The Ramsey Show - App - Don't Just Move Debt - Get Rid of It! (Hour 2)

Episode Date: May 5, 2020

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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. Open phones at 888-825-5225. That's 888-825-5225 that's 888-825-5225 chris is on the line in ohio to start off this hour hey chris how are you i'm doing great dave god bless you i love what you do i've got a question i know it's bold because i want to see if i'm an exception to the rule okay i'm on baby step two. I've got a household income of 200,000. Debt is 30,000 student loan. That's all I've got. I've got 15,000 in cash and here's the rub. I want to see if it makes more

sense for me to use that cash for closing costs on a refi because I'm in real high property taxes. So I think I'm going to need some cash to refi, but I know I can go from a 30 to a 15 and either maintain or reduce my expenses, but I don't know if that's an exception to the rule or how I should be thinking about this. Okay. The property taxes being high would not affect your need for cash except for prepaids, and all of that can be rolled into the refi if you've got equity or you don't have any equity? I don't have much. My house was a $335,000 mortgage.

I'm down to $310,000. Okay. What I would do is discuss it with the mortgage company. If you can roll the closing costs and the prepaids into the closing, I would do that. Is that something that's fairly regular? But I would not come out of pocket for cash. What's your current interest rate? Four and a half. Okay.

Yeah, you can probably get a three on a 15-year roughly right now. And so I'd save a point and a half, which is going to be like $4,000, $4,500 a year in savings on the interest. To move from a $30,000 to a $15,000, I wouldn't refinance, but to move from a $4,500 to a $3,000, I surely would, especially if you're going to stay in the house. You know you're going to stay in the house, right? It's my dream house. Okay. All right. Cool. So what I would do is roll your closing costs in, and then that doesn't change your cash position at all.

All it does is change the structure and get you a lower interest rate, and then you take that cash and use it to get the half of your student loans gone and use your fabulous income to knock them off. So otherwise, if you can't roll it in, here's what I would do. I would not do the refinance right now. I would first get rid of the student loans. I know that that's going to be fairly easy because you have $15,000 in the bank towards your $30,000, and you make $200,000.

So you should be debt-free by September and then refinance. I mean, rates may tick up a little by September, but they're not going to be substantially different. It's probably still going to make sense to refinance in September, probably similar numbers. I don't know how long these rates are going to stay. They're artificially low right now probably. That's my thought anyway. So, yeah, I think the environment, the economic environment,

has driven the rates down with the Fed dropping rates and so forth as well. So anyway, all that to say, I think you're pretty safe. You might get a three and a quarter in September or something like that, or even a three and a half, but it'll still make sense to refinance. And I would wait if you have to come out of pocket with cash until you clear the student loan. So overall, the answer is you're not the exception. Good try, though. Matt's in Colorado. Hey, Matt, welcome to the Dave Ramsey Show. Hey, Dave, thanks for taking my call.

Sure, man, what's up? So kind of an extension on the small business hour, my dad runs his own consulting for a very, very specialized field. And with all the stuff that's going on, my mom is worried about estate planning and has asked him over and over to help share the books and help track down his inventory so we can see what it costs. None of us kids are specialized enough to be able to take over this business. So we know it's going to be liquidation once he's,

once the business is over or if he passes so i was wondering if you had any advice on how we can get him to take the steps to open the books to us as his kids or even a mom just so that we can help protect everybody's future and especially my mom if something were to happen yeah well people are just weird about this subject sometimes your dad is one of them you know they just it's like i've had people actually tell me matt that they don't want to do a will because they think it'll cause them to die i mean people are just whacked about this it's almost like admitting your mortality to plan for your death, you know? Uh, and so, um, uh, there's something about that psychologically. So what I would do is, uh, do, uh, you know, coach your mom on saying, honey,

I really need to know this stuff. It scares me that I'm ignorant. It scares me that I'm in the dark. And then you, you could sit down and come alongside in a separate conversation and say, dad, it was be an act of love to mom for the stuff to be cleaned up and very clear. I don't want any of your money, but I do want to make sure that I execute as your son, your wishes and that mom is taking care of. So help me do that. Show me enough about what's going on just so I can do what you want me to do when something happens because you're going to die. Right.

