The Ramsey Show - App - Filing Bankruptcy Won't Get Rid of Your Student Loan Debt (Hour 2)

Episode Date: February 6, 2019

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Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, broadcasting from the Dollar Car Rental Studio, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us, America. We are so glad you are here. Open phones at 888-825-5225. You jump in, we'll talk about your life and your money. It is a free call. All right, let's go to Theo in Miami to start off this hour.

Hey, Theo, welcome to The Dave Ramsey Show. Hey, Dave, how are you? Better than I deserve. What's up? Well, I just wanted to, first, before I even get into my question, I'd say I've been thankful for all that you've done through Financial Peace, the Total Money Makeover book I read actually when I was in high school, and it was just a big blessing

and really helped pave the way for kind of how I viewed finances uh later on in life so thank you for that thank you how can I help today something into it yeah so my question is in regards to um some strategy going forward in life so currently um my wife wife and I both work and my wife does social media influencing, and she's actually just exploded in the last six months to a year. She went from just kind of doing it as a hobby to now making upwards of about $25,000, give or take a couple every month. Wow. She'll get with like brand deals and collaborations and things like that. Wonderful.

We're just so blessed and wondering kind of how do we go forward with stewarding this to man's benefit and God's glory. Good. Well, the first thing I'm going to do is walk up. The first step is to walk through the baby steps and clear up your debt, have an emergency fund, be putting 15% away for retirement, and pay off your home. Have you done all of that already? Yes, sir. We own our home free and clear. You have your emergency fund in place?

We do. And you're fully funding retirement then? Yes. I work for the federal government, actually, and I have a trip savings plan plus a pension, which I'm blessed to hopefully take advantage of down the road. It doesn't go away. Take advantage of the thrift plan, and then she can do a simple IRA. And how old are you guys?

I'm 23. She's 22. Okay. And she can do up 22 and make it $25,000 a month. I don't want to drive by that. That's impressive. Very cool. Yeah, she can put $19,000 a year in a simple.

So you guys need to sit down from an investing perspective with your smart investor pro. Do you have that yet? Have you got a relationship with a good advisor or a good broker? I do, yes, sir. Yeah, with my father-in-law, actually. Okay, cool. We'll sit down with them and max out all the things that are available to you in good growth stock mutual funds.

Now, overall, when I'm meeting with people that are baby step seven, which you are, House is paid for. Your funding retirement is max and so forth. Then what Sharon and I do and what I advise, like when I'm meeting with an NFL person or an NHL person or a country music star or somebody that's making bank, and you guys are making bank, okay, and it's going to get better, it sounds like, what you want to do is you want to apply a ratio to it. And there's really four things that grab at every dollar you guys make right now.

After expenses. So you set a household budget. I don't care. Set that at whatever you want. If she's making $300, you're making what? About $100. Okay, so you've got a $400,000 income. So let's just pretend that, for instance, you would set your household budget maybe at $100,000. Okay, so you've got a $400,000 income. So let's just pretend that, for instance, you would set your household budget maybe at $100,000.

Okay? And that's a pretty good life, and you've got no payments, so you can do a lot with $100,000 and just be paying your bills and keeping the lights on and keeping insurance paid and so forth, right? So that gives me $300,000. If you set it at $150,000, you'd have $150,000 left, whatever, $250,000 left, whatever it is. So right now you've got $300,000. But wherever you set your baseline at, whatever's left over beyond that, there's four things grabbing the money, four things that the money should go to.

One is you have to set taxes out of it. Okay, and so you need to be with your tax professional and say, I'm setting 30% out for taxes or 50% out for taxes or whatever it is you need to be setting out for taxes or 50 out for taxes or whatever it is you need to be setting out for taxes but you apply percentages to every dollar above your baseline budget and the percentages are taxes giving which would in my house i'm an evangelical christian would be at least 10 because it's a tithe and beyond the tithe if if I wanted to do another 10%, so it would be 20% to giving as an example or something like that. I don't care if you put 30%, whatever percentage, but some percentage,

a percentage to enjoy additional lifestyle above your budget, and a percentage to do more investing. So invest, pay your taxes, enjoy, and generosity, and put a percentage on each of those. An athlete that I was meeting with the other day that makes $10 million a year, after their baseline budget, this particular athlete decided to put 50% aside for taxes, and that left 50%. Wanted to do 20% in for taxes, and that left 50%. Wanted to do 20% in giving, so that's 70. That leaves 30 for investing and enjoyment.

