The Ramsey Show - App - How to Overcome "Powdered Butt Syndrome" (Hour 2)

Episode Date: February 11, 2020

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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 am Dave Ramsey, your host. This is your show. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Brady starts off this hour in Poplar Bluff, Missouri. Hey, Brady, how are you?

I'm doing good. How are you doing, sir? Better than I deserve, sir. How can I help? Well, me and my dad, it's looking like we're going to start our own business together. We do construction. He's been in it for several years. I've been in it the last six or seven.

And it's looking like, well, I just talked to him a little while ago, and he's thinking he's going to have to work until he's about 75. And I don't want that for him. I don't want him to have to work for that long. So I want to know how we start the business and get it running on the right track to be successful enough that he doesn't have to work that long. That's a really good question.

So what are you, 27, 28? 24. 24. So you started working in the business around 17 years old then, huh? Yes, yes. Wow. And how old is he? He's 54.

Okay. All right. Well, you're smart. There's a couple things involved here. The first thing you need to think about is that partnerships are difficult. Partnerships with family are also difficult. They're very rough. They're very rough, and there's a lot of, they're full of danger, but it can work in family.

Family business can work. You need to decide who's going to own it. Is he going to own it and you work for him until such time as he retires and then he hands it to you? Are you going to own it 50-50? Is he going to own 75? You own 25? I don't know.

But you need to decide who's going to own it. Okay. And then once you decide that, it's going to start telling you some other things about how you're going to operate. For instance, let's say he was the owner and you worked there with a promise of someday it being handed to you or you being able to purchase it or something like that. Okay. Then you need to remember when you're working there that he's not your father.

He's your boss. Right. And he needs to remember when he's working there that he is your leader in business and on the job, and he treats you as well as he treats his best guy on the job. He doesn't treat you like his son. He can't use his dad voice. Yeah, that's true. Okay.

This is the problem with family business right here. You have to remember which hat you're wearing, and when you're at home at Thanksgiving dinner, he can be dad and father to your grandkids and that kind of stuff. But when you're on the job, like when we're around here, Rachel Cruz is a Ramsey personality, and I'm the CEO. I treat her like I treat Chris Hogan on the job, and she treats me like Chris Hogan treats me me on the job i'm the freaking owner and

the ceo okay and and so you don't roll your eyes at the ceo you follow me yeah i'm following you okay so that's thing too is how you guys interact relationally on the job and and at work and you work that through so number one is who owns it. Number two is once we establish that, then let's lay those roles out very carefully and stick to your lane on your roles. You're not entitled to something because of your name. You're entitled to something because of the promises that are made to you as you start the business, but not just because of your name. You're a 24-year-old construction worker right now, okay?

And then we figure out what we do from there. The third section comes to your last idea or your original question, and that is how do we grow this and how do we hand it off when he is done? When he's going to hang up the tool belt, how are we going to hand this off and how do we grow it to enough that um that when we hand it off he doesn't maybe he maybe we can make a lot more sooner and like in the next 10 years do a bazillion dollars worth and he could just retire off that bazillion dollars and not have to worry about it right and so you know that has to do with the type of construction you're doing

how you grow the business how steadily you grow business, how you manage the team and grow the team, lead the team, how you interface with your customers, how you price, how you estimate accurately on the jobs, and it's growing and running a construction business. Now, are you guys doing residential or are you doing? Yeah, we do mainly residential. We did. We had a business, and I was his foreman for the first five years, and then a friend of ours wanted to start his own company,

and that raised our income, both of us, exponentially. Okay, which means that the business you were running before didn't do very well. It could have done better. Well, if you took a job working for someone else instead of running your own thing, your own thing wasn't going well. Our thing was the employees not having good help that wanted to treat the business like we did.

