The Ramsey Show - App - Don't Get Paralysis of the Analysis (Hour 1)

Episode Date: December 6, 2019

Savings, Home Buying, Budgeting Tools to get you started:  Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Starting off this hour is going to be Jared in California. Merry Christmas, Jared.

How are you? Merry Christmas, Dave. I'm doing great. How about yourself? Better than I deserve. How can I help? So the reason for my call is me and my wife did your Financial Peace University a couple years ago. It's been life-changing for us.

We're on to baby steps four through six now, and we're starting to save up for our next automobile purchase, which we hope to do with cash, of course. My question for you is that cash that I'm saving for the new car, should I keep that liquid with my emergency fund or should I be investing that in my mutual fund portfolio so that it grows faster and I can reach my goal sooner? Well, if you're investing it for less than five years, you take the chance of it going down as much as you take the chance of it going up in a mutual fund. Mutual funds, generally, if you remember from Financial Peace University, 97% of the five-year periods have made money on the stock market, but only 67% of the three-year periods have. So you have a one in three chance of actually losing money when you're playing with three years.

And I suspect you're not saving very long for this car, right? Right. It would be around the five-year mark. Oh, really? You're going to save for five years for a car? Yeah, right now we're driving two sedans, but we plan on having more kids. So at some point we're going to have to upgrade to a minivan or something like that. Yeah. Cool. Okay. So how much would you be saving towards the car? Um, ideally 20, 20 to 30 K. Okay. Over five years. All right. So let's just take, um, 20 K on, uh, five years is $4,000 a year, right? Yep. And let's say you made 10% on it versus 1%. That's a $400 swing per year.

Okay. So it doesn't make or break the deal because the actual dollars that you would make during the period of time would be, you know, if you made 10% versus 1%, as an example, through the period of time, you might make $1,500 or something through the period of time. But it doesn't mean you get to buy a car because of this

or you don't get to buy a car because you didn't put the money in a mutual fund. In other words, 98%, 99% of the money is going to be you putting the money in the account. It's not going to be growth mathematically. And so the more you put in the account, the faster you're to be growth, mathematically. And so the more you put in the account, the faster you're going to get your van. That's what it amounts to. And so you can do either one. It's not going to destroy you, keep you from getting a car if it went down in value. But it's more of a theoretical discussion than it is an actual dollars that move the needle. And so that's sometimes what you can get caught up in in this personal finance game is all

these people have theoretical discussions instead of exactly what really happens. Hey, thanks for the call. Open phones at 888-825-5225. I'll give you an example of one of those theoretical discussions, okay? You can do a Roth IRA, you can do a regular ira and you can do six thousand dollars a year if you're under 50 years old okay now what happens is in reality in the real world people just do six thousand dollars in a traditional or they put six thousand dollars in the roth but of course there's some duber living in his mother's basement writing a

blog about how dave ramsey doesn't understand mathematics when he tells people to do that. Because when you actually look at the mathematics of it, according to the duper in the basement, he's actually mathematically correct. Although I live out here in the real6,000 in a Roth, you have to earn about $8,000 or $9,000 because you've got to pay taxes. The money going into a Roth is an after-tax calculation. In order to put $6,000 into a traditional, you have to earn $6,000 because it's pre-tax. And so when you compare a traditional with a Roth, you're technically comparing $9,000 to $6,000 because it's an after-tax investment. If you wanted to do the arithmetic properly and do it in a vacuum, that's fine.

But here's the real world. The real world is people don't even think like that. They just put $6,000 dollars in and they just do it and so you know the net result of me getting everybody to do roth says it's as if they're investing nine ding ding so you know i came out way ahead but you know but i'm cheating of course because people are getting rich faster and we can't have that if you're a victim and you live in your mother's basement. So there you go. I mean, but that's in the real world.

I mean, you have an arithmetic vacuum or a theoretical discussion of mathematics versus what people actually freaking do. And so if you'll start just kind of thinking through what people actually freaking do, then you've got a deal. Another thing is everybody gets all upset about some mutual funds charge a commission. Oh, God, you're going to die if you pay a commission. The fees, the fees. Doesn't matter.

