The Ramsey Show - App - How to Allocate a Bonus (Hour 1)

Episode Date: December 12, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us, America. It's a free call at 888-825-5225. That's 888-825-5225. Merry Christmas to you, America. Rachel starts off this hour in California. Hi, Rachel. Welcome to the Dave Ramsey Show. Hey, Dave. How are you? Better than I deserve. What's up in your world? So my question is about my student loans. I graduated about five years ago, and I was paying them down for quite a bit.

I was paying in excess of, you know, $1,000 on my monthly payments, but I recently got an apartment in August, so paying towards them has, you know, decreased immensely. And I've also tried consolidating them to get a better rate, but I've been rejected everywhere that I go. So I'm just trying to figure out what to do at this point. Where were you living before? I was living with my grandparents for a few years. Like five? I'm sorry? Like five years?

It was about three to four years. You said you'd been out of school for five, right? Yes, but I wasn't living with them right after school, right out of school. Awesome. Okay. So how much is your apartment rent? It's $1,450.

Well, that's a big jump. Yeah, it was. What city are you in? I'm in Fullerton, California. It's close to L.A. Yeah. Okay. And what is your income?

It's about, it's between 40 and 45. Okay. So it's kind of, my payment is really high. And what's your balance? Yeah, it's ridiculous. What's the balance on your student loans? Right now it's at $22. I got it down from about $35 to $22.

Good for you. Okay. So we were putting $1,000 a month on student loans, and now we're spending that and then some on rent. Correct. Okay. There's not any magic pill that gets you out of student loan debt. Big, hairy payments get you out of student loan debt big hairy payments get you out of student loan debt

and so we have to reverse the mathematics that have occurred here somehow you know truthfully the rent you're paying for the area you're in is not you know completely brain damage crazy but as a percentage of your income and the and that causing you to be able to do nothing else is is a problem so you're probably going to rethink your housing sooner rather than later it's not a good long-term plan to pay 1450 whether you have student loan debt or not to pay 1450 when you make 40 grand so we've either got to get your income up or your outgo down. Temporarily, the way you get income up is you work more, an extra job or six. And what do you do for a living?

So I have a full-time job as a credit associate, and then I do work Starbucks and like a side hustle part-time. So I'm working about 60, 65 hours a week. Yeah, but you're not making anything at that Starbucks gig. What are they paying you, $10? Yeah, well, like $12. Yeah, okay. You're not making enough to fool with that. You've got to make some money.

We need to make some money. We need to make some real money. You can make a lot more than a Starbucks babysitting. Right. Well, so my plan right now, like I'm working full-time as a credit associate, you know, about $20, a little over $20 an hour. Yeah. But I am trying to get into the police academy come February. I'm taking a test.

So, you know, if I get that, that'll increase my income. Let's do that. And in the meantime meantime let's look for better side hustles okay to make you some money i mean let's make it extra here's an idea you dropped 1400 bucks a month let's go make 1400 a month and a thousand dollars a month on your student loans in 22 months they're gone right so not even two years of side hustles. Because you work a lot of hours. You're not afraid of work. You just got sucky jobs.

Right. So let's just go make some money so that we can get Sally Mae out of that apartment. And I love your idea of moving towards the police academy as your long-term upgrade, your long-term gig. So there's two ways we make more money. There's a short-term, which is, you know, side hustles. And some of those don't – they're temporary, so they don't have to be pleasant, they don't have to be part of your career moves. And then long-term, you think about, what do I want to be in the next phase of my life? What do I want to be when I'm 50 years old, 60 years old,

40 years old? What do I want to be then that makes double what I'm making now? And so let's be aiming at something, because Zig Ziglar used And so let's be aiming at something, because Zig Ziglar used to say if you aim at nothing, you'll hit it every time. So your problem is a fairly simple problem, Rachel. It's you raised your expenses $1,450 a month, and voila, you didn't have any money to put on the student loans. So we've got to raise our income by that much and probably long-term address this housing situation.