And doing this is not going to hasten your death. Absolutely. So what I figured out was I didn't have the problem of i was being bullheaded about it i had the problem of it was always something i would do tomorrow i just procrastinated on taking care of estate planning stuff and i finally figured out it was one of the greatest ways i could say i love you to my wife is to have a really thorough, detailed plan that's well thought out with good legal advice and all of it's documented, and so she can go to the legacy drawer, the drawer in our house that has everything in it, you know, in my office.

It's got the papers for the house in it. It's got the, you know, all the trusts are in it, all the wills are in it, who to contact, an outline of the assets, and she knows exactly who to talk to about the real estate. She knows exactly who to talk and gets a review on it once a year, knows exactly who to talk to about the mutual funds and gets a review on it once a year, knows exactly what's going to occur with Ramsey Solutions and gets a review on it once a year. And she really is not interested in the details. But I just didn't want her to not know what is going on and not be able to handle it if something happens to me.

And over the years, it's gotten to be a joke. The whole thing's planned as if I pre-decease her. So apparently she's planning something. But, you know, joke around about it a little bit, but when I couch it in my mind and even to other people that it is an act of love, and as a Christian it's an act of stewardship, it's good management to have the proper life insurance in place, a will, a good, the details on the business.

So, and what, you know, if you'll call Joe, he'll buy this thing, and so the liquidation part starts to be easier, right? That kind of stuff. And so usually if your dad is a person of faith, if you couch it in the stewardship scenario, that it's managing God's assets that he allowed you to manage well to have the next manager lined up and informed. Secondly, it's a way of saying I love you to your family. It's an act of diligence to have a will in place and to have everything detailed out.

You don't have to obsess about it, but it is good management. Business leaders, now more than ever, we need people with the right skills to support our communities, especially the frontline workers who provide resources and care for those most in need. To help, LinkedIn is offering free job posts for healthcare and essential service organizations that need to quickly fill critical roles with the people who help us all. If you are hiring for one of these organizations, free job posts on LinkedIn can help you quickly

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Hey, Roderick, welcome to the Dave Ramsey Show. How can I help? Hey, Dave, thanks for taking my call. Sure. I have a small debt on my car of $2,100, and I'm on Baby Step 2 with $1,000 in my savings, and I was just wondering if I should use that emergency fund, that $1,000, put it towards my car,

and when I get paid again, put and finish it off, or should I just keep that $1,000, put it towards my car, and when I get paid again, put and finish it off, or should I just keep that $1,000 there and just keep following through the baby steps, or just get rid of it? Well, the reason we tell you to keep the $1,000 there is because we're afraid something will come up and you'll have absolutely no money. And so the $1,000 is not much, as you know. It's not enough of an emergency fund. That's just a starter, beginner emergency fund just to give you a little pad. Having zero pad, I wouldn't want you to be there. I would be scared for you.

And so I'm already scared for you with only $1,000, right? I'd like for you to have $10,000, but, you know, for now, baby step one is $1,000, and then we'll move on and get out of debt. But I wouldn't use that $1,000 to pay off your stuff early. Just fight your way through the car. You're almost there, man. You can do it. And then once you're debt-free of that, then build up the $1,000 since that's your only debt.

But, no, I wouldn't take yourself down to nothing. I just think it's too many. I mean, any little thing that happens, then you're going to have a problem. You know, you're going to really be in a mess. I mean, a $200 alternator goes out in the car, you blow a tire, you know, you're going to be in a mess, any little thing that happens. So no, I wouldn't do that, hon. Charlie's with me in Texas. Hey, Charlie, how are you? Hi, Dave. It's a pleasure to talk to you, and thanks for taking my call. My pleasure. How can I help?

Well, thanks to you, I've recently retired from my corporate job, and I'm ready to start my own venture, my own business. And I have the money set aside, but I don't know if the first step is to go out and get legal counsel to set up the tax structure and, you know, putting the money into a business account so that I can start my due diligence into the two ventures that I want to get involved with. And I really just need some baby steps because I've never done this before. No, I wouldn't open up an LLC or S-Corp until you're very, very profitable, unless you have substantial personal assets. What's your personal assets? Are you a millionaire?