One of the largest studies ever done by the Actuarial Association of America, which is a group of nerds, found that 74% of the reason that people end up building wealth in their investments is not the fees. It is not the return on investment. It's not that they got 12.4 and the S&P was 11.8. It was not that you beat the S&P or slightly didn't beat the S&P by a few points here or half a point here or there. 74% of the reason that people succeed in investing

is because they actually invest. It's called the savings rate, meaning you freaking put money into the account instead of sitting around sucking your thumb in the back booth of some bar having some kind of a discussion about mathematics. I can't do this, the fees, and Ramsey and the fees, and oh my God, and oh geez, and you can't beat the S&P because everybody knows passive investing, and buy the S&P because most mutual funds don't beat the S&P because everybody knows passive investing. And buy the S&P because most mutual funds don't beat the S&P.

Just invest. And those are the people that end up with money. They're people that put money into investments or the people that have money in investments. Isn't that a shocking statistical correlation? I mean, it's amazing that this idea that personal finance is really 80 behavior it's only 20 head knowledge so i'm not suggesting you overpay in fees and i'm not suggesting you buy mutual funds that underperform but really that's not the secret the secret is for you to not get paralysis of the analysis and analyze everything to the point that you do nothing do it just shut up and do it

and that's how people get rich isn't that amazing the ones that actually do put money in investments so the next time your brother-in-law who's broke has a theoretical discussion about investing returns time all the returns come from to people who put money in the account this is the dave ramsey show One question I get asked all the time is, do I need life insurance? Listen, the whole point of life insurance is to replace your income for someone who counts on you. So if you have a spouse or you have kids, yes, you need term life insurance. It's the only way to protect them until you're out of debt and have built up your wealth. You're only digging a deeper hole if you waste money on cash value plans

since it robs you of the ability to make real progress. And that's why I send you to Zander Insurance, and I have for 20 years. That's where I get all my insurance, and they only offer the plans I recommend. It is not expensive. It's not complicated, and Zander will be there as your guide every step of the way. Visit Zander.com or call 800-356-4282. You need to get this taken care of. I can give you the advice, and I can tell you where to go, but it's really up to you to take that important step to get your family protected. That's zander.com or 800-356-4282. Thank you for joining us, America. This is the Dave Ramsey Show.

Mike is in Indiana. Hey, Mike, welcome to the show. Merry Christmas. Merry Christmas to you, too, sir. How can I help? Well, I have a question. I have $470,000 worth of rental property. That's three different duplexes.

I figure I net about $50,000 a year, and that's after vacancies, maintenance repairs, all the other things. And if I invest that $50,000 a year for the next 20 years and then sell the houses, it looks like I'll have about $4.9 million. But I was looking on your website. If I sold them all today at $470,000 and invested that for the next 20 years, I'd have the same amount. So I'm wondering what

i'm missing and well i just don't know what what to do you know what's what is it worth the trouble to rent all these things for all those years well generally speaking good pieces of real estate estate will make you more money than mutual funds will. But they require, but there's a hassle factor. You have to deal with these things called tenants and repair people and all these other things. The way to measure real estate accurately, there are three places that the return comes from in real estate. One is obviously, like you said, the cash-on-cash return, which is the rents that come in net of all expenses per year.

That's your cash-on-cash return on investment. In addition to that, the properties are going up in value, the capital gains net on that, and so this $400,000 worth of property becomes worth a million or 2 million or whatever over a period of however many years. And then the third thing is, is that these properties are depreciable, meaning you probably have them on a depreciation schedule. And that realizes you an actual cash tax savings, which means that some of your income, whether it's from the rentals or otherwise,

is sheltered as a result of depreciating these properties. And there's an actual, you paid X number of dollars less in taxes last year because of the depreciation schedule on those properties. So those dollars, plus the increases in value, plus the cash flows added together are what's called an internal rate of return, an IRR. And an internal rate of return on real estate, when you put it all on a sheet and you develop that out fairly sophisticated, you should be probably making 17% to 18% on your money. And you're probably, it sounds like you're making around a 10% cash on cash, so that means we'd be projecting in tax savings and in appreciation another 7% a year as an example.

