The Ramsey Show - App - How to Care for Your Family Long-Term (Hour 3)

Episode Date: July 2, 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. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Starting off this hour is Green Bay, Wisconsin. Virginia's calling.

Hi, Virginia. How are you? I'm good. How are you? Better than I deserve. What's up? All right. So I had seen a video of yours talking about how you don't need a credit score and just pay cash for what you want.

My problem is that I have about $10,000 in collection. Most of it is medical. So I'm wondering if I can just leave the credit alone and just pay cash for everything along with obviously my active debt, or how would you go about that? You have active debt in addition to the $10,000 in medical? Correct, in collection. The medical is in collections? Correct. The active debt is not in collections, and how much of that do you have there? It's about $2,000.

Good. Okay. And what's your household income? My boyfriend and I together, we make about $70,000. Okay. Who has the debt? Me. Okay.

What do you make? I make $30,000 a year. Okay. All right. And how old is the $10,000 in debt? It's000 a year. Okay. All right. And how old is the $10,000 in debt? It's about a year. Okay. And have you got health insurance in place now?

Yes. Okay. Good. All right. Well, what I would do is work two different debt snowballs. I'd leave the medical alone. It's sitting there now. You're not paying any payments on it now, right?

No. Okay. And I'd clear the $2,000 first because you are paying payments on that. And let's get that cleared up as fast as you possibly can. And then with the medical, what I would do is begin to make them some offers to settle it as you can save some money. You probably can settle this for $ to 50 cents on the dollar. Okay. Somewhere around 2,500 to 5,000 dollars will

probably clear this. And you need to clear it. Not because of your credit score, but because they're going to sue you. Okay. If you don't pay it. And then they're going to come take part of your check. And you don't want this chasing you around for the rest of your life.

Right. Plus, they actually extended medical care to you, and you owe them money from a moral standpoint. So what I'm going to do is say, hey, I'm a single lady. I make $30,000 a year. These are all true statements. What's the largest one of the deaths of the 10,000? I believe it's about 5,000. Okay.

You call them up and you go, I have $2,742 saved when you do. That's all I've got. If you'll take that as settlement for this 5,000, I'll give it to you today. Oh, we'll take that and then payments. No, that wasn't what I said. What I said was, I I'll give it to you today. Oh, we'll take that and then payments. No, that wasn't what I said. What I said was, I will give you that as settlement today, but it wipes the debt out. Well, we won't do that.

Well, then you get no money, and you begin this negotiating back and forth, back and forth, back and forth, and finally you settle on a number. When you settle on a number, of course, you have to have the money to negotiate that. So you're going to save up that money, right? and what i do is clear off the little one first when you get to the clear off the 2 000 get that out of the way but then whatever your smallest medical debt is clear it off first what's the little one uh the little one is about 300 okay yeah so you probably just pay that one after you get the 2 000 paid just reach over and pay that one on your budget, okay?

And that one's done. Because it's not big enough to screw around with, you know? And then we're going to go on to the next one. And then we're going to go on to the next one. And as you get to one that's too big, then just offer them $0.50 or $0.25 on the dollar, as long as you have the money to do that. So you have to have saved up the money to have the conversation. Are you following this?

Yes. Okay. Then once you haggle with them, and you're going to go back and forth for weeks, it's not going to happen in two phone calls. Okay. That sounds like fun. It's going to be a blast, but it's going to save you about five grand. Okay.

It's worth, you know know not a bad part-time job is one way of looking at it and so um it's an ugly part-time job that's going to make you five thousand dollars or so and or you can just save up and pay for it i don't care if you want to go the other way but if you want to if you want to argue with them you can probably get them down because they you know i'm a single lady i make thirty thousand dollars a year i don't have money after i buy food this is your pitch okay when i buy food and lights i'm i don't have any money left and so if you want some money i've got some right now and i will settle this with you now two rules once you get them to agree to the number and you have the money in the account before you do that rule number one is do not send them any money unless you have this in writing if it's not in writing it never happened

they will have the weirdest memory that your conversation never happened if you do not have it in writing you understand understand me? They lie. Yes. Okay. So get it in writing. Number two, once you settle the deal, we'll just take your checking account information and draft your checking account. Oh, no, no, no, no, no, no, no, no, no. Because they'll clean out everything that's in there. And then you won't be able to pay rent or buy your food or something. Okay.