This particular athlete put 25% into investing and 5% into enjoyment, which 5% of $10 million is a lot of enjoyment, okay? So you're okay, right? It's not like he cheaped himself out or something. But you've got to look at those percentages and say, okay, that you're okay, right? It's not like he cheaped himself out or something. But you've got to look at those percentages and say, okay, that means we get to buy a nicer car. We get to go on this trip.

That's your enjoyment money. You need to always enjoy some of it, give some of it, and invest some of it. Oh, and you've got to pay your taxes. And just to put a ratio that totals up to 100% on every one of those dollars. And so, for instance, when I get in a check from one of our publishers for a royalty check on one of our books, which I opened up the mail yesterday, and there was a nice check in there from one of my publishers, that money is already spent on those ratios. Some of it's fun, some of it's investing, some of it's additional giving,

and some of it's taxes. It's already got a plan for every one of those dollars. And then I increase my fund budget or my spend budget, my lifestyle budget, whatever, by that amount of money. I put the rest of it in an investment. I put the rest of it in the Family Foundation for giving and put the rest in a tithe for my church, and there we go. And it's just – it's real easy. So I don't have to sit and think about every time I get money, what am I going to do with it? It's already got a plan.

And it's just a ratioed-out plan. And that's baby step seven stuff. Now, I'm going to send you a copy of the book, The Legacy Journey, which is the only book I've written on wealth. All of the other books I've written were about money. There's a difference in money and wealth. And you're getting ready to be wealthy, and you're trying to get your head around that. And there's going to be a lot of voices coming

at you, saying, this is what's happening, and that's what's happening. Yeah, you're going to need to be ready for that. So, hold on. I'm going to send you a copy of The Legacy Journey, and I think it'll guide you well in that. Thanks for calling in. Open phones at 888-825-5225.

Heather says, should we spend $20,000 for solar panels on our California house to make it competitive to sell, even if we think it won't make the $20,000 back in the home sale price? Well, no, that's dumb. You can sell a house without solar panels in California. That's just dumb. I mean, and no, I might as well spend $20,000 on it and make less than, increase the value less than I spend on it. That's double dumb.

No, absolutely not. Not against solar panels, but the way you asked the question answered the question. This is the Dave Ramsey Show. Are high healthcare costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your healthcare costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major health care costs.

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Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. This is the Dave Ramsey Show. Thank you for joining us, America. We're glad you are here. Open phones at 888-825-5225. Our question of the day comes from Blinds.com. At the bottom of the hour, Rachel Cruz will be joining us.

And if you have a question for her, as you hear me finish with a caller, jump in. And she'll be here for about a half an hour, a couple of segments, and we can get your question in at 888-825-5225. Blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and the new promos they run every month gets to save money. Use the promo code Ramsey. Questions from Ashley in Rhode Island. I bought the Total Money Makeover. I'm sitting down to create a budget Use the promo code Ramsey. Questions from Ashley in Rhode Island. I bought the Total Money Makeover.

I'm sitting down to create a budget for the first time. Do I stop all automatic savings immediately? Yes. Aside from creating an emergency fund? Yes. I have a stock purchase plan, a 401k contribution, and a health savings account. All of these are taken right out of my check. Do I stop everything immediately?

Yes. When do I stop everything immediately? Yes. When do I restart? Maybe step four, when you start putting 15% of your income into retirement. But when you are investing and you still have debt, you're not going to get out of debt. When you are investing and you don't have an emergency fund, when you have an emergency fund, when you have an emergency, not if, because we all have them. When you have an emergency, you will cash out your 401k to pay your house payment because you lost your job. Well, that involves penalties and taxes.

And that's dumb because you didn't have an emergency fund. And so getting out of debt and getting the emergency fund in place baby steps one two and three are foundational to even beginning to start to build wealth it lays the foundation and so you're just doing it out of order um so you've got a natural bent towards savings and that's a good thing i want you to use that natural bent but i and the fact that it's going to kind of pain you to stop this stuff you're going to kind of go oh i don't want to do that oh use that pain to drive you through your debt snowball and get your debt paid off that much faster because every day you screw around with that debt snowball and don't get that debt paid off is a day you don't get to invest.

And you need to invest, invest, invest, invest, invest. But you can't do that until you get your debts cleared and build your emergency fund. That's the proper order in a decent financial plan. And it's really not rocket science. You can't do three things at once. You don't get any of them done. Jasmine's in Detroit, Michigan. Hi, Jasmine.