That's the hardest part of business. I agree. Business is easy until people get involved. Right. And so I'm going to send you a copy of the book Entree Leadership, and I'm going to recommend you start tying into the Entree Leadership podcast. We spend a lot of time on hiring and firing and putting the right people in the right seats on your bus so that your bus runs better because I want you want you guys to build make a bunch of money but

now so number one is who owns it number two is clearly define your relational things you might have done some of those relational things wrong the first time and you have the chance to correct them this time how you treat him how he treats you and then the third thing is who's gonna how you gonna end up owning this when he hangs the tool belt up and that's your succession plan and you need a succession plan too so all of that to say you guys got to go make a bunch of money to at least make what you used to make wow there you go at the old job working for somebody else so hold on i'll have kelly pick up i'm going to give you a copy of the book entre leadership and we'll get you going. And that's the whole thing. Open phones at 888-825-5225.

Rich on Twitter says, Dave, what are your thoughts on GoFundMe fundraising? Well, I guess it probably would change based on what you're fundraising for. If you're doing a GoFundMe for um a tragedy for something that's horrible and you're trying to help somebody in that then that's just a charitable contribution and when you're doing a go fund me to pay your bills because you're too lazy to get off your own butt and get a job then i think that's pretty lame um and so you no, I'm not going to go fund your butt. You should fund your own butt by getting a job. And so go fund you.

I'm not going to do. And so there's some of that out there. You know, I can't pay my bills. I wrecked my sailboat or whatever. There's one in the news a while back on that one. And, you know, I've never been in the same. I never was a sailor, but I took my sailboat out and wrecked it. Would you help me

pay for my sailboat? That one was actually in the news. No. I don't pay your stupid tax for you. I've had to pay my own stupid tax. You get to pay your own stupid tax. But if you're going to fund me for a child that's got an illness or something, sure. Yeah, if you want to help that way.

That's wonderful. I'm not against the concept. It's just a matter of what it's going for. But some of these people have figured out that they're their own charity or something, and that's just lame and strange in so many ways. This is The Dave Ramsey Show. We'll see you next time. to navigate your options? Do you wish you could find an affordable, biblical solution to your healthcare costs? Based on New Testament principles, Christian Healthcare Ministries, or CHM,

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Jonathan, welcome to the Dave Ramsey Show. Hi, thanks for taking my call, Dave. I have a question. So my wife and I are going to be finishing up baby step three. So we're going to be starting babies at the end of the month. And we're going to be starting babies at four. And I month, and we're going to start a baby step four. And I actually just got a new job where I got a raise and everything, and I was looking at their retirement plan,

and they offer a 401K where they give me a 3% just for being employed there, and they match up to 5%, 100% up to 5%. But then they also have a 403B and Roth option. So I was kind of curious. I know you say 15%. I was trying to figure out what would be the best way to put in all 15%. Gotcha. Okay. And the 401K with the matches, it has a Roth option as well?

Well, I'm looking at the paperwork, and it says 401K as one retirement plan, and then they have another one that says 403B with Roth option. Okay. Usually, if they have a Roth option on one, they would have it on the other. Okay, so let's walk through this. The first thing is when you get to Baby Step 4, after you have your Baby Step 3 complete of three to six months of expenses for emergencies, you take your household income times.15, 15%.

So what is your income and what is your wife's income? It's 75, and I'm the only, my wife just quit her job. Uh, we're having a baby at the end of April. And she's not going back. Yeah, no, she's not going back. Okay. All right. And so we need to put aside $11,250.

So somewhere around a thousand dollars a month. All right. And, um, the first and best option is a Roth 401k with a match. Okay. The second best option is a regular 401k with a match. Now, the 403b could be in this mix, okay? But my guess is the 403b, usually they have bad insurance-type products, annuities, and those kinds of things as your options for investing there. And I'm looking for good growth stock mutual fund options like we talk about all the time.

And I'm going to – I'm suspicious that you won't have those available in the 403B. So I'm going to just deal with the 401k now okay let's say that your options the mutual funds that are available in your 401k are medium they're not really bad but they're not great okay then i would put in the three percent and the five percent to get the full match and then pass the match i might go do my own Roth IRA off to the side. And that's going to get you, you know, about there. So the goal is by adding all this together, we want to get you to about $1,000 a month, about $11,250 a year,

close to $12,000 a year, something like that, going into these programs. But, yeah, we definitely want to do the Roth 401k with a match as our first choice. Regular 401k is a second choice up to the match. Past the match, I'm probably going to do Roth. Unless your mutual fund options are amazingly good inside the 401K, I'm probably going to do a Roth IRA with my own mutual fund selection because I can pick out better mutual funds maybe than your 401K has. So look at the track records on your long-term track records on the mutual funds inside your 401K. It might be that you just end up putting it all in the 401K and just go, you know, I need 15% of my income going in to my 401k.