Yes, sir, I am. Okay. Well, you may want to open up an LLC then. The purpose of that is not to get the business started. It's merely if you do something in the name of the business that gets you sued and causes you to lose some of your personal assets, then you would have protection against that if you're operating in the LLC. Okay.

So, yeah, go ahead and open up an LLC, and you'll order a tax ID number and the tax from the feds, from the IRS, and then I think you can get it online in 20 minutes now. And then you'll just use that to open up your checking account in the company name. And then everything you execute, sign it not as yourself, but as the president or the chief manager, some states call it, of the LLC. You do all your business in the name of the company, not in the name of Charlie. Okay, okay, very good.

Yeah, that's what I was concerned about is I really want this to be a completely separate entity, and I wanted to have some insulation between my own family finances and this venture that I'm about to take on yeah i no longer own anything i don't own any of my cars i don't own my house i don't own this business everything is in an llc a sub-s or a trust and uh so long time ago because you know then whatever that entity is if it has a problem, then it gets sued. You can sue me, but you'll lose on that part. And besides that, I don't own anything except all those entities.

But the point being that that's just a risk mitigation, a risk management scenario that you're wanting to do there. And you can go ahead and give your business a name that way, and then you just keep all your, even the financial transactions, all go through that checking account only. Don't deposit income from that business into your personal. Operate it like you're running it for someone else. Right, right. Okay, perfect. That's exactly the advice I was looking for. And I just, I can't thank you enough for letting me be in the position that I'm in. Congratulations.

How old are you? You're awesome. I just turned 55. Cool. And what kind of businesses are you going to try? I'm going to try one e-commerce venture, and then the other one is more of a, not quite a brick and mortar, but it'll be a business equipment rental, which will have an e-commerce part to it. So I'm pretty excited.

They've been on my list since I've been, you know, paying down my house and finally got that done. And my wife and I are out of debt, and I saved enough money to start a business and to quit my job. Well, congratulations, Charlie. Hang on. I'm going to send you a copy of the Entree Leadership book, our playbook for Ramsey. This is how we have grown and run this business from a card table in our living room to where we are now. So Kelly will pick up and get you a copy of Entree Leadership.

Open phones at 888-825-5225. Bethany is in Pennsylvania. Hi, Bethany. Welcome to the Dave Ramsey Show. Hi, Dave. How are you? Dave Ramsey Show. Hi, Dave. How are you? Better than I deserve. What's up?

So I have a couple questions regarding student loans. My husband and I have been talking about whether or not we should refinance my student loans. I have a little over $62,000 and two of those are federal loans, one of them being the largest that I have. And because federal student loan interest rates are at zero right now, we're trying to figure out whether now is a good time or if waiting for a different time is better. Yeah. If they cannot give you zero on the refinance, I would wait until that time has run to do the refinance.

And you can check with Splash Financial. They're one of our advertisers, and they're a wonderful company for refinancing the federal student loans. But there's some question in the air right now, and I don't know the answer to it, is if they are on a refinance able to offer you zero interest through the same period of time. But obviously you would want to take the free interest

and then take the reduced rate whenever that goes away. Now, what's your current interest rate on these? So the two federal, like I said, are zero, and then I have two federal. No, no, no. When they're not zero, what are they? Oh, they're between 7% and 9%. Okay. You're going to want to refinance those with Splash.

The other one, the private are very difficult to refinance. They're problem children. But those you can get with Splash, and I don't remember, I think it's a four rate or something like that right now it's running. But even four is more than zero. So we would definitely take advantage of the zero and then do the refinance when that period runs out. If Splash hasn't figured out a way to get that through with the feds and everything.

I don't know where they stand on that exactly. Open phones at 888-825-5225. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee. Even if you mismeasure or you pick the wrong color, they'll remake your blinds for free. Free samples, free shipping, new promos they run all the time. You'll save even more. The promo code is RAMSEY.