Now, you do not give them electronic access to your main checking account because they'll clean you out. So you can either do a prepaid Visa card and just put the exact amount on there and let them take it out of that and then close that one and then go get another prepaid Visa card and do another one. Or you can wire them the money. Or you can go over there and take them a check. You're in Green Bay. It's not that big, you know.

And just sit there with them and get it in writing and hand them a check. You're in Green Bay. It's not that big, you know. And just sit there with them and get it in writing and hand them a check. Okay. Will that bill then come off of my credit report? Yep. It'll show a bad debt, which it is today. It's a bad debt that has been settled. Okay. And so it will leave a black mark, I mean a gray mark, but it's not a black mark.

Today it's a black mark. You're not getting anything with bad debt on there. You're not going to get a house. You're not going to get anything with your name on it with outstanding collections that are bad debt. So you've got to clean them up. But also just from a practical standpoint, they're just going to bug the crud out of you for the rest of your life,

and you need to clean it up. So get yourself on a real tight budget and start working it through. Let's get rid of the $2,000 active debt. Then pay off the $300 one. And then let's start the process of negotiating with the rest of the $9,700 worth or so, of which $5,000 is one of them. Save up a little. Settle in writing, no electronic access to your checking account. Save up a little, settle, in writing, no electronic access to your checking account. And you just work your way down that list of those old bad debts.

And that's the best way to work through it. Open phones at 888-825-5225. If you want to talk, we are here. We're glad you're with us. We appreciate you hanging out with Real Radio, with Satellite Radio, and with podcasts. There's about

15 million of you there right now. Thanks for hanging out with us. This is the Dave Ramsey Show. For years, I refused to endorse any company that claimed to get people out of timeshares. I told my listeners it's a horrible product and that unfortunately they didn't have a lot of options. Then a few years ago, I sat down with Brandon Reed, the owner of Timeshare Exit Team. Brandon walked me through the timeshare industry, and I learned that you can't sell them and you can't even give them away. And then we talked about Timeshare Exit Team's process. Every ownership situation is different, which is why they have more solutions than any other company.

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Plus, you can take an additional 5% off at Blinds.com slash Ramsey. That's where the deals are. Blinds.com slash Ramsey. Nicole's in Pennsylvania. I was just notified our mortgage is being serviced by a new company that has a D, better business rating, and many complaints. Is there anything we can do other than refinance? We just bought our house in 2017, so we couldn't get a lower rate today. I wouldn't do anything. It may get resold again.

And if you refinanced it, it could very well get sold to that same company. You have no control over who buys the mortgage when you owe the mortgage. And the market is very fluid. They buy and sell mortgages like people buy and sell shares of stock. And so it's not unusual at all for a block of these uniform they're called conforming mortgages fhas vas or conventionals to be fannie mays to be sold in blocks back and forth between these different companies um you know the good news is you've just lowered your expectations of any kind of you of intelligent life on the other end of the phone when you're dealing with these people. So that makes it easier to have lowered expectations.

Kelly is in Boise, Idaho. Hi, Kelly. How are you? I'm good. How are you doing? Better than I deserve. What's up in your world? Well, what's up in my world is I've been more or less, mostly more, following your total money makeover for the past 10 years.

My wife has never been really completely on board, although she agrees with it. And about six and a half years ago, she became disabled, which allowed me to clean up our debt. And other than my mortgage, I am debt-free, which is nice. But 10 weeks ago, she had a stroke and so forgive me if I get a little emotional, but, um, so she's not doing all that well, but yet she's, uh, long story short, she's now in assisted living and I did not have any long-term care insurance. And I have been able to, through my employer 401k plan, I have amassed about $1.5 million.

Good. But I don't know what to do with it at this point. I don't know where to go. How old are you? 60. How old is she? 60. So you guys have been married?

40 plus years. Wow. Wow. Wow. Well, the good news is you've done a great job with your money. Well done, sir. Congratulations. What is your home worth? Thank you.

About a little over $500,000. What do you owe on it? Just a little under $100,000. Okay. All right. And you have $1.5 million in your 401K and you're 60 years old. Yes, and I just rolled that over because I'm 60. I rolled that over with one of your smart vets or pros into an IRA for the majority of it.

What's assisted living costing? It's about, for now, because it's fairly new, it's about $3,700 a month. It's going to be about $50,000 a year, give or take. Yeah. Okay. Are you working? Yes. What's your income? $120,000.

Good for you. Okay. All right. Well, you don't have a financial problem. You just got a heartbreak. Your finances are in great shape. I mean, you can use the 401K without penalty. You'll just pay some taxes on it to do whatever you need to do.

