The Ramsey Show - App - Dave’s Nothing Down Real Estate Horror Story (Hour 1)

Episode Date: March 21, 2022

Dave Ramsey & Ken Coleman discuss: Insurance is insurance, not an investment, Nothing down real estate and Dave's personal experience with it, College vs. code school. Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6

Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where dad is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. Ken Coleman, Ramsey Personality, is my co-host today as we answer your questions about your life, your money, your mental wellness, your relationships, your boundaries, your career, your job. We talk about you right here in front of you. It's called The Ramsey Show. Open phones at 888-825-5225. The call is free, and some say the advice is worth exactly what you pay for it. We're going to start with Gene in Denver.

Hey, Gene, welcome to the Ramsey Show. Hi. I just retired from my job. I'm collecting a pension of about $5,300, but it has a condition where I could take less, 25% less, and keep that for my wife should I pass, and that would be about $3,900. And the advice I've been told is to take out a universal life policy with a long-term care writer to save that $1,300 to pay for the insurance.

Do you think that's wise? I've got a paid-for house. I don't have any debt. I'm debt-free. And I've got about $750,000 in my savings IRA. I missed you. You kind of cut out when you said where that horrible advice came from. From my financial advisors.

Oh, you need a new one. You have an insurance salesman. Right. Yeah. He's not a financial advisor. He's an insurance salesman because he's selling his whole life. No one else sells that crap except people that are in the insurance business. So, now, if you want to buy some insurance, what's your net worth?

It's $1.1 million. Okay. And how much of that is the house? About $400,000. Okay. So you've got $700,000 in investments. Roughly. About $750,000. It all So you got $700,000 in investments. Roughly. About $750,000.

It all depends what my house would go for. He said that I could invest in the whole life so that it would be tax-free to convert my 401k into a factory should I die. It would be tax-free to convert your 401k into what? Into a life, a universal whole life. Well, that's not. If I die. Yeah, that's true because you lose all the money. So usually when you lose all your money, it's tax-free.

So, no, you need to get away from this guy. He's horrible. His advice is horrible. No, you need to keep your investments in real investments, and then when you die, your wife will get the investments. And if you want to supplement the level of net worth that you have should you die, you can do that with some term life insurance for a short period of time. How old are you?

I'm 58. 58. 58. Okay. time how old are you i'm 58 58 okay so when you're 65 you're going to have 1.4 million dollars in investments assuming your money is invested in decent growth stock mutual funds yes it'll double about every seven years when you're 72 uh you'll have uh uh 2.8, almost $3 million in investments. How's your health? My health is good. Good.

Okay. How old is your wife? She's two years older than me. She'll be 60 in a couple months. Okay. So what we're doing is we're saying if your pension disappears because you died, what does your wife need that your net worth does not now provide? And so $700,000 would create maybe $60,000 or $70,000 worth of income if something happened to you.

What's your income today? I'm retired. I'm just collecting my pension of $30,000 and about $4,000. Okay. Just under $4,000. And that's why I could take the whole thing at $53,000, but if I die, she would get nothing. And we're both in good health.

It's just a matter of playing the odds. Yep. I'm taking the $53,000. And if you want to play a math game, you invest the difference in that and $3,900, and you buy term life insurance out of some of that difference, and you will come out with a lot more than this goob is offering you with this horrible policy.

Yeah, I'm a long-term care writer. I wouldn't need it. No, you don't need a long-term care writer. Don't tie long-term care into life insurance. It's a gimmick and they overcharge for it. If you need long-term care, just go to an insurance broker and get long-term care insurance.

Right. Okay. I figured i would have enough with with my my retirement so here's the thing if you go into a nursing home are you going to burn through this nest egg and leave her with nothing if the answer is yes you need long-term care insurance if the or leave her with not enough so since you're concerned about it i might buy a half million dollars in um life insurance term life insurance for five years or 10 years something like that if you're getting good health it's not going to be that expensive and at 60 i would buy some long-term care insurance but in the meantime i'm not here's a good rule here's a good rule here's a good rule never use a life insurance policy as an investment vehicle 100 of those suck mathematically 100 it's kind of like saying

never do payday lending ken it's like saying never there is never a case where leasing a car makes sense. That's right. There is never a case where going into debt at 18% interest on a credit card makes sense. There's not one. You're not the exception, Snowflake. These are all stupid things. They go in one bucket, the stupid bucket. And just never, never, never, never do that.