Welcome to the Dave Ramsey Show. Hi, Dave. Thank you so much for taking my call. Sure. What's up? Okay, well, my question is, should my husband and I consider bankruptcy? of bankruptcy. We're expecting our second kid in April, and I've been at home. I've been a stay-at-home mom with my daughter, who's now, well, she's one years old now, and I was taken off of work because of the disability that came with my second pregnancy.

So he's been the primary one that works, and I've been home with her. How old are you, honey? How old are you? I'm 28. You're what? I'm 28. 28, okay. And what does he do for a living?

He's in staffing. Okay, And what does he do for a living? He's in staffing. Okay, and what does he make a year? He makes about $56,000. Okay, and how much debt do you have? Combined, we're about $110,000, like $112,000. Okay, and break that down for me. How much of that is student loans? All right, so him and I together, the loan is $96,334.

Okay. And then I have credit cards, $10,000, like $500. um like 500 um i am his he has some collection accounts that's about 36 um and some change and then um also with my my car we share share car in our past lease we went over a mile so we also have a um an overage of $2,000 for Ford. On an old car that you don't have anymore? Well, so we returned our lease, and they put us in a new lease, and we had an outstanding overage for the mileage of $2,000 that we have to pay that we're trying to work through now with this new lease that we have.

Oh, Lord. Okay, and so how much is your lease payment? It's about $284, and we're expected to owe on that again. Wait a minute. Stop a second. How much time is left on that lease? We have 17 months. 17 months left?

Okay. Yeah. All right. right now here's the thing if you file bankruptcy you will still owe the student loans and if you don't turn in the car in the bankruptcy you will still owe the lease payment so you really would only be filing bankruptcy on about $13,000. So it doesn't really do much for you. But I understand you've got a baby, and you've got a baby on the way any minute, and you're scared. I get that, and you have a right to be scared, but that would be normal in this situation.

So what we've got to do instead is figure out what we're going to do first and what we're going to do second okay the first thing you're going to do the first thing you're going to do is you're going to pay your rent or house payment your food bill and your lights and water and you're going to put gas in the car the next thing you're going to pay is the car payment until we can get out of this car, and don't you ever lease a car again. You're going to get a $1,000 beater car when you get this one turned in. It may be 17 months before you get out of it,

but at the end of that time, you turn it in and you get you a beater car. Don't let them put you in another lease. You're getting killed with these leases. Tell the student loan people to jump in the creek because you got no money it's called a hardship deferral we're in the middle of a hardship we cannot pay 96 000 with two babies brand new babies and a 50 000 income so we're not we'll do that right now so for now they're going to get nothing but they're not going to get anything in bankruptcy, and you've got to pay them after bankruptcy anyway. So the credit cards, you can quit paying them if you have to,

but if you do your budget, you buy food first, lights and water second, shelter third, transportation fourth. We call that the four walls of your house, the basic necessities to live. Paying a student loan, paying a credit card, paying a collections, or paying on the $2,000 overage on your last lease are not necessities. Those are good things, but they're not to pay. We want to pay them and get them out of your life, but they're not necessities. So they're far down the list.

Keep the list in order. Here's what happens. You'll be less fearful if your belly is full, your lights and water are on, and you're not going to be evicted. If you do those things, if you've got lights and water, heat, cool, food, and a place to live, and you know that that's done, and you make enough to do that, and enough to, for that matter, pay this car payment, although it's a bad deal, but pay the car payment.

You make enough to do all of those things. So you've got something to drive, a place to live, and you've got food. The rest of this is a bunch of barking dogs out in the backyard, and we'll get around to feeding them, but right now they're just going to yap, but they're in the backyard. They're not going to destroy your life and then you begin to whittle at those as you're able to get an income coming in and as he's able to get his income up with part-time jobs and career changes and other things over time you begin to beat you get rid of this car you begin to beat your way through this and i'm going to help you i've been right where you are when I was 28 years old.

I was just as scared and lost as you are right now. And we're going to put you into Financial Peace University. It's our nine-week class with a one-year online membership as well. To every dollar and to all the classes, audio, video, everything, all the community, everything's online. And we're going to put you in the nine-week class. Hold on. Kelly's going to pick up. I'm going to pay for it.

