The Ramsey Show - App - Having 2 Car Payments is Double Stupid (Hour 2)

Episode Date: April 5, 2019

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Starting point is 00:00:00 🎵 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. Brandon is with us in Canada.
Starting point is 00:00:58 Hi, Brandon. Welcome to The Dave Ramsey Show. Hi, thank you, Dave. How can I help? So right now I've got a vehicle that I know you'll probably tell me I can't afford, and really I'm looking for some advice as to what to do with it. Okay. Well, if you don't need me, you already know you can't afford it. Why haven't you sold it? Well, I'm upside down on it right now, so I'm trying to decide if it would be best for myself to sell it
Starting point is 00:01:27 or if I should put away some extra money every month and accelerate my payments on it. How much do you make a year? I make about $100,000. Good for you. How old are you? Before it packs. I'm 25. Wow.
Starting point is 00:01:42 You're killing it. What do you do for a living? I work in the oil field. Oh, okay. You're working your butt off. Okay, cool. I'm 25. Wow, you're killing it. What do you do for a living? I work in the oil field. Oh, okay, you're working your butt off. Okay, cool. I'm trying. Yeah, so what is the car and how much do you owe on it? It is a Range Rover Evoque and I currently owe $60,000 on it. Yeah, okay. Yeah, you just went crazy. So what will it sell for? I've looked it up online, and the high end that I could get for it would be $45,000, which would put me $15,000 upside down. Yeah, okay.
Starting point is 00:02:12 Did you roll negative equity into this, or does it just suck that bad? Yeah, I had a Jeep in 2012 that I traded for a truck in 2014, which I traded for the Range Rover in 2017. Yeah, so you just doubled up on stupid. Most people do that. Most people do that. It's okay. I mean, you're just learning your lesson.
Starting point is 00:02:29 The good news is you can learn the lesson at 25, and you never have to learn it again. Right. Yeah, I'd say I've probably learned that lesson by now. Yeah, it's pretty thorough. I mean, you know, when you get in a hole this big, it teaches you where you don't forget. It leaves a mark, you know? So, yeah, definitely you've got to get rid of it, and you've got to get the $15,000. Who do you owe the $62,000 to?
Starting point is 00:02:51 It would be to the bank. Your local bank? Yeah. Okay. I would troll over there and sit down with the branch manager and say, you have a $45,000 car loan and a $15,000 unsecured loan because the collateral does not cover the other $15,000 of this loan. You follow me? Right.
Starting point is 00:03:10 And so I'd like to convert it to that formally by selling the car, and you release the title for what the car will bring, $45,000. And I'll sign a note with you for the $15,000, and I think I can pay that off in about a year. Right. And then you get a beater. I think I can pay that off in about a year. Right. And then you get a beater. Yeah. Until you get that loan paid off. Do you have any other debt? No.
Starting point is 00:03:32 I did have about $3,000 in credit card debt last week that I paid off in the last couple days. Good for you. And then we had some furniture loans that we're paying off here. Who's we? In the next couple of days. My fiance. Okay. Who has the furniture loan, you or her?
Starting point is 00:03:51 I have the furniture loan under my name. Okay. Now, you've got to get that paid off, too, then. And when are you getting married? We definitely haven't decided on a date to be getting married. Well, definitely don't be buying crap together until you're married. And definitely don't be going into debt anymore, okay, together until you're married. Because it puts a strain on your relationship.
Starting point is 00:04:13 Yeah, for sure. So, yeah, she's going to be marrying a guy without a Range Rover. I'm sure we'll be okay with that. Okay, so what does she make a year? Well, he works in the restaurant industry, so I would say he's making in and around, I'd say $40,000 a year on the low end, but he is part-time right now. He's going to school.
Starting point is 00:04:43 He did have some college funds put away by his parents, so we're luckily avoiding the student loans for now. Okay. Well, we aren't doing anything because we aren't married. You know, there's not a we until we're married. So you need to keep your financials separate until you're married, and then you combine things when you're married. So I think you treat this like a single guy because you are that uh that has a mess which means you're gonna have no life
Starting point is 00:05:10 the bad news is you're gonna know life the good news is you make really good money and if you'll take your lifestyle down to scorched earth to nothing uh you can clean this 15 000 up this furniture loan up and you know you'll be cleaned up in no time, easily a year, and be able to move up in car and get you about a $10,000 car and pay cash for it and have your emergency fund in place and that kind of stuff. And that's how we're going to do it. David is with us in Jacksonville, Florida. Hi, David.