So thank you for calling. I'm glad you called. Hopefully I helped you avoid a hundreds of thousands of dollars mistake here. I would keep the full pension, and if you want to buy a little bit of term and later on buy some long-term care insurance, that's what I would do. As separate policies, never bundled. Yeah, I think what you laid out for him is actually alleviating all of his concerns, and they're not bad financial decisions.

He's healthy at 58. You said seven years from now he's going to double, so if he gets it to 65, I mean, he's got everything taken care of, and they're in good financial shape. I think they're clearly living below their means anyway. Oh, they've done a great job. They're millionaires. They're millionaires. Yeah.

So here's the thing. On both of those insurance policies, insurance is what you buy for one reason only, to cover something you can't cover yourself so if you're broke stone cold broke and you have a five thousand dollar car you need to cover carry insurance on that five thousand dollar car collision because that car being total is a catastrophic financial event because you're broke if you've got three hundred fifty thousand dollars cash in your checking account, and you're driving a $20,000 car, and you don't want to carry collision,

you can afford to write the check to replace the stupid car. So that's an event you can choose to insure or not to insure. So with your case, here's the thing. Long-term care insurance is this. The average nursing home stay is 2.3 years. Average cost right now is about $95,000 a year. So we're talking about somewhere around $250,000. So if you have $4 million, you don't need long-term care insurance.

On average, you're going to go through $250,000 for your care. Mama's going to be just fine when you die, financially speaking. I'm sure she'll cry but financially speaking my wife is actually planning my death and it's got me very concerned y'all i just need to say that out loud in front of everybody oh sharon loves dave we've been we've been married almost 40 years and all of my estate plan is predicating on me pre-deceasing her and i don't know how she knows that so that that's bothers bothersome but the uh so yeah the same thing with long-term care other thing is so in his case if he wanted to if she's okay with 700 000

yes to cover nursing home and or cover death him and loss of income they don't need any insurance correct if she's okay with that i think they might be a little slim emotionally i'd probably beef it up because it didn't cost that much i would for a short period of time this is the ramsey show hey small business owners you know what usually causes small businesses to fail? Poor accounting. Yep, you heard me. And not managing your books well often leads to not paying your quarterly income taxes. I don't want that to happen to you. In fact, I want you to be able to focus on what you love and let a pro worry about the tax code changes.

That's why I recommend small business owners work with a tax professional like our endorsed local providers or ELPs. They're some of the most qualified tax pros in the nation. My team has vetted them and they're Ramsey trusted. That means they're committed to excellence. They want to see you win and they can help you minimize your tax liability, which means you keep more money for your business. To find a Ramsey-trusted tax pro near you, go to ramseysolutions.com slash tax pro. That's ramseysolutions.com slash tax pro. We'll be right back. Ken Coleman, Ramsey Personality, is my co-host. Thank you for joining us, America. Open phones at 888-825-5225.

Chris is in Springfield, Missouri. Hey, Chris, welcome to the Ramsey Show. Hey, Dave. It's an honor to be on the show here. Well, thank you. How can we help? I want to know your opinion on, okay, I bought my first house last summer. Me and a couple friends renovated it.

According to my realtor, we increased the value by about 50 grand, and I have some aspirations to become a small-time landlord. I was wondering if it's a totally dumb idea to get a HELOC on my current house for a down payment for a second house and turn the first one into an Airbnb or a rental. Yeah. Chris, how old are you? 26. Good for you. Cool.

And what do you do for a living? I'm a plumber. Good. Okay. So when you say we did this renovation, do we own the house or you own the house and your friends helped you with renovation? I own the house and they helped. Okay. So it's completely in your name? Yes. And the house, and they helped, yes. Okay, so it's completely in your name. Yes.

