The Ramsey Show - App - Don't Use Interest Rates to Justify Stupidity! (Hour 1)

Episode Date: April 15, 2020

Rachel Cruze, Budgeting, Debt, Career, Retirement 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. You jump in, we'll talk about your life and your money. Joining me on today's show, Rachel Cruz, Ramsey personality, number one best-selling author, and my daughter, answering your questions with me about your life and your money. It's a free call at 888-825-5225. Some say the advice is worth what you pay for it. Free, 888-825-5225 john is in indiana to start off this hour hey john your question for rachel and i hey i got laid off uh for my job and i was wanting to

figure out where to go from here um right now they are calling it a temporary layoff, but that's all dependent on the economy. The industry that I am in is the auto manufacturing industry. So you work in the factory or what? Yes, I do. Okay. What were you making? Vehicles. I mean, what kind of money? Oh, 60 base worth 60 000 working for toyota

uh yes okay cool all right i've been in that plant that's a nice plant okay very cool well um yeah they're going to call you back. It's just a matter of what you do between now and then. Are you collecting unemployment? Yes, I am. Okay. And obviously, I'm guessing they have not given you any indication as to when they're going to call people back, have they? Correct. Okay. Well, you can make up to half of your unemployment in additional income working a side gig without creating any penalty on the unemployment. If you make more than that, it starts to cause you to not qualify for unemployment in the interim.

But there's lots of side gigs out there you could do right now. Okay. now okay if it was me i would try to fill in my income you know that's lost until they call you back because i think they're going to call you back within a month how y'all doing on stuff like food and lights and did you have any money in the bank and that kind of stuff yeah i'm working your plan i was almost done with it almost done with it your your house is almost paid off yeah awesome man so you got a good emergency fund right correct and you don't have any payments that's good news john well i i think it's pretty assured that toyota is going to call you back i don't know when that will be just like you don't but the chances of toy Toyota shutting down and shutting down that plant even

is very very low so you know I'm going to pick up side hustle add to my unemployment and hang on and let's see maybe what the first of May looks like and if it looks like it's going to be months before you they call you back then you may be up for a career change. But otherwise, I don't think I would abandon that job. That's a good job. Yeah, and I would say, John, you're not in this major urgent sense. Like some people we talk on the show, they literally have no money. They have bills coming in. I mean, it's just they it's in this freak out stage.

And while, yes, being laid off, obviously, is there's an element of freak out there for sure, but the urgency isn't there because you have your emergency fund in place. And so that's the beauty of this is that you can not somewhat take your time, but that it doesn't have to be this stressful because you've planned for an emergency, just like what you're experiencing now. And all these short-term side gigs are temporary. And I think that's what's key for people is we're going to get through this and the decisions and sacrifices we make in the moment today may be things we never thought we'd have to but it's going to get back to normal. Matt I'm proud of you you were ready weren't you? Yes. It's got to feel pretty good. It does. Yeah are you married? Yes yes does your wife work outside the home yes in the same industry oh so she lost her job too exactly wow that's a double hit okay all right well even even with that i'm proud of you guys and i think you guys pick up some

side hustles that you can add to your unemployment to keep from tearing into your emergency fund much and try to live on your two unemployment checks plus some side hustle money that you can make up above that. You've also got the government's $1,200 check coming each coming in, and that should tide you through the month if you just buckle down and, you know, pull back on all your spending. And let's try to get through until they call you back. I don't know when they'll call you back. Obviously, I don't have a crystal ball. But I would be shocked if you're not back to work in May.

There's just almost no cases in your area. And the rhetoric that the government is using on the areas that are not hot spots coming back to work sooner rather than later. I think that'll happen. I don't know what Toyota will decide to do. But in terms of will the governor allow you guys to, I suspect may. There's a lot of data points and a lot of rhetoric pointing towards that right now. And you guys can certainly make it till then because of such a good job, John. Well done, man.