Most of my properties I'm making that or more on the return on the actual value of the property, not on what I paid for them. So in other words, I look at a piece of property I have today. Let's say I've got a million dollar piece of property today. Okay. And I look at that and I say, if I cashed it out, I could take that million dollars and I could invest it in mutual funds or I could buy another piece of real estate. So that's what the, so I want my return to be on the value, my rental return to be on the value. And I want my return in increase in value, and even the tax is not based on the value, but even I'm looking at the total returns based on what

the property's worth, not what I paid for it. Because I have several pieces of property that are worth like a million dollars or five million dollars or whatever that I've got 20 cents on the dollar in them. I bought them in 08 for nothing. And so what I've got in them is not relevant in that. I'm looking at the value because that's what I could cash out of if I sold it. So we do an analysis on our properties individually and as a portfolio each year at the end of the year to see how they're doing. And generally, our IRRs are between 17 and 20, and our cash on cashes are

around 10, depending on the type of property it is and so forth. But again, with a mutual fund, all I have to do is open the email, and I know that's the extent of my managing a mutual fund. But with properties, you know, I've got a full-time property management firm because I've got a large portfolio of real estate. So, you know, my son-in-law runs all of our real estate and he's got a staff that does that you know and and so but so the net net net of all of that is what we're looking at is of all the costs and so forth so i love real estate uh and but you should make more

on it because you you have to screw with it more so it's up to you do you want to own real estate or do you want to you know do you like that do you mind the process i think you make more money if you don't mind being a landlord and you will do the good work of being fair with people and firm with people uh that you put in your properties but not everybody's uh wants to do that and that's okay so I'm lopsided right now. I've got a lot more in real estate than I do in mutual funds because the real estate, because I bought it so cheap and it's gone up so fast. Uh, and it's gotten out of balance. Um, but I like real estate more than I like mutual funds. So there you go. But mutual funds are the best place to make your first three or 4 million

because you can get started in there. you can throw some money at them, and, you know, like your 401K and that kind of stuff, you ought to have, you know, a million, million and a half in your 401K as you approach retirement easily. Every one of you listening should. So, and you can put in, you know, $250 or $500 or $1,000 or $1,500. You can't do that with real estate. Real estate requires a big chunk.

So real estate usually is going to come later in your wealth building process. You've gotten into these properties early in your wealth building process, and that's fine. But if you want to hold them until retirement, fine. I would tell you I would do some mutual funds in addition to this, though. I would not be 100% in either one unless you just hate one or the other. Some people hate real estate, so they're 100% mutual funds. Fine. That's okay. And some people hate mutual funds, are scared to death of the stock market or whatever. Then

they got all their money in real estate. That's fine. But real estate's what we call a less efficient market, meaning there are more bargains available. There's few bargains on the stock market because there's so many people chasing so many digits at the same time that that market becomes very efficient and a very efficient market, meaning that the price charge is pretty much the price. Real estate, you can occasionally you can sneak up on a piece of property and get a deal. So that's what you're looking towards. All right, Rachel's going to be with us in North Carolina. Hi, Rachel.

Welcome to the Dave Ramsey Show. Hey, Dave. How are you? Better than I deserve. What's up? Okay. So my husband and I are financially obese, I guess you would say, and we're ready to be gazelle intense. I have a question.

Should I pay off my $83,000 in student loans as part of Baby Step 2, or should I wait until Baby Step 6 so that I can save for retirement and my three children? Oh, no, no, no, no, no. We need to get that student loans gone. They're in Baby Step 2. Okay. So what's your household income? Now it's $143,000.

Phenomenal. Okay. And what's your degree in? I'm embarrassed to say accounting. What's wrong with accounting? Well, because I'm one of those finance stupid professor type people that you talk about. Oh, I was too. That's okay.

They don't teach us personal finance in that. But at least you've got a degree that's usable. It's not left-handed puppetry or something. I'm proud of it. That's good. So you've got a degree in accounting, and your household income is $145. You've got $82 in student loans. What else have you got in debt, not counting your house? We have about $6,000 total in credit cards.

That it? That we brought down to about. That it? Yeah, it was. You don't have car debt? Closer to $10,000. No, no, we have a lot of car debt. Just a little bit of debt other than your 82.

No, a lot of debt. $143,000 in debt. Okay, I'm so confused. I asked you how much debt you've got. So you've got 83 on your student loan, and you've got 6,000 on, you said, credit cards, right? Yep. What's the rest of it? About $9,000 on one car.