So that's your offset. Hey, thanks for the call. Daniel is with us. Daniel is in Pennsylvania. Merry Christmas, Daniel. How are you? Good afternoon, Dave. Merry Christmas to you also.

Thank you, sir. It's a pleasure to ask you how you're doing today. Better than I deserve. Some things are predictable. I'm 62, an early retiree. I'd like to know whether to convert a regular IRA to a Roth IRA. How much is in it? It's about $1.35, and we'll be rolling another employer plan into it for another $400, so about $1.7.

Very cool. Well done, sir. Not bad at 62. Ding, ding, $2 million net worth, huh? Well, there's other investments as well, but you have some liquid cash available to do it. I talked to my accountant, but he gave me a pretty brief answer that said, if you never touch it, you might want to do it. That's exactly right. I want to know what your advice would be. He's exactly right. If you never or don't touch it for a long time because the growth from this point forward after you do

this will be tax free. And if you're going to leave that money alone long enough for that growth to be substantial, like never touch it, or a 20-year plan, I'm not going to touch it until I'm 82 because I'm going to use other pieces of my investments to live off of, or I may never touch it at all, allowing it to grow completely tax-free or debt, allowing the growth to be tax-free from this point forward makes a lot of sense. The faster you're going to pull off of it, the less sense it makes. Does that make sense? I think so. Well, there won't be any growth. There won't be any growth if you pull it fast.

And so the small, tiny amount of growth that was tax-free didn't make it worth screwing with. But if this sits there and doubles and becomes, you know, that million becomes two million, and that second million is tax-free because you weren't pulling off of it, ding, ding, it was worth it. So that's what I would look at is how much of it can you leave alone for, let's just say, 20 years, which is probably forever, right? You're 62, that'd be 82, right? So we're leaving it alone. Your accountant was right.

He gave you good advice. I would look at moving some or a lot of this based on that. But you're going to pay the taxes when you do, obviously. This is the Dave Ramsey Show. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable 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. Christian Health Care Ministries is the original health cost-sharing

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chministries.org. Thanks for joining us, America. We're glad you are here. James is with us in Florida. Hi, James. How are you? I'm doing better than I deserve, Dave. How are you? Just the same, sir.

What's up? So I was calling. I just got married six months ago. My wife and I were looking into term life insurance. She's able to get a quote, but I'm not able to because of past mistakes. So it's going to be about a year and a half before they will, you know, allow me to go through them. So I was wondering, is it smart to do a whole life for the next year and a half you can't get a whole life if you can't get term okay okay they don't

they don't sell you one if they won't sell you the other what what was the past mistake you know just rebellious lifestyle alcohol drugs you know a whole mess i found god that's cool that i'm clean now but okay i just but you did like you know, a whole mess. I found God. That's cool. Thank the Lord that I'm clean now. Okay. But you did like a rehab stand or something? No, just I moved to Florida, got my life together. I didn't need rehab. What showed up that spooked the life insurance people?

I'm sure it was the drug use or the alcoholism, one of the two. Okay. All right. So that is recorded somewhere in some process that showed up, and, of course, you told them about it as well, right? Yeah, there was a hospital visit. I was, you know, out there trying to get help, so it was on file. Good.

Okay. Well, I was just trying to figure out what they had, because that kind of tells you what it is. Did you talk to Zander Insurance? Yes, sir. Okay, and they're the ones that told you about a year and a half? Yeah, they said five years from the last time there was any substance use at all. Good, and that's three and a half years ago. Okay, good.

All right, and you're 23, you said? 26. 26, and you's three and a half years ago. Okay, good. All right, and you're 23, you said? 26. 26, and you just got married. Well, if you can't get term, you can't get whole life, and I would not, but you can't get it. So do you guys have a lot of debt? No, sir. We're actually a baby step three right now there's actually a second question that makes it seem like my second question is also i did my credit

report a small the hospital that stay that i had there's a little 67 fee we're going to pay that off how long will that be on my credit report it It'll be on for seven years, but it won't count against you much, but for a couple of years. Okay. It's an old bad debt is all it amounts to, and the older it gets, meaning from the time you pay it off, the older it gets, the less it counts against you. Kind of like the life insurance thing in a sense. The older it gets, the less it counts against you, right? The further in your past it is, the less it counts against you.