You're going to be okay. But you're going to follow what I teach you to do. This is the Dave Ramsey Show. Do you know who is a prime target for identity theft? Your children. Kids have no debts or credit history. Their personal information is just as easy to get, but the theft could go completely undetected for years. Every day all over the country, young adults are starting down their own path in life

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Zander.com or 800-356-4282. Join me this half hour to answer your question. Rachel Cruz, number one bestselling author multiple times. Her latest book is Love Your Life, Not Theirs. And she's also the host of the very popular Rachel Cruz Show, the Rachel Cruz Show video and podcast series on YouTube, Facebook, and now again a podcast, and the podcast has exploded. Welcome back. Thank you. Thanks for having me back.

So you got in late last night. You were in Raleigh. Yes, we did a Raleigh Smart Money event, me and Anthony O'Neill, and it was so fun. We were just talking about it before we came on the air. Oh, such a great crowd, 1,300 of you out there in Raleigh. It was so fun. Apparently, the venue was electric. You could hear everything and see everything.

Yes. That's what both you and Anthony said when you came back. That makes it so much more fun as a speaker. Yeah. As a speaker, sometimes these venues, you can't hear the audience or really see them, and they just kind of feel away. But this was so great. You could hear laughter.

It's like hanging out with friends then. Yeah. Absolutely. It was fun. It was like a dinner party. Yeah, totally. Just having fun, telling jokes, and making progress. It was great. You could hear laughter. It's like hanging out with friends then. Yeah, absolutely. It's like a dinner party. Yeah, totally. Just having fun telling jokes and making progress. Yeah, that's great.

Good stuff. So the Smart Money event, a big success last night in Raleigh. Our next one is February the 20th in Grand Rapids, Michigan. I'll be doing that with Anthony O'Neill. And that will also be a live stream if you would like to watch that as a live stream it's available so you can check that out and then rachel you and anthony the next day will be in cincinnati ohio the 21st yes so cincinnati smart money there we go and then march 14th i'll do atlanta with anthony and San Diego. I'll be there doing a Smart Money event solo.

First time I've done that in a while. March 25th in San Diego at Rock Church. Looking forward to that. So lots of stuff going on. And really next week, you've got the Valentine's Day marriage and money thing coming up. Yes. You're busy. Yeah, there's a lot happening, but it's good.

Yeah, money and marriage event, Valentine's night. So we are doing it here in Nashville. Still some tickets left to come to the actual live show. So if you want to take a destination trip, Nashville's a fun place. So spend Thanksgiving night with us. You can if you want to do that in November, but this will be for Valentine's. And we're live streaming that one as well. So if you're not able

to get to Nashville, you can get tickets for the live stream. It'll be fun. So that one has Dr. Les Parrott, myself, and we're bringing on musical guest Dave Barnes.

So he'll be playing kind of in and out of the, within the event. Well, he's not only very talented, but he's funny. Oh, he's so funny.

With you three as cut-ups, that's going to be stand-up comedy. Yeah, he's funny. Because you and Les are already doing stand-up comedy. You put Barnes in there, this is going to be a fest. Yeah, he's so funny. With you three as cut-ups, that's going to be stand-up comedy. Yeah, he's funny. Because you and Les are already doing stand-up comedy. You put Barnes in there, this is going to be a fest. Yeah, it's going to be. Oh, my gosh.

He's great. That'll be a great addition. Yes. So we're making a Valentine's special. That's what, a week from Thursday, right? Yes. Yeah, you're right. Coming up, man.

They're coming up fast. And that's here in Nashville, Valentine's Day, Money in Marriage. Then Kansas City, Des Moines, and Dallas, money and marriage. A lot of stuff going on. A lot of places where you can see Rachel Cruz. And this week's episode on the podcast, the subject is what? How to give yourself a raise. So how do you do that?

Yeah, a couple of ways. So one of the things we talk about is the idea of taxes. So tax season's coming up. And so many people love getting a refund. Like they get money in the mail and they're like, it's free money. Like let's go shopping. Let's go on vacation. And you emotionally forget that you worked for that money.

And so taking the challenge of don't get a tax refund this year. Like do what you can to equal out your taxes so you don't get that refund. Because technically that's your money sitting in Washington, D.C., and it's not working for you. You could have been using that money all year to pay off debt, to invest, to give it away, to spend it. But it's been sitting in Uncle Sam's hands this whole year. He doesn't even pay you interest on it.