Starting point is 00:05:37 Welcome to the Dave Ramsey Show. Good afternoon, sir. I'm honored to speak with you. You too. How can I help? So I just found your program a couple weeks ago and I was looking for it specifically just because I had a lot of really small debts that were just chipping away at my paycheck. And I was looking at my paycheck at the end of the month and I was not having enough money. It didn't make sense. So I looked at my debt and it was just
Starting point is 00:06:02 staggering. Anyway, I was fortunate enough to sign a re-enlistment bonus with the military and I was looking at spending all that money towards paying off all my smallest debts. Good. And it's honestly great because I was able to get rid of all, all but three of my largest debts. Great. Um I have about $5,000 to $6,000 left at the end of that. And mathematically, I've always been told, you know, pay off your largest interest first, and that makes sense to me, and I understand why you say pay off your smallest debts first. I was wondering what you would think of spending that $5,000 towards my credit card,
Starting point is 00:06:43 which is my highest debt, that would actually lock it down to my lowest debt, so I would pay it off even faster. So you have how much owed on your credit card? So the credit card that I have left is $11,500. What about the other two debts? What are they? So those are both vehicles. Okay.
Starting point is 00:07:06 And tell me what you owe on them so one vehicle um it honestly would be really hard to sell but it's worth about 20 and i owe 8 on it okay all right and the other car i have a truck and it's worth about 17 and i owe 27 okay and um are you married engaged okay and are is one of these cars hers no they're they're both mine like i said i'm in the military and what you said before it's just i got in and the stupid stuff on both sides of the road yeah okay and um so the car that's worth 20 that you owe eight on and you said it's difficult to sell tell me about that um so it's a sports car i bought it when i was freshly 21 um and i've just i've modified it so much um i've put a lot of money into it. I actually re-enlisted once before and almost all the money from that went into modifying it.
Starting point is 00:08:09 So what is it? What kind of car is it? It's a Subaru BRZ. Okay. Well, I mean, you can do what you want to do. I woke up in your shoes, and thank you for your service, by the way. If I woke up in your shoes, I would sell both cars and get me a car that was paid for out of getting rid of the two of them. Because you can clear the one you're upside down in by getting rid of the stupid sports car. And you're just growing up now, man.
Starting point is 00:08:34 I mean, you've got a toy you can't afford for what it amounts to. And I know it's probably got a limited market because you've souped it up so high, but let's see if we can get them sold. And I'm going to work my bet snowball in order, smallest to largest. Hey, thanks for the call and thanks for your service. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care 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.
Starting point is 00:09:16 Christian Health Care Ministries is the original health cost-sharing ministry. A Better Business Bureau-accredited organization, CHM members share to pay each other's medical bills. It's not insurance. It's Christians financially and spiritually supporting each other. It's what Christian Healthcare Ministries has done for over 35 years. And our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org.
Starting point is 00:09:47 Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. Thank you for joining us, America. We appreciate you being here. Open phones at 888-825-5225. Dan is in New York. Welcome to the Dave Ramsey Show, Dan. Welcome, Dave. How are you, sir? Better than I deserve. How can I help? Excellent. I'm a police officer
Starting point is 00:10:27 and I'm going to retire. And when we go to retire, we have the option of taking what they call a final loan against our pension balance, which will create a shortage and result in a lesser payment per month in our pension.
Starting point is 00:10:43 The loan is a significant amount, and I was just wondering your advice on whether or not that's true or not. Okay. I'm aware of pensions doing lump sum options, or you can lump sum out rather than taking a payment. But the words you're using, loan, makes my hair curl so what uh uh i've only got one or two so it's bad when they curl but um the it sounds like you're are they going to charge you interest for this loan no basically they use the word loan it's kind of a catchphrase it's not
Starting point is 00:11:21 actually a loan it's it's boring against your required amount that you are contributing during your career. And then as you retire, you have the option of taking a portion of that out and getting a lump sum. Yeah, I got that. Okay, as a result. I just don't know what the terms are on this loan. So it's a partial lump sum, and you still are going to get some monthly? Right. Basically, it depends on what age you retire at.