So proud of you. You and your wife versus the people standing next to you in that same assembly line, you know, and they haven't done the stuff. They're up a creek right now, and they're really hurting. And it just changes everything. That's a beautiful plant, done the stuff. They're up a creek right now, and they're really hurting. And it just changes everything. That's a beautiful plant, by the way. Toyota was one of the first companies years ago to furnish financial peace to their employees. And that may have been how he got hooked up with this, by the way.

Many, many years ago I was up, and I got to tour that plant. And I swear you could eat off the floor in there. I mean, it is spectacular. It's awesome. It's a spectacular environment in terms of manufacturing situation. The safety, but also just the cleanliness and how they run the thing. It's an impressive thing. For somebody that doesn't, I don't know much about manufacturing stuff,

so I'm just like a kid walking through there watching all this factory stuff happen. Look at all this stuff. It's so cool, man. that you know that kind of a thing so uh jeremy is in indiana as well hey jeremy welcome to the dave ramsey show hey dave very good absolute honor to be speaking with you guys you too what's up i had a question about a possible refinance i want to get your advice on it. Okay. What's your interest rate? Right now it is 3.625. I built the home just under four years ago.

What would be the purpose of the refinance? There was a mortgage, a special type of mortgage, whenever my house was built that they said I was eligible for, and then they said I wasn't. Well, now I've become eligible for that mortgage type again, and basically along with that and the coronavirus, it's got the interest rate pretty low. They're offering me a 2% at 16 years.

What is the type of mortgage? They are calling a New Hope mortgage based upon moderate to low-income area development. They said at first my neighborhood did not apply for that, but they went back and re-evaluated it per census, and now it does apply. So you can drop your interest rate almost 2%. Correct. It would go down to a 2% at 15 years. From 3.6, so yeah, it's going to drop to 1.6.

Yeah, I'm doing that. If you're going to stay in the home, I'm going to do that. I don't know anything about the special type of mortgage you're looking at, but just on the interest rate alone, you're going to break even on your refinance costs, and I would definitely do it if you're going to stay in the home. This is the Dave Ramsey Show. you know i get lots of questions about id theft since it's a huge problem most people just worry about financial fraud which is a big mistake tax Tax refund fraud, for example, is out of control. Last year, the IRS paid out over $10 billion in fraudulent refunds.

Thieves are stealing your refunds. They're also hacking into accounting and tax preparer firms to steal your personal information and use it for all kinds of fraudulent activities that aren't detected by pricey credit monitoring and prevention plans. That's why Zander's ID theft plan is the only one I've ever recommended or used. They cover all types of ID theft, including tax refund fraud. Plus, they take over the work if you become a victim, your money if you get hacked they even protect your kids for free on their family plan go to zander.com or call 800-356-4282 it's just the smartest most affordable way to go thanks for joining us america this is the dave ramsey show open phones at 888-825-5225. Nevada is on the line.

Cynthia is calling. Hey, Cynthia, how are you? I'm doing very well, Dave. Thank you so much for taking my call. And I want to ask thank you up front. The position that I'm in right now is due to learning how to budget and follow your system. My husband and I live here in Las Vegas. We both got laid off and no fear, really, because we're basically debt-free.

So much so that we would like to know whether or not I can retire and not go back to work when work comes back. We both work in the casinos, so it's a lot of germs there. And we're both in our 60s, and I'd just like to know what you think. Okay. So how much money you got in your nest egg? Well, by my calculations, it should be close to $1.4 million. Okay. And you're in your 60s, and is it invested in mutual funds?

Actually, no. We did something kind of strange with our 401 case. We got together with a company called Equity Trust. Through Equity Trust, we used our IRAs to purchase real estate. Okay, you did self-directed IRAs. Okay. Yes. So are you making enough money off the real estate to live on if you don't work? Well, yes. We make $2,600 a month, or call it $2,500 a month from one house and $1,200 a month from the second house. But that's not your whole $1.6 million. No.

Well, actually, they are IRAs. Between my husband's Roth and traditional, it's about $170,000. Between my money that's in equity trust and... Okay, the money that is not in equity trust in the two houses, what is it invested in? It's still in our 401ks at work. In mutual funds. Yes, in regular mutual funds. Okay, your 401k can be transferred, of course, if you quit, to an IRA.