Lori in Delaware says, Dave, soon I will be receiving checks from my kids' colleges for room and board reimbursement after the COVID shutdown. Am I obligated because of taxes or for any reason to put that towards my parent loan, or should I pay it into my debt snowball? Make sure you've got the money to pay their college next fall. If they are seniors and they're graduating and this is clear money, then I would throw it at your debt snowball. No, you're not obligated from a tax standpoint to put it towards your parent loan. Your parent loan should be in your debt snowball, though, and you're obligated from a tax standpoint to put it towards your parent loan. Your parent loan should be in your debt snowball, though,

and you're working it that way whenever you get to it. But rule number one is take on no more new debts. I want to make sure you're ready for them to go to college next fall. That's the big deal here. Once you've done that, then the rest of it would just be wherever you land in the debt snowball. So, hey, good question. Thank you for joining us there.

This is the Dave Ramsey Show. Business leaders make your life easier with FreshBooks. Whether you're starting a business or you've been at it a long time, FreshBooks is one of the smartest decisions you'll make this year. FreshBooks is an accounting software designed for people like you that lets you do the things like automate your invoicing and your online payments. So you get more time to work on your business. Try FreshBooks for 30 days free at FreshBooks.com slash Dave Ramsey. so the dow jones industrial average got almost to 30 000 or did get to 30 000 down to 19 back up to 24.

So it's been a rough year. And I've been yelling and screaming and flopping around telling people, do not cash out your 401k. Don't freak out because of the coronavirus and cash out your retirement. I feel like I've said that 9,000 times in the past month. Probably have, considering her. Ramsey personalities have done almost 400 media hits in the last 45 days, just to give you an idea. Do not cash out your 401k,

unless it's to avoid a bankruptcy or a foreclosure, and most of you are not there. The government did pass a stimulus bill in March March which lowered the 401k early withdrawal penalties. But do not cash it out. The only time you should ever think about it is, again, if you're facing a bankruptcy or a foreclosure. And you are not facing either because of coronavirus. In 30 days, you don't get to foreclosure. In 30 days, you don't get to foreclosure. In 30 days, you don't get to bankruptcy.

You are already there if coronavirus. And a coronavirus may be in the straw that broke the camel's back, but you're not facing it because of this. You may be in a pinch. It may be tight. You may be scared. I get that. I understand that.

Be concerned. You may be penitent. You may be scared. I get that. I understand that. Be concerned. You may be penitent. You may be worried about the stock market. Listen, the stock market is fine. The American economy is fine. You're going to make money over the next 10, 20, 30 years. Whatever time you've got to invest, leave it alone. If you've already withdrawn your 401K,

you can still put yourself on the right track for retirement you can fix this before the market comes back up especially that way you don't buy you don't sell low and buy high you don't want to do that your first step is immediately get in touch with a financial advisor who isn't afraid to tell you the truth. They'll be kind, but they're going to tell you you were stupid. I'm not going to be as kind. But if you need some help with your investing and you need someone in your corner to go to, we have a network of people that we have vetted.

They do not work for us, but they give advice the way we teach, and they always do it with the heart of a teacher. Go to DaveRamsey.com slash SmartVestor. They're called SmartVestor Pros. Click SmartVestor at DaveRamsey.com. Fill out the information. It'll drop down a list of the SmartVestor Pros in your area. You pick which one you want to deal with.

Or you can interview two or three of them. I don't care. Won't make me mad at all. And that way you've got someone in your corner and it is their job all day long to help you with this i don't pull my own teeth i don't work on my own cars anymore i used to because i was too broke to do anything else but the the thing is you can get help with your investments and help you understand it, and you'll be in a position to win like you've never won before.

Smart investor. Click it at DaveRamsey.com. Frank's in Florida. Hey, Frank, how are you? Hi, Mr. Ramsey. How are you doing? Better than I deserve, sir. What's up?