Yeah, and that's kind of what I planned, but I just don't know. I don't know whether to try to pay down the mortgage or work extra or... No, I think what I would do is I'd take enough out of the 401K and pay off the mortgage this week. So that means you're going to pull about $140,000 out probably because you've got taxes on it as well. And then you don't have a mortgage and you make $120,000 a year. And if you can't cash flow her care out of your income with no house payment, which you probably can actually, but if you can't,

then you can pull down on that 401K just a little bit as you need to because it's going to be sitting there growing. I mean, you're 60 years old. When it's 70, you got a million. You said you had a million five? Yeah. Okay, and we just reduced it to a million 350, and so it will be 2.7 million when you're 70 if it's invested well yeah okay my my career requires me to uh retire at 65 unfortunately yeah but if you don't add

anything to the 401k 1 million 350 will double about every seven years okay so by the time you're 67 to 70 somewhere in there you're going to be bumping up around three million dollars minus whatever little bit you have to pull off for her care but i don't think you're going to have to i think with no house payment you probably can just about cash flow that assisted living i don't know what else you're spending money on right now but if you don't, it's okay. If you pulled the whole 50 out of there, it still doesn't mess up your retirement.

Okay. I mean, think about it. If you pull down 50K for five years, that's $250,000. You're still over a million dollars sitting there with a paid-for house and making $120,000. See, you're in over a million dollars sitting there with a paid-for house and making 120. So you're in great shape. Your finances, you do not have a problem at all because you've done such a good job to this point. What a great provider you've been.

And you've done a good job. You're a good husband. You're a good man. And you're an economic hero. You did a great job. Did you inherit any of this million? No, no. This is just 401K since I was 30, or 20, 28, actually, and just putting a bunch in.

And my financial advisor said keep putting in the 6% that they're matching currently. Is that a good idea? Yeah, yeah. Okay. Yeah, I'd definitely get that match. Keep putting in the 6% that they're matching currently. Is that a good idea? Yeah. Yeah. Okay. Yeah, I'd definitely get that match. Let's keep loading that puppy up. But let's take enough out to pay off the house and take enough out.

And if you can't cash flow her care, you take a little bit out. But you don't need to take much out. Don't use her care as an excuse to drain it down. But that's not your nature. Your nature is a saver, not a spender anyway. Yeah. But you've done such a good job. You're going to be in fine shape.

And her care is taken care of. You've done a good job. Thank you. Proud of you. Well done, sir. Thank you for calling in. It's an honor to speak with you so if you're 28 and you're listening to that call wake up and don't tell me I want to live life now while I can.

That man just took care of his wife of 40 years. Why? Because he systematically invested and didn't spend everything he makes like he's in Congress. Because he was a grown-up. And now he's caring for his wife. Did you hear him? He's a hero. That's a man right there.

That's not a little boy walking around in a man's body whining about how his life sucks. He took care of business. If that doesn't inspire you to get up off your butt, nothing does. 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, 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 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. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org Joel is with us in Reno, Nevada. Hi, Joel.

Welcome to the Dave Ramsey Show. Hi, Dave. How you doing? Better than I deserve. How are you? I'm living like no one else. I hear you. I see on my screen you're debt-free.

Congratulations. Yes, sir. How much you paid off? I paid off $95,000 in about 27 months. Good for you. And your range of income during that time? When I started, I made, I think, $80,000 that year. And then last year, my taxes, I made $133,000. Good.

What do you do for a living? I'm an EMTD, English Major Truck Driver. Well, there's always that. How did you cause your income to go from $80,000 to $137,000 in 27 months? Well, the year before I made that $80,000, I was working two jobs, one full-time, one part-time, about 70 hours a week, and barely broke 50. And then I was able to go full-time with UPS. And that jumped me to 80.

And then once I started working those 60-hour weeks, I was able to do over 130 last year. It's those big hours, huh? Okay. Yeah. And what kind of debt was the 95? Well, it was pretty much three big chunks and a couple of little ones, but $30,000 was a truck, a Chevy Silverado. $26,000 was a home equity loan. $35,000 was a divorce settlement, and then I had about $2,000 in student loans and $2,000 in 401k loans. you're just kind of normal yeah yeah well you know before the

divorce we only had the truck so i thought it was really normal but so did you keep the truck or did you pay it off um i ended up keeping the truck um that was the first thing i paid off and then i um the divorce settlement was a structured settlement so i couldn't really pay that one off early but then i had those other two small ones. Those were actually the first two that got paid off. And then I attacked the HELOC after the truck and then just continued on with the rest of the payments and got them done probably about four months ahead of schedule. I planned to do it under three years, and just over two made it good.

