 15 or 20 000 in it i would self-insure through that children we love them they're precious they're everything they do not create financial benefit.

Well, most often. I had a friend who had a kid in a diaper commercial. He created financial benefit. But most of the time, kids cost money. They don't make money. And so our goal is to take care of them, not for their passing to take care of us. And so the only cost you would want to cover would be, God forbid, in the event you lost a child, would be a final expenses cost. And you usually have an emergency fund if you're following our steps and you're up to baby step three to do that, and you won't need to do that.

When you're switching your – so I would cancel the whole life policies on kids. They're sold to you as a college benefit, but your child will never see the front door of a college using a whole life policy because there's i mean you just they're going to be four dollars or something in that thing i mean it's ridiculous these little kid policies are just a complete ripoff and for whatever you do don't buy financial stuff from a baby food company those of you buying those gerber policies i don't know who buys that stuff. I mean, it just strikes me as funny that anybody would even consider buying a financial investment from a baby food company. It's just backward. But we're going to use them to feed our kids more ways than one, I guess.

I don't know. What are you thinking? So, Dharmesh, jump on Zander Insurance's website, get you some quotes on you and your wife, and just drop the kids' whole life policies completely. And drop your whole life policies once Zander issues your term policy. Once you have the term policy in place, you can get the best prices anywhere at ZanderInsurance.com because they're a broker. They shop among a gazillion companies and get you the best

price michael is with us in lexington hey michael how are you hey dave how you doing better than i deserve what's up i just got a quick question i'm 20 years old i am not married i've completed baby steps one and two and i'm in the National Guard right now. I'm looking to deploy in a few months for the greater part next year. And I'm wondering, I'm living at home for free now, and I'm wondering if I should go ahead and open up a retirement account and start contributing to that, or if I should save up a little bit more to fully fund an emergency fund. You need an emergency fund.

Everybody needs an emergency fund. The good news in your case is most of your emergencies will be covered by the fact that you know you're in what's known as a stable job you're not gonna like i mean you could lose that job it's possible but you'd have to really work at it and um it's not like they're not gonna make payroll right so um that part's okay but i mean other types of emergencies other than job loss can occur so yeah you need some money set aside as an emergency fund and then yeah you'd be at baby step four and you'd start putting 15 of your income away and um that would be baby step four and i do that first in a roth ira and then i do it in a roth tsp after that if they're matching

i don't think they do, but if they're matching on the TSP, I'd go ahead and start there with the Roth with the match. That'd be the plan. Michael, thank you for serving your country, buddy. We appreciate it. It's good to talk to you. Martin is with us in Los Angeles. Hey, Martin, welcome to the Dave Ramsey Show.

Hi, Dave. Hey, what's up? Well, I wanted your opinion on regards to whether I should sell my rental property to pay off my primary residence and pay off any other debt also that I have. How much other debt have you got? Just two cars. I had credit card debt, but I paid pretty much about $15,000 in the last, I would say, three or four months. Okay, so you're debt-free, but two cars and two houses.

Right. Okay, how much do you owe on your cars? $50,000 on both. Each or total? On both, total. Okay. Wow. And what's your household income?

$130,000. Okay. You got a lot of car. And so what do you owe on your primary, and what do you owe on the rental? My primary, I owe $260,000, and it's worth about $550,000. And the rental? And my rental, I owe $160,000, and it's worth about, I would say, $430. The sales is $450, but I estimate a little bit less.

Okay. So, I mean, the two ways to do it is use the income to clear up the mess or use the rental to clean up the mess, right? Right. And so, you know, if we take and say, you know, I'm going to start paying, I'm going to live on beans and rice until I get these cars paid off. And so they're going to be paid off in well under a year. And then once they're paid off, then I'm going to decide I'm going to pay off either the house or the rental first, probably go ahead and pay off the rental.

Might pay off the house first. I don't know. Either one's fine. But, you know, you start throwing, what, 40,,000, $50,000 a year at that stuff. Let's see here. We've got $3,000, $4,000, $4,000, $20,000. So you've got about five to ten, you've got about seven to ten years to clean up those two things after the year of paying off your car.

Or you can sell the rental now and be done. Right. I mean, that's what I really had in question, whether to do that and pay off most, pretty much sell the rental and pay off pretty much all my debt. Yeah, I think I would. But I also have in mind, as far as I have a son who's about to, well, I would say in two years he's going to go to college. Yeah, well, if you don't have a house payment, you can cash flow that.