So you've got two or three things ticking here. What does your wife make a year? She just started her career about four months ago. We're projecting her to make probably $60,000, $70,000 in her first year. You have children? No, sir. Okay. All right. If she makes makes seventy thousand dollars a year and something happens to you in the next year and a half it would be really really sad and really really bad but i think she can make it she'd just be a single lady making seventy thousand dollars a year right yeah yeah okay so i'm just gonna i'm just gonna tap the brakes and wait until I can get the proper insurance at the proper time. And I'm not going to pay a huge amount for it at 26 with no kids in the house and your wife has got a wonderful career.

And so I'd like for you to have the insurance. I highly recommend it. But I don't think there's a bazillion things we can do about it. And it's not worth some of the other ideas that sometimes we use that are super expensive ways to get life insurance. If you bought a home during that time, I would get mortgage life insurance, which is five to ten times more expensive than term, but it's a guaranteed issue, meaning regardless of your past, your medical, they will issue it to anyone that's breathing. And so, you know, if you bought a home.

But you don't have any debt. You've got good careers. I'm not going to worry about it right now. All right. Up next is going to be Ryan in Oklahoma. Hey, Ryan, how are you? Hey, David. Good.

How are you doing? Better than I deserve. What's up? Good. How are you doing? Better than I deserve. What's up? Good. Also, I'm in the military and we're doing good financially, but I'm getting back on the Dave Ramsey wagon. Fell off a few years ago, so we're knocking out baby step number two now. The question is, I have a bonus that I get every year for the next four years, and it's just under $16,000. So I have a plan to pay off our truck loan, which is the smallest of our debt. And I

guess my question is, how would you recommend we use that bonus going forward between, we have a rental property to get that paid off, kids, college, savings, and, you know, how would you recommend we use that? Well, we teach the baby steps. That's what you referenced a minute ago, right? Yeah. And they're in order. Mm-hmm. And so the money goes wherever you are on the baby step.

It sounds like you're working your debt snowball on baby step two, and your truck is there as your next one, so you're going to pay it off. What's the next smallest debt in your debt snowball other than your truck? It'll be our rental property mortgage, which has about $103,000 left. That's not in Baby Step 2. That's in Baby Step 6. Then the truck is it.

So you're debt-free except your rental property and your house. Yes. Okay. Then you move on to Baby Step 3, fully funded emergency fund. So you're debt-free except your rental property and your house? Yes. Okay. Then you move on to baby step three, fully funded emergency fund. Then you start putting 15% of your income into retirement, baby step four. Then if you have kids, college that you want to work on, that's baby step five. Then once you've done, you're doing baby steps four, five, and six at the same time.

Four is 15% of your income into retirement. Five is kids' college. And six, if there's money left above that, we start throwing it at the house and we get our home paid off. If the home and the rental property are similar in size as far as the mortgage goes, I would pay the home off first. If the home's much, much larger and you want to knock out the little rental property, that's fine. But all things being close or equal, I knock out the home first in baby step six.

All real estate or most real estate debt goes to baby step six. So, hey, thanks for the call, man. We appreciate you joining in. Derek is with us. Derek is in Wisconsin. Hi, Derek. How are you? I'm good. How are you, Dave?

Better than I deserve. What's up? Well, I wanted to get your thoughts on the best use for some proceeds from a recent wholesale. So just sold my wife's house that she had before we were married in August. I netted about $100,000 on that sale. The house that we're living in now, we have a mortgage balance of about 150,000. It's worth about 250, uh, somewhere in that range. Planned on starting a family and we'll probably upgrade in house, uh, at that point, 18 to 24 months timeframe on that Lord willing, uh, baby step now.