And that's going to get you all those matches, and it's Roth, and you've got good mutual funds. And we always suggest, and my personal investments are one-fourth in each of these, growth, growth in income, aggressive growth, and international. Spread across those evenly, and that's what I'm always looking for. Good mutual funds, long-term track records are five years, ten years, and longer. Nothing that's like one-year, two-year, three-year track record. I don't care about that. Steven is in Pasadena, California. Hi, Steven. How are you?

Hey, Dave. I'm doing good. Good. So I have a question, if you can explain, because my brother, I've been talking to him about your program, and he says, yeah, that's all fine and stuff, but I don't see the positive in having a zero credit, because then how am I going to buy a house? How am I going to be able to do all these things without having a credit score? And I completely am 100% all in on your program and everything but i want to talk him into it because i know they're having some struggles with things but at the same time

i don't know how to explain that as well let's start with the idea that he is arguing with financial advice and he's broke that's pretty. So let's just start there. I mean, this guy, he really, you know, if you hire a personal trainer and they tell you what to do, you ought to do it. So let's start with the idea that credit score hasn't been a blessing to this guy. He's broke. He's having financial problems. So his plan really sucks. We need to start with that idea.

Now, then we can back up and say okay what is the technical aspects of this uh buy a house and all these other things you said uh he said well all these other things are your problem you pay cash for everything but a house and i'd rather you pay cash for a house but uh zero chance ever that you need to have any credit card debt, any student loan debt, or any car debt, or any debt other than a house if you want to be a millionaire. All these millionaires we've studied, all these not broke people like your brother, but all these people who have money that we have studied for 30 years have avoided debt as their primary way to become wealthy because that allowed them then without any payments to invest so you save up and pay cash for your trips your christmas your college you

save up and pay cash for your cars your boats your toys you save up and pay cash like grandma said if you ain't got the money don't buy it and the money means you need to have all the money to buy the item and it doesn't chase you home. Now, how to deal with the house without a credit score? Then you can actually get a mortgage. You would have to do what's called manual underwriting, and not a lot of mortgage companies know how to do that. Churchill Mortgage is one that does know how to do it, and there are a few others, but a lot of them are just so stupid, the only loans they know how to make are FICO loans, and they look at the FICO number and they make the loan.

It's stated income loans, and they're the type of loans that are disastrous. But that's the way the industry is set up. But you can get a manually underwritten loan, and that means that they can't just look at the number because there's not a number they actually have to look at the person and verify that you have a job and verify that you have a down payment and verify that you can make the payments based on your income ratio to your payments and they actually do underwriting and like we used to do when we first started in the when i first started the real estate business 35 years ago we actually the mortgage companies

did real underwriting back then. They didn't just look at one number and make the loan, and that number being the FICO score. So the answer is, yes, you can get a house. No, you can't get a lot of other stuff, but you shouldn't anyway unless you pay for it. And if you're going to stay in debt, you are not following the shortest track to becoming a millionaire. So that's the answer to his equation. The other thing you've got to remember is this. I find myself in the early days of this show, like you are, Stephen, arguing with people.

It's not worth it. Just go live your life. You can't talk stupid out of some people, even if they're in your family. They're just going to be stupid. So you go live your life. You can't talk stupid out of some people, even if they're in your family, they're just going to be stupid. So you go live your life. You're not going to argue him into anything. He's broke and has strong opinions about money. How interestingly stupid is that? So he's arrogant and it's gonna, he's, he's gonna have problems until he decides he's going to have problems until he decides he's going to listen to someone who knows more than he knows, which includes you, by the way. You know more than he knows.