And then the really stupid part is that we have $43,000 on another car. Well, sell it. That is stupid. Sell it. Get rid of it. It's killing you. And you guys roll up your sleeves. You should be debt-free in two, two and a half years, plus or minus selling the car.

Yes, you pay off your student loan in Baby Step 2. You've got to get this mess cleaned up, kiddo. It's killing you. This is the Dave Ramsey Show. Support a small business this holiday season that does business right. I'm talking about Grip6 Belts. It's the only belt you can get online with no holes, no flap, and no bulk. And the buckles come in really cool designs and are interchangeable. I personally own a number of these belts. Plus, these guys have a great story.

B.J. Minson started Grip6 on Kickstarter from his garage in 2014 and now sells hundreds of thousands of these American-made belts to customers all over the world. As a mechanical engineer and a minimalist, BJ took his dislike for heavy, bulky leather belts that never fit right and created the perfect belt, a high quality minimalist belt that gives the strength and support of a belt without even knowing you're wearing one. I'm really proud of these guys and I'm thrilled to recommend them to you. Go to Grip6.com and search for the Dave Ramsey page to get 35% or more off GRIP6 products. GRIP6.com.

In the lobby of Ramsey Solutions on the debt free stage michael and katie are with us hey guys how are you good how are you dave i am better than i deserve merry christmas merry christmas welcome to nashville where do you guys live we live in columbus ohio oh fun cool great town love it well welcome here to do a debt-free scream. How much have you paid off? We've paid off $227,000. Wow. And how long did this take you? Took us 49 months. Very good. And your range of income during that time?

So we started about $125,000 and ended up about $165,000. Very cool. What do you guys do for a living? I'm a teacher. I'm a district manager in automotive repair. Oh, very good. Cool. Well, fun. And what kind of debt was your $227,000?

We were pretty normal, Dave. We had credit card debt, student loan, car payments. But the biggest part of our debt was our house. You paid off your house! We did. Looking at weird people. Way to go, you guys. Wow, you're young to have a paid-for house. You paid off your house. We did. Looking at weird people. Way to go, you guys. Wow. You're young to have a paid for house. That's awesome. Very cool. So how much of the 227 was the mortgage? Well, about 70 of it was consumer debt that we knocked

out first and then the rest of it was all the mortgage. So 150, 140 or so. About that. Yeah. All right. Cool. What's the house worth? I think we could sell for about $280 right now. That's pretty exciting. And it's yours, baby. It's all ours. It's all yours. I love it. How long you guys been married?

For 13 years. Have you ever been debt free while you were married? No. No. Not even close. No. I love it. Very good.

Very good. Man, this has got to feel great. I mean, you've got to be just, you're debt free. You don't even owe on your house. It's pretty exciting. It's kind of surreal, isn't it? It is. So surreal.

Yeah. That's fun. You just feel light as a feather. Yeah. It's something else, man. Well, I'm so proud for y'all. Excellent. Good job.

So tell me what happened four years ago that put you on this journey. Well, we were struggling. We were just living paycheck to paycheck. And we're making pretty good money, and we were pretty happy with what we were making. But then when we were doing our taxes and things like that, where's all the money going? Yeah. And it was getting to the point where on Tuesdays and Wednesdays, leading up to my payday, Katie would go, hey, don't spend any money until Friday.

And that obviously led to arguments because I'm like, well, we have money coming in. Why can't I go to lunch at work this week? Because we don't have any money, Mike. Don't spend any money. We're done. And it was just a lot of tension. And everything we were doing, trying to figure it out ourselves and fix it, just wasn't working. It was like quicksand. We were going backwards, backwards, backwards. Every great idea I had back then was not a great idea. And we went to a good friend of ours' wedding, and it was one of those weddings where we know them, but we don't really know anybody else. So we're sitting at one of those assigned seats tables.

On one side of us is a couple, and on another side of us is a financial advisor. And God bless the guy who was sitting next to us. He's like, well, I'm broke. I could use a financial advisor. And God bless the guy who was sitting next to us. He's like, well, I'm broke. I could use a financial advisor. And then we're just kind of sitting in the middle going, this is an interesting conversation. Just keep our mouth shut. And so they're talking about money and a couple of different things.

