The Ramsey Show - App - Don't Wait 10 Years to Climb Your Mountain of Debt! (Hour 3)

Episode Date: May 29, 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. Thanks for joining us, America. We're glad you're here. Open phones at 888-825-5225. That's 888-825-5225. Stacey is with us in Detroit, Michigan, starting off this hour. Welcome to the Dave Ramsey

Show, Stacey. Hi, thanks, Dave. It's an honor to be able to talk to you. You too. What's up? About four years ago, before we started your program, my husband and I purchased a couple of rental homes. We put 20% down on them, and then we financed the rest on a 15-year mortgage. About four years, we finally found your program, and we've fully embraced it. But we're just about to finish paying off all of our debt, except for those two rental homes.

And I'm kind of trying to figure out where that fits into the whole plan. Is it something that we should include in our debt snowball? No. Or is it something that we can pay off after we do our savings and everything else? It would be baby step six. It would be baby step six. Yeah. We pay it off with our own mortgage.

Yeah, pay off your real estate, all real estate, your personal mortgage, your any rentals, that kind of stuff in baby step six. Okay. We put real estate your personal mortgage or any rentals that kind of stuff in baby step six we put real estate there so you have a mortgage a home mortgage as well right yeah we own a home as well okay all right and what's your household income um last year was just under 180 oh wow you're killing it good for you what do you guys do yeah um well i'm a stay-at-home well Well, I'm a stay-at-home mom. I have a couple little businesses I run on the side. But my husband works for a startup electric vehicle company here in the Detroit area.

Okay. So he's doing well. Good. Very good. And obviously your startup businesses aren't slouching either. So good for you. No. No, yeah.

We work hard. But at the end of the day, we never had any money left over, which is what made me take a second look at you, because I was sick and tired of being sick and tired. Good. So what do you owe on your mortgage, your home? Our mortgage on our home, we owe about, I think, about $280. And what about the rentals?

The rentals, we owe about $60 for both of them. Okay, all right. I'll probably knock those out before I knock out the house, and the reason I'm doing that is they're very small in ratio to your household income. Okay. You can pretty easily knock out one a year. Yeah. You know, if you just lean into it, right? Once you get to that baby step, I mean, you got other debts you've already cleaned up

or what? Yeah, we've gotten most of our other stuff cleaned up. We paid off our student loans years ago. When we made the same money, we invested in these houses, which was nice. But we just made some dumb choices. So we had some credit cards, and we paid off our cell phones. Okay. Are you debt-free now except for the homes?

We would be except that we ended up owing on our taxes. So by the end of the month, we should be debt-free. Okay. And then you'll have to make sure your emergency fund is placed, and then you'll start putting 15% of your income away, and then you'll start your baby step six. And in 12 months, I think from that point, which is probably 18 months from today, you would have your first rental paid for.

Okay. And 12 months after that, the second rental paid for, and then it's going to take about three or four years to knock out the house. But that's a very, very reasonable schedule, and you make really good money, so you're going to do great. Congratulations. Well done. Oh, thank you. I wish it always felt like we were doing great, but now that we're sitting on a budget, it's a lot easier. Now, that's assuming, of course, you want to keep the rentals, do you? I think we do, yeah.

I mean, it's something we want to do as part of our portfolio, our retirement portfolio. I like rentals, but it's just some people, you know, if they're driving you crazy or something, then we're not going to force you to keep them, you know. No, they don't bother us at all. I just wasn't sure when I needed to get them paid off. And I know you say to always pay cash for rentals, but we did it before we opened the light. See, when your house is paid off in like four years from now and all the rentals are paid off, you're going to have cash everywhere, and you'll be able to save up and pay cash for a rental really fast.

Yeah, that would be really nice. I mean, you could buy a $100,000 rental every year and a half or so pretty easy. Okay, that would be great. Yeah, you can buy a $100,000 rental every year and a half or so pretty easy. Okay. That would be great. Yeah, you can build a really nice portfolio. And every time you buy another one, all that rent. See, when you don't have any payments on those rentals, the cash flow is astronomical. Yeah, of course.

