The Ramsey Show - App - How Long Does it Take to Become a Millionaire? (Hour 1)

Episode Date: August 10, 2018

The show about you

🎵 Live from the headquarters of Ramsey Solutions, 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 am Dave Ramsey, your host. This is your show, America, because it's all about you. There's a free call at 888-825-5225. 888-825-5225. Micah starts off this hour in Asheville, North Carolina. Hi, Micah. How are you?

I'm good. How are you today? Better than I deserve. What's up in your world? Well, I just entered the workforce. I'm 22 years old, graduated college, living at home, and I just had some questions. I'm grossing about $28K a year and wanted to know what your advice would be, whether I should step into looking into real estate,

whether I should look into Roth IRAs or something of that nature, you know, to kind of get the financial wheels rolling and so that I also can also prevent myself from going into debt. Good for you. Okay. So you are debt-free? Yes, sir, I am. 100%? Yep. No car, no student loan debt, nothing? Nope. Still living at home. Good for you. Okay. What are you driving? Old 98 Nissan Frontier. Okay. When are you going to upgrade that? Well, that's the first thing I was planning on looking at doing. It's not that it's unreliable. It's been a fantastic vehicle.

The only problem is I'm freakishly tall and don't fit in it. So it's very uncomfortable to drive for long periods of time. So I'm looking at upgrading that here in the near future. Okay. Well, cool. You got no overhead. Yeah, I would save up some money and move up in car. I think that's appropriate in your situation. Of course, above your emergency fund, and you need to have three to six months of expenses set aside

and having plans to move out and get on your own sometime soon and set up your household budget and get things rolling. The first thing I would do after you've done those things is to start your Roth IRA. Do they have a 401k at your work? They do not. Okay. Then your Roth IRA is $5,500 per year that you can put in. You can have that automatically drafted monthly out of your checking account,

going into a good mutual fund. We recommend growth stock mutual funds. And let's get started there. By the way, at 22 years old, if all you ever do is a Roth IRA, you will be more than a millionaire by the time you – in Good Mutual Funds, you will be more than a millionaire by the time you get to 65. So you're going to be fine because you're starting out early and you're smart and you're debt-free and you're thinking and you're on a show like this asking questions which i didn't have sense enough to do at 22 so you know you're on your way and uh if you just do that you'll be okay and then above that if you want to do some other things you want to start saving to buy some real estate uh you know i'd buy a home first that you live in or a condo or whatever that you pay cash for uh You may be able to do that if you watch what you're doing in your situation.

And let's get that paid off. And then as far as rental properties go and so forth, I would save up and pay cash for those. I know I would do that because it's exactly what I did do the second time. The first time I went broke because I borrowed money up to my eyeballs and had to learn a bunch of stupid lessons the hard way because I wasn't very smart. But let's start with moving up in car, getting your emergency fund in place,

and then start your Roth IRA. If you need some help doing that, just click on smartvestor at DaveRamsey.com, and the guys and gals that are in the business, I'm not in the mutual fund business, you enter your information, it will drop down a list of SmartVestor pros in your area for you to select from. And they'll get in touch with you. You get in touch with them. Sit down. Learn about it.

Take your time. Don't act like you're something you're not. Know that you're 22 and you're just brand new at this. And it's all a little bit weird and a little bit scary. And they need to come in there with the heart of a teacher. And you need to leave there knowing what you put money in or don't put money in it. But it's pretty simple to do. You can buy a mutual fund or two.

Once you start rolling on it, I always recommend spreading it across four types of mutual funds, growth, growth and income, aggressive growth, and international. And by the way, Micah, when we do the millionaire theme hours, you know what all the millionaires tell me? Like 80, 95% of them tell me they started investing in their Roth IRAs and their 401ks when they were your age. And then their 46, their 56, and their millionaires and or multi-millionaires. And the 401k and Roth IRAs and good mutual funds is what did it.

So there you go. Thanks for joining us. Yeah, there's a stupid article in USA Today that basically says you can't be a millionaire anymore because it used people making $28,000 a year as if they're going to make $28,000 a year their whole life. And because I can tell you that's Micah's starter job. That's his beginner job. He's not going to work for 40 years and never get a raise. That would make you a loser.