And the broke guy's wife said, you know, we've been doing the Dave Ramsey plan. It's been really working for us. And then later in the conversation, they said something about mortgage debt. And that's when I decided to open my mouth because I thought I was the smartest guy at the table, which I wasn't. And I said, you know, well, you're always going to have a mortgage. And then his wife looked at me, and I'll never forget the way she looked at me. She goes, Dave Ramsey says you won't. And I'd never even heard your name before.

Who the flip is Dave Ramsey? Right. So that night when we got home from that wedding i i got the total money makeover and uh read that book so fast it's the fastest i've ever read a book in my life and then asked katie to read it and then we were off to the races at that point it was like clarity like washed over us like this is what we have to do this is how we have to live our life yeah so how fast did you knock off the 70 the consumer debt about 16 months ah that's what i thought yeah okay very cool and then record you broke records on the house yeah we we bought our house pretty smart we didn't have any pmi we were

pretty good in it and then we got done with baby step three we're looking at four five and six and we're just chugging along on four five and six enjoying it and then katie's like hey we got to stay gazelle intense we have to get this house done like i can't, and six, and we're just chugging along on four, five, and six, enjoying it. And then Katie's like, hey, we've got to stay gazelle intense. We have to get this house done. Like, I can't live in a life where we're just going to talk about it. We've got to do it. And our behaviors were in place from knocking out the 70. Exactly, yeah. You had 16, 18 months of muscle built up to be able to do it, and so you just leaned in and knocked it out.

Yeah, so we were game on, like, big time. Anything that would bring in extra money, we were doing it. That's impressive. Very well done. So really, you did the house in about two and a half years from the time you knocked out the other. Yeah, we did. That's very, that's highly, that's very fast. The typical is about seven years, just to tell you.

So excellent. Well done. Thank you. Well done. So outside of the two of you, who were your biggest cheerleaders? So our parents were really big cheerleaders. We hadleaders? So our parents were really big cheerleaders. We had a couple groups of friends that were really big cheerleaders, and they didn't necessarily understand exactly what we were doing,

but they were supportive. So, you know, that really helped in our journey. We have some good friends who may not be on the plan, but they understand if you're going to hang out with us, we're going to cook at home or we're going to play euchre. Like we're not going to go out to a fancy dinner. And I really, I knew you were going to ask that question. I really feel like that's like the support we were looking for through that. They just really helped us stay on process.

Absolutely. That's very, very cool. Good. Very good. So what do you tell people? The key. I mean, you guys are how old? How old are you? I'm 36. I'm 39. And you have a paid for house. Very good. So what do you tell people? The key. I mean, you guys are how old? How old are you?

I'm 36. I'm 39. And you have a paid for house. We do. I mean, you're officially weird. Yeah. That's just so cool. It's so cool.

We actually have a doormat in front of our paid off house that says weird people live here. And nobody knows what it means, but I like it. That weird day Ramsey a guy yeah all right that's perfect so what do you tell people the key to getting out of debt is it's a couple different things the number one thing's teamwork the number one call that i hear on your podcast that just breaks my heart is how do i get my spouse on board and it's just a blessing from god that katie's been on board with this from the very beginning. And I mean, she's my, she says about you, she's my accountability partner and

I'm hers, you know, in this journey, you want to struggle and you want to buy stuff. And sometimes I'm a guy and you know, I might not even know it existed five minutes ago, but now I have to have it. And that's where our wife comes in handy. We're like, Hey, we're not buying that. Take a cold shower, wait a week. If you you still want it maybe we'll talk about putting in the budget when the house is done but move on mike we're getting the house done yeah and uh you know i think a little bit of vice versa there so that and um the envelope system and a budget you know you gotta be on the budget the budget is the law and if we wrote it in the budget we wrote aggressive budgets we were going to hit that budget no matter what it took and like at the beginning of this i

had a really nice gun collection i was a big gun collector and going into dave ramsey plan i'm like all right we'll get rid of everything i'll be super aggressive just don't touch the guns yeah there's no guns left and i mean we were three months from being done with the house, and we were going to be $200 under budget. And I had a Glock. It was the first gun I ever bought. And it's, like, very important to me. But hitting that budget that month and not missing by $200 is way more important to me. It was three months left.