It can be done as a rollover to an IRA. And the question is simply, if you add up the income off of your money and the income off of the equity trust, do you make enough to live on if you're not working? You should be with that kind of nest egg. That nest egg is including everything we own, and three of them are properties. It's including our house. Yeah, but they should be making enough money for you to live on if you're not working. Otherwise, your investments suck.

Yeah, good point. So if you had a million, listen, if you got a million six and you make 10% on it, that's $160,000 a year. If you make 5% on it, it's $80,000 a year. I'm only making about 4% on the house that we have in California. Okay. So it sucks. It's not doing very good. So the thing is, that's the way, the answer to your question is, can I retire?

And the answer to your question is, do you have enough income coming in, if you don't work, off of your investments to be okay? You should be, or you should redeploy some of these investments, because you've done it. You're millionaires working in the casinos. Well done. Good job. But it's a simple thing.

You want to, you know, a million dollars at 8% is $80,000 a year. Can you live on $80,000 a year? If so, once you have a million dollars, then you're ready to retire, whoever you are listening to Rachel and me right now. Yeah, but with part of the retirement being in real estate that's not getting a good return, waiting a certain amount, a period, and then rethinking the way that the money is attributed in real estate for what you can live off of. The house in California is not doing very well. The cash-on-cash return of 4% on a residential property is not great. And why are you buying houses in California if you live in Nevada,

even if they're inside of a self-directed IRA? And basically what that means, folks, is you can take your IRA money if you're good at real estate. It sounds like she's got a company doing it for her, which makes me suspect, because I don't know anything about the company name she mentioned. But the concept simply is your IRA money can be used to buy real estate. If you're not in your 60s, you can't take any of the money out of your IRA that the real estate makes.

So all the rental incomes just build up inside of that account. And, you know, it pays expenses for the rental, but your net profits on your rentals inside of there, you know, build up and you can't touch them just like you can't touch your 401k money or your IRA money until you're 59 1⁄2 without penalty. And that's what she has done, for those of you listening in. And it's not a bad thing as long as you know something about real estate. Be careful of a company doing it all for you if they put you in houses that make you a 4% rate of return. That's the part of the story I don't care for here that I'm hearing. But the bottom line, hon, is this.

Can you live off of the income your nest egg has created? If you've got a million six nest egg, you should be able to. That's something in your 60s. You did it. Touchdown. You're everyday millionaires. You pulled it off. Well done.

Tyler is in Texas. Hey, Tyler, how are you? I'm doing well, Dave. How are you? Better than I deserve. How can Rachel me help? Well, we've been following the program for several years, and for most of that time, W-2 salaries, easy to budget for a zero-based budget.

We're very well versed. But as of about a month ago no more w-2 income we are 100 self-employed um consulting business doing very well well uh it it's actually uh there's a positive demand due to what's going on oh good well it was great timing sarcasm aside then aside then. Okay, great. Okay. Yeah. But it's very different from a budgeting perspective, right? It's pass-through income from the LLC.

Right. And we don't have a regularly scheduled draw. We don't have salaries set up for ourselves. So we're kind of lost as where do we get started to set up a new zero-based budget to continue to run our household, meet our goals for our household and for the business. Well, is the business making enough to pay you what you need to operate the household? Yes. Okay. Well above, maybe 3x.

Okay. Well, then what I would do is set up a salary coming out of the business that is equal to your your monthly nut at home that you need and then i would bonus the rest as needed you may want to hold some in the business for retained earnings or expansion or buying something or whatever in the business but i would bring home enough to i mean if you're doing 3x maybe 1.5 of that maybe half of that and it sets up as a salary and just coming home and just run your house off of that and let the other stuff lay around the business and continue to

cause this business to skyrocket and then because you don't need the money and then just bring it home when you want to as a bonus item. That's actually how I run this business. Okay. Now, if there's a bad month, how does that come into play? Well, you would use some of your retained earnings to continue to pay your salary. Okay. Because you've got money left. We're leaving money in the business with my formula.