You got after it, man. Well done. Good for you. What do you tell people the key to getting out of debt is? Well, of course, the budget, having a plan, having a goal that's bigger than your right now. In my 20s, I pretty much lived just day to day, you know, thinking any trouble I got myself into, I could work myself out of it. But without having that plan of like a future goal and like you say, no discipline seems like it's worth it at the time, but it reaps a reward at the long run.

Very cool. Good for you. Well done. Well done. So how's it feel now that you're done? Oh, it's amazing. It's amazing. You know, once I got the finances in order, I was able to, I was going through a divorce at the time as well.

And so I was really focused on, you know, which path am I going to take? Am I going to go down the self-destruction and live in for myself? Or am I going to try to make myself better so I can help other people as well? So, you know, during this time I also lost 40 pounds. Wow. I ran my first half marathon earlier this year. Wow. I'm planning on running a marathon in October.

Yeah, so it's just like, you know, endless possibilities, lots of potential. Good for you, man. Well done. You're knocking it out, man. I. Good for you, man. Well done. You're knocking it out, man. I'm proud of you. Very, very good. Excellent, excellent stuff. Wow, you got, hey, man, you're free.

You're debt free. You did it, man. So, you know, you know how to work. You know how to accomplish goals and set goals and hit them. And, you know, you can do anything you want to do now, right? How old are you? I'm 39. I'll be 40 this year.

Wow. Wow. You're young. You've got a whole lifetime ahead of you to live with these newfound tools of yours. Yeah. I mean, if you would have talked to me five years ago, I probably would have said, I don't know if I'll ever be able to retire. I just figured I'd just work until I died.

But now, thanks to your plan and some other good guidance, I've been able to, you know, put a lot of money away, start paying off the house without any debt. You know, it's achievable for sure. Yeah, it goes fast. You're going to be a millionaire in no time at this rate. Well done. Good for you, man.

So proud of you. Great, great job. We've got a copy of Chris Hoganogan's book retire inspired for you that's the next chapter in your story like we said for you to be a millionaire and outrageously generous as you go along like you said giving back finding ways to give to others it's a lot more fun than it is just living for yourself a lot richer life so well done good job joel joel from Reno, Nevada. $95,000 paid off in 27 months, making $80,000 up to $137,000. Count it down. Let's hear a debt-free scream.

Three, two, one. I'm debt-free! Yeah! This is how it's done right here. You can listen to talk radio for the next three weeks, and unless you're listening to this show, you will not hear two calls back-to-back that are any more motivating than those two men. You'll hear people griping and whining and yelling about all kinds of stuff.

Their voices are screeching like there's a fingernail running down a chalkboard and all this carrying on about how the world's coming to an end because of Trump or because you don't like Trump or whatever, because you do like him or whatever. In the meantime, there's a UPS driver in Reno, Nevada, who just paid off $95,000. He's working 60 hours a week, making $137,000 a year. He lost 40 pounds and is planning to run his first marathon. And you're going to do what this week? What are you going to do this week? Hmm? What are you going to do what this week? What are you going to do this week? Hmm?

What are you going to do? Or the guy who for 10 years has sort of been following our stuff and had a million and a half in his 401K because 30 years ago he started putting 6% of his income into his 401K. No inheritance. No, he's not an evil millionaire. He's not reading any websites about wealth inequality. He just wanted to take care of his wife who had a stroke.

Yeah, he's a millionaire. But he's a millionaire because he saved up the money. And he invested the money. Nobody gave him any money. And he's not looking for a government program to take care of his wife. He's going to take care of his wife. And he's not screaming about how unfair life is. He's sad.

His heart's broken because his love of his life for 40 years has had a stroke, and she's in a nursing home. But he's able to take care of her. Joel will be there. Joel will have several million dollars. The guy we just talked to. He easily, I mean, his 30s are up and up on 40.

He'll just do the math. I can do it in my head. I've done it so long. I mean, he's $10 million man if he wants to be, but he's at least a $5 million man by the time he gets there. When are you going to do it? What are you waiting on? Adults devise a plan and follow it.

Children do what feels good. The interesting thing is that when you pay a price to win, you enjoy winning. And you really have no tolerance for whiners at that point. You have no tolerance for people who are claiming that they're a victim of this or that because you were a victim of everything and you went and won anyway.