Yeah, it's wonderful. Yeah. You just make different decisions then with the rentals. It makes your real estate much more enjoyable it really does dimitri is with us in lexington kentucky hi dimitri how are you hey dave thanks for taking my call sure what's up hey so i uh i got a few questions for you i hope i don't take up too much time um but i'm pretty new to your whole debt-free thing. I first heard you on YouTube, and then me and my wife, we decided to try to get rid of our debt,

but we never really followed your steps because I don't even really know them. So we sold our house right before January of this year, and so we don't have any debt. I'm currently living with the in-laws just until we find something. But we are thinking about renting just so we don't have to get another loan for a house. Plus, I don't think I can with my new job that I've got. Why? Well, I heard there's a loophole to where you can get a house, but you have to be in the same industry for like two years, and I haven't done that.

I've only been in the industry for a year. That would be if you had no credit. Do you have no credit? Pretty much just a couple credit cards that I pay off every month, you know, make the 30%, you know, credit utilization and then pay it off. Right. Okay. Well, I would cut those up and get you a debit card,

which will further damage the situation. But I think you probably still could get a house. The only way you're required to have two years is if you're, A, self-employed, or, B, you have a zero credit score, and then they want to see stability. So you can talk to Churchill Mortgage, and they can tell you. There's no sin in renting for a short period of time as patients in order to wisely purchase. And if you need to rent for six months and save up and, you know, get established or whatever in your job, whatever you've got to do to get a reasonable situation and wisely purchase, then that's not a bad thing.

But I don't teach people to rent for 10 years. You know, I don't want you to be a renter for life, but it is a smart thing to rent for a period of time until you're out of debt. You have your emergency fund in place, plus a good down payment. You're stable in the job. Everything's wise and steady. And then the house can be a blessing to you. And of course, we tell people not to take out more than a 15-year mortgage where the wise and steady, and then the house can be a blessing to you.

And, of course, we tell people not to take out more than a 15-year mortgage where the payment is more than a fourth of your take-home pay. And if you do all of that, then the house can be a blessing instead of a curse. And we just don't. Everybody runs around and buys houses they can't afford on adjustable-rate mortgages, and then it adjusts, and they're shocked. You know? And you bought an adjustable rate mortgage. Of course it was going to adjust.

And you bought it at the lowest interest rates in 50 years. Where did you think it was going to adjust? Down? You think they were going to start paying you? You know, that kind of stuff. That's what people get into, Demetri. So if you'll just do it wisely with a good down payment above your emergency fund, payments no more than a fourth of your take-home pay on a 15-year.

And if it requires you rent a little while to be able to pull that off, that's not a problem. The renting in that case is just patience money. And, yeah, it's money that's going down a rat hole. I get that. But it's patience. And there's nothing wrong with having a little patience. This is the Dave Ramsey Show. For most of us, health care costs seem to increase every year, and saving money on health insurance feels more and more out of reach.

For example, take the Olcheski family from LaGrange, Texas. Jeff and Carice had just celebrated the birth of a new baby boy. Shortly after, they had a health scare involving one of their kids that was completely unexpected. With today's healthcare climate, this could have bankrupted them. But thanks to Christian Healthcare Ministries, the Olcheskis were spared from a ton of medical bills. As members of Christian Healthcare Ministries, they're part of a group of believers who financially and spiritually support each other. CHM is the original health cost-sharing ministry and is a Better Business Bureau accredited charity.

It's biblical, affordable, and it shared nearly $97,000 to help the Olcheski's. To be a part of Christian Healthcare Ministries, visit chministries.org. That's chministries.org. CHM is a proud sponsor of Dave Ramsey Live Events. Carly is with us in Salt Lake City. Hey, Carly, welcome to the Dave Ramsey Show. Hi, Dave. How's it going? Better than I deserve. What's up? Okay, so I just have a couple questions. So my husband and I are trying to decide whether we should invest and continue renting the current apartment that we are renting,

or if we should purchase a house. Okay, and you're debt-free other than that. You're debt-free. Yep, that's correct. I'm sorry, are you debt-free? Yes, yes we are. Okay, and do you have your emergency fund saved of three to six months of expenses? Okay, good.

Well, this is the point at which people decide, are they going to save up a down payment for a house, or are they going to save up to pay cash for a house? What's your household income? Currently, it's about $60,000 a year. Okay, and what price range home would you be saving for? We're probably looking at somewhere around $300,000 to $350,000. Okay. All right. And so if you saved $30,000 a year out of $65,000 towards a house, it would take you 10 years.