And the house is worth how much? Roughly $160,000 after the fact. And so you think you could sell it for $160,000 and you owe like $110,000? I owe about $100,000. About $100,000. Okay, so you got about 60 equity minus expenses all right cool all right yeah well in fairness as i answer the question when i was to tell you who's answering the question when i was uh 23 24 years old i started buying and selling real estate using the nothing down real estate techniques that were promising back 35 years ago.

They're the same ones that are out there floating around today telling you to buy real estate and get rich in real estate. And so I didn't have any money. I started buying real estate. I started borrowing all the money to buy all the real estate. I got rich. By the time I was your age at 26, I had $4 million worth of real estate, starting from nothing. And I had over a million dollars in that worth.

The problem was I had no idea the influence of debt on that situation. And I was flipping houses. That's what I was doing. I was fixing them and flipping them. I actually hired crews to do it. I know how to swing a hammer, but I was choosing to do more volume than my hammer would do by itself. And so I just would set up a crew or hire a painter or hire a plumber or whatever to get the different rehab things done on the houses I was fixing and flipping. Some of them I was holding as rentals.

And so I tell you all of that to tell you I aspired at that time to do what you aspire to do now it's what i wanted to be it's what you want to be fair enough yes what happened was the bank got sold that i was dealing with to another bank and they looked over and saw that they they felt like this 26 year old kid owed them too much money and they called our notes and we spent the next two and a half years of our life fighting through severe banking technicalities that I didn't even know existed, and losing everything that we owned. We were sued, we were foreclosed on, and finally we were bankrupt. At the bottom of that, I started studying how money works, and I started talking to old rich people. I didn't want to talk to young rich people

i had been him i didn't want his advice it didn't work and old rich people started telling me this thing called common sense and as a christian i started studying the bible and it talks negatively about debt 100 of the time and so i figured out that this debt thing didn't work and i started buying my i bought my first piece of real estate after that with cash. It took me a little while because it's hard to get the cash together. And you made some quick easy money, plus or minus your sweat, in this house. But it's been fairly quick, and it feels like you could do it all the time. Well, I did it a lot.

I did it a lot. But it still came crashing down around my ears. So that's the guy you're talking to he not only wanted to do what you're talking about but he did it and i did it with debt and it backfired on me and it wasn't that i was stupid it was the debt is stupid and so all of that to answer your question and say no i would not borrow on a HELOC to go buy a rental. I would keep working like a crazy man as a plumber. I get this house paid off if you're going to live in it. Or I would sell it and take $50,000, $60,000 and buy a tiny little cheap something and flip it with cash.

And if you want to do some flips with cash, I'm in. I'm fine with that. Especially where you're swinging a hammer and some of your buddies are doing the renovation with you and that kind of stuff. That's all cool. But I'll tell you now, that was 35 years ago that we crashed, 30 years ago that we crashed, 35 years ago that story started. And today I own several hundred million dollars in real estate.

The building I'm sitting in is worth $100 million. And it's all paid for, 100%. 100 million dollars in real estate the building i'm sitting in is worth 100 million and so uh and it's all paid for 100 i do not borrow money for anything ever after that experience so i tell you a big long story to give you a really solid no don't do that yeah you know i love the point you make he's a young guy and if he's not living in that house flip that and and get an apartment yes sir i don't mind you renting and flipping sir but pay cash that's right okay he's off to a good start there if he flips that now yeah and it's good time to make a little money if you can get in one at a deal very difficult to find a deal right now yeah like i'm almost

impossible needle and haste yeah i was shocked at how how much that house cost yeah but um but you can do that and it's possible in springfield missouri i mean that's a it's a great market and i i want you to go live your dream i don't want you to let it turn into a nightmare and it has for me oh and by the way there was a whole bunch of people did nothing down real estate then i was actually in a nothing down real estate club back then, Chris, that had 150 members. Let me tell you how many of those guys are still doing real estate deals with nothing down. Zero. Let me tell you how many of those guys went broke.