So I'm wondering, it's the best to put the hundred thousand dollars in proceeds towards the current mortgage,000 in proceeds towards the current mortgage, or should we hold that back in like a money market or something until we look to buy the next house? So you're not living in the house you... When are you planning to move? Planning to move in probably a year and a half to two years. Okay.

But you would sell your current home at that time and it's got a ton of equity in it? Yes, we would sell the current house. Okay. Then I'm just going to work the baby steps straight up. Anything you got in two, clean it up with 100K. Make sure you got your emergency fund in three. You should, at that point, start putting 15% of your income away. It doesn't use any of the 100 to do that. If you want to lump some of a couple of the kids' college things into some $529, you can do that. And then let's reach over and start beating on the home mortgage and get it paid off. Before you leave, it'd be nice if you don't get paid off. Of course, when you sell it, they will give you this nice thing at the closing table called a check.

That's all of your equity. And so the money that you put towards your home, of course, is not lost. It's just parked there until you get ready to leave. And that's your game plan. So, hey, man, good. You're doing great. Congratulations. Got a good plan there. Thanks for calling in.

Open phones at 888-825-5225. We're glad you're here. This is common sense for your dollars and cents. Giving you the same financial advice your grandmother would, only we keep our teeth in. This is the Dave Ramsey Show. Thank you. Support a small business this holiday season that does business right. I'm talking about Grip6 Belts. It's the only belt you can get online with no holes, no flap, and no bulk. And the buckles come in really cool designs and are interchangeable.

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Every day, people, like your friends, your family, work their tails off and they have too much month left at the end of the money. Maybe you figured out that you don't have to live that way. Maybe you listen to this show and answer the questions before I do. Because you've been listening a while and you know what I'm going to say. Because I do say the same thing over and over. It's fairly predictable, right? Well, you don't have to have all the answers like that.

But regardless of where you are in your financial journey, if you've got a heart to help other people, you can become a Financial Peace University coordinator. Now, we handle all the teaching. You don't have to get an MBA in finance. It's taught by me and Rachel and Chris Hogan and whoever else we pop into one of those videos, right? And our team is going to walk you through every step of the process to be a coordinator. It's

fairly easy to do. It's just got to have a heart for people and willing to commit the time to pull it off. And so if you want to become a Financial Peace University coordinator and take your friends, your family, other people in your church from the I don't know what I'm going to do to the I've had it moment to I've got this, you can get started by texting LEEDFPU to 33-789. All one word, LEEDFPU. Our question of the day comes from Blinds.com. They are the number one online retailer of custom window coverings. You get free samples, free shipping, and new promos every month. You save even more that way.

Use the promo code RAMSEY. It's the magic word. Brent is in Illinois. Dave, I've gotsey. It's the magic word. Brent is in Illinois. Dave, I've got a small IRA and one mutual fund. I've had it in this fund for about 25 years. It grows at about $5. It's grown from about $5K to about $30K.

Wondering if I should move it into a $529 if I can move it into a $529 without getting nailed on taxes. No, you cannot. An IRA can be moved into an IRA or into a Roth IRA, but it cannot be moved into a 529, not without paying all the penalties and taxes and everything else, and you wouldn't want to do that.

That doesn't make sense. So you may want to convert it to a Roth at some point, pay the taxes on it, but I would not pay the taxes and the penalties to put it into a 529. Sorry. All right. Tom's with us in Florida. Hey, Tom, welcome to the Dave Ramsey Show. Hey, Dave, how are you?

Better than I deserve, sir. What's up? Kind of a two-part question. Number one is my wife and I went through your program about five years ago, but we didn't have kids then, and we have three now, and we were newly married and on fire, and things have kind of went by the wayside. And here we are. I got some, you know, about $11,000 in credit card debt, $11,000 in student loan, and about $40,000 in a vehicle. And we're getting to that point where it's like, okay, this isn't cool. We're spending more than we're making, and I'm the only person that brings in any income.