Okay. Right? Or if you saved up a down payment and bought a home on a 15-year mortgage, that's the one thing we don't yell at people about. That's the one kind of debt we don't yell at people about is a 15-year fixed rate mortgage where the payments are no more than a fourth of your take-home pay. I think that $300,000 house might actually be above that number on a $60,000 income. So that might not work. You may be buying a little less house coming out, but it's your first house. So that's not a problem to buy less than 350,000 in Salt Lake City for sure that's a pretty nice home when he's doing

school too so he's almost done with school so he should be able to be bringing more right now I'm the provider so oh when does he graduate when does he graduate and what will he make so he'll have his undergrad at the end of this fall and then he has his master's program that will start the following fall and be one year long. And what is he studying? Accounting. Okay, all right. Yeah, so your household income is probably going to double

at the point that he gets through with that, right out of the gate, if not a little more. Okay. And so at that point, you could save a lot very aggressively, and you probably save up and pay cash for a house in three or four years after he graduates. Okay. But if you're paying cash for all of his education. That's correct.

We've already got it all set aside, so the master's going to cost about $30,000, and we've got that saved already to go. Well done. Good job. I'm proud of you guys. That's very well done. Okay. Well, the whole thing is this. It's just a matter of whether you want to buy something now that's a little less expensive and you save up that down payment above his tuition cost and above your emergency fund, put it on 15 year fixed, or whether you

want to wait until after he graduates and do something a little different. Either one is fine. There's not a real wrong answer here. As long as you don't just jump out here and buy too much house or you're not buying a house for the wrong reasons. And that's usually panic and fear and I've got to get a house and all this kind of stuff. People just go crazy about owning a house and owning a house is a good thing as a part of your long-term plan. Doing it wrong is a bad thing. It'll set you back and, you know, it costs you a decade of your life to buy a house is a good thing as a part of your long-term plan. Doing it wrong is a bad thing. It'll set you back and, you know, it costs you a decade of your life to buy a house wrong because it's a huge mistake. You never make little mistakes with housing.

So just keep it super conservative. Put down a good, strong down payment. And, again, a 15-year fixed where the payment's no more than a fourth of your take-home pay. And you can apply that formula before or after graduation. Obviously, it will change before graduation what you purchase. Katrina is on the line in Phoenix. Hi, Katrina. How are you?

I'm doing well. How are you, Dave? Better than I deserve. How can I help? I was calling. So me and my husband were recently married. We became debt-free prior to us actually getting engaged, and we just completed baby step number three.

Yay! I know. So my question for you is each of us actually bought a home prior to us ever actually meeting and dating and getting married. Cool. And so we're not sure if we should keep both homes or should we sell one and pay down the other? Which one are you living in

um we live in the one that i bought okay so what are you renting his um currently it's sitting empty we just got married like two months ago okay all right we've not been in a hurry to do anything with it uh how much do you owe on your present home the one you're living in we owe about 210 what about the other one and we owe about 125 okay and what's your household income it's about 190 i just got a raise so it's either between 190 to 200 wow look at you guys what do y'all do for a living um i'm a pa and my husband works as a buyer for a company that remanufactures um office. Great. Very well done. Okay, cool.

Well, you guys are killing it. Congratulations on the income side of the equation. So what I would do is just lay it out and say, how fast can I pay both of these off, my primary first and then the other one? And am I willing to wait that long? What is that? Wait a minute. What's his old house worth?

So his house is worth about $220. And so you can pull $100 out of that and throw it at yours and have yours paid for in about a year and a half two years correct well mine's worth about 360 i know but you could pay the one you're living in is yours right yeah correct okay so he you said you owe 120 on the old one and it's worth about 220 you got about 100 000 equity in his old one right correct yeah Correct. Yeah, so if you sold it, throw that at your $210,000 mortgage, take your $190,000 income, we're just about clearing your home in a year and a half or so. So that's one possible equation, okay? Okay.

The second equation is it takes three years to pay yours off and another two years to pay that other one off, which is not a bad plan. You've got a paid-for rental and a paid-for home in five years. Yeah, that's kind of what we're leaning towards, but we go back and forth, and we're like, what would Dave do in this situation? Yeah, I think I would be on the bubble because I love real estate, but I don't want your plan for rental real estate to be in debt the rest of your life and keep borrowing money to buy rental real estate and all that kind of a thing.