No. Shocking. You literally couldn't be making money. So that's one thing. Obviously, contentment is a huge part, right? If you're not just spending money, buying a bunch of crap that you think is going to make you happy, like so many of us tend to do, and learning just to be content. And so one of my actual personal good friends, Annie F. Downs, came on, and we kind of talked through that subject about, you know, when life doesn't end up the way you think it is, you know, with disappointment and all that. How do you stay content? You just do not run around with people that aren't funny, do you?

And she's funny. She's a hoot. Yeah, she's so funny. And it's great because I'm able to take, you know, this content that we talk about here on the podcast, and we surveyed my audience and asked them what their favorite podcasts were. And out of all the podcasts, the number one was Annie F. Downs' That Sounds Fun podcast. We have a lot of crossover in our audience.

So that was fun. So it's always fun bringing on friends that people kind of know both of us, too. Well, your mother's a big fan of Annie's podcast. Yes, yes, yes. So there you go. There you go. All right. So the podcast airs once a week?

Well, every other week right now. Every other week, just like the YouTube show does. But subscribe to the podcast because that's one element. I said this last time I was on the show, but it's true. It's one way I can just kind of put out content when I want. So you can do some random drops in between. Yes, and there will be some random drops coming soon. Coming soon.

So go ahead and subscribe so you get that. So Apple, iTunes, you can do Spotify, you can do Google Podcasts, anywhere there's podcasts anywhere great podcasts are sold yes and on the show as well we talk about budgeting and how that gives you a raise we always say that and we brought on a lady named tracy and she was phenomenal she's a single lady and she it took her four paychecks to save up money to get an fpu kit and she went through it she was on the brink of losing everything. I mean, she was just barely making it.

And now she's paid off debt. She's almost debt-free. I mean, it's just amazing, her turnaround and her story. So she's on there as well. It's always fun to kind of bring on people that are in the middle of this and they're doing the journey. And she was phenomenal. So, so cool.

Well, it's authentic. It just makes what we're doing real. Yeah. Instead of me just saying the baby steps, baby So, so cool. Well, it's authentic. It just makes what we're doing real. Yeah. Instead of me just saying the baby steps, baby steps, baby steps. Right. You actually meet someone that's grinding. You know, they're doing the hustle and the grind. Oh, she's been working extra for almost a year now.

Wow. Like part-time. Like she does a part-time gig after her full-time. And she's just killing it. So it's just inspiring. It really is seeing these people. So we get to tell her story and talk with her and how she's doing it. Very, very cool.

All right. these people so we get to tell her story and talk with her and how she's doing it very very cool all right from the official race rachel cruz community is that that's a facebook community yes we kind of organically started it for the show and the people started flocking to it so it's out there if you want to join cool the official rachel cruz community christy says my husband and i inherited a house when his mother passed away. We've rented out the house. Do we use the rent money to save an emergency fund for the rental house? We had our regular emergency fund, and then we took a hit when we changed insurance. Well, I would say if your regular emergency fund is not full, absolutely. I mean, you definitely can take that rent and put it towards it. I mean, the emergency fund's there to build it up as quickly as possible with any extra cash you have coming in.

So I would definitely consider that extra income. Yeah, the first thing you do is you have an emergency fund at home. And then the second thing when you have a rental property is you do need to keep some extra cash in your rental account because something's going to break at the rental house or they're going to move out and you've got to put some carpet in or something's going to come up. You're going to need at the rental house or they're going to move out and you got to put some carpet in or something's going to come up you're going to need some cash so you better be holding a rental

emergency fund after you get your main one done and so sarah also in the official rachel cruise community says my husband and i have been debating how we're going to come come up with a thousand dollars for emergency savings uh we can take it from the tax refund, but unsure when that will arrive. Any other suggestions? I mean, the $1,000 emergency fund is interesting to me. So, yes, can you take it from the tax refund? Absolutely. But you have to understand, like, when you get this,

you take that first step of that $1,000, you have to be so emotionally bought in. Like, you will save money when it becomes important to you. Like, you have to realize that you have to change what emotionally bought in. Like you will save money when it becomes important to you. Like you have to realize that you have to change what you've been doing. And it sounds like, you know, yes, is $1,000 a lot depending on your case? Yeah, it can be a lot. It can be overwhelming, but it's overwhelming

because you've been doing what you've been doing for so long. And so you have to completely shift your mind to say, okay, I'm going to budget and I'm going to take stuff out of my budget. I'm going to sell stuff. I'm going to work extra. You're going to have to do things differently than you have in your past in order to get this thousand dollars.