So I'm sorry, but that's just, I've had these conversations with people like this for years, and I just quit having them. It's a waste of good energy. So I can't talk you into being smart. You've got to decide you're going to get smart, and then I can help you get there. But I can't just club you over the head. And he's not, he just wanted to argue. He did not really want to learn. And so I don't think you can argue him into it. You're probably going to be really frustrated trying. So I probably wouldn't try. I probably wouldn't

have any more arguments with him. But you do whatever you want. That gives you the tools to do it either way. This is the Dave Ramsey Show. If you do this one simple thing that we all do, you are literally at risk of being hacked and someone stealing what you've worked so hard for. Do you ever use public Wi-Fi? I'm talking about getting online at a coffee shop, a store, the airport, or even at home. Hackers can use a simple $100 device to mimic Wi-Fi, and with just a little bit of skills, they can take over your financial life. This means you may think you're on your bank's site or app

or securely making that purchase online, but hackers could see and steal that information. That's why I trust CyberGhost VPN. CyberGhost thinks about cybercrime so you don't have to. You can try it for free for seven days. Protect up to seven internet devices and keep all of your internet connections secure. That's CyberGhost VPN. Download it today from your app store and be secure in seconds. In the lobby of Ramsey Solutions, Chris and Catherine are with us. Hey, guys, how are you?

Good. How are you? We're great, Dave. Welcome. Where are you from? We're from Bradenham, Florida, Dave. Tampa area. Yes, sir. Cool. Good to have you guys. And young men that are with you are who in ages?

This is my oldest son, Sean. He's 17, and Kevin is 16. Very cool. And you guys are here all the way to Nashville to do a debt-free screen. Yes. Very good. How much have you paid off? Well, we have paid off a little over $800,000. Whoa!

Yeah. $425,000 of that was debt that we paid off on our own. The rest of that was we received an inheritance. Unfortunately, my father passed away, and he was due for an inheritance, and he wasn't able to enjoy that, so it came down to my brothers and I, and we took the rest of that, and we paid off all our mortgages and the mortgages on our rental properties also.

Wow. So how long did this adventure take? This was an 11-year process. Okay, cool. And your range of income during that time? is on our rental properties also. Wow. So how long did this adventure take? This was an 11-year process. Okay, cool. And your range of income during that time? Started out at about $90,000, and then over this time, been able to well over double that.

Okay, very good. What do you all do for a living? I've been in pharmaceutical sales for about 16 years. Very good. I was in pharmaceutical sales, but I'm a stay-at-home mom. And then about halfway through this, I complicated everything and I started a nonprofit organization to help children with autism. Very cool. Good for you. That's great. That's fun. And so your dad was scheduled to receive this $375,000 approximately, right? Yes, sir. And instead, you did. Who passed away that left that inheritance?

It was his great aunt that passed away. Okay. All right. Very cool. Very cool. Wow. And so now everything is paid for. I'm looking at weird people.

The house. Yeah. And houses, rental properties, everything. Everything. 100% paid. Y'all are just strange. I love it. rental properties, everything. Everything. 100% payable. Y'all are just strange. I love it. We do, too.

What's the house worth? What did we say? It's about $500,000 to $550,000. Okay. What's the rentals worth? Rentals, we have two rentals. They're about $150,000. Yeah, about $150,000 each.

Okay. Very good. Very good. So you guys are millionaires probably then. Pretty much. Well done. Good job. We, about 150 each. Okay. Very good. Very good. So you guys are millionaires probably then. Pretty much. Well done. Good job. We are.

Thank you. I love it. Thank you. This is awesome. What happened 11 years ago that started this? Because y'all have been married more than 11 years because Sean's 20 years old or 17 years old or whatever, right? Yeah, we've been married 20 years.

11 years ago, I wanted to stay home with the kids. So he kind of made a deal with me. If we followed Dave Ramsey, then I could stay home with the kids. Yeah. So that's how it all started. It was blackmail. Blackmail. But it worked.

Yeah, I was fully on board, Dave. I wanted to do everything I could to have her stay home with the boys, and it worked out. And the timing was perfect because by the time we paid off everything except our mortgages, 2008 was coming and things got very scary. And the reason that Catherine was able to stay home and do that was because we were out of debt. Thank you very much. Very cool. So what kind of debt did you have other than mortgages? You name it. We had everything except student loans. Well, you were making good money, and you're both in sales. And those of us in sales have a tendency to try to out-earn our stupidity, and we think we can always out-earn whatever.