All of us. All of us. All of us went broke. No one made it out using that technique. Now, I do know one guy started selling the properties off, taking the equities and paying off the others. He ended up with a portfolio about one-third the size of his original portfolio, downgraded by 70%, but turned out with cash. He went the other way from the nothing down to 100% debt-free, and he's still managing those properties. I ran into him the other day but the guys that persisted with this nothing down bullcrap stuff that's sold in these weekend seminars 100 failure

rate a decade later two decades later so i want to stay there dave because it's still being sold and it's being glamorized on social media oh big time so what's what are they not telling them they're telling you oh you can do all this you go but there's what are they not telling them they're telling you oh you can do all this you go but there's something they're not telling them they're not properly portraying the risk what's the what's the hidden information they're not sharing the the nothing down deal only works if everything goes perfect and nothing ever goes perfect that's it risk debt equals risk more debt equals more risk if you owe owe $100,000 on something, that's a lot more risk than if you owe $1,000 on that thing. So more debt equals more risk,

100% of the time, because you've got to carry it if it doesn't sell. You've got to carry it if the Fed decides to jack up rates. Oh, wait, that happened. You've got to carry it if there's a pandemic. Oh, wait, that happened. You've got to carry it even if you lose your job because of the pandemic oh you got to carry it even if there's hyperinflation so it freezes the market like a deer in the headlights oh these are real freaking things that happen and they happen to me you got to carry it if the president changes the tax legislation and flips all investment property on its head. Ronald Reagan completely destroyed the real estate market while I was in the middle of it. I'm a Ronald Reagan fan, but worst presidential decision he made completely undid

the investment real estate market by flipping the depreciation schedules off, changing the value of real estate with one stroke of the pen, and it turned the S&L business on its head back then, the savings and loan industry. And you can't control that crap because you're not the president. And it affects things out of your control come in and make you stupid when it's stress tested, always reveals itself to be stupid. You can tell it was skinny dipping when the tide goes out.

Uh-oh. That's what they don't know. We'll be right back. Thank you for joining us, America. One of the most important types of insurance you have is, of course, car insurance. It's actually the law. Maybe even motorcycle insurance, if that's your thing most americans don't have enough car insurance and you're probably one of them if you get into an accident you don't have enough insurance you'll have to pay for your own car repairs medical bills the other drivers car repairs and their medical bills and their passengers medical bills it can cost you thousands and thousands of dollars, even get you sued.

You've got to have the right car insurance. And that's why we created a network of endorsed local providers, or ELPs. They're licensed independent insurance agents, which means they will shop around and get you the best deal among a bunch of different companies. And get you the coverage that you actually need. Hello hello they'll teach you how to understand your car insurance a lot of people pay for car insurance just mad about it don't even know what they got you need to actually understand what your freaking money is going to yeah if you're ready to work with an insurance agent who actually works for you not for the insurance company visit visit ramseysolutions.com slash auto to connect with a Ramsey-trusted ELP, ramseysolutions.com slash auto.

Eduardo is with us in Los Angeles. Hey, Eduardo, what's up? Hi, thank you guys for taking my call. Sure, how can we help? Yeah, my question is to Ken today. It's about career advice. I am looking into getting into college, and so I am pretty clear on what I want to study.

And I always hear him talk about the Bethel Tech School of Technology, and I just need some advice if, you know, since college right now, it's starting to become more irrelevant for a degree. And so I don't know. So what direction do you want to go? You said you knew what you want to study. Presumably you know why you want to study that. Where do you want to go?

I want to get into engineering, software engineering, computer science-based. Yeah. Well, specifically, what would that look like, your first entry level? What's that going to look like? You know the industry well enough to know what entry-level work is going to be? Mostly it's the coding. Gotcha. So here's the answer.

Computer science degrees or many computer degrees, they're never going to ROI for you based on the fact that you want to go into developing and coding. You don't need to do that. Bethel Tech, obviously, they are a big-time partner of the Ken Coleman Show. In fact, we just got an email this last week. The first Ken Coleman Show grad to get a job making over $100,000 just happened, and he is a recent graduate of their nine-week program.

That's one example. There are a lot of other coding boot camps. You need to do your homework on reputable boot camps. Call Bethel Tech, but talk to other folks. Do your homework because the reality is to get a four-year degree, and in some places that could be as much as $180,000 for some computer science degrees. It just does not ROI. You do not need it. Google has announced a major initiative where they are training future developers, future engineers, because they know that they can teach people what they need to be able to work for Google.