And that change is not fun. You know, last night at Raleigh as we're doing the baby steps, we talked about this. The first baby step, it's usually the easiest and it's the hardest because it's the hardest because you're saying, I'm going to do something different. And that change is uncomfortable. It's not always exciting. But you have to make that change if you're unhappy with where you are. So there's that. And then the second, I'm like, man, you use this example in Financial Peace University, but it's a true one of like, if you had something that was so important

to you to save, you could save. And if you just imagine a child in your life that you love, maybe one of your kids, maybe a niece and nephew, and if they were sick and they needed a thousand dollars to get a vaccine to heal them within a month, you could do that, right? I mean, I would be ripping TVs off my wall. I mean, I would do whatever I could to sell. I mean, I would go crazy for that for my kids. And so there's a visceral reaction you have to have, and that's when you start to save.

Rachel Cruz joins us this half hour to answer your questions. Back with your questions right here on the Dave Ramsey Show. best-selling author rachel cruz ramsey personality host of the rachel cruz show popular every other week youtube show and podcast. You can check it out there. Tiffany is with us in Orlando. Hi, Tiffany. Your question for Rachel and me. Hi, Dave. Hi, Rachel.

How are you? Doing well. How are you doing? Doing okay. I have a question about purchasing a home. My husband and I have been married for about a year, and I don't have, I don't have any children myself, but my husband has three children abroad, which two of them will

be coming over within the next year. And we are currently renting a one-bedroom, and we are wanting to have children ourselves as well, too. So I guess I'm trying to seek advice. We want to get a house because we need something bigger, and we've already completed Baby Step 1 and currently in the middle of finishing Baby Step 2. So I wanted to find out, would it be possible for us to purchase a house, or should we just rent a bigger unit? Well, the quick answer is rent a bigger unit or go rent a house. But because buying a house while you're in baby step two is not a

good idea. When you have debt and you have that small emergency fund of just $1,000, putting a mortgage and a house purchase and a down payment, everything on top of that, what's going to end up happening usually is that your house becomes a burden rather than a blessing. And so we always tell people baby step three B, so that's once you're out of debt and you have a fully funded emergency fund, a baby step three, then save for the down payment on your home. So how much debt do you guys have left? Oh, well, we have, I have my car payment.

He doesn't have a car payment, but my loan is $18,000. I have $18,000 left, and we have about $5,000 worth of credit card debt, and that's it. What's your household income? We're taking home about $70,000. Okay. That's great. I mean, for me, I'm like, gosh, those numbers. I mean, you're going to be able to.

How much is the car worth? Because I was going to say, do you sell the car? How much is it worth? If I was to sell it, it'll probably be worth about $12,000. Okay. Well, I think you can pay off that debt and that credit card in a year, girl. I mean, if you guys stuck to it, you sacrificed some things, you planned it out well, you could be debt-free rather quickly and build up that emergency fund.

So buying a house for you, to me, is like it's in the near future. I wouldn't do it tomorrow, but I would do it once you're out of debt and that emergency fund is funded. I think you've got about two years to get there, so you're going to have to rent a little bigger space to house these babies that you're getting and or you're going to have, and that's a temporary thing, though, because it's going to take you about a year to get out of debt, another year to save your emergency fund and your down payment. Okay.

But you're only about two years away, and you're probably not getting these kids for what? It's really going to be about a year, isn't it? Well, yes, about a year. Yeah, okay. So really, you could stay right where you are for about a year. You could rent something a little bigger for a year uh with kids start planning your family and start looking for a house while you save the emergency fund and the down payment you're going to be there two years is going to go by so fast

and if you get this out of order it's going to turn your dream into a nightmare rachel's right andrew is with us in columbus hi andrew your question for Rachel Cruz. Hey, guys. It's such an honor to speak with you. Thank you so much for taking my call. Sure. So, we are getting ready to get our tax return. We recently actually just got a few thousand dollars.

In a situation where my income doesn't cover all of our bills and my wife does photography, so what happens is we kind of need money month to month. And then sometimes she has more business than others. So what's happening is we have a lot of money coming in and I need about $400 extra per month out of my tax return for my monthly bills. How do I set aside the money that I am going to need for those bills without getting

into it? Because we've spent extra money this past month that we shouldn't have, and I'm trying to prevent that going forward. So most of the time, though, does your wife's photography business cover your bills month to month? Or you're $400 short every every month even with her income um that is it does not include her income so when she has the business when it comes in like if she gets photo shoot it helps make up the difference but i try to plan like with my tax refund 400 per month to cover all my bills and so you're getting a tax right with that you're using your tax refund to subsidize your income? Yes. So why don't you just adjust your W-2 so that you don't have a tax refund?