So looking for how intense should we be because I feel like we may be on two different pages. I'm an all-or-nothing type of guy. I want to rip the Band-Aid off and eat beans and rice. Yeah, but you're not, you're not been that. You've not been doing that. Well, I haven't, no, but that's where I'm at right now. That's what I want to do. Oh.

And, you know, I want to deplete our account and pay off our credit card, you know, because I have, we have enough to pay the credit card off right now. What's your household income? 160. Okay. All right. to pay the credit card off right now. What's your household income? $160,000. Okay. All right. Well, you know, there's a concept in Christianity called repentance. Yeah.

And it means when I'm walking towards stupid, I first stop, and then I do a 180, and I walk directly as fast as I can away from stupid. I change directions, okay? Yeah. And, you know, and sometimes repentance for me has been it was something stupid. I knew better than to do that. I know if I eat chocolate chip cookies, I get big as a house. I know better right but sometimes i reach a point where i've say i've had it and i have to stop

and i have to turn 180 and go the other direction it sounds like mentally emotionally that that's where you might be but something occurred in the last few weeks that didn't occur six months or eight months ago with you that caused you to start thinking that way. Is that right? Yeah, I think, you know, honestly what it is is a lot of our friends, you know, live by your principles and have, I mean, we can just see the fruits in a lot of people. And it's, you know, going through it five years ago, you know, we were debt free.

But, I mean, you went and bought a $40,000 freaking car. That's stupid. Well, I know. And that was, yeah, I know. And so, you know, we put a new AC unit in a few weeks ago, which fortunately, you know, we had the money to do. Yeah. Well, you make really good money.

If I were in your shoes, I'd be disgusted that I was just broke as much money as you make. I am. I am. And so now we've kind of talked about you. Then you asked about her. My point is that you probably have had some information or an experience that she hasn't had. So to assume that she's going to simultaneously turn and do the 180 with intensity the way that you are thinking you are going to, without the same set of information, without the same set of motivations, without the same why that popped up in front.

Maybe you're doing the bills and she doesn't feel any stress from them maybe you're feeling the stress and you maybe need to get her to look at the bills with you and make her feel stressed out like you are because you ought to be you ought to be you ought to be disgusted and stressed and a couple of other things that cause you to want to change yeah but it's unfair for you to snap your fingers after you just got this epiphany because both of you were walking hand in hand stupid for four years yeah and then you just decide to stop and turn and you're shocked that she didn't so you know you you it's not just bandaid off you've got information and motivation from outside influences and sources that she does not have,

or she probably would have turned to. So my suggestion is for both of you to go back through the class and say, Honey, we've got to re-look at this. We make too much money to be this broke. This is driving me crazy. I think we've got to get some of this stuff paid off. I want to look at it again. I want us to work on this together.

And we can decide together what we're going to do but together we need to go back through financial peace and look at what joan and jim over here did and look at what this happened and and you know it didn't take the first time we flunked we got to go back you got to repeat the class we flunked it and uh no shame in that the shame would be as if you'd never woke up. Obviously been more efficient to do it the first time, but it's not unusual for some of us to have to do things over. Most of us have to.

I'm pretty thick. It takes me a couple times to get stuff sometimes. So are you. So give it another run. You flunk the class, grab her by the hand and say, Honey, I don't have this figured out, but you don't have it figured out, and let's get back through here. Let's start looking at this again. And I think when you go back through Financial Peace University, you're going to find it to be a completely different experience than it was five years ago.

Considerable upgrade nowadays. Oh, man, we have spent a lot of money and a lot of time on that thing since five years ago. So, yes, the principles are tried and true, but the process we use to teach you is so much more efficient. So that's what I would do if I were in your shoes. Scott is with us. Scott is in Louisiana. Hi, Scott. How are you?

I'm doing well. Thank you for having me on, Dave. My pleasure, sir. How can I help? So I'm on the debt snowball right now. My wife and I, we just got married. Congratulations. And I got a family member.