So the goal is can we knock these two things out, and the good news is you make a lot of money so if you will apply that mathematics to that in a very real way i'm not saying you can never go on vacation but you guys really need to lean in hard and say okay we really have about 350 000 here in two mortgages and i'd really like to pay all of that off in five years out of a 190 income that's pretty doable yeah we're definitely thinking about hopefully four years actually but yeah there you go that see that kind of a plan is very reasonable because if you sold his house and applied it to yours then you're pretty quick going to start piling up cash to buy a rental paid for and And on the backside of four years, you're going to be buying a paid-for rental anyway. And if his is a good rental, you might as well just keep it and plow on through this.

Yeah, his is a good rental, actually. Then get some renters in it. Okay. It's been sitting there empty two months. Time to rent it. And let's just lean into yours first and the one you're living in, and then we'll lean into that one, put it on a four- to a five-year plan. Every time you get a raise, you'll be on your every-dollar budget.

You know, we've got a goal here. It's not beans and rice, rice and beans. You're past that level, but you're being very intentional and very focused with this fabulous income God has blessed you with. And you're going to take that to do all kinds of good things for not only your family but for a lot of other people as well. Amy's on the line in pittsburgh hey amy what's up hey dave i think you're hilarious well thanks how can i help okay so we my husband and i do the baby steps sort of out of order and i know you're going to yell well then that would not be the baby steps. That would be you made up your own plan.

Yeah, pretty much. Yeah. We're Italian. I mean, you know. That's what caused it is you're Italian. Okay. I got that. We'll blame it on that.

Why not? Let's just blame it on that. I mean, babe, I could have you on the phone for an hour. I grew up a bookie's daughter. I love it. I mean. I love it. How can I help before I run out of time? What's your question?

Yes. Very quickly. So we need a different car because my husband's car is only three years old and it keeps breaking. So instead of sinking money into the car to get another repair, I'm like, this is ridiculous. Let's just get a different one. So we own his car, so I'll just put a number on it. Say the car is worth $15,000. Do we take the $15,000 and leave it in a savings, like a quick money market,

or do we put the $15,000 towards the new car? You buy another car for $15,000 or less. You don't go into debt. But, of course, you're doing your own plan. We have to keep that in mind. You're Italian, so I don't know what the heck you're going to do. But if you're calling to ask my opinion, which is, I thought, what we were doing. Yeah, you just pay cash for your next car, kiddo.

Like, buy a $12,000 car. Put $3,000 of it towards your other debts. That's a new one. This is the Dave Ramsey Show. Hey, folks, there's literally never been a better time to try online grocery. My friends at eMeals make it incredibly easy for you. eMeals creates a shopping list based on the meals you want for the week and then directly sends it to Walmart, Kroger, Instacart, Shipt, or Amazon Fresh.

Your choice. Head to emails.com slash grocery. Find what delivery and pickup providers are available in your area. Try eMeals free for two full weeks. That's emails.com slash grocery. We'll be right back. In the lobby of Ramsey Solutions, Jennifer is with us. Hi, Jennifer. How are you? Hi.

How are you? Better than I deserve. Welcome. Thank you. Thank you. Where are you from? I'm from Chicago. Cool.

Welcome. Good to have you. And how much debt have you paid off? So I paid off $42,944 in two years. Good for you. And your income range during that two years? It started at like $75,000, and then it's like $80-something thousand. Okay.

I went to blank, like $83,000. Okay, good. Very good. What do you do for a living? I'm a middle school bilingual math teacher. Oh, very good. Yes. Way to go.

What kind of debt was the 43? So it was credit card debt, some personal loans, which was just money to borrow to buy clothes and stuff. A car that I had to turn in because it had depreciated so much when I got laid off as a teacher. And so I had to pay for a car loan that I no longer drive. And student loans that I had to take in order to try to get to become a teacher again to go had to pay for a car loan that I no longer drive and student loans that I had to take in order to try to get to become a teacher again to go back to school okay wow good for you what happened to you two years ago that put you on this journey so I was laid off as a teacher

there were like 2,000 teachers that were laid off and three years in a row being laid off because around this time is when teachers find out if they're going to return. It's very stressful. And so in losing the position, I had to work as a makeup artist at a local mall and turning in the car was the beginning of the debt. And then I thought, well, I'll open up credit cards to help pay rent and things with the intention of getting a teaching job and paying it off. And it didn't work out that way.

And also, I think my ego, I wasn't ready to let people know that I was laid off. And so I think I was still living the lifestyle that I no longer could afford. And so I heard your name and I didn't do anything about it. And then I saw it at a church and I took the course. And since then at my church have led it three times okay um yes thank you very good you've changed my life i appreciate everything you've done look at you teaching me very cool yes good so you're now an fpu coordinator yes and so i um did everything you said you said you have no business um being at a restaurant unless you work at one. So I had a weekend job at a restaurant.