We'll just buy something, buy something, buy something. Exactly. We're a sucker for buying something since we love to sell stuff. That's true. I'm the same way. Very cool, you guys. That's very fun. So how does it feel to stand here now?

Everything is paid for. That's very fun. So how does it feel to stand here now? Everything is paid for. It's incredible. Like you say, our family tree has changed. My boys were, you know, five and six when this process started. All they know is Dave Ramsey and your teachings. And to have them standing here with us now to be able to do this is just incredible. Wow. Very cool.

Very proud of these boys. Sean got his first job this year. He now has, and then we opened up a Roth IRA for him. Oh, yeah. So he's already got his well into doing that. Wow. And Kevin is now taking your class. Oh, wow.

Yep. Very good. Financials and Foundations and Financial Peace. Oh, at the high school. Okay. At the high school level. And some of my best times this year has been working on the case studies with him during your class. And he gets to go back home to his class and tell them that he got to meet you and the person that started this.

Absolutely. And then he's got the YouTube debt-free screen, too. So there we go. That should be extra credit, I'm thinking, Gavin. I'm just saying. I'll just put in a good word for you here. Thank you. So good stuff. Well done,

you guys. Very well done. What do you tell people the key to getting out of debt is? I think it's two things. One is that you have to be on the same page with your spouse and have a common goal, what you want to work for. And for us, it was Catherine being able to stay home with the boys. The second thing is just don't give up. You know, we're 11 years into this and we hit some times when, um, you know, I had a, uh, home equity line that was large, very large. I thought we'd never, ever pay that off. And there were times when I listened to you every day in the car cause I was in sales and the debt-free screams would come on. And sometimes I'm like, I just can't listen to those because I want to be there so bad. Um, but I had to say, you know,

I'm very happy for those people and we're going to get there one day. So just don't give up. Those people that are just starting now, and they feel like there's just no end to the road, just hang in there. It's all going to pay off, and it's going to be well worth it. Yeah. Well, 11 years later, you know, you're done. You're done. I mean, this is very cool.

Maybe step seven. I love it. And now it's all about giving. Yeah. Put you in that position, and you've got this nonprofit to work that through and so forth. very cool. Baby step seven. I love it. And now it's all about giving. Yeah. Put you in that position and you got this nonprofit to work that through and so forth. Very cool. So what drew you to the autism cause? Just a personal experience, but it's grown.

It's really just all children with special needs. So it's turned out to be a great thing. Okay. Wonderful. Very cool. Good job, you guys. Very well done. All right. It job, you guys. Very well done. All right, it's Chris and Catherine, Sean and Kevin.

We got a copy of Chris Hogan's retire-inspired book for you, number one bestseller. And, of course, that's your next chapter in your story. Continue this millionaire journey that you're on, an outrageously generous journey that you're on. You're doing everything you're supposed to do. Very well done. All right, again, Chris and Catherine, Sean and Kevin, Tampa, Florida, $800,000 paid off. That includes $375,000 of an inheritance, but $425,000 themselves over an 11-year period of time, making $90,000 to $180,000. Count it down.

Let's hear a debt-free scream. Three, two, one. We're debt-free! Yeah! free scream three two one we're dead free love it love it love it well done very well done you guys that's how it works open phones at 888-825-5225. Laura is on Instagram. Dave, can you sell your car if there's still a loan on it? Sure. You have to pay the loan off as a part of the transaction to get the title,

because your bank has your title. Whoever has the loan is holding the title of the car. There's a lien on your title. And so the buyer cannot, you can't give the ownership of the car to the buyer until you pay the loan off. And so if you owe less than the car is worth, it's very easy. You have a $10,000 car. You owe $8,000 on it. If I buy it from you, I give you $10,000. You take that down to the bank. You pay off your $8,000. They give you the title. You put $2,000 in your pocket. It's very easy. And then you give the title to me, the buyer. It's not a problem at all. Then the second thing is if you're upside down in a car,

meaning you owe more on it than it's worth, so the car is worth $10,000, but you owe $12,000, well, you got to come up with that other $2,000 as a part of this transaction because if I give you $10,000, I'm going to want the title. And so you've got to put the other $2,000 with the $10,000 the buyer gives you in order to pay the car off and so that you end up with the title in your hand to be able to give it to me if I'm the buyer or whoever your buyer is, right? So that's exactly how it works. But, yes, you can certainly sell a car if there's a loan on it.