We're all a victim of something. The question is, are you going to be a victor or a victim? Are you going to sit around like you're freaking four years old in Hawaiian and stick your lip out, throw a little fit like a toddler on the cereal aisle of the grocery store because his mommy won't give him something? You've got a whole society full of these babies. You know what the difference is? You can be a baby right now, and 10 minutes from now you can decide to be an adult.

Ta-da! You just got to decide. Ta-da! Just like that. You just decide. Adults devise a plan and follow it. Children. Oh, and there's a lot of them.

Do what feels good. What are you going to be? A grown-up? Or a baby? Just a little baby. Don't be a little baby. It's kind of disgusting. This is the Dave Ramsey Show.

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today. Our scripture of the day, Hebrews 13.6. So we say with confidence, the Lord is my helper. I will not be afraid. What can man do to me? Vince Lombardi said, The price of success is hard work, dedication to the job at hand, and the determination that whether we win or lose, we've applied the best of ourselves to the task at hand.

Nowadays we say we left it all on the field. We left everything we had out there. And we weren't going to play another round that was the round that was it you know it's amazing to me in the financial world

that everybody wants to DIY do it yourself I don't grasp this you don't even work on your own freaking car a lot of you don't mow your own grass you certainly wouldn't sell your own house not if you're smart you would get a quality realtor to do that oh somebody really knows what they're doing not a monkey that got a license but i'm talking about a top-notch real estate agent and you might be patting yourself on the back because you think you're saving your fees by doing your own investing.

But picking funds isn't the value of having a personal financial advisor. Everyone knows the phrase, buy low and sell high. Everybody gets the idea. But what do you do when the market starts to go down? Because the market's going to go down. What are you going to do? Are you going to go down. Mm-hmm. What are you going to do? Are you going to freak and sell?

That's the exact wrong time to cash out. You haven't lost money until you sell. An advisor that is the voice of reason can talk you off the ledge is worth a mint to you. Most people who win with money have somebody in their corner coaching them and talking them off the ledge. And finding one that talks and thinks like we do here on the air is kind of a bit of a challenge. But we've taken the challenge,

and we've lined up a group of what we call smart investor pros because we think you are the smart investor. You're the smart investor, and then the pro is the one that can help you do that, and they can help you with the heart of a teacher. So if you're ready to do some investing, I suggest you put somebody in your corner, click smart investor, put in the info. It'll drop down a list of the smart investor pros in your area, and you decide which one you want to work

with. But they all have the heart of a teacher, and they all will give you investment advice that sounds suspiciously like what you hear here on the air. And you'll understand it. Hello. Kevin's in Orlando. Hi, Kevin. Welcome to the Dave Ramsey Show.

Thank you, sir. What's up? So I have a baby step seven, and I've got about a hundred thousand that i want to park somewhere for about four years until i retire and i look for some advice on what to do with that what are you going to do with it when you retire um looking to kind of bless ourselves a little bit for the hard work that we've done thus far. So maybe looking at getting an RV and traveling around the United States a little bit. Okay.

How much is in your 401K now? So my wife and I both have pensions. And then on top of that, I do have a Roth IRA. I've got about $50,000 in that, but I'm putting 20% to it now. Good. And your house to it now. Good. And your house is paid for? Yes. And what's it worth?

About $75,000. Cool. And what's your household income? We're about $130,000. Good for you. Okay. Well, here's the thing. If you look back over the history of the stock market and the New York Stock Exchange,

you will find that 90-something percent of the five-year periods made money, if you leave money alone, five years in a decent growth stock mutual fund, okay? One that's got a track record of somewhat of stability, that kind of a thing. You following me? Yeah. of stability, that kind of a thing. You following me? Yes. And if you look back at three-year periods, not 90%, but around 65% of them made money. So that's the chance you take at four years is in between. If you're going to leave money alone five years or longer, I'm very comfortable picking some conservative growth stock mutual funds okay okay um you could pick a growth and income fund which is the more conservative of the four types i personally invest in and i recommend growth and income growth growth

aggressive growth growth and income growth fund and an international those are the four i always talk about that i personally invest in but i own one growth and income, growth fund, and international. Those are the four I always talk about and that I personally invest in. But I own one growth and income fund that's been open since 1934. It has averaged 12.07% per year since 1934. And out of those 83, 84 years, it's had 15 down years. 15 times it was down and 70 times it was up. Okay? I'm pretty comfortable putting a bunch of that $100,000 in something like that.