I mean, how do you work 40 years and never get a raise? Most people, if you just breathe, will get a raise eventually, you know. So, you know, so $28,000 for your entire working lifetime. And, of course, the USA Today fools that wrote the article said, you know, you can count on a 7% rate of return. Well, I don't know where they're investing, but I make anywhere from 10% to 15% on our money in mutual funds, like I was just suggesting. And, oh, by the way this is not dave ramsey doesn't know what he's doing oh gee me so here's the thing listen to the millionaires on the millionaire theme hour they did not invest making seven percent on their money they invested in good

growth stock mutual funds and they made a lot more than that so the proof. And, you know, we've been doing this show for 25 years. So now we've actually got people that started doing the stuff we teach 25 years ago and they're millionaires or multimillionaires. They started doing it 15 years ago and they're millionaires or multimillionaires. By the way, the average is it takes about 17 years. That's the average among millionaires. So, you know, you can do it. You just have to do it and micah's well on

his way very very well done sir i love it our question of the day comes from blinds.com you don't need a second mortgage to make your home over you can get brand new custom blinds without paying custom prices blinds.com will give you free samples free shipping and new promos they run every month use the promo code RAMSEY. Grace is in Missouri. We're in Baby Step 2. It means they're getting out of debt. They purchased a $1,700 car to get us through paying off debt.

Would you recommend carrying collision and rental car insurance on the vehicle? The deductible would be $500. I wouldn't carry rental car insurance on it, but I would carry collision on it because it'll cost about $3 to cover $1,200 worth of car, $1,700 minus $500 deductible. Very, very inexpensive to cover it. And right now you're broke, and $1,700 car replacement would be a major catastrophe for you. So look at what it costs to carry the collision, and you'll figure out it's almost nothing.

And so it's worth the coverage given that you're broke and you can't afford to take the risk right now. That risk would pound you in the face. So that's all insurance is for. You only buy insurance. You never make money on insurance. By definition, you lose money on insurance on average unless you have

a worse than average experience. You don't make money on insurance. But if you have an average experience with loss that the insurance covers, the insurance company makes money on average. They have to make profit. That's how they stay open.

And so you don't buy insurance to make money on it. You buy insurance to transfer risk that you can't afford to accept, which in that case right there, you're too broke and can't afford to accept a $1,700 risk right now. This is the Dave Ramsey Show. Can you believe this real estate market? Home shopping has become so competitive. There's a ton of new buyers in the market, and bidding wars are the new normal. Folks are under a lot of pressure to offer more money to get into that house. Don't do that.

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NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Thank you for joining us, America. Sarah is with us in California. Hi, Sarah. How are you? Hi, Dave.

I'm great. How are you? Better than I deserve. What's up? Well, I just had a quick question regarding emergency fund versus a hills and valleys fund. We're small business owners. We're actually small-scale chicken farmers. And we're trying to decide how much, you know, we divide between what we call baby step three versus what we have set aside for, you know, slow months in sales. You know, the livestock still needs to eat during the winter winter even if our, you know, our sales are low.

So how do we determine, you know, what amount should go to each of those funds, if you will? Well, the home fund is very easy. It's three to six months of household expenses. And is the farm operation your only source of income? Correct, yes. Then I would do the six-month of expenses side because you have an irregular income and you're subject to the markets on what people will pay and how fast they're buying and so forth on agricultural stuff, obviously.

So I'd do the six-month side on that. On the business side, you keep what's called retained earnings, which is basically an emergency fund there, but it also can be used for things that are not emergencies. It could be used for buying equipment. You can save up and you could open up another line of business if you wanted to try something new. You could hire somebody or whatever. Anything you need some money for that you've got to pay for and isn't making you money right then, you would use retained earnings for that.

And we tell people to build a really nice retained earnings in your business as well because it gives you lots of peace and you get the ability to take advantage of opportunities. Let's say a piece of equipment you use that another guy went broke and you could buy it for 10 or 20 cents on the dollar, even though you don't need it today. And you could buy a $100,000 item for $10,000. Well, you'd need that $10,000 handy and you'd just jump on that. Even though you don't need it today, you'd take it for $10,000 if it's worth $100,000 in your world. Okay.