Increase your check by $400. How big a tax refund are you getting? This year we're probably looking at about $7,000. We actually did just fix that problem, so we'll be getting that in. But even after fixing that, we're about $400 short every month. Okay, so you're now having the proper amount withheld, so you're going to have no tax

refund, and now you're still going to be $400. Yes, sir. How much is your car payment? $335 a month. Ding month ding ding looking at going over the whole year i think i can have the car with the tax refund i can have it paid off you're not gonna get another tax refund you're getting one right right so i fixed the taxes so they're good from now on and then we're

getting one this year from last year when our taxes are correct. I got it. I got it. And how much debt do you have? So we have about $14,000 in student loans, $16,000 on the car, and about $16570 on a house. Oh, okay. All right. So, yeah, I mean, you've got to get your budget to balance. That's your starting point without some kind of outside subsidy. So you're working an extra job that brings in $400. You're going to use the $7,000 on your debt snowball.

And if you can't do that, you need to get this car sold tomorrow. Okay. Because that's your $400 shortage right there that's killing you. But if I'm you, you're right. You can clean up these debts in a year overall. But you've just got this monthly drain that you've got to make adjustment for, and that means that you're doing something extra if she's not doing photo shoots. So she's going to have to get her butt in gear and do some photo shoots, or you're going to have, really, honestly, she's going to have to get her butt in gear and do some photo shoots or you're going to be out there

Ubering or something. Yeah, yeah. So is it smart to set aside what we're short monthly out of our tax return since we're getting a big one back? No, it's smart to cover it by the sale of your car

or increase of your income. Okay, okay. Basically, emotionally thinking you're not getting that $7,000, it's going straight to debt and then adjusting your life beyond that, yeah. Yeah, okay. Basically, emotionally thinking you're not getting that $7,000, it's going straight to debt. And then adjusting your life beyond that. Yeah, okay. That's how I'm going to do it.

Great question. You've got an income problem that you need to address, and you're hiding it if you use savings to address it. Right. You're hiding from your reality. How did you know you had a car payment? You're good. I've been doing this a little while know it's the wisdom of the age who knew that the car payment was going to be almost exactly the shortage though there you go ding ding i was like oh no andrew you're

gonna have to sell my car ding ding there you go that's the sound of your car being sold if you didn't know what that was oh the craigslist transaction that occurs. Just like that. Just like that, the car is gone with a ding-ding. Oh, my goodness. Dave, I'm just starting your program. We've got $25,000 in the bank. Money is my security, and I'm scared to death to take it down to almost nothing. Help me understand how to live with just $1,000 in the bank.

It makes me nervous. I have $78,000 in debt. What do you think? Oh, I mean, there's a true fear of the lack of security. That's a real thing. And so that $1,000, yep, that, oh, it does. It gets you. But what it does is it keeps that motivation high,

and it makes emergencies that are not emergencies not happen. Because sometimes if you have that cushion, it's easy to kind of live life, and there's not emergencies not happen. Because sometimes if you have that cushion, it's easy to kind of live life and there's not that much motivation. But when you know that that's all you have and everything else goes to the debt, it's amazing the progress you make on the debt, but also you reframe your mind

a lot on your life choices as well. Yeah. You actually repurpose that fear to cause you to sacrifice deeply to get the debts paid off as fast as possible because you don't want to live with only $1,000. Right. It's good. That's a wise fear. It's a good fear.

Like, don't play in the traffic fear. And so, yeah. And $25,000 on 78 leaves you 53. I know. I was going to say. So you're a quarter of the way there. I mean, you're a third of the way there, rather. And so you're going to get there.

Rachel Cruz, Rachel Cruz Show on Facebook, on YouTube, and now as a podcast on Apple, Spotify, and Google. Congratulations on all of this booming. Thank you. Proud of you. Thanks so much. Appreciate it. Thanks for having me on. This is The Dave Ramsey Show.

This is James Childs, producer of The Dave Ramsey Show. Did you know you can now listen to The Dave Ramsey Show on Pandora and Spotify? For all the ways to watch and listen, check out our show page at DaveRamsey.com.