Starting point is 00:11:51 If I was to retire at my age, they would charge $85 per $1,000 taking out of this quarter of a loan for the duration of my life until I pass away on my pension. $85 every year? No, per $1,000 per month. Per month? Yes. Whoa. No, that's a loan with a pretty high interest rate.
Starting point is 00:12:23 Okay. Let's see. I mean, the idea, they tell you if you would take that final loan and invest it, and the return that you would get from investing that larger loan sum is you little over 10% a year in interest. $85 per month per thousand is... I could give you an example with rough numbers, but just type it. No, I would not do this deal with what I'm hearing about it right now. If you want to learn more about it, holler at one of our SmartVestor pros and sit down and they'll help you crunch the numbers on it.
Starting point is 00:13:15 But what I'm hearing right now, this is not a good deal at all. $85 per month? That's more than 10%. Yeah, that's going to be, wow, out of every 1,000. Because 10% would be $100 is 10% of 1,000 per month? I mean, this is like 100% a year. So, no, there's something wrong with everything you're telling me. This doesn't even make sense.
Starting point is 00:13:47 It's self-destructive. So it must be $85 a year per 1,000. And even that would not be great. So that's 8% to borrow the money. So, no, I wouldn't do that either. But anyway, if you want to sit down with a SmartVestor Pro, click SmartVestor at DaveRamsey.com. Those are the investing guys that we recommend.
Starting point is 00:14:11 I don't do investments, but the program you're – everything I'm hearing about this has got me spooked. So if I had to answer on what I know today and what you're trying to tell me today, no, I wouldn't do it. I'd just stay with your regular. Now, if you out there are listening and you have a lump sum option for your pension, you almost always come out ahead taking the lump sum. But this is not a lump sum option he's talking about.
Starting point is 00:14:36 He's being charged a fee for this. A lump sum option is you're just going to get a lump sum, and that's going to set you up to win. And you roll that out into an investment. That will make you more than your pension would have paid you. And when you die, the pension dies with you or with your spouse if you have a survivorship clause. But either way, when both of you are dead, the money is dead.
Starting point is 00:15:02 And when you move the money out, if you did like a lump sum and you rolled it over into an IRA, into good mutual funds, and both of you die, that money survives. So you come out better alive and dead most of the time with a lump sum. But what Dan's describing there does not sound good at all. Ben is with us. Ben's in Johnson City, Tennessee. Hey, Ben, how are you?
Starting point is 00:15:23 Hey, I'm all right. How are you? Better than I deserve. What's up? So thanks for taking my call. So my wife and I, we actually did your class through our church. We've been married about six years, and we did your class right at the beginning of our marriage. And we have been able to, I actually just got out
Starting point is 00:15:47 of school. I was in a five-year doctoral program. And so we didn't, we weren't really able to do much financially during that time. But since I've been out and employed, we've gone through baby steps one through three. And so we don't have any debt and we're trying to figure out sort of what to do now that we have higher income and what to do with baby steps four through six. Um, we both work, um, at the VA. And so we, uh, we have the option to have 5% of our IRA matched, which we're doing. And I know, I think your recommendation is to go up to 15%. That's maybe step four, yeah. Maybe step four is put 15% of your income into retirement.
Starting point is 00:16:36 Right. And so it's tempting to pay the house off first because we could probably pay our house off in maybe about five years. And I wanted to get your opinion on that. No. You can pay it off in seven years if you do it the way we're talking about. If you can pay it off in five without, it's not. What's your household income?
Starting point is 00:17:01 It's maybe about, I figured it to be about $185,000. Okay. And so $30,000 a year is going into retirement, not quite. $27,000 if you're putting 15% in. It's not yet, but that's where you're going to be. And what's your loan balance on your home? $260,000. Okay.
Starting point is 00:17:19 And you can pay that off in five years to the tune of $50,000 if you don't do this. And so it's going to take you eight years to pay it off doing it my way instead of five. Yeah, and I'm not going to miss out on that retirement during that time. No, the baby steps are there for a reason, because you need to get your retirement started and get things moving. There are two things that happen with all the millionaires that we've studied, Ben, and we've studied over 10,000 of them in detailed research. Number one, they pay off their home in an average of 10.2 years.