So how do we decide then, you know, from our quote-unquote net income at the end of the year or monthly or whatever, how do we decide what percentage goes into our home emergency fund and how much we keep back for retained earnings? I load the home emergency fund. I mean, you need to keep some retained earnings operationally minimum. You've got to have something to cover your downturn months, and you just project those out. It sounds like you've been doing this long enough to where you kind of know what winter is going to look like. Yeah, we're in our fourth year. Yeah, so go ahead and reach over there and go, okay, here's what we think winter is going to look like.

And based on that, I need x number of dollars and we're going to that's going to be our minimum emergency fund for quote survival in a slow time right and that that's the retained earnings in the business now then i'm going to load up the home and get it to six months okay once it's loaded then then the only question is how much profit do i take home from the business to enjoy and to invest aside from the business? And how much do I leave in the business in the retained earnings account? And I want you to build that retained earnings account eventually up to very few small businesses pull this off. But I wouldn't be mad at you if you had as much as six months of business expenses in your business retained earnings. We don't have that here today because we've always grown faster than our retained earnings has grown.

That's kind of the spot we're at, too. Yeah, and so we've never gotten there, and I don't know that we ever will get there. But that's the most I would have. Past that, I think you you got too much money stuck in the business okay but if you said all right our operational expenses for a year on the business are a hundred thousand dollars then i'd like to have 50 grand in retained earnings okay but build up the house emergency fund is more of a priority in the beginning just because we need to eat and the animals need to eat even during our slow time.

Exactly. Well, no, no. The animals eating is a minimum retained earnings. Okay. But I'm not going to load it up as heavy. I just want to get the retained earnings in the business up to where the business survives a downturn, a predictable downturn. Okay.

Okay? Like winter. Okay? Like we're talking about but then past that i'm gonna load the house when the house is loaded then when i'm deciding okay how much do i take home out of the profits and how much do i leave them retained earnings i'm gonna go and build that retained earnings up and above up to about six months maximum just because that gives you the money to grow with too since you're not borrowing money anymore, if you're doing Dave Ramsey stuff, you know, borrow or slave to the lender, the Bible says.

We're not doing this anymore. Then since you're not borrowing money, you've got to be your own line of credit, and that's what that retained earnings does. And that's how we've used it here in our business as well. So, hey, really good question. Thank you for joining us. Open phones at 888-825-5225. Sheila's with us in Seattle.

Hi, Sheila. How are you? Hi, Dave. I'm good. Thank you for your ministry, Dave. I really appreciate you. Thank you. How can I help today?

So my son, he is 18 years old. He's a senior in high school. He received almost 100,000 inheritance from his dad who passed a couple years ago. So while he's a senior in high school, I thought maybe I could park this somewhere where it would make a little bit more money when college comes next year, so should I put that maybe just in a money market fund or mutual funds? Or what's the best way to deal with this? Because I know that I have to be paying tuition, I don't know, every semester. So I don't know how to do that and make the money grow, too.

Okay. Well, what we need is a college budget. And to do that and make it intelligent, you need to think about, all right, here's where he might go to school, and let's find out what the actual tuition that they charge is. Is he going to live at home or is he going to live on campus? He's going to live at home because it's going to be at a community college, which I also want to ask you, Dave, because he's going to be at a community college, which I also want to ask you, Dave, because he's going to pursue computer science, and our community college has offered actually

a four-year bachelor of science degree, which is way cheaper than going to the University of Washington. And I'm thinking, should we just stick it out here with Bellevue College? Yes. Oh, yes? Okay. Let me just tell you what I'm thinking, should we just stick it out here with Bellevue College? Yes. Oh, yes? Okay. Let me just tell you what I'm betting on. I'm betting on the home of Microsoft, Seattle, having a community college for computer science that's stellar. I would imagine it's amazingly good. I'm guessing. I don't know. I have nothing to base that on except for the fact that you're definitely in a tech corridor there.

And if the community college is so up on tech that they are offering a four-year at the community college level, that's a deal, and you're probably getting an excellent education. That would be my guess. Now, you could check around and check on that but that's that's going to be the best bang for the buck so what does it cost reputation what's it cost oh my gosh it's only gonna be 12 000 a year 12 to 15 and he's staying at home with me okay 15 a year times four years is 60 is 60 right he's gonna be staying home with you, and he doesn't need a ton of other money. Has he got a car?