And so it does not require a college degree not to go the direction you want to go. And so less time, less money is what you're looking for here. And so don't feel the trap that I have to go to college to become a developer. Yeah. Eduardo, we've got at Ramsey Solutions, we have software engineers, dev ones, twos, threes. We've got architect and platform people all in the space that you're talking about. Totals over 400 folks working on my team. I pay millions and millions of dollars a year in salary and income to people like you want to be. i would i'll just tell you 100 we do not

require a four-year degree to enter that field 100 if you were going to hire you to do code to be a software engineer to to write java to write uh ruby whatever it is you're going to write uh all we want to know is can you do it and we're going to run a code test on you and if you can code we're going to bring you in and the level, and if you can code, we're going to bring you in. And the level you code at is the level we're going to pay you at, not what you think you are, whether you think you're a dev one or you think you're a dev two. Our guys, we've got professional executive leadership in this area that hire people every day. I will hire probably 60 or 70 people in the coming 12 months in the field you're talking about,

and we will not require a four-year degree from a single one of them. All we want to know is can you code. All we want to know is the background. If you have any experience that proves you can code, if you can pass the test showing you can code, if you have the certifications from something like Bethel Tech or Microsoft or whoever showing you know how to run the technology, then you're in. Technology is not driven by that. The only time you would get a four-year information systems or computer science degree is if you're going to want to go into a very high level of leadership where the actual coding doesn't matter. Because by the time you get a four-year,

if you're graduating today with a four-year degree, the stuff you have studied in college is already obsolete. Because it changes almost by the minute what they need to study. And so being in the field, having your hands in the code, makes you much more valuable. Oh, and by the way, that's four years of income making $100,000 that you're missing out on too. Not only are you going to pay somebody $180,000, so this is a $500,000 or $600,000 conversation we're having right here. Yeah.

And listen, I believe in four-year degrees. If you ask me if you need to go get a four-year degree in marketing, I would say yeah. Or a four-year degree in business or accounting, I'd say yeah, it i think it's worth it there's going to be some superfluous classes in there but it's worth it you'll get an roi on that it makes sense it's it and it you know and it's going to give you literal lift uh but i gotta tell you you come in here to interview you got a four-year degree in information systems or you got three years of code experience as a software engineer i'll take the code experience over the four-year degree 100% of the time. Now, we're going to interview the rest of the person and learn about them too.

We're not going to rule out the guy with a four-year degree. We're not calling you an idiot for having one. But I'm just saying, it does not even give you a one-up. No, and let me also give an alternate path for leadership in this space too because I've seen it happen here at Ramsey Solutions. It's happening all the time where we'll have somebody come in as a coder and they do great work. We realize they've got great people skills or otherwise known as soft skills. You hear this in the marketplace all the time.

And because they follow well, they get the opportunity to lead. And so you could go to a boot camp, a Bethel Tech like this, get in, do a good job, listen to the Entree Leadership podcast. Buy the Entree Leadership bestselling book written by Dave. How do we lead? How do we teach leadership here at Ramsey Solutions? And begin to follow well and work your way up the leadership ladder as well. It is possible. So the long and the short is, Eduardo, go to code school, don't go to college. Not for this particular path. Not for this path, yeah. Doctor, yes. I wouldn't. If you were my son, I would tell you no. No you no and so and then when you graduate from code school take a dev one position and keep going to code school this is the key it's a very important point just because you come out with this this qualification you're not a dev three when you come out of school take the entry

level position the young man i was talking about dave he was in a non-technical technology position making sixty thousand dollars he just got a hundred thousand dollar entry level position as a dev one dev one code school on only under his belt with a nine-week program at bethel tech which by the way ramsey solutions because we pay cash our audience you're going to get it for less than 15 grand yeah so that's not an ad for them you could go anywhere well i tell people check everybody out you choose them they're great we wouldn't endorse them if we didn't think they're great but it's everywhere but you know our guys all the time i mean we even talked about opening a code school yeah just because our need is so high and really that's all they need to know how to do to get in to get their foot in the door and then they can

grow from there and we can teach them the rest on the job in an apprenticeship-type situation, because our dev threes coach our dev ones every day. They write code together, and they'll pull them up and teach them. And so that's how you learn this particular thing. It's like a modern-day version of a trade like welding or pipe fitting. And I'll tell you this, Dave, the industry, the data is out there on this. If you are one of these brilliant developers, and you've got good people skills, there's no stopping you. Yeah, because most developers don't. They say it.