Right, okay. Yeah, no debt. Now, the only way this makes sense is if you don't have a house payment you can cash flow that right okay yeah no debt now the only way this makes sense is if you don't borrow money anymore right no my credit cards are cut up there and next time you get ready to buy a car you pay cash for it oh right you never borrow money again on anything if you do this Because otherwise it doesn't make sense. Right, that's the plan, is to get on track. Yeah, you can't sort of ride this out of dead horse. It doesn't work.

You can't sort of ride him. You've got to ride him or not. And so if you're going to ride him, it makes a lot of sense. And I think it makes sense. I would sell the rental, and I'd pay off everything. I'd cash flow college, and I'd save up and buy me some other rentals with cash as I go along out there into the future. And I think 10 years from today, you'll be in a better place by having done that if you stay on budget and you don't spend money that you don't have and go back out there and borrow money and all that kind of stuff.

But you've got to stop it. You've got to break the cycle. And if you've broken the cycle, then, yeah, I'd dump the rental. I'd pay off the cars. I'd pay off the cars i'd pay off the house um and it does look like you've got enough to do both um barely close very close but you need to be 100 dead free asap build your emergency fund and then start building towards junior's college fund and then once you got junior's college covered uh by just throwing it just throw it in the savings account this is junior's college junior's college just throw it in there build it

up build it up build it up build it, and work your way right through it. And then once that's done, then you just start saving up and paying cash for rentals or doing other kinds of investing along the way. But we're working the baby steps here. The only thing is we're just short-circuiting everything by the sale of that rental. I would. I love rental property, but I love being debt-free more. And so I don't borrow money. And life is good when I don't have any payments anywhere.

Life is good. It's awesome. Hey, thanks for the call, man. We appreciate you joining us. Open phones this hour as we talk about your life and your money, it's a free call. The phone number is 888-825-5225. Dave, what's your opinion on used car warranties? I don't recommend any extended warranties ever. Used car warranties are especially bad. They're very, very expensive. Self-insure through your own repairs. 12% of what you spend on an extended warranty actually goes to cover the cost of the repairs.

88% is profit and overhead and commissions. So you benefit almost not at all on average. They make a lot of money on that. A lot of used car dealers make more money on warranties than they do on the cars. Stay away from that crap. This is the Dave Ramsey Show. Our Scripture of the Day, 2 Timothy 2.6 It is the hardworking farmer who ought to have the first share of the crops. Colin Powell said, A dream doesn't become a reality through magic.

It takes sweat, determination, and hard work. John's with us in Wichita, Kansas. Hey, John, how are you? Good, Dave. Thanks for taking my call. Sure, what's up? Well, me and my wife just got married about six months ago, and we just completed week four of Financial Peace University. And we have three cars, one that's paid for, one that's worth about what we owe on it,

and one that is worth about half of what we owe on it. And we were kind of wanting to, we were trying to figure out how we were going to free up extra cash, and we kind of were thinking of the idea of maybe trading in the two cars that we owe money on for a new car and taking out a personal loan to cover the upside-down amount, and that would, by my figure, strip about $400 a month in cash. How much do you owe on the car that you break even on? It's about $21,000.

What's your household income? Between the two of us, about $126 a year. The third car that's paid for, what's it worth? About $500. It's a hoopty. It's running hoopty. Okay.

And it's running? Yes, I am. Okay. And the other car that you have, you owe half on, or it's worth half of what you owe. What is it worth? What do you owe? It's worth about $18,000, I think, and we owe $33,000. Okay.

All right. Well, as you probably heard in the lesson, there's two rules of thumb I use on getting out of debt. How much other debt do you have, not counting your home? All told, probably about, without the cars, probably another $70,000, most of us student loans. Okay. So $70,000 plus about $50,000. okay all right um well the rule of thumb i use is this you don't want to own vehicles that are more than half your annual income and if you discover through going through financial peace and you

make the phone call like you're making is can we be debt-free but the house in two years if we keep the cars and your answer is no you can't be i mean something's got to give here i don't know what it is but something's got to give and so if you sold the $21,000 car where'd you get your values are those private sale values or wholesale or a dealer offer or what uh those are trade-in values. Okay. So you could actually sell them for more than that? Possibly, yes. How's your credit?

Oh, no, you definitely could. You can sell it for more than trade-in. Trade-in is a wholesale value. I mean, you can sell it for a private sale amount on Craigslist. So how's your credit? Mine's in the tank. i went through a divorce a couple years ago okay and who do you owe this money to these these two car loans where are the loans um i believe they're both through ford motor credit okay all right so you've not got any

easy way to finance the difference uh well my wife's per credit score is about an 800. Okay, so you would just do it all in her name then? Yes. Okay. You were going to drive the $500 car as one driver, and then this other car deal is going to be your second driver? Yes. Okay.