No, no. I asked him to take a bus and the train when we move to a home next year. So right now we're just renting right now. Okay. Is that smart? I don't care. I mean, if he's got $100,000, he may want a car. Yeah, he's thinking about it, but not right now.

He's kind of like you. Okay, what I'm trying to do is lay out a budget here, okay? So let's say he bought a $10,000 car and he needed $60,000 for school. That's 70 of the 100. That means you've got 30 you can put in mutual funds, and the rest of it needs to be in a money market. See, I laid out a budget there. You've got 30 you can put in mutual funds, and the rest of it needs to be in a money market. Oh. See, I laid out a budget there.

You've got four years. The money you're going to need in the next four years does not need to be in a mutual fund because mutual funds go up and down, and I don't want any of that money to get lost to the market going down about the time he needs to pay tuition. So I'd put about 30 of that in mutual funds for him to use after he gets out of college, and I'd put about 70 aside in a money market, 10 for a car and 60 for his school. And I'm just making those numbers up, but based on what you're saying, let's have a budget. Let's have a plan.

And in order to learn more about that and put together your actual investments, you can check with one of our SmartVestor pros. Just click on SmartVestor at DaveRamsey.com, and those guys will help you. This is the Dave Ramsey Show. Hey, Chris Hogan here. Retirement isn't an age, it's a financial number. But with three out of four Americans living paycheck to paycheck, most people's retirement dreams are a nightmare. And if you own a business or work in HR, your team is looking to you for that help.

That's why our team created SmartDollar. SmartDollar was built on the same principles that have been changing lives for the last 25 years and has been designed specifically for the workplace. With the help of Dave Ramsey, myself, and Rachel Cruz, SmartDollar equips the employees of companies of all sizes to get on a budget, save for emergencies, eliminate debt, and get on track for retirement. SmartDollar is completely online and accessible anytime, anywhere, on any device. This proven step-by-step plan with world-class content and easy-to-use tools, including EveryDollar Plus, will give your employees everything they need to take control of their money. To bring this life-changing benefit to your company, visit SmartDollar.com today. In the lobby of Ramsey Solutions, Keith and Lisa are with us. Hey, guys, how are you?

Hi, Dave. Hey. Welcome, welcome. Oh, my gosh. And you're here to do your debt-free screening. Yes, sir. I love it. How much have you guys paid off? $191,000. Oh, my gosh. And you're here to do your debt-free screening. Yes, sir. I love it. How much have you guys paid off?

$191,000. All right. How long did that take? Well, hold on, Dave. He's not done. $191,000 while cash flowing, $90,000 in medical, and $19,000 in car repairs and replacement vehicles. Woo! Okay.

So, plus another $100,000. Yeah. Okay. All right. And how long did this take? Five years. All right. Cool. And your range of income during that time? Starting at $110,000, ending at $208,000. Cool. What do you guys do for a living? We're both federal employees. Awesome. Very good. Bun, so where are you guys from? Kansas City. All right. Good to have you. That's fun. And it looks like from those things hanging around your neck that you guys are here for the counselor training, the coach training this week, right? Yes. Awesome time. Master series training. Yeah. Very cool. It's been a good week, huh? It has been awesome. Chris Hogan's pretty awesome. Yes, he is. He is a great teacher, and I'm sure you guys have had a lot of fun with him. Yes, we love him.

We love his communication. So what kind of debt was the $191,000? It would be mostly interest on student loans, IRS, credit cards, business debt, family and friends, and the dreaded 401K loans. You had everything. We had everything. You were just like normal. Yes. We were normal.

Wow. Yeah. So were normal. Wow. Yeah. So what happened five years ago that put you on this journey to get out of debt? It actually started eight years ago when he sat next to me in church. Uh-oh. We kind of liked each other, started dating. Uh-huh. And on the second date, he kind of laid all of his dirty financial laundry out. Wow. You don't mess around. No. I mean, you go right for it on the second date, he kind of laid all of his dirty financial laundry out.