So got rid of it. And, you know, we did that so we would hit our number. If we wrote it, it was the law. We had to do it. Well, the good news is you don't have any payments. So you can buy guns. Exactly. good life is good that's what happened to me i bought a few way too many but yeah way to go man congratulations you guys very cool katie what do you tell people the key to getting out of debt is uh definitely to have your spouse on board um i will admit that i was a little hesitant at first. I cried our first couple budget

meetings because I thought he was taking everything away from me. But then I learned that I didn't really need all that stuff. So yeah, it's getting your spouse on board and being on the same page. So but eventually by the third budget meeting, you had a vote. I did. Where later on you start taking stuff away from him. I did. Turnabout's fair play, right? Yeah.

It's the way it's supposed to be right there. Well done, you guys. And the young men are, what are your sons? What age and names? This is Matt. He's 11. And this is Leandry, and he's 8. Okay.

So were they involved? Do they know what's going on? Oh, yeah. Oh, definitely. Yeah. Very much so. They know mom and dad have changed their family tree? Yes.'s never going back no i mean this is generational change yeah well done all right count it down you guys michael katie madden landry columbus ohio 227 000 paid

off in 49 months making 125 to 165 house and. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free. Yeah. They're house, man. Not even 40 years old. Yeah. This is the Dave Ramsey Show. Eddie is in Florida.

Hi, Eddie. Welcome to the Dave Ramsey Show. Hi, Dave. Merry Christmas. Merry Christmas to you. What's up? I'm on baby steps. The end of baby step two.

I got nothing left but my wife's Camry. I owe 12 grand on it. And my house, I owe 124. And I got 48 in cash, 12 in gold coins. And that's it. Wait, wait, wait. I think you misunderstood what Baby Step 2 is. Baby Step 2 is you have sold everything except retirement funds to be out of debt.

So you would write a check today and be debt-free, except your house. And pay off the car. Yes, sir. Like 18 weeks ago, yeah. We're two months pregnant with our second child. Okay. But you have $40, sir. Like 18 weeks ago, yeah. We're two months pregnant with our second child. Okay. But you got $40,000. How much did you say you had in the savings?

$48,000. $48,000 and you owe $12,000 on the car? Yeah. Yeah. So you got $36,000 left in the account and the baby gone away. You'll be okay. And I got the 401K. I can do the match.

But here's my question. This doesn't fit in the plan. And it's something I wanted to do for a long time. I've been with my wife 12 years. She lost both her parents. Her brother is on disability and, um, he's in a bad neighborhood in a bad apartment and, uh, I have an opportunity to put 20% down on a small house around the corner from us, take out a second mortgage, and his check will cover the mortgage and move him closer to us. But I'll have two mortgages.

I'll have one on my house and one on his house, but he'll be able to pay for it. I'm handy. I put a roof on our own house. I just didn't know if this would end up sinking our ship or if i should just stick to the plan and do this 10 years from now or i don't know because now there's other babies on the way and that's kind of my main focus yeah it should be um yeah you need to have an emergency fund set aside out of your debt free and and out of your sell your coins and your emergency fund of three to six months

set aside out of that. And then you start baby steps four, five, and six, which is 15% of your income going into retirement. Start talking about a kid's college fund when baby comes. And then we start talking about paying off your home as quick as you can. What is your household income? 53. Six, three or five,? $53,000. $63,000 or $53,000?

$53,000. And our total monthly expenses are $2,700, and that includes food and utilities and everything. Okay. So let's set $10,000 of the $36,000 aside that's remaining after the Camry as your emergency fund. That leaves us $26,000. And you said $12,000 in gold coins, right? Yeah. fund that leaves us 26 and you said 12 in gold coins right yeah which puts us back to um uh 48 or 38 i'm sorry 38 um that we put towards the 124 on the house and now the house now this is all

after mama comes home with for with the baby but um now you only owe like $80,000 on your house, and you make $50,000. It's not 10 years. It's about three years, four years you're going to have your house paid off. Yeah, so mortgage in a second house, $120,000 house to put my brother-in-law in. If you need to help him, help him a little bit with cash flow, renting something better than where he is until you can get your house paid off and you can save up and pay cash for the house you move him into. We quit borrowing money.