Well, thank you. I got your book from her brother-in-law, my now brother-in-law. Cool. I've got right at $31,000 in student loans, and I've got $20,000 in a car payment, make right at like on average $70,000 to $75,000, could go up depending on commissions. So my question, it's a two-parter, first being my student loans are more expensive, you say, to pay off the smaller amount first.

Yes. But my student loan interest is like $6.8. I don't care. It doesn't matter? No. Pay off the car first. It's the smallest. And you said I. You're married now. It's a we. Pay off the car first. It's the smallest. And you said I.

You're married now. It's a we. Does she have debt too? It's our, yeah. It's our debt. What's her income? It's very minimal. Okay. Well, then you got a 70,000 plus minimal to get after a pretty good sized pile of debt here. So, yeah. Roll up your sleeves and let's get with it. You can do it. Congratulations

on getting married, man. This is the Dave Ramsey Show. Thank you for joining us, America. This is the Dave Ramsey Show. Alex is in North Carolina. Merry us, America. This is the Dave Ramsey Show. Alex is in North Carolina. Merry Christmas, Alex. Merry Christmas. Thanks for taking my call. Sure. What's up?

So I've hit the ground running on Baby Step 2. This is the first time we've ever really had any significant debt. But I am getting a settlement from an auto accident earlier this year, and I'm trying to figure out, because my car right now, like a good girl, it's a piece of junk, but it runs, doesn't qualify for Uber. So I'm wondering if I should take some of that funds to do a ride share to get more money in in the long run, instead of just throwing it all at the debt. Okay. And so the car that you currently are driving is worth what? About $2,000.

And what would it cost to get a car that qualifies for Uber? About $5,000 is what I'm looking at, because it needs to be within the last 10 years and in good standing repair and such. Okay. So it's $3,000 spread. How much can you make driving Uber? I do have two kids, so I'd only be able to do it once or twice a week. So the income I'm not sure on, I just know it's an opportunity to make money.

Okay. But if it's a dollar, it would take you 3,000 rides and it wouldn't make much sense. If it's a thousand dollars, it would take you three rides and it'd make a ton of sense. It's not either one of those two, right? Right. Okay. So that's how you need to analyze this. And so what I would do is have some conversations with some of the ride sharing folks, Uber or Lyft or whoever you're talking about, and figure out what you would make in your particular area driving two nights a week and divide that into $3,000. And if you can get your money back in a couple of months, yeah, that's probably okay because from then on you're adding to the equation to get out of debt. But if it's going to take you two years to break even on this, no, I wouldn't fool with it.

You see how I'm doing there? No, that makes perfect sense. And the follow-up to that, and I know the baby steps, you start with the small steps, go to the largest to kind of get that motivation and that win. My concern is if I clear the credit card debt, because I could, and we'd only have the student loan left, that my husband, who's Dave Ramsey-ish, isn't going to get that sense of motivation if I clear the easy stuff.

I can't help you modify our formula that works. I can help you modify your husband. That's a task. Yeah. But, I mean, that modify your husband. That's a task. Yeah. But, I mean, that's the problem. It's not the – you can't half-butt do something and figure out a way that that's going to work. And so that's something you and him are going to have to talk about. And I would not buy the Uber car unless you've gotten him on board.

And, no, I'm not going to modify this. And the reason is it doesn't work, honey. It doesn't work. What works is the two of you working together on stuff. Couples that do not work together on money have an almost zero probability of winning with money. Ta-da. All the data that we have of all the millionaires, of all the people getting out of debt, almost never do we find someone dragging a spouse along where they actually win and have success.

Spouses are just too heavy to drag along. All right. Open phones at 888-825-5225. Sini is with us in Florida. Hi, Sini. How are you? I'm good, and you? Better than I deserve.

What's up? Awesome. Well, my husband and I are kind of in a dilemma where we are 48 and 46, and we want to gear up for retirement. Good. Right now, we are a single-income home. I'm currently looking for a job, but I was laid off. And our current income is $135,000 on his salary, and we really don't have a ton of debt.