Did you follow that? Yes. Yeah. And then if it gets too much laying around there, then just bonus, you know, you look up and you've got $300,000 laying there or something, and, you know, that's like a year's worth of whatever, then just bonus yourself $100,000, take it home, and do something with it. Invest it, give it, enjoy it, whatever you're going to do with it once you get home with the extra money.

But that's how we do, that's how we run this down here. Congratulations. I'm glad it's going well for you. That's pretty cool. There's a lot of businesses that did catch the wave. I was going to say that aren't thriving, and that could be it, depending on what he's doing, but that's great. He's obviously doing consulting in an area that has a need right now.

Pretty cool. Very cool. 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 GRIPSIX.com. That's GRIPSIX.com. Charles is with us in Texas. Hey, Charles, welcome to the Dave Ramsey Show. Hey, Dave. Hey, Rachel.

Thanks. I'm actually in Virginia, but that's okay. Married actually one month ago, right before the COVID-19 outbreak. Wow. I'd like to publicly say, though, that I've adapted to using we better than my wife. So I'm hoping that she can catch up with me. Whoa, public shaming. That'll work.

That'll work as a newlywed. Yeah. We'll see. I might be giving myself into trouble here. Yeah, I think you just did. But my question is, what type of life insurance should we get? And also, what other important steps should we take now that we are married? That's a great question, Charles.

So I'm assuming you guys don't have any kids. Correct. And how much do you both make? I guess you work both at work outside the home? Yeah. And by the way, we have a dog that is probably worse than having a kid. But we make a combined of about $150,000. Okay.

How much do you make and how much does she make? Um, I am about a hundred and she is about 50. Okay. Well, the way we always look at life insurance is that if someone is dependent upon your income, that's when you need to take out life insurance. So when you guys get to a position that she is going to be dependent upon yours more than likely more so than you are hers at this point. And so running the numbers and saying, okay, to get about 10 to 12 times your annual income. And I would go ahead and do that for

each of you because you are married, even though you don't have kids right now. So for kids, it's a 100% absolutely get life insurance. But when it's newlyweds and you guys start your life, and if you start living your life off of $150,000 and something happens to you or her in that case, you guys are going to need to be able to replenish that income. And that's where life insurance comes in. And you guys, I mean, you sound young. How old are you guys? I'm 35 and she's 32. Okay.

That's great. Well, my husband and I were right about the same age as you all. And we actually just upped ours about two months ago. And I just am reminded with term life insurance how inexpensive it is, like how much you can get, and it's really not that expensive at all. And so to go forward with that, that's what I would recommend. Yeah, Zander Insurance is who we suggest because they shop a bunch of different companies. And I've been having a bunch of interaction with Jeff Zander, the guy that owns that,

that the COVID is actually going to affect rates um particularly older people rates uh and it hasn't yet uh and so uh we may see life insurance rates not drastically go up but we may see a little bump in them for your age group. And if you're 65 or something like that, you may see a pretty good bump. So any of you out there considering life insurance and you're quarantined at home, you're under a stay-at-home order, you're trying to do some things like Charles is asking good questions about planning and that kind of stuff right now i would jump in there right now and get an application in because that locks your rates in on these uh before they you know the before we do see an increase because it may be 30 60 90 days before these companies get around to bumping the rates but they're you know they see stuff like this in the marketplace a covid pandemic and they go oh yeah there we go i mean it's like hurricanes hitting Florida.

You know, six months later, you see two hurricanes hit Florida. Six months later, you see rates go up substantially on homeowners down there. And so that kind of a thing is what we may be experiencing. We're not sure yet, but there's a lot of industry chatter about it. The other thing you can do is, you know, jump on MamaBearLegalForms.com, get your wills done, just tighten up the stuff and going, okay, we're married. I want to make sure she's taken care of. I want to make sure I'm taken care of. If something happens to her, I don't have to go talk to her mother about her car. It's now my wife's car. And so, you know, that kind of stuff, you need to have