All right, so I've got a very odd situation. I just want to say I'm one of the most fortunate people in the world. My father is a great man. He has put together a business, computer software stuff. That's his primary income. He's also, for tax purposes, set up a palm tree farm, which I've grown up on running machinery and selling palm trees and stuff. He decided that we needed a new machine,

and part of the gig is I have to uh pay off part of the machine by selling work and doing side you know side work at this point from the truck trailer and machine we purchased at 150 000 and the truck is way more truck than i need it's a $75,000 truck with insurance for six years, uh, included in that price. And, uh, I'm 24 years old starting a business. I was making 24,000 a year. I've cleared about 45,000, uh, profit this year, uh, in my pocket and then paid my father, uh, of the 50% profit in the business, 25%, I take 25%. And, uh, I'm just looking for some advice as far as downsizing. I don't want to finance a truck, but if I could purchase a truck, I've got 10,000 in my bank account. The truck I could get for 10,000 wouldn't be safe to pull the machine that I have. All right. I'm a little bit confused.

Whose business is this? It's my business. We bought the equipment for my father's business, but we bought a bigger and more expensive machine than my father needed on the back of me being able to sell jobs. I've sold about $80,000 or $90,000 worth of work in my first year of business. I'm sorry. Sounds like you both are in the same business.

Are you? Yeah. Okay. So is he active and he owns the palm tree growing business, or do you own it? Yeah, but he runs it. Or you have two separate palm tree farms. You have your own farm and he has his own farm? He has a farm, and I run the farm practically.

He does computer software. He made an ERP system. I got that part. I'm talking about the farm because you're not in the computer software business at all. Nope. Okay. No, sir. So he owns a palm tree farm and he lets you work on it?

Yes, sir. But you are on the hook for the debt and you're an employee? Well, the truck is my primary truck. I daily drive the truck. Yeah, but you wouldn't have bought that truck as a daily driver. You bought it for his business. Yes, and there's also, I can give the truck back, but I'm going to pay for what I've used on the truck.

You know, it's absolutely fine. Give it back to who? I worked on that deal with my father. He bought the truck cash out. Okay. I'm looking for advice. Okay, this is really confusing, Frank. I'm sorry.

I'm sorry. I apologize. I'm having trouble tracking with you here. So why would you have a truck with payments on it for someone else's business? It's for my business. I'm starting the skid steer construction side of it. I do land clearing, grading, stuff like that, and that's where I've pulled in 80 grand over the last year. So you have a separate business from the palm tree farm?

Yes. Oh, I didn't get that. Okay, that's why I was confused. So you have your own business, completely separate, that you own. Yes, but I use my father's machine, and I pay an hourly rate on the machine. Okay, so you're renting his machine, and you're paying for, and you're renting his truck while you're driving it for personal use as well. Yes, we've gotten to a year.

Okay, so you made $80,000. What does it cost to pay off the truck and own the truck to pay off the truck and own the truck the purchase price was 63 000 and then on my father's insurance because i have to have for this uh for the certain weight of the machine the truck and trailer i have to have a specific truck that can pull that uh for legal it doesn't take a 60 000 truck to do that does it no it doesn't and i'm i'm trying to figure out should i buy a truck cash with the 10 grand that i have that won't pull the machine not legally a truck that will legally pull it uh is 26 000 but i don't have that and i'm just looking for some advice i got you as far as

downsizing. I can pay off the truck that I have. Let me ask you this. Your dad bought this truck for use on his farm, and he's allowing you to use it for your business as well, and you're driving it. Do I understand that correctly? He wouldn't have bought the truck. I know. He doesn't touch the truck is my point.

So would he consider selling his truck and buying a cheap truck, a $26,000 truck, that will do the job and allowing you to buy that from him instead of the $65,000 truck you buy from him? Yes. Why don't we do that? And you've got $10, ten thousand of that money and then you could turn around and knock the other 16 out right quick i can give him instead of selling the current truck that i have he has offered to take ownership of the truck and i just need to pay off six thousand or seven thousand for the use of it for a year because i didn't put too many miles on it

and i took really good care of it. Okay. But then how are you going to pull your equipment? My father would be able to finance me the $26,000 truck, or should I just use that truck until I can save up? I think you need to get out of this truck. It's like four times more truck than you need. So, yeah, you need to get down to the $26,000 level, and that way you're going to get out of debt faster. I think I got my head around this.