We have an $8,000 student loan with a $256 payment. Our primary mortgage is about, I'm sorry? Why do you still have that student loan? You make $135,000 a year. We just haven't paid it off. When I got laid off, we paid off about $30,000. How much is in your savings? In debt that we had. How much is in your savings? We have, in our liquid savings, we have $38,000. Write a check when you get off the phone. Okay. Okay. The other dilemma that we have is we have a rental property in another state, and our long-term goal is to acquire more rental properties so that we can get residual income coming in. The problem with this rental property is we're not making any income on it because

we are renting to a family member who's in need. So we're not really making any money, but the home is valued at $200,000 only owe 30 000 on it um so we're just trying to figure out if we should take our losses and sell that home and pay towards our primary mortgage and kind of start all over on the real estate front yes or okay what are you going to do with the family member that you put in the street well i mean i mean obviously we're not going to put them in the street i mean you know we'll do it the right way and just you know say hey you know we're considering selling the home and give them ample time you know to make other living arrangements it wouldn't just be oh so

they can afford to pay yeah no they're paying uh, I thought you said you were just helping them out. No, no, I'm saying we're not making a profit on the property because she's not paying the rent rate in the area. So she's basically just paying what our mortgage payment is. I see. So we're not making any money. Every month, actually, we're out of $200 because we have to pay the excess on the mortgage payment um you know to have to have that person in the property okay so

she's going to be able to move somewhere and not going to be homeless and you're going to be able to sell it right that's what we're hoping that's just been our biggest dilemma do we do we sell it yes do we keep it no sell it you saw it it? No. Sell it. You sell it. It's long-distance landlording. It's not working. The property isn't maximized. The money is better used paying off your property. When you get your property paid off, you'll be able to save up and start buying rentals that you pay cash

for as you go along because you guys make good money. When you're working, you make $200,000, don't you? Right. Yeah. And see, that's serious money. And now you don't have a student and see that's serious money and you have no debt and now you don't have student loan right correct well once you pay that off correct that's today that's when you get off the phone so dave i i know in the last question i know i know you you want it per your per your plan you want to get aggressive with the investments after the home is paid off.

So my husband was thinking that when he gets his next raise, that he wants to amp up on the investment. But in my opinion, I think we should pay more towards the mortgage. If we're going to sell the rental property to put towards the mortgage, you know, shouldn't we continue those efforts on the mortgage? You should be putting 15% of your income away for retirement at baby step four, and you should have three to six months of expenses set aside for emergencies in baby step three. Kids' college is five.

Pay off your house. The reason that that works is your most powerful wealth-building tool is not buying leveraged real estate. Your most powerful wealth-building tool is not buying leveraged real estate. Your most powerful wealth-building tool, the proven data of the 10,000 millionaires that we studied, almost 0% of them became millionaires by buying real estate with debt. Okay. That only works on infomercials. Okay.

So what I find, what we found in the real world is that people get out of debt, house and everything, and when you make $200,000 a year and you don't have a student loan and you don't have a house payment, you can invest some serious money and pay cash for a rental property fairly quickly. I mean, just think about it. Let's say you lived on $100,000 and banked $100,000. You could buy a $200,000 rental property every two years. Okay. Oh, and by the way, those things all cash flow like crazy

because we don't put relatives in them and there's no debt on them. Right. And they're going to go, and as they cash flow, that means you're going to buy a property every year with cash. And that's what's happened with Sharon and I. But we've been able to multiply beyond that. But buying that first one for cash and getting your home paid off, those are the hardest parts.

But once their house is paid off, you get a paid full rental property, you can buy that second one pretty quick, and that third one even quicker, and that fourth one even quicker. Because these things make serious money when you don't have payments on them and you're not stressed out dealing with tenants because you don't put yeah just a whole different world this is the dave ramsey show hey it's kelly associate producer and phone screener for the dave ramsey show if you would like to do your debt-free screen live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you to come to Nashville and tell Dave your story.