No, they don't have people skills. That's not what they do. Most of them are, you know, game on with the ones and zeros. That's it. Yeah. Yeah. So it's a great space, though, dude. And I got a bunch of them on the team, and we love them.

We love them. They're great people. And I got a bunch of them on the team, and we love them. We love them. They're great people, and they care very deeply about their work. They're wonderful. It's a great interaction we have here at Ramsey with them. This is The Ramsey Show. We'll be right back. Ken Coleman, Ramsey personality, is my co-host. This is the Ramsey Show. Jacob is with us in Seattle. Hi, Jacob.

How are you? I'm doing well, Dave. Ken, thanks for taking my call. I appreciate it. Sure. What's up? All right. So me and my wife are currently, have no doubt, looking to purchase a house in the upcoming

couple of years. We have a little bit of a disagreement on how we are going to be saving the money. I have a higher risk appetite than she does. I would like to put it into a diversified ETF and try to get the money to work for us for the upcoming few years before we purchase. And she would like to put it into a high-yield savings account so we know exactly where we're going to be in three years.

How would you suggest to go about finding a compromise with that? Well, I think what you both need to realize is that this decision is not going to keep you from buying a house or cause you to be able to buy a house. So let's do the math for a second, and I'll show you what I'm talking about. How much are you talking about saving um we would like i would like to purchase a house that we're going to be in for the next 30 40 basically our lifetime so good luck with that but yeah it usually doesn't work that way but but how much are you talking about saving in the next three years uh about 200 000 okay and so if you make 10 on this money you're going to make 20 000 bucks if you put it in a high yield savings you're going to make nothing and you'll lose 20 000 bucks

but 200 000 is what's going to cause you to be able to buy the house and 220 is not going to cause you to buy a substantially different house so the fact that you made a little money on your money is more of an intellectual exercise than a factual change in your situation. Okay, that makes sense. I'm following you. Okay. And the same thing is true with her. Let's say you put it into an ETF and it did not make 10% a year.

You had a bad three-year run in the stock market stock market in general was down you got tagged you know in the face with this thing which could happen in a three-year swing and uh you don't have 200 000 you end up with 180 000 so you actually lost money you follow me still doesn't keep you from buying a house so my point is your concern that you're not making a bunch of money is somewhat mathematically invalid her concern that you're going to lose so much that you're going to not be able to get a house is also not really mathematically valid this is all more about emotion than it is actual dollars okay yeah that makes sense i'm following you yeah so anyway all that to say how do we solve this probably at our house uh we'd probably end up splitting the baby we'd probably get let me do uh

put a hundred thousand over in investments and she'd put a hundred thousand over there and at the end we would see who won the bet so you would say put it do a 50 50 down the middle yeah yeah i don't think there's anything wrong with that at all because but again before you do this both of you need to really own the fact that this is not going to cause you to buy a house or not buy a house it's just more of an argument over how we park the money so i i gotta weigh in here uh you know look i i think you do exactly what dave just laid out walk her through that both sides of the coin then i would see how she's reacting to that and if her safety gland is still flaring i'm going with mama you know what i'm happy wife happy life what's the other alternative that's the other alternative. You don't lose on that one.