It was a little confusing. I'm sorry. This is the Dave Ramsey Show. Folks, I love telling you about well-made, well-thought-out products. Today, I'm talking about Grip6 belts. I don't know about you, but I'm not a fan of traditional belts. They never fit right, and they're uncomfortable. Grip6 belts are unique. Owner BJ designed a truly modern minimalist belt made of high quality materials with no holes, no flap, and no bulk. And the buckles come in really cool designs and are interchangeable. I personally own these belts in different styles and talk about affordability grip six belts come with a lifetime guarantee

and that means if you no longer like or fit the style of your belt you can replace them for free plus i like the way these guys do business grip six is determined to help build and modernize american manufacturing to learn more and get this month's Dave Ramsey special, visit Grip6.com. That's Grip6.com. We'll be right back. My husband is 26 and I'm 25. We have a one-year-old daughter. Back in January, my husband's grandmother passed and she left us a $50,000 inheritance that we just discovered last week, I would say. We were starting to budget, but we're kind of unsure as to how we should allocate the funds. We have a little less than $10,000 in debt. We were wanting to obviously save our $10,000, my $10,000, sorry, 10% for tithes and then just a few other things. But we weren't entirely sure,

like if we're wanting to set up, you know, like a plan for our long-term for our future, how we should best allocate those funds. And so I just, I want to know what your advice is on that, especially because we are so young and we're just trying to be as wise as possible with this inheritance, with our legacy. Thank you for your wisdom.

I appreciate that. And his grandmother, your grandmother, whoever it was, appreciates that. That's how she ended up with enough money to leave a grandbaby that much money. So well done. Well done. So we teach a process for how to handle money and hit your goals that is progressive, and we call it the baby steps. So baby step one is to save $1,000.

Do you have any money saved other than this $50,000? We actually, we're kind of familiar with the baby steps. We've actually, we have about $10,000 in our account, savings account right now. How much debt? You said you had $10,000 in debt. Well, we have, it's about, it's kind of complicated because I didn't want to pay my medical bill because our hospital was charging us twice as much when our explanation of benefits from our insurance was telling us

that it wasn't that much. And I tried to fight it for about nine months and eventually it was sent to a creditor. And we're looking into getting a lawyer to possibly fight that amount, which is why I've kind of been hesitant about paying it. I wouldn't pay it. I wouldn't pay it. It's in dispute. Yeah. So you've got the money sitting there to pay it, but you're trying to get the dispute settled. Right, right. Yeah. You need to get a lawyer yeah okay so that's one thing so then you would be debt free right right okay so if we if we said you had ten thousand dollars in savings and you have a ten thousand dollar bill in dispute that might be five plus a lawyer fee? You're going to spend some money to protect your rights here. But, you know, you're debt-free then, right? Right.

If we look at it that way. Then you would have an emergency fund as baby step three, three to six months of expenses. What's your household income? I'm a stay-at-home mom but my husband works about forty thousand dollars a year um okay as of right now that's about where it's at okay and so if we said your expenses were three thousand dollars a month you would need three to six months of expenses on that so that's nine to eighteen somewhere in there so you know you could park 10 more as your emergency fund and be pretty safe in your situation. Agreed? Right, right. That leaves

us 40, and that takes us to baby step four, and you need to start saving 15% of his income, which doesn't use any of this money, but you need to set up and start saving 15% of your household income into retirement so that you have some. If you want to pop a little bit of this into a couple of Roth IRAs and get all that started, you could do that. $6,000 each would be another $12,000. That would be $22,000 we're at, $10,000 in the emergency fund, a couple of Roth IRAs. You said you had a one-year-old.

While you're meeting with a SmartVestor Pro to do the two Roth IRAs and some mutual funds, go ahead and put about $10,000 in juniors college fund in a good 529 in a mutual fund okay uh and so now we've used up 32 of the 50 walking the baby steps that was baby step five college right you're going to set that up to also be adding to it monthly as you go along i think you ought to allocate you're going to set that up to also be adding to it monthly as you go along. I think you ought to allocate, you're going to allocate some to generosity, you said, tithing. And you're going to, I think you ought to allocate some for fun. Okay. And we might do, if you're going to do a tithe of five, you might do five for fun as an example.