Starting point is 00:17:50 That's the average. Number two, they use their 401K and their TSP and their Roth IRAs to build wealth, and they do that steadily and predictably, just exactly like the baby steps teach, and they don't do it any other way. There's very, very few of them that violate that. Now, there's some millionaires become millionaires by all kinds of different ways, but the primary data points is like 80%, 79% are doing those two things.
Starting point is 00:18:22 And they're doing those simultaneously the way that we've taught for years, oddly enough. So that's what I would do, man. Thanks for the call. Timothy is in Chattanooga. Hi, Timothy. Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my call.
Starting point is 00:18:38 Sure. What's up? I just missed a little guidance. I'm on baby step 3, almost complete. Good. I'm looking at Baby Step 4, 5, and 6. My house payment is less than a quarter percent, or right at or less than a quarter percent of my take-home pay.
Starting point is 00:18:55 And if I put 15% back for retirement and save for kids' college, I have nothing left in the budget. So I guess my question is, if I'm supposed to be able to do that, my house payment being right, you know, am I missing something? What's your household income? $47.12 a month. And how many kids you got? Two.
Starting point is 00:19:18 Okay. Well, I mean, you may want to just do a limited amount towards college so that you can leave a little room in the budget and or put some towards that. But average household income in America is $54,000 right now. And we run these numbers over millions and millions and millions of case studies. And they work. It's not magical. I mean, you don't have lots of room, but you should have enough room to make it and be able to do all of these things. The last thing I want you to feel is buyer's remorse, especially when you offered thousands more on a new home to win a bidding war.
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Starting point is 00:20:32 Call 888-LOAN-200 or visit churchillmortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Dan is in Boise, Idaho. Hi, Dan. Welcome to the Dave Ramsey Show.
Starting point is 00:21:17 Hey, Dave. Thanks for having me on today. I appreciate it. My pleasure. How can I help? Well, me and my wife, we've been fans of the show for a while, and we're both teachers, but I recently got a new job
Starting point is 00:21:29 that's going to change things quite dramatically for us. We're moving states, everything, and we just kind of wanted to make sure we got this done right, because we've never been in some of these positions before. Cool. What do you make now? Right now, I make about
Starting point is 00:21:45 $50,000 a year as a teacher, and the new salary is going to be closer to about $140,000. Wow. Big jump. Good for you. What are you going to be doing? Well, I'm going to be working for one of the larger tech companies in the world.
Starting point is 00:22:01 I don't want to call them out or anything, but in the top four or five. Cool. Good for you. Good. Yeah, it's been a long work and process to get there, but it's been great. Okay. So we're having to relocate cities, and we're leaving the whole life behind.
Starting point is 00:22:17 You know, we've got to bring my dad with me because of his health and stuff. And so I have a retirement plan that's pretty much been managed by the system, and then now I'm going into a system where it's sort of up to me to kind of manage that. And so I'm a little nervous about that part and, you know, getting some of the debts gone that we had to take on to get through education. Okay. Well, as you may have heard, we teach a process,
Starting point is 00:22:41 a step-by-step plan called the Baby Steps, and that would be your order of attack on this. You get moved and you get settled, and you would take your current retirement plan and roll it to an IRA. You can click SmartVestor at DaveRamsey.com. They'll help you do that. When you're ready, and you're not ready now, but when you're ready to start doing your own retirement,
Starting point is 00:23:05 they can help you put that together as well. But baby step one is $1,000 saved. Baby step two is to be debt-free, everything but your house. So that's what you're going to concentrate on right now. Yeah. Because the house we have now, when we sell it, it will pay off all of our outstanding debts. Oh, good. For our student loans.
Starting point is 00:23:24 Oh. How much student loan debt have you got? I got a pretty big chunk of student loan debt. It's about $200,000. Oh! I've got a couple masters. I know. Because as a teacher...
Starting point is 00:23:36 Okay, so anyway, so you've got $200,000 to clean up making $140,000. Is your wife going to be working outside the home in the new location? No, we've got one at home that's got some health issues, and she won't be able to go to work. Okay, all right. And so you're making $140,000. How fast do you plan to pay off $200,000? Well, that's just it.