Because if you win, if you put it all in there and you go down 30 grand, that's going to cost you 30 years of remembering that. That's the truth. It may be subjury. It's going to cost you $1,000 a year in memory. That's my take. Remember back in all 23 when you didn't do what i said do they have memories oh they have memories elephants have nothing on women yeah this is true they remember yeah ever especially when they're right that's even more devastating which again if you

want to be married most of the time actually that's what you need to come to that conclusion as well so this is not even a mathematical question at all. Who can find a virtuous wife for her worth is far above rubies? The heart of her husband safely trusts her, and he will have no lack of gain. So at our house, today we would split the baby 20 years ago when we were still a little fresher. The nerves were still a little more raw after going broke. We probably would have parked it yeah in a high yield savings and we're not taking any risk because sharon was so terrorized yes

emotionally by what we went through that it took a decade for her to go and we had to have a big pile of money where she could go oh if you screw you screw that up over there, it ain't going to kill us. And she's still one of the most frugal people I know. Oh, my God. It's extraordinary. The woman will pick up an old used golf ball like no one I have ever seen. We have a collection of old used golf balls. She's over in the weeds picking up. She's going to get bit by a snake getting a golf ball that's worth 50 cents because it's already been hit by the mower.

It's unbelievable. The woman is, oh, gosh. Frugal frugal frugal don't even touch it yeah all right and and that's a compliment my darling it's a compliment my darling eric's in new york city hey eric what's up how you doing dave better than i deserve man how can I help? Yes. I have credit card debt, about $25,000, and two of them total $20,000. My credit union is offering a 1.99% to, and I was thinking about refinancing it, those two larger debts because it's about $400 in interest that I'm paying every single month while I'm doing the baby steps. I'm on baby step one. So you owe $40,000 on plastic?

No, I owe $25,000 on plastic. Oh, $25,000. Right, and two of them total $20,000. I got you. Okay, and you're going to refinance $20,000 of the $25,000. Right. Okay. What do you make a year? okay over 100 you know it's odd this is the same conversation we were just having a minute

ago but he was on the investing side and you're on the debt side you can do this if you want to do it here's the danger you're going to think you actually did something you think this is a big deal you don't have a 400 problem my man you have a 25 000 problem when you address the 25 000 problem with the idiocy spending you've been doing like you've been in congress on plastic when you address that deep down in your soul, you're going to get out of debt really, really fast on $25,000 making $100,000. You're not going to be in debt very long. Interest is not your problem.

But if you want to lower the interest, it'll help you a tiny bit. Here's the deal. 5% of you getting out of debt is refinancing this. 95% of you getting out of debt is you looking in the mirror and getting pissed off and chunking on this thing and beating the snot out of it because mathematically 95% of this is not going to be an interest problem. Mathematically, this is going to be you chunking money on this because you're mad, you're sick and tired, being sick and tired.

I'm not living like this anymore that you are 95 percent of the secret sauce that that level of ah you hearing me dude yes so how long would it take if i just left it two months longer you save two months i might have missed that by a few days one way or another but my point is four hundred dollars is forty eight hundred dollars a year and you're going to be out of debt in a year and so uh you know we cut it in half because halfway through the year you're going to have the debt half paid down so it's not forty eight hundred a year you're going to save it's going to be more like twenty four hundred a year in this year that you get out of debt in one year and so you're saving 2,400 bucks 200 bucks a month

at the end of the day and how fast does how much does that apply to a 2,500 oh I was right it's 10 there we go look at that so yeah you know so it's probably it's between a month and two months you're going to save it's okay to do it I'm not mad about you doing it. But what I don't want you to do, Eric, the thing people do with debt consolidation is they feel like they did something and they think they fixed it with this loan. And you cannot borrow your way out of debt. Yeah, I mean, that's what they're selling is saving money. And then you kind of lean on that instead of the intensity that you're talking about. And you have this frustration like, I've got to get out of debt.

And then you think you did something, and then you look up a year later, and you're still in exactly the same place. I got a line. But with lower payments. You gave me a line. What's that? He doesn't have an interest problem. He has an intensity problem.

Ooh. That's what you're teaching. It's a good line. Well, you gave it to me. Well, I didn't say it. You said it. I'll let you have it. Taking notes over here, folks.

You can own it. This is The Ramsey Show. Hey, folks. Ken Coleman here. Did you know The Ramsey Show is one of the most popular podcasts in the world? Get your daily dose of advice on life and money. Check out all of our shows from The Ramsey Network wherever you listen to podcasts. one of the most popular podcasts in the world. Get your daily dose of advice on life and money. Check out all of our shows from the Ramsey Network wherever you listen to podcasts.