That puts us at 42. Do you own a home? We do. Okay. Which brings us to baby step six. So if you spent five for fun, you gave five, you put 10 in an emergency fund, 10 in your baby's college fund, and 12 into a couple of Roth IRAs. You following me here?

I'm spending the 50. I'm investing it. I'm giving it. I'm enjoying it. It's all going away here. That leaves you about $8,000 to throw towards the house. Now, you can do whichever one of those things you want to do. It's your idea. But when you ask me how to do it wisely, it's I'm going to walk you right up the baby steps, which is what I just did. So I'd get on the phone with a SmartVestor Pro and get an appointment about your kid's college and getting a couple of Roth IRAs going. I'd set aside $10,000.

I'd get on the phone for a lawyer. Don't let this lay around in collections. Collectors do not have brains, by and large, and they are not going to help you with this situation. It is not going to be resolved until you and until you punch the hospital in the nose and get their attention or you have an attorney do it so you're going to get that solved be very proactive on that be proactive on getting your retirement going be proactive on getting your kids college going be proactive on setting up the money market account to put 10 000 in as your emergency fund you may want 15 in your emergency fund. You may want $15,000 in your emergency fund. And you may want to spend $8,000, in which case the money's gone if you did that.

So we spent $8,000. We gave $5,000. We put $15,000 in the emergency fund. That totals $50,000. So either way, just put $50,000 at the top of the page and keep working those numbers until you get to the bottom. And every dollar then has an assignment as if you had a budget, but it's all about walking up the baby steps

and starting to accomplish some of these goals and get these things rolling for yourselves. Maybe there's something else out there that you need to do. I don't know. But that's how I would look at it is to go ahead and lay out a game plan because I guarantee you this. If you just put it in your checking account, you're going to look up, and it's going to be gone, and you're going to wonder what happened to it.

And, oh, we wonder what happened to it. And, oh, we've got a new couch. Oh, we went on a trip. And it'll get away from you. So you need to have a budget for it, a game plan, an assignment for every one of those dollars. Raymond is with us in D.C. Hey, Raymond, welcome to the Dave Ramsey Show. Thank you, Mr. Ramsey. Thank you for taking my call.

Sure, what's up? I have a question about a house I own, but there's a couple of other components of information that would be helpful to share. I've been married for about a little over a year. My wife and I have a new baby. Yay. Yeah, we're excited. It's a Zachariah. And when we got married, we brought together our incomes, obviously. We're earning about $120,000 combined, but we also bought in savings and debt. Our savings is at about $58,000. Our debt is at about $60,000, student loan and a car and some credit card debt. I have a home with a balance of $150,000. It's a 30-year fixed at 4%. And the value of the house is about a half a million. And so we're wanting to refinance with a 15-year. That will keep us even below our 25%.

But we're trying to make a decision on the debt and the cash that we have. We also have $100,000 in the IRA, and then we have $58,000 between checking and savings. That includes our emergency money. So we're just trying to determine as we're going to refinance to a 15-year 3%. Good. But we're trying to determine what to do with that debt. To roll it into the mortgage? Oh, no, no.

We need to get rid of debt. We don't need to move it. Okay. Moving it doesn't get rid of it. Right. That's an illusion. Okay. The P is get rid of it. Right. That's an illusion. Okay. The P is still under a shell.

Right. And so your shortest path to wealth is zero debt. Moving it doesn't get us there. Okay. And so if I'm in your shoes, I'm going to take $57,000 and throw it at the $60,000 worth of debt. The next month with your $120,000 income, I'm going to be debt-free. And the next month, I'm going to begin to rebuild my savings from $1,000 up to a fully funded emergency fund of three to six months of expenses. I'll roll the closing costs only into the refi and go ahead and do the refi

at 15-year fixed rate, which is a great place. So where are we then? You're going to have an emergency fund fully funded by Christmas, be 100% debt-free except your home, which is on a great rate and on a 15-year. And you've got a new baby. Life is pretty good when you do it that way. This is the Dave Ramsey Show. In the middle of these uncertain times,

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