I might not put it all in there, but I might put 75 in there and 25 in a money market. Okay, and I have some flexibility. I mean, it's not like in four years, bam, I have to draw. Okay. And I have some flexibility. I mean, it's not like in four years, bam, I have to draw it out. So I have some flexibility with time. So if the market was down, you could hold your breath and hold your nose for a year and let it come back up, right? Yes, sir. Exactly.

If we had some kind of a weird event, which we do have those weird events every so often. That's right. It could be. We'll see, because then we get more gain It could be... Yeah, exactly, but you see what I'm saying. If you said, I've got to pull it out, and your $100 was worth $75, you wouldn't like Dave Ramsey then, you know?

Right, exactly. That's the thing, and that's the analysis. So I probably would do some mix, but I'm very comfortable, if I'm in those exact numbers that you gave me. If I were doing it, I would take the risk of putting, you know, like $75,000 of it in something like that type of a growth and income fund that I just described. Something that's got a very stable track record. It's not a guarantee.

It's a stable track record, and if it makes half of what it's made since 1934, it's still made 6%, or if you put it in a money market, it's making 1, 1.5. Yes, sir. You know, so, I mean, it's got to go down. It's got to be 1 12th as good as it's been to be as bad as a money market. You know, that's pretty bad. Yes, sir. So that's how I'm comfortable with it, but you do need to kind of feel that, that you're taking some risks there.

So your four years might turn into five, and your 100 might turn into 90, but more than likely your 100 would turn into 120, 140, somewhere in there during that time. More than likely. It's just a matter of how much. So I'm willing to take a little bit of risk in there during that time. More than likely. It's just a matter of how much. So I'm willing to take a little bit of risk in something like that for a whole lot better return than a standard savings account. If you told me you had two years, I'd just tell you to put it in a savings account.

Just put it in the money market and make one, one and a half. That's simple. That's all I would do. Just keep it that clean. George is on Facebook. Dave, should I attack my rental property debt in baby step two or build an emergency fund and pay for it in baby step six? Rental property goes in baby step six. Real estate.

And, you know, if you've got a large loan on your small business, I'll put an SBA loan, something like that, $100,000, $200,000 on your business or something. I'll put that out at Baby Step 6 too. But Baby Step 2 is any kind of other debt goes in Baby Step 2, including ridiculous student loan amounts. They all go in Baby Step 2. You've got to clean those up and get rid of those. If your second mortgage is more than half your annual income,

we push it out to baby step six. And that's household income. So if your household income is $100,000 and you have a $60,000 second mortgage, it's in baby step six too. If you have a $25,000 second mortgage and a $100,000 income, it's a baby step two item. And it drops right into the debt snowball. And you work it through like that.

And the reason is you can simply mathematically, you can knock it out. But if it's going to slog along and you're going to be sitting there with $1,000 for five years and not be getting into your 401K and that kind of stuff because you've got a big, huge second mortgage laying there, then I'm going to push it on out to baby step six. I do not do that with student loans because the student loan issue is such an emotional thing, and people get stuck in them for 25 years if I let you push them out. So you've got to punch them in the face, punch them hard, and get it done. You've got to knock it out.

There's no way around it. You have to do that. James is on Twitter. How do you recommend paying for home renovations? Cash or don't do them, Dave? What about a HELOC or a second mortgage? Nope. Grandma's rule. If you don't have them, Dave. What about a HELOC or a second mortgage? Nope. Grandma's rule. If you don't have the money,

you can't buy it. It's Grandma's rule. It's called common sense. If you get it, it's so rare, it's like having a superpower. Try it. That puts this hour of the Dave Ramsey show in the books. We'll be back with you before you know it. In the meantime, remember there's ultimately only one way to financial peace,

and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, guys, this is James Childs, producer of The Dave Ramsey Show. I'm excited to announce that we're now carried on 600 radio stations across the country. To find one near you, head to DaveRamsey.com slash show. I get asked all the time, when in the baby steps is the right time to buy life insurance? My answer is typically now. Life insurance is not part of the baby steps because it's needed when your family has debt and not enough savings to provide for their financial needs.

That's when they're at the highest risk. And no matter where you are in your baby steps, it's a necessity, not a choice. This includes working husbands and wives, as well as stay-at-home parents. It's pretty expensive to replace those stay-at-home parent responsibilities. I only recommend term life insurance since it's the most affordable way to get the right amount of coverage and not break your budget. Go to Zander.com or call 800-356-4282.

These are the guys I personally use. Term life insurance is inexpensive and your family needs this no matter where you are in your baby steps. That's Zander.com or call 800-356-4282. Zander.com.