Starting point is 00:23:55 I haven't gotten to that. We haven't ever had to make a payment on it because our income's never been high enough. And in two more years as a teacher, I would have qualified for the forgiveness. Well, assuming you could have got it. Nobody's gotten it much yet. But anyway, so, okay, let's just pretend that you put $75,000 or, let's see, $80,000 on it. In other words, you live on about what you used to live on.
Starting point is 00:24:21 Uh-huh. And you put all this new income on the debt debt and you'd be out of debt in three years okay and then once you're debt free then you would build your emergency fund to three to six months of expenses and only then would you start retirement and baby step four 15 of your income going towards retirement but uh this is not uh you didn't hit the lottery and you get to go buy new furniture right you're broke that's one of the things yeah yeah you're broke and deeply in debt okay and we weren't sure because of the size of the student loans if we should put that in the same step with like the um like the house mortgage because of how big it was absolutely doesn't
Starting point is 00:25:03 matter size doesn't matter on it you've got to take care of it big it was. Absolutely. It doesn't matter. Size doesn't matter on it. You've got to take care of it because it's not going anywhere until you punch it. The great news is you almost tripled your income, and so now you're going to be able to address it very, very aggressively as long as you don't go crazy with this new income. And so you've got to get on a written budget and keep your lifestyle down to nothing. And if you start throwing 75 80 000 dollars at this in three years it's gone and that's you know that's still living on about
Starting point is 00:25:31 what you used to make so you're not going to get to enjoy this money for right now for right now you're going to use it to clean up this huge mess that you made and uh then you once you get that mess cleaned up then you're 100 debt free you're renting a cheap house you're selling the house you're in you're gonna rent something cheap you're gonna drive something cheap we're gonna be a hundred percent debt free we'll build an emergency fund of three to six months of expenses then we'll save up towards starting to buy a home and once we've done that then we'll start talking about putting money in baby step four into your retirement. Brandon is with us in Tyler, Texas.
Starting point is 00:26:13 Hi, Brandon. Welcome to the Dave Ramsey Show. Hey, Dave. How you doing? Better than I deserve. What's up? Good. I have a question.
Starting point is 00:26:22 I'm a full-time student. I hold two part-time jobs. Get me through school. I'm having trouble hearing you. Can you speak directly into your phone, please? Yes, sir. Is that better? A little bit, yes, sir. Okay, so I'm a full-time student. I have two jobs, and I have a wife and four children. I'm just about to graduate in may and uh well i'm just um i'm also having trouble also finding the job because a lot of folks want experience but so what the phone call is about um um my wife we're i'm roughly about twenty four thousand
Starting point is 00:27:01 dollars in debt for student loans i just me and my wife just got saved about two years ago, and we're on fire for the Lord, on fire. I'm a youth pastor at my local church, and I'm anyways, I'm wanting to be debt-free and trying to also have an $8,000 car payment, which I should be able to have that paid off with my current income in about eight months. But my wife, we have four kids, one only at home. All the other ones are at school. She does not want to work. She wants to be a stay-at-home mom,
Starting point is 00:27:47 and I wanted to see what you thought about that, what the Bible says about that. I don't find the Bible requiring her to work or to stay at home. I think that's a decision the two of you make, and your economics look at that. There's lots of scriptures dealing with women and men being industrious. Probably the most famous about ladies would be Proverbs 31, and it goes through in great detail the great industry of the Proverbs 31 woman,
Starting point is 00:28:18 that she earns an income, that she makes money, and she makes her household proud as well. But I don't find Scripture saying you have to stay home with your kids. I don't find Scripture saying you have to be in the marketplace. And so either one. So what we do need to do is work together as a team and submitting ourselves one to another. Scripture says that. I mean, we're there to serve each other and serve our household. And it's not selfish desire or selfish ambition.
Starting point is 00:28:51 It would be what's good for the family. And if you've got four children at home and she can, at a minimum, biblically, she would be required to be an expert home economist, use that time at home to cook from scratch, which is much cheaper and also more healthy. Obviously, she's a coupon queen. You know, she's looking at consignment sale clothing and anything she can do. A lot of ladies have great eBay businesses. You know, what can she do that's a Christy Wright kind of a business boutique thing that she can do while she's ladies have great ebay businesses uh you know what can she do that's a christy
Starting point is 00:29:25 wright kind of a business boutique thing that they she can do while she's at home with the kids that actually makes money and there's lots of things out there that you can do without quote taking the nine to five career job but there's nothing wrong with the career job so what do you what is your degree going to be in? Instrumentation and electrical. Okay. And pretty much working in power plants, chemical plants, the maintenance part of the job. Okay. All right. And so when you land that, what will your income increase to?