I found a restaurant that would allow me to work just Friday and Saturday. And then I did tutoring after school. Yeah? Anything I could to pay off the debt. I also, with Mickey, I ordered the Dave Ramsey for the middle school students, and I taught my students. And it turns out one of my students told me that her dad was getting out of debt because of the stories I was sharing with them. Yeah. And so I learned how to sew my clothes. I wasn't buying new clothes.

Someone from the church donated food for me. Someone gave me cash. People would take me out. I feel like when you make the steps to get out of debt, God will meet you where you are, where you're at. He will provide in ways that I never could imagine. I would pray to him all the time, like, Lord, please have someone bail me out. I meant money, but he had people bail me out with food or someone shared my story with their friend and that person was going to give clothes to the Salvation Army. Instead, she came to my house and let me take all the clothes i wanted out of her car um we were the same size

so that sustained me yes so it was amazing and the restaurant would feed me and and the cafeteria workers would feed me at lunch so it was at school so it was there were ways for me to yeah um once you set your mind to it yes so uh getting laid off scared you to death it did you wander into the financial peace university class yes and then you got fired up man you were on fire yes you're going for it yes and i um used to always borrow money from my dad but i would hear you and you said nobody you cannot borrow any more money and i cried a lot at the beginning of the class like how am i going to come up with a thousand dollars and how am I going to do this? But my dad would support me and say, you can, you can do this. And I did it. And it, it, it felt so incredible.

And I had, um, my friends were encouraging me and I would listen to your podcast all the time at the gym. And especially when single people would come on and share their story. It encouraged me because I'm single. And so if they can do it, I can do it. And the other thing I wanted to share is I heard a lot of your past callers saying they didn't socialize. But I still socialize. I just didn't eat out. I would have food in my purse. The only thing we did, I did cheap things.

Like if there was the White Sox, sorry, the games are really cheap. So they were $11. I could do that. But I went bowling, but I didn't bowl. I went out to brunch with my friends, but I didn't eat out. So I still socialized with my friends. And they were supportive. They would come over to my house and eat instead of eating at a restaurant.

So it was awesome. What a great journey. Well done. Thank you. Well done. So you got on fire. When you went into that class, you said I cried a lot at first. I did.

What clicked? What was it you were learning while you were going through Financial Peace University that clicked and made you go, I think I can do this? I think I loved your humor, but also when you were serious, but there was a lot of empathy in the way you delivered. And that meant a lot to me that you had been there too, and you weren't coming from a place of judgment. And so it was done. There was nothing I could do about my decisions. I had to reflect, why did I get in this position? And it was done. There was nothing I could do about my decisions. I had to reflect why did I get in this position and it was because I thought I had it all.

I had the house and the car and everything but I was a paycheck to paycheck person and I thought I was living the dream but when you said financial peace, I realized I never had that and so I wanted to change my life also for my niece and nephew. I bought them the kits and I've taught my nephew as much as I could.

This really ended up being a spiritual journey for you. Oh, yeah. And the Lord humbled me. I felt like there was so much he gave me before that I didn't appreciate, and now I know he'll give it to me again, and I will appreciate it. And I also want to say I say I tied through the whole thing that was very important to me that I knew that everything I have is because of him. And so, um, I knew that, uh, if we went on strike, it didn't matter because if, if I received less money,

so would he. And if he was okay with that, then I was okay with that. And so I just had a trust that things would work out. And, um, I feel that because I trusted in him, he moved it along so much faster than I thought. And he provided support along the way. And also helping lead the classes kept me going as well, because I would hear things a second time or a third time that I didn't hear the first time I took it as a participant. And now I'm going to be doing in the fall, the Smart Money, Smart Kids. I'm going to be doing in the fall the Smart Money, Smart Kids. I'm going to be volunteering with my church as well. Hey, thank you.