Wow, you don't mess around. I mean, you go right for it on the second date. I was a little more cautious. I was embarrassed. I didn't have as much as him, but I was still embarrassed. Well, after hearing his, you should have felt smart, right? So the church we were attending did Crown Financial Ministries. Yeah, wonderful.

He wanted me to do this 10-week Bible study on Sunday afternoons during nap time. I was like, oh, no. No, not nap time. Right, exactly. But he kind of looked at me like if I didn't, he might not be my boyfriend anymore. Yeah, so I went. And that's when I realized just how much negative emotion I had about money um so fast forward three years we moved to Kansas City got married

um began to consolidate everything including the debt and I put all the numbers down on paper and about passed out you know because it was 191,000. And he told me, but I guess I didn't carry the one, you know. That decimal thing will mess you up. It just, yeah. So we had 19 lines of payments going out that first couple months. And, you know, $110,000 sounds like a lot, but it was not back then i'm just trying to feed everybody get it get everybody a little something so we got a coach which is why we're now becoming coaches because that was huge in our world cool and then fast forward about a year and he comes home he

tells me about this crazy ball guy on the radio and i'm like he's mean we're not doing that and then he is yeah and so but he's a christian he's a mean christian he's a mean christian one of those oh my gosh and so once i heard the christian part i'm a high d so give me a plan i'm good to go okay and so um we borrowed the 13 week series from the library of financial peace University because, frankly, we couldn't afford to pay for it. And we listened our way through, read the total money makeover. I had more heart palpitations when you said stop the 401K contributions. But we did that, and that's when the medical bills started. And fast forward five years, we both have heavy metal poisoning oh yeah his is

from he um was in desert storm he's a marine and um it took all those years decades for his symptoms to really show wow and uh it took us three years to figure out what his diagnosis was and then we just got my diagnosis about three four months ago i have mercury poisoning from all the fillings that were put in my mouth as a as a young child wow and so um traditional medicine just wanted to mask the symptoms and we weren't feeling any better oh you're great come back in a year take another test and uh so we that's where the 90,000 and we still have medical bills that were you know it's an ongoing thing we at least have diagnoses now and we're you know on the path to healing so now that you're coaching

and you've been through financial peace university what do you tell people when you when they say how do you get out of debt we get that question a lot because we aren't shy with our numbers. We tell them. How do you do that? Yeah. What's the keys? The main key is communication. We each have our own spending money, but we talk about every purchase.

We try not to have judgment. And then the second is to just stay plugged into the Holy Spirit. I'm actually writing a devotional because I couldn't find one during our time and I needed some help. So I created that wall of scripture. Good for you. And from there, the Holy Spirit was like, other people need this inspiration. So we're working on getting that done by the end of the year. Keith, what do you say the key to getting out of debt is? Well, I have four keys. One, prayer. Two, the love of my beautiful wife and two kids. Number three, addressing the man in my mirror on a daily basis. And number four, which is really number one, chasing jesus okay very cool so your faith

walk was a big part of you guys getting out of this yeah our life group was amazing they supported us they were with us they didn't always understand why we were doing what we were doing but they didn't judge us they they were there right there with us and so you had a lot of cheerleaders we did that's helpful. You've got to have that. Because there's always a detractor or two. Yeah. We had those too.

Even if it's just the subtle roll of an eye. Yeah. You know, that contemptuous, oh, you're just people. You're people. Oh, my gosh. Yeah. You're Dave Ramsey people. Oh, my gosh.

Yeah. Like you're in some kind of cult or something. Exactly. It's hilarious. It is. Well done. How does it feel to not have any debt? We had a $1,500 car repair on Friday. Of course you did.

We just swiped the debit card and came on down to Nashville for the weekend. Just paid for it. Because that's what was planned. And there was no angst. There was no nothing. I remember the first time I just fixed the car. And it didn't involve drama. Right. You just fix the car. You don't have to melt down. You don't have to flop in the floor. You don't have to not eat for two weeks. You just fix the car. It was an amazing thing.