And so if you sold the $21,000 car for $20,000, probably $24,000, that gives you about $3,000 to throw at the other deal. And the $18,000 is probably worth more like $21,000 or $22,000. So it's probably more like $9,000 in the hole

if those are trade-in values. Minus $3,000. So you're only about $6 about six in the hole here. Right. Yeah, that's not the end of the world. I would only do that if I moved down into a car that had a value of under $10,000. Okay. And the problem with your trading them in is you're not going to get as much for them.

So that part I'm really not up for. I'll tell you what, let's don't do that. Let's sell the $21,000 car that's worth actually more than $21,000 and buy a car. Try to sell it for, I'm going to guess and say, let's say, for instance, it would bring $20,000, $24,000. That would put $3,000 in your pocket. Let's buy a $3,000 car with that. Okay? Okay. Then let's get the other car sold for as much as it'll sell for and just borrow the difference from the credit union in your wife's name

with her credit score. And that gets you a $3,000 car and a hoopty but you still got $70,000 over here to deal with of student loans but you're making $126 you can do that in within a couple of years easy 18 months or so and so then we're going to move up in car once we're out of debt and have your emergency fund in place so we're not going to drive these hoopties but maybe two years is what it sounds like maybe two two and a half years okay okay and Okay. And that gets you clear. But, yeah, you're car poor. You have a car mess on your hands.

You're right to observe that. And, you know, at a minimum, I'm getting rid of one of them. But I like your idea of getting rid of both of them. If you were to do a trade-in with a dealer, though, you're going to make a lot less on these cars because they're going to give you a trade-in. That's all they do. And it's not because they're evil or something. They just have to turn around and sell that car and make a lot less on these cars because they're going to give you trade-in. That's all they do. And it's not because they're evil or something. They just have to turn around and sell that car and make a profit.

They're not in the break-even business. They're in the profit business. And so, you know, a trade-in through a dealer is probably not going to help you achieve your goals nearly as fast. It could throw a difference in $5,000 or $6,000 in this discussion. Easy, if not more, the difference in trade-in value and private sale on these two vehicles. Tracy is with us in Orlando, Florida. Hi, Tracy. How are you?

Hi. I'm doing very good. I am confused. I did buy your books through the store, so I didn't really get the whole program with them, but I did kind of read through them. Which book did you buy? I bought the SPU and then the Total Money Makeover. Financial Peace book and the Total Money Makeover book.

Okay. Yep. And I am $73,000 in debt, and my income is $22,000, and that's between my husband and myself. I'm working like crazy. I have two jobs right now, working about 70 hours a week i'm a custodian and i work uh sales associate um right now our bills are kind of at their minimum payments but i do not have a thousand dollars saved up my main question is is um i have my bills paid up for this month,

and I should have about $850 left over, and that's not including any gas money or anything like that, get back and forth. But how much should I put towards the $1,000, and how much should I put towards the smallest bill in the first, in the low category? Okay, now it the smallest bill in the first, in the low categories. Okay. Now it's time to read the books that you bought.

Yeah. The book, The Total Money Makeover, will explain to you exactly how to take your baby steps. And the first thing we're going to do is get current with everyone and get on a written budget. You don't have a detailed budget yet. You just got a little list that you made, but you haven't even got car gas on your little list yet. So you don't have a detailed budget yet. You've just got a little list that you've made, but you haven't even got car gas on your little list yet. So you don't have a detailed budget yet. You need to do that. An easy way to do that is to go to everydollar.com and download the app for your iPhone or your iPad,

or I'm sorry, your iPhone or your Android, or you can put it on your desktop, and it's free to use every dollar. And every dollar will help you put together your budget in about 10 minutes. So the first thing is to get a detailed written budget that you do a new one every single month. The second thing you've got to do, as a part of doing that budget, you have to have your husband involved. You have to be in agreement.

If you're not in agreement agreement and both of you pulling this wagon together, you're going to get really tired of pulling this wagon by yourself. You have to have unity. You have to have agreement in order to win with money. It's almost impossible to do it with one spouse by themselves. So a budget that your spouse and you both have looked at and you both agree to on EveryDollar.com. Now, when you've got that and you're current with your bills, the first goal is to save $1,000. Not save $1,000 and pay extra on debt. Just save $1,000.

Put all the money you can squeeze out of your budget into that baby step one until you get $1,000. Then, baby step two, you'll read all of this when you read the total money makeover, is you start listing your debts smallest to largest, and you attack them in that order. That puts us out of the Dave Ramsey Show and the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, it's Kelly, Dave's phone screener. We finished 2017 with a bang as the fourth most downloaded podcast of the year. Thanks to all of

you for listening and helping us spread the word.