Wow, you are something else. Well done, well done. So the key to getting out of debt is what? Is you have to follow the steps, I feel. You have to say, I'm going to do it. You have to say for a short season, you are going to sacrifice. You're not going to eat out. You're'm going to do it. Um, you, you have to say for a short season, you are going to sacrifice. You're not going to eat out. You're not going to buy clothes, but it's going to make a difference when you combine in cash. And I found that, um, all of a sudden having cash,

it's such a rare thing. People would ask me questions and I would share. Um, and I think the, just knowing the reward, um, for example, I'm on step three right now, but I also, in addition, after step three, I want to save for a used Lexus, and that feels very difficult, but it'll be the first thing I've ever done in cash, buying a used car. It's going to be like a 2000, 2001,

but it's going to be a Lexus. But in cash, that's going to be huge for me. Yeah, you've got it in HD. You've got it dialed in exactly what you want. Yeah. Way to go. Thank you. I'm so proud of you.

I know your dad is. Yeah, he is. And the other thing, my students were supportive. They would make me bar graphs because they're really good artists. And I would shade with them. And we would have little celebrations at lunch if I said, I paid off another one. And so when I became debt free, we had a lunch party and a dance party combined. And it was so great that they supported.

There was one particular class out of four classes that really got it. They'll remember that forever, too. Yeah. That's very cool. We've got a copy of Chris Hogan's book for you, Retire Inspired. Thank you. That's the next chapter where you're a millionaire, and you continue your outrageous generosity.

And thank you. Thank you so much for leading the classes. Oh, thank you. Great story. Thank you. Very well done. Thank you. Very well done. Thank you. Very well done.

Jennifer from Chicago. $43,000 paid off in two years, making $75,000 to $83,000. Count it down. Let's hear a debt-free scream. Three, two, one. I'm debt-free. Love it. Love it. Love it.

Well done. Man, that is fabulous stuff. This is The Dave Ramsey Show. Please hear me loud and clear. The government is not going to bail you out of your student loans, at least not completely and not without a catch. What they're talking about only impacts federal, not private loans, and you need to take responsibility for what you owe and pay your debt down quicker. Right now, Splash Financial is offering their lowest rates ever.

With lower rates and extra payments, you could just find yourself debt-free in the next five years. Visit SplashFinancial.com slash Ramsey to see if you qualify. our scripture of the day proverbs 12 18 there is one whose rash words are like sword thrusts but the tongue of the wise brings healing. Oliver Wendell Holmes said, speak clearly if you speak at all. Carve every word before you let it fall. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee that means even if you mess up, if you goof up, if you screw up, you mismeasure, you pick the wrong color,

they will remake your blinds free. You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code RAMSY to get the best possible deal. Today's question is from Jameson in Virginia. We're making our last debt payment with a bonus check I received. We have about $6,000 left over after the payoff. Should we use that to jumpstart our emergency fund or upgrade my car?

I currently drive a 1998 Volvo with almost 300,000 miles on it. Well, you definitely need a new car, Jameson. I don't want to argue that at all, but it's not an emergency. And you get your emergency fund in place before you do non-emergencies. I think the first thing I'm going to do after I get my emergency fund in place is save up for that car. But I want your emergency fund of three to six months of expenses in place, and then we're going to move up out of the hoopty and move on with our life. Rachel's with us in San Diego.

Hi, Rachel. How are you? Hey, I'm doing pretty good. Good. How can I help? How are you? Good. So my husband and I had a question.

I'm at home full time with my two kids. And from home, I make about $9,000 a year between watching my niece and nephew and then Ubering on the weekends. And then my husband takes home about $34,000 a year. We've been doing your financial peace class. We're in our last couple weeks of the class. We got our emergency fund set up. The last debt that we have is our credit card debt. It's about $8,000 in credit cards.

Go ahead. And we found a way to zero out our budget. Our highest thing is our car payment. I thought you said the last thing was your credit card debt. So you've got a car. How much do you owe on your car? So it's a lease. So we pay about $431 a month.

We're about 18 months into it. 18 months into how much? Out of how many months? Three years. Okay, so you're about halfway through. We're about halfway. We are starting a savings to be able to buy the car afterwards. That car that I am currently making payments on is also the car that I use to

make money every weekend. Um, but we, we've been zeroing out the budget. We have our emergency fund. We've been saving, um, our main question. Um, my husband's asked, let's ask dave ramsey we um we're wanting to expand our family um with one more child and um he says oh we need to be 100 out of debt and like sitting perfectly before we have more kids and i told him well you know it's part of life we you know we can plan for i have all the cloth diapers because we cloth diaper, and I still have all the baby stuff or baby needs that we would need because I knew we were going to have more. And I have clothes sizes for boys. Here's the deal.