Very cool. What about you, Keith? How's it feel? The day we paid off the payment, we made our last payment, I was expecting this overwhelming feeling and there was nothing and I looked at Lisa and I remembered you talking in a segment what we did was follow the plan so the reward was we took our business and now

it's time to move forward yeah exactly next chapter we've got a copy of Chris Hogan's book for you yeah retire inspired signed by him signed by the guy himself forward. Yeah, exactly. Next chapter. We've got a copy of Chris Hogan's book for you. Retire Inspired. Signed by him. Signed by the guy himself. That's the next chapter. Be millionaires and be outrageously generous as you

go along. You've learned how to control money. That's an amazing move. Basically, about a $300,000 move overall in five years. That's pretty impressive. Alright, well thanks for being here. Yes, sir? $300,000 move overall in five years. That's pretty impressive. All right. Well, thanks for being here.

Yes, sir? One of the things that's come out of this is I send out a daily quote every day. And so to my tribe, I'd like to say a quote. Okay. What are the most powerful words in the universe? The ones you use to talk to yourself. Are you saying anything worth listening to? Very good. All right. It's Keith and Lisa, Kansas city, 191,000 plus a hundred thousand dollars and other stuff in five years, Megan one 10 to two Oh eight. Count it down. Let's hear a debt-free scream.

Three, two, one. We're the Joneses, and we're debt-free! Well done, well done, well done. Wow. Our financial coach master series team has just let out from a three-day training, and they're all out here cheering them on, too. Big crowd today. This is the Dave Ramsey Show. Our high health care costs getting you down?

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To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. Every time we do a debt-free screen, well, almost every time, you know what people say when I ask them, what's the number one thing, what's the main thing you have to do to get out of debt? Budget. Communication.

And they always say them in the same sentence, because budgets create communication. When you sit down with your spouse and you spend money together, you are agreeing on your dreams, your fears, your value system. And when you can come into agreement on those things, that's called communication. And so doing a zero-based budget before the month begins, giving every dollar an assignment, look at your income for this coming month,

and giving every dollar an assignment, that's a zero-based budget. Income minus outgo equals exactly zero. Every dollar has an assignment. That's a zero-based budget. Income minus outgo equals exactly zero. Every dollar has an assignment. I don't even care that much what you assign it to. I'll give you the baby steps as a suggestion of what to assign it to, but the bottom line is when you start doing money on purpose, you will win with money. That's why over 3 million people are using the EveryDollar app for their iPhone or Android or on their desktop for free. It's a free budgeting app. Takes about 10 minutes to build out

your budget at EveryDollar. And it will change everything. It will change everything when you take control. And that's why, again, 3 million people are using this free app. It's pretty stinking incredible. Things are moving, man. So check out EveryDollar. When you give EveryDollar a name, EveryDollar an assignment, EveryDollar a mission,

then you'll start to win. And the neat thing is you get to decide what those dollars are going towards you're still in charge we don't make you do anything we just make you do it on purpose britney is with us in austin texas hi britney how are you hi dave how are you better than i deserve what's up so i'm a new mom and i'm trying to get out of debt and handle money better. I'm on baby step number two, and right now my job has a 5% match in our 401k.

So I've stopped putting money towards the Roth 401k, but I'm wondering if I should still invest at least that 5% since it's a match and since it's free money while I'm still doing baby step number two, or should I take it out of my entire 401k? We tell folks to stop investing completely, even if there's a match, because it is a temporary thing and something switches off in your brain when you completely focus on one goal instead of having these goals bifurcated across four or five different things and diluted then. The math is not nearly as important as the commitment to the process. There's something about focusing on something that moves the needle.

You said you had a new baby? Yes, I do. about focusing on something that moves the needle uh you said you had a new baby yes i do so you kind of noticed how all of a sudden the axis of the world runs through this child yes isn't it amazing when you feel like i need to get on track my point is this what you focus on is what happens in your life and right now you if you're smart if you're a normal person uh when you have a new baby everything stops the whole world stops and we focus on that child for a while and so that child gets incredible attention and gets incredible care uh they won't require that much focus for survival and nurturing and so forth later as they become more autonomous as they go along, right?

But for right now, that focus is very, very important. And what you focus on is what gets excellent. And so that's why we tell you for a temporary period of time, stop all investing because what you focus on is what gets excellent. And just completely focus on the debt and be a little bit mad that you're missing out on that 5%, and that will drive you even deeper and faster to get out of debt and to push this through. How much debt have you got, not counting your home? So I don't own a home I rent, so right now I have $11,000 in debt. And what is your income? It have $11,000 in debt. And what is your income?