Starting point is 00:29:57 Roughly about $30 to $40 an hour. Wow. And so it will increase a lot. I've raised my kids by myself on $10 an hour for the last, since 2009. Yeah, so when you get that job, I don't think we're going to have to worry much about her, the income she produces. My wife's been a full-time mom for 33 years. Now she's a full-time Mimi and keeper of the Shih Tzu Rufus. But we're not in a position that we need an income created from her. Thanks for joining us, America. Glad you're here.
Starting point is 00:31:02 Our question of the day comes from blinds.com. Find out for yourself why blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and with new promos every month, you save money. Use the promo code Ramsey. Aaron is in Missouri. My student loan is growing faster than we are paying with the minimum payment. It will take us one to two years to get to the point where we're focusing on my student loan in our snowball.
Starting point is 00:31:33 Should we pay above the minimum payment just so it isn't growing or focus that money towards our lowest debt and just let it continue to grow until we can crush it like the bug that it is? That's great. Well done, sir. Oh, yeah. Pay your minimum payments even if it continues to grow. And the aggravation that this presents causes you to do anything you can to get through your debt snowball faster.
Starting point is 00:32:01 So you can crush it like the bug that it is. Yeah, but just pay your minimum payments it doesn't it's you're paying one thing or another i mean if you pay extra on it so that it doesn't grow it slows down the other parts of the debt snowball so it's it's the money's going to get there one way or the other you're going to get to it eventually doug is with us in dallas texas hi doug how are you i'm doing great dave how are you today better than i deserve how can i help great hey my question to you today is is about um we owe forty four thousand dollars on our house um we are completely debt free no car payments no consumer credit nothing else other than this
Starting point is 00:32:43 but we have a we have a high school senior about to go to college. We have about $50,000 in our savings account saved up to start paying for college. Should I take that $50,000 and go ahead and pay the $44,000 and pay the house off now, leaving us with $6,000 in our savings? And then we're wanting to try to bankroll college so she doesn't go to school with any college debt. Well, that's the only way she's going, yeah. I agree.
Starting point is 00:33:12 So what's your household income? About $230 a year. Okay. And how expensive a school have we picked out? It's a D1 school, and it's going to be about $10,000 a semester, $20,000 a year. Okay. Tuition alone? No, all included, tuition and room and board.
Starting point is 00:33:32 Okay. With or without a house payment, why could someone making a quarter of a million dollars a year not fund $20,000 a year? Oh, that's the easy part. My question is about taking the $50,000 out right now and just paying the house off. I'm saying it doesn't matter. Either way, you should still be able to cash flow college, right? Correct.
Starting point is 00:33:53 So the point is she's not going to go to college with debt. There's no reason for her to because you make a ton of money. You've done great. Congratulations. I'd write a check today and be debt-free. That's what I wanted to hear. I just need to get my wife. She's kind of worried about getting that savings account down to $6,000.
Starting point is 00:34:10 Well, now, that's not your emergency fund, right? No, no, that's outside of the emergency fund. How much is in your emergency fund? About another $10,000. Okay, and when does kiddo go to school? She starts, we have to make our first payment in August, so she'll start in the fall. This coming fall? Yes, yes, yes, she's a senior.
Starting point is 00:34:31 Okay. So I think the way you do this is you lay out your budget, your monthly budget, you and your wife looking at it, and you say, okay, we're a little slim on your emergency fund, by the way. I'd like to get your emergency fund to $20,000, and then I'd like to pay off your house, and I still think you can make $10,000 by August without any trouble at all. Oh, yeah. Your income is $20,000 a month.