the wheels done. And Rachel, the thing that I've watched you all start your lives and your brothers and sisters with their spouses start their lives is when you get the life insurance in place, you get the wheels in place, you know, you do that legacy drawer where you've got all the things in there in a certain drawer in the house where everybody knows what's going on. There really is a. An added sense of peace that goes with that comes from that planning in there. Yeah. And I think it's it's a piece you don't think about day to day. Right. Like if you're just running the race and going, but it's when something occurs or something happens that makes you stop and think, oh gosh, if something happened to him, do I know everything? Like it's moments like that that you realize, oh wow. So it may not be an angst that's high up in your spirit right now, but it's one that you

need to check in and say, okay, yeah, just because it doesn't feel urgent right now, it could be urgent because you never know when something could happen. And so as quickly as you can get these things in place. Yeah. It's not that I'm telling you to do this because of COVID. That's not the thing, or coronavirus. No, but it does bring up a – You have the time on your hands to clean out your closet. You have the time on your hands to clean out your financial stuff

and make sure you've got these things in order. And this is a good time to do your will. It's a good time to do your stuff. Well, you're not doing it out of fear, sure, but I say from personal experience because of covid i've been thinking like okay let's just it makes you ask those questions if something happens are we good and again it's you're not doing it out of fear you're doing it out of wisdom because you never know what could happen and so uh yeah that life insurance that will getting everything organized um again it's just being wise and when there is an angst or something

comes up of thinking oh gosh well what if what if it's all planned out it's all right there and it's like oh that's where the piece comes that you don't realize you need yeah until something happens well even if there's it's just like you know if everything's organized and you know mom knows to go to this drawer everything is in that drawer dad knows to go to this drawer. Everything is in that drawer. Or dad knows to go to that drawer, too. I talked to some guys. I was talking about your mom. Oh, yeah. Oh, yeah, yeah, yeah, yeah. But she knows to do that.

She knows right there. That's where the wills are. That's where the trusts are. That's where all the contact information for the investments is. It's where everything is on the house, the file on the houses, the different properties. And then past that, she knows who to contact. Obviously, your husband, Winston, runs all of our real estate,

so she's going to sit down with him, and she gets a review on that every year from him anyway. She gets a review from our investment people every year on the other stuff, and so it's all dialed in, and it doesn't take a lot of work to stay up-to-date on it and to have that sense of, hey, this is grown-up activities here. We're doing grown-up stuff. Evan is with us in Indiana. Hi, Evan. Welcome to the Dave Ramsey Show.

Hi, Dave. Hi, Rachel. Thanks for taking my call here. Long-time listener, first-time caller, and I've been a Dave Ramsey disciple since I heard your name back in high school. So humbling experience, I believe. Thanks for having me. We're honored. Guys, I have a bit of a, maybe a little bit of a unique question for what you're you hear sometimes. My wife and I are 1000% debt-free. I'm 29. She's 28. We've recently paid off my office building, our home, and all of our investment properties.

And we're in a pretty unique position. We have a considerable amount in savings and investments. And really, our question here is we're kind of talking while we begin to start our family. What now? I mean, what can we do to continue to make ourselves financially bulletproof given that we're debt-free? Good for you. What do you guys do? I'm curious. Being this young and you have an office building paid off, you have rental properties paid off, what's the unique situation?

How did you guys get there? Because that's not a normal 28-year-old life right now. Yeah, I honestly got lucky buying real estate in 2013 when anybody could do it. I own a real estate investment company. I help out-of-state investors invest here in Indianapolis. And my wife is in cardiac medical sales, so she's the sugar mom of it all but um you know we'll we're high you know higher earners and uh we I mean you know aggressively pay down pay down all of our debts and now we're kind of in a position where you know we don't we don't have kids that

you know save for college or anything yet but just want to see what the next steps are and the actual response well there's three things you can do with money you can give it you can continue to grow your investments for purposes of your own use and changing your family tree, and you can enjoy it. And you need to do percentages of your current household income to each. So we set aside our tax money, our tithe as Christians, and then that takes up about 50% of our income. The other 50%, we enjoy some of it, we give some of it, and we invest some of it. And yet I'll always be doing all three. And you decide what percentage you want to do for the rest of that other 50%. 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 fresh books for 30 days free at freshbooks.com slash dave ramsey Chris is with us in Texas. Hey, Chris, welcome to The Dave Ramsey Show.