It's $40,000 a year. Okay. All right. And so how quickly do you anticipate knocking out this $11,000? I really haven't written it down yet. Okay. Time to do that. I'll tell you.

I'll tell you. It's a year. Okay. And if it's beans and rice, rice rice and beans you can make it in a year thousand dollars a month thousand dollars a month out of your budget but you're going to write it down and you're going to be on you have no life beans and rice rice and beans that's it and no going out to eat no vac vacations, no whining. You've got to get this debt knocked out because the faster you get it knocked out, the faster you build the emergency fund, and then you move on through the process and get back to investing again and taking advantage of that 5% match. And so my point is you shouldn't be missing out on this match for very long,

and it doesn't sound like you will be if you're working our system so you hold on i'm going to give you a copy of the book the total money makeover to help you with this process melody is with us in indianapolis hi melody how are you hi dave i'm great how you doing better than i deserve what's up So my husband started a painting business in about May, and we are pretty much on baby step, too. We have sort of a small disagreement, so I need your opinion because I understand where he's coming from. Sorry. So he does mostly commercial painting, and generally in this type of business, you've got about three months in the year where there's pretty much no income or really low, kind of depending.

So my husband would like to skip sort of baby step two and jump to baby step three. And then when we have baby step three, you know, kind of close, which we almost pretty much do, he wants to then work all through the debt. Okay. Baby step three is not a fill in the gap on income that we know is not going to be their fund. So he's wrong. Baby step three is for emergencies. This is not an emergency.

We know this is coming. Okay. So by definition, it's not an emergency. Emergencies are unforeseen things. Your tires wearing out on your car are not an emergency. We know they're going to wear out, and so you have to replace them. The paint peeling off your house is not an emergency. We know we have to save up and paint the house.

And so he needs to make, number one, he needs a different business model where he has actually something to do during those three months and doesn't go down to no income. This just planning to do nothing for three months is not a very good plan. So number one, he needs to do that. But then number two, if you are going to set some money aside for a downtime so that your family can eat uh then you would that would not be baby step three that would be just something we're in the budget where we're setting some money

aside because we got a problem coming you know it's kind of like saying during baby step two uh we still save for christmas because we don't want to have no christmas okay and so you but that's not an emergency fund that's a christmas fund christmas not an emergency it happens the same time every year it's very predictable okay and so that's the thing there so it's not a matter of the order of the baby steps it's a matter of you either budget for this whole or the smarter thing to do would be to say what can i do with my time during that that actually makes some money and let's build out that idea in our business and figure out some of these skills that he has that he could use in a different way during that time i don't care what it it is, but the idea of absolutely no income on purpose year after year during

a three-month period of time is, I mean, you need to come up with something. I don't know what it is, but if you're a teacher and you don't work all summer, maybe you ought to have a plan to work. A lot of teachers have things they do in the summer, little other self-employment things or they just have a job that they always do in the summer. I don't care what it is, but there's something you can do to earn some money during that downtime, and go ahead and plan that. Then you don't have to take the cash out of the house and away from your goals,

and put you in a much stronger position overall. So, hey, thanks for calling in. I appreciate you joining us. You win the argument. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money. That's what this show's all about.

Common sense for your dollars and cents. God's and Grandma's ways of handling money. Our thanks to James Childs, our producer, Blake Thompson, our senior executive producer, Kelly Daniel, our associate producer and phone screener. I am Dave Ramsey, your host, and we will be back. Hey, guys, it's Blake Thompson, chief production officer for The Dave Ramsey Show. This hour's up, but you'll find more on our YouTube channel, where we have over 6 million YouTube views each month. You can find debt-free screens, millionaire hour clips, Dave rants, and so much more.

Go check it out. Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has debt and has struggled to make ends meet. But they're starting to make headway with their budgets and smarter decisions with money. They have dreams and plans, and the only real difference is that one family has the right amount of term life insurance,

and the other doesn't. Big difference. If one of the parents die, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is.

Be the family that takes those deliberate steps to be different and responsible. It really does make you the hero of your story, and it puts you on course for better things ahead.