That's how we get out of debt. Okay. So that's what I would do. I love that you want to help him, and I love that you've got this angst pulling in your brain between taking care of your child and helping your brother-in-law you're just a giving guy you're a guy that wants to help everybody and that's a good thing what you have to do uh most and you're probably a spender too i'm a spender and most of us that are spenders are givers and so um what i figured out though a few years ago was the if i'll manage the spending and keep things prioritized,

it enables me to become wealthier so that I can give more, and it changes my giving. So that's what I want you to do. And don't let your giving keep your wealth from building, which will keep you from giving. So you've just got to keep this stuff prioritized. So I don't mind you helping him. I would not buy him a house until you can pay cash for it after your home is paid off. But I don't think that's but about three years from now that the house is paid off. And then shortly after that with no house payment or payments of any kind,

I mean, you can work an extra job and save up money to buy a little house pretty quick to put him in, and then he can pay you rent equal to his income or whatever if you wanted to do that, which would be pure cash flow. Or you could just let him live there if you wanted to as an act of ministry or just an act of taking care of him or something. It wouldn't kill you because it's paid for. It changes the game when it's paid for. Or if something happened and he just took off and there you're left holding that house

and you got a payment and he's not paying the payment anymore, you're stuck. Now you got a relationship with your brother-in-law that's strained and we just don't want to be in all of that. So get your house paid off and then save up and pay cash. No, I would not buy a rental right now. And those are the reasons behind it so that you can be in a position to do more even even more later uh jenna is with us in kansas hi jenna welcome to the day ramsey show hi dave thank you so much for taking the time to talk to me certainly how can i help yeah so my husband and i are been married for five years and we are at a point where we're

disgusted and tired and we're ready to finally get out of debt. We mapped out our budget and our plan and we feel like we can have our $97,000 in consumer debt paid off in about two to three years at maximum. Great. Um, and my question is though, we know how much we can throw at our debt monthly, but we bought a home three years ago and we have a relatively low mortgage. So we know it's a good place to stay and allow us to pay off even more. in some regards. It's 75 years old, and it needs some serious repair

that I just don't know how to budget for those repairs that are necessary that we can't wait until three years goes by to fix them. Well, you slow down your getting out of debt, and you pay cash for the repairs, or you don't do them. Okay. So you just prioritize them and go from there. What about just selling the money pit and moving? We don't have very much equity in the house.

So I guess I just don't know really what that looks like. Well, let me tell you, if you sold it and you broke even and you went and rented something you're not having to write checks for repairs every month while you're trying to get out of debt and you just increase the quality of your life because you're living in a dump yeah absolutely okay i'd sell it i hadn't even thought of that as an option yeah i'll just get rid of it because here's what happens with most people when they buy a house to do a renovation while they're living in it it sucks the marrow out of your bones yeah that's where the money you ever see that that old movie that was cheesy as crud called the money pit yeah yeah it was an over

dramatization of how most people feel when they do a renovation while they're living in the house it's a very difficult thing to do emotionally to renovate a house over a four or five-year period of time while you're living in it. It drains you. Absolutely. It strains your relationship. It drains your money. You know, you just get tired of dealing with the crap.

Am I wrong? Am I wrong? No, not at all please okay that's that's where most yeah that's where most people when you go into it you go hey we got a deal and i'm kind of handy and i can do this stuff and we'll do it and unless you push on through that in about six months it gets really really old and you're way past the really old part. I'd get out of there if I were you and just get you another place after you get out of that. And you can decide whether you want to do a renovation again this time or not. I don't mind doing renovations.

I've bought a lot of properties that we've rehabbed, but not while people lived in them. And a couple times we've done some pretty massive redecorating. Sharon decides we have to do that every so often. Just shoot me. But it's something she understands and I don't, so we're doing it. But even that level of just stuff being torn up for four or five weeks while they're running paint and putting up new little crap on the wall or whatever it is they're going to do um that drives me bananas just just over a period of weeks but to do it for months or years it's just harsh i wouldn't do it you can do what you want to do but i don't see many people do that successfully hey thank you for the call merry

christmas to you that puts us out of the dave ramsey show in the books our thanks to james childs our producer kelly daniels our associate producer and phone screener. I am Dave Ramsey, your host, and we'll be back. Hey, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. This episode is over, but if you heard about a product or service and didn't have a chance to write it down, don't worry. We list everything that is mentioned during this episode in the podcast show notes section. Thanks for listening.