Thanks. How are you doing, Dave? Hi, Rachel. Hey, what's up? I'm new to your baby steps. My wife and I, we actually just closed on a house today. Congratulations. Thank you.

We saved $10,000 for an emergency fund, and we do plan on paying the mortgage down as fast as possible and putting additional payments into it each month. Um, the only debt we have is on a 0% interest rate credit card, uh, in a 0% for five years. And we do have about 4,500 on it. So my, my question is, is it, is it smart to just pay that off and get rid of it? Or should we just pay them what the monthly is on it and put the additional either towards the mortgage or add to that emergency fund or investment? Yeah. So you guys have 10,000 total credit card is 4,500. Is that what you said?

Yeah. Yeah. Then I would 100% today pay it off, get rid of it, cut it up, get it out of your life, and then use the remainder of that money to start your fully funded emergency fund. So we always teach that after you're out of debt to get three to six months worth of expenses. And so that $5,500 will just jumpstart you guys into your fully funded emergency fund. How much do you guys make a year? I make about $ and i assume that's stable yes or you wouldn't have closed on a house today yeah so yeah yeah yeah so basically if you came to us fresh and said um you know i've got ten thousand dollars in savings i have forty4,500 in debt.

We would say you're in baby step two, clear up all your debts first. And then the baby step three is to build your emergency fund. So what Rachel just told you is exactly correct. I'd pay that card off today, cut it up, get on a budget, get your every dollar budget going where you guys are telling your money what to do. You make good money. And by the way, you've been very responsible. You've done a great job. I mean, you're not calling us up with a big, huge pile of debt coming out your ears, six card loans and a boat loan and four credit cards and a vacation loan and everything else. I mean, you've been

very responsible. So really, all we're doing is taking your really good plan and fine-tuning it a little bit. Okay. Should I be concerned at all? So the one vehicle is in good condition. Another vehicle, it's getting on there in age and mileage. Again, my thing is I go back to, and I know, get rid of the debt, get rid of the debt, get rid of the debt get rid of the debt get rid of the debt but it's zero percent for five years yep so in my mind i i think should i should i just continue to to build up an egg either to take care of the car if it breaks down or but you're saying just i would finish the emergency fund and then i would begin saving for a car and while i start saving for retirement maybe step four is 15 of your income going into retirement, and then you need to systematically in your budget go, we're going to save $500 a month for two years.

That's going to give us $12,000 to buy a car or something like that. I mean, you dream up whatever the number is, but you just put that into your budget and pay yourself a car payment for a period of time or even more than a car payment depending on how fast you want to move up in car. But something along those lines is what I'm going to do, budget and pay yourself a car payment for a period of time or even more than a car payment depending on how fast you want to move up in car uh but something along those lines is what i'm gonna do but you need your emergency fund to be debt free before you move up in car before you buy a new couch before you uh you know paid ten thousand dollars to go on a vacation post corona and all that kind of stuff and so yeah just this is um it's not a uh a devastating amount of

debt it's more like a bothersome item that needs to be cleaned up and if you're not careful you you start using interest rates to justify stupidity and um and oh it's zero percent for five years well that doesn't mean you want to keep it around. It's like I've got a backache, but it doesn't hurt too bad. You know, no, fix the backache. Fix what's wrong with you, and let's get on with it. So, hey, good question, man. We appreciate you joining us.

Emmanuel is with us in Minnesota. Hi, Emmanuel. How are you? Hi, Dave. I'm great. Hi, Rachel. Thanks for taking my call. Yeah, absolutely. Thanks for taking my call. Yeah, absolutely. Thanks.

What's up? So I have the situation where me and my fiance are getting married on Saturday, and we're looking at the Financial Peace University, and we've been following some of your content, really watching a lot of your videos. And I have an extremely irregular income. I do sales for a construction company, so it's all commission. Last year I made $80,000 pre-tax,

and I'm trying to figure out how to budget that the right way because some months it's $15,000, some months it's $0,000, and winter is practically $0,000 from, like, November until March. Yeah, and then you've got coronavirus hiccup in the middle of it. Right. Yeah. Yeah. Does she work outside the home?