Dave Ramsey does not make baby decisions. People make their own baby decisions with God. I don't make those decisions. And so you guys decide. You guys decide. You guys decide. I never tell people that they should be debt-free before they get married or before they have children.

But you do have to use some common sense. Correct. Okay, and that means you're probably going to have to get rid of this car. This car is completely out of control. A $431 payment in the middle of all this is nightmarish. And so, yeah, I can help you with stuff like that. And, you know, yeah, he's probably looking at some extra work himself because you do need to clean up this debt.

Because raising three kids in San Diego, I don't care how many cloth diapers you got. Raising three kids in San Diego on $50,000 a year, which is about what you guys are dealing with is tough that's tough and you're sure not doing it with a dad gum car payment coming out your ears so um you know it's not worth the uber return uh i would not finance a car to drive for uber and effectively that's what you've done here and i don't think with the numbers you're giving me you're gonna have the money to buy this car at the end of 18 months. And if you don't, then for sure we know you should have gotten rid of the car.

So if you guys are willing to pick up a bunch of extra work and clean up these last two things, the car problem and the credit card debt problem, it's going to make it a whole lot easier to manage having a child. Oh, I totally agree. But, you know, but no, I don't make baby decisions. God and people make their own baby decisions. But you do have to, you know, you've got to understand that this is, hey,

going from one to two is double. Going from two to three is 30% more. I mean, 33% more. And so you go from a one-on-one defense to a zone defense when you go from two to three is 30% more. I mean, 33% more. And so you go from a one-on-one defense to a zone defense when you go from two to three. And it changes the dynamic. It changes a lot of stuff. But it's not untenable. People do it.

But you live in an expensive city, expensive state, and you guys don't make a lot of money. So we need to work on your income side of the equation, and you need to clean up the other stuff regardless of when and how you have kids and so forth. That's part of the equation. But no, it doesn't justify the car by the fact that you drive it on the weekends for Uber to keep a car you can't afford. It doesn't justify that at all. Beverly is with us in Baltimore, Maryland. Hi, Beverly. How are you? Hi, how are you doing? Better than I deserve. What's up? Very good. Question about loan forgiveness. I'm two years into a public service loan forgiveness for student loans. The 10-year one right oh good lord i'm in my late 50s and looking to retire in about

10 to 12 years and so my question is how much student loan have you got 250 000 oh my lord right on what On what? On what? Did you become a doctor? No. What'd you do? Not at all. Program manager. A what? Program manager.

What kind of programs do you manage for $250,000? Oh, not enough. What kind of program? Not enough. It just wasn't any, it just wasn't. I guess it wasn't a good decision. So, I mean, what's your income? I'm 120. 120.

All right. So, my question is, do I just let this ride out for eight years and get the rest of it forgiven, or should I do the pay off the debt? I would pay it off. Eight years is just too long. But I know it's a huge mountain but i i mean let's go ahead and get everest climbed and just knock it out as fast as you possibly can you're going to be living on beans and rice rice and beans because you you have made a uh as you said a large mess here and so anything you can do to get your income up and

your out go down and just live on nothing. Let's say you did that and you put $60,000 a year towards this, which you ought to be able to do that, uh, $70,000 a year, you're done in three years. And that's where I want you to be. I don't, I don't want to put anybody in a jail cell for eight years. And that's what you're facing here because you basically got no life at all. I mean, this thing owns you. And that's what you're facing here. Because you basically got no life at all. I mean, this thing owns you. And I would just, I would say this thing has to go and I've got to do whatever it takes that's legal and moral to get it done. And clean it up as fast as I possibly can.

Wow. Ouch. Thanks for calling in. This is the Dave Ramsey Show. We teach people really basic stuff because it is how you become wealthy. Number one, you get out of debt and stay out of debt. And don't go into debt. Your most powerful wealth building tool is your income.

Number two, you live on a written plan every month. It's called a budget. You give every dollar a name before the month begins. That's why we named the world's best, most robust budgeting software, EveryDollar. Number three, you save for emergencies and for your future and to change your family tree. Number four, you give like a maniac. Outrageous generosity. You do those things, you will become successful financially. And it's really the only way.

You can try some of the other stuff. I'm going to do Dave Ramsey late. It's not Dave Ramsey. It's God's and Grandma's ways of handling money. That puts us out of the Dave Ramsey Show and the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace,

and that's to walk daily with the Prince of Peace, Christ Jesus. 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 so you can watch from home.