Starting point is 00:34:58 Right, and we're maxing out all of our 401K, and then my wife's a teacher, so her 403B, and she's got a separate IRA. So all of those are already fully funded. I know that kind of goes against your wishes a little bit about paying the house off first and then funding those. No, I mean, I would fund them up to 15% of your income, and you're probably not going over that right now. But if you need to back that down a little bit, even to pay for college, you can. But you would be at baby step seven at this point. And so the only pull you're going to have as soon as you pay off the house,
Starting point is 00:35:34 you've got to make sure you've got $20,000 in this emergency fund, and you're a little slim on that. That's a little slim with an income. So anyway, let's get that up there, and let's get the house paid off. But lay out the budget with her. Sit down and go and go okay here's how we're going to do this between now and august we've got this many months and we can do it at this pace and you know unless one of us lost our job we're not going to be trouble and even if one of us did lose our job this 50 000 doesn't send her to school so yeah i i i'm i'm doing that but i think you can be you can give yourself some assurance and her some assurance by looking at the budget and saying okay we can do this you know
Starting point is 00:36:12 we can send her to school uh once a month if we have to uh you're and you've only got to do it twice a year so um it's fairly fairly easy to do and if you need to wait one semester to pay off the house, that's okay, too. But lay it all out. Just plan it out. By Christmas, the house is paid for for sure. And you've got $20,000 in an emergency fund, and her first semester, second semester, her first year is funded by Christmas. Easily, though, between your income and the 50K that's laying there.
Starting point is 00:36:48 James is with us in San Diego. Hi, James. Welcome to the Dave Ramsey Show. Hey, Dave. Thank you for taking my call. Sure. What's up? Hey, so I got a question.
Starting point is 00:36:58 I want to see what advice you can give me on a decision that's coming my way. I am currently active duty in the military, going to be getting out in May, and wondering if I should use the GI Bill and go to school, get my MBA, or just focus on a career, get employed as soon as possible, and start that. I have a pretty good resume as it is. I'll get my bachelor's degree in May around the same time of me getting out. My wife is currently finishing up her graduate degree as a speech-language pathologist. So we're dealing with that.
Starting point is 00:37:35 We've got no real debt except for the loan. What do you want to do? So I'm a logistics specialist in the military, so I'm going to continue that. Is your undergrad in supply chain? Yeah, yeah, it is. So I'm a logistics specialist in the military, so I'm going to continue that. Is your undergrad in supply chain? Yeah, yeah, it is. Wow. Yeah.
Starting point is 00:37:57 Listen, you're going to walk in $80,000, $90,000 a year straight in, and you can pick up your MBA as a side thing if you want to later. And then, gee, I'll pay for it whenever you want to do it. Right, right. The rest of your life. And so you don't need an MBA to make $100,000 a year in supply chain. Okay. So just get out and start running to some career.
Starting point is 00:38:20 It is. Hey, man, I'm meeting guys coming out of college that are 22 years old making $75,000 and $80,000 a year with supply chain. The logistics is one of the hottest sections of a business degree that you can get now. I mean, you're quite hot, man. I mean, this is a great way to go, way to use your military career to line up on civilian life. Yeah. Very well done. That's good to hear. Okay.
Starting point is 00:38:50 The NBA is valuable. It's nice. It's not a precursor for you being successful financially or in your career field. I would go ahead and do it at some point, because if you want to, if you'd like to have it. It is a good investment in the sense that, but is it necessary to be successful in your field? No, no, it's not. And I'd get after it. And thanks for your service to the country.
Starting point is 00:39:17 And very, very well done with managing your career and your exit into civilian life. That's about as sweet as I've heard in a while. Very well done. Open phones at 888-825-5225. Andrea is on Instagram. Dave, what's the safe withdrawal rate that you suggest retirees take out of their retirement accounts?
Starting point is 00:39:40 Well, the inflation rate has run. The CPI, the Consumer Price Index, has averaged 4.2% for the last 70 years. So the cost of gasoline, bread, housing, electricity goes up an average of 4% a year. So if you will look at your retirement and leave 4% in, you can pull off anything beyond 4% that your retirement makes. So if your retirement is invested at 5%, then you can pull off 1 safely. If your retirement is vested and it's making 12, you can pull off 8 safely. It has to do with what it's making, because you need to at least let your nest egg grow
Starting point is 00:40:20 by the inflation rate so that your returns grow by the inflation rate so that it runs in perpetuation mathematically. 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 slash show.

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