What does she make? She does. We're actually pretty young, but she makes, last year she made about 15K. Okay. So how old are you guys? I'm 21. She's 20. What does she do?

She used to work at a bank, but she quit that because she wants to go intern for accounting. Oh, good. She's studying for accounting right now. Okay, so she's got a game plan to get her income up. Right. Good. Very good. You guys are on fire. I'm proud of you.

Good stuff. Thank you. Thank you. Well, first thing is we're going to give you Financial Peace University as our wedding gift. Oh, no way. We want you guys to go through it and have a year membership to be able to continue to do and look at the videos and learn everything. Man, if I'd learned that at 20 and 21 years old, I would have been a freaking genius by now. And so we'll give you guys that and get you started.

And then, Rachel, what do they do with their regular income? Yeah, well, I would say, number one, congratulations, getting married in the middle of COVID-19. So I know it's a small – Some memory. That's two in a row. It'll be a small wedding. Oh, I know. That's right.

That's right. The other one did, too. Yeah, so what you've got to do is, yeah, what you're saying is you just have to plan. And so when you're making more of your $80,000 in certain months, you have to be very diligent to set some of that aside to say, okay, that's going to go into savings. And in the months that is zero is what you're pulling out of savings. So it just takes a level of intentionality. And like, even for me, I'm on mostly commission. And so mine is very seasonal as well. Summer and, you know, I have seasons of the year that I'm like, yeah, I'm not making as much other seasons I am.

And so I do have to be very, my husband and I both, we talk about it and we have to be very, very specific with, okay, we're going to set some of that aside because if we need to pull anything during those low months, we have the cash to do it. So it just takes a lot of diligence in the planning process, but it is still possible to budget even with an irregular income. And on the months that is low, I mean, I would even encourage you guys to make sure your four walls of course are covered and everything else, but you will have to prioritize because there may be a month that you're like, you know what? We're going to cut some things out of here just because it is a lower month. We don't take as much out of savings.

So you'll see it kind of shift your spending patterns as well. And so that's really, really important to watch. When Sharon and I were first starting this budgeting stuff, we were living like you guys are living. I was doing real estate deals and I had nothing or $20 in a month i mean it was extremely volatile not just mildly volatile and that's what you're describing here um so what we learned to do was separate from the baby steps not counting your emergency fund not counting your normal baby step process we set aside a different savings account and it's a dumb name but it's the only name we could come up with. We call it the hill and valley account.

The hills are when the really good month and the valleys when it's really sucky month, right? And so I needed to be able to cover with the good months, cover the bad months. And so we set aside some money. So let's just pretend for a second. You do your budget and you figure out i need uh three thousand dollars a month that's thirty six thousand dollars a year out of your hundred thousand just to make my bills okay and and and the chances of me having two months of zero are almost zero i mean two consecutive zero months are very unlikely. And so I'm going to set aside $3,000 in a Hill Valley account in case I had a down month or a zero month.

And I can at least make my monthly amount. And then past that, I'm just going to use my income to work the emergency fund. Now, if you think two consecutive months of zero are possible, then your Hill Valley account would be $6,000 in our example. I don't know whether $3,000 is the right amount, but that's an example. But if you set aside and say, we can make our monthly bills with $3,000 a month and the chance of having more than one month of zero is zero, so we're going to do one month. Or we're going to do two months because that's know, that's the most it could ever be.

And that's not your emergency fund. That's a separate account from emergency. That's to cover the volatility in your income on the valley months from the months when you're on the hill. Again, dumb name, but it's all I could come up with. That puts us out of the Dave Ramsey Show in the books. In the middle of these uncertain times, Ramsey Solutions wants to give you some hope. For the very first time ever, we're giving you Financial Peace University free for 14 days.

Go to DaveRamsey.com slash hope so you can watch from home.