In most states, there's different processes in different states, but in most states, if there's a loan on the car, you give me the car. If I'm the buyer, I give you the check. You give me a bill of sale, and we both sign the bill of sale, and I become the owner of the car. You take the money, go get the title, and bring it to me as soon as you get it from your bank. Sometimes that takes a few weeks. But I leave with your car, you leave with my money, and we do a bill of sale.

That's how it's done in most states. But some places it's a little different. Be sure and check on what the process is in your state to do it but definitely you can sell a car if it has debt on it this is the dave ramsey show Thank you. Thanks for being with us. This is Anastasia's with us in Mobile, Alabama. Welcome to the Dave Ramsey Show. How can I help? Hey, Dave. It's really good to talk to you. I've been listening to you for a while now. Thanks.

Like, intensely. Cool. So, I'm having a little bit of an issue, like I mentioned. I'm really getting into the Dave Ramsey program. I'm pretty passionate about it, and I'm planning to follow it through. Thankfully, I'm 22, so I have a lot of time to go ahead and implement all of the baby steps. But my family does not have the biggest, the greatest financial history. I'm trying to, I guess, spread it around to everyone around me, including my friends and family, but mainly my parents. They aren't in a

great financial situation. My mom just filed bankruptcy, and my dad is deeply in debt, and I am committed to helping them when they're at retirement age because I don't know if they'll be able to do it alone. But they don't really. I'm trying to get them on board to, I guess, help me help them so that they be in as good a financial situation as possible. How old are they? They're both around 60, 57 and 58.

Okay. And your question's what? How do I get them to get on board so that I can eventually help them better in the future? You can't. You can't. 98% of the time you can't. Here's the thing. It's called the powdered butt syndrome. Once someone has powdered your butt, they don't care for your advice on sex or money it's hard to give your parents advice really really hard when you're 22 and they're 58 okay it's hard for them to hear it from you even though you're right but it's just it's a very difficult relational thing to cause that to happen i've got very wise beyond their years kids that are 26 and 30 and 32 and it's hard for me to hear their advice

and i work at it but it's difficult i'm 58 and they sit on my operating board they're part of our management our leadership team here and even in that, I have to stop and not use my dad voice and listen because sometimes they actually have to have something to say. But it is an unnatural thing to listen to your 22 year old kid when you're 58. It's unnatural, especially about something like money. So it's a very difficult thing. The only thing you can do is two things, I suggest one is if you know of anyone that they look up to in the area of money like you know my uncle lou they always talked about uncle lou uncle lou's good with money he's good with money i got look at him he's rich he's good with money if uncle lou would talk to them because they look up to him you might you might you know draft him into this conversation let him have the

conversation they might listen to him because he's got credibility that that one sometimes can happen and sometimes can work it's difficult to find uncle lou and know who he is i don't know who that is their pastor it could be it could be a boss that they look up to that's good with money that could speak to them or you know on a personal level that kind of stuff the second thing you can do is much more likely to happen than anything we've talked about and that that is you go win you go win and you don't talk about them and you don't talk about all the dumb things they've done and you don't condemn their decisions all you do is talk about how you used to do something that's dumb you and you don't do it anymore your story no one can argue with my story is i used to do dumb stuff i don't do dumb stuff anymore now i've got some

money because i don't do dumb stuff with money anymore and you talk about whatever dumb stuff that was i was using credit cards to live on. I was scared. I was always late on my utility bill. I was worried they were going to repo my car. And when I got on a budget and I started writing it down, man, I felt so good. And when I got that credit card paid off and I cut up that stupid thing, I felt so good. When I got $10,000 saved in my emergency fund, I felt so good.

And that story is a great story and you know what it's your it's your story no one can argue with that and eventually they'll go hey i want what you've got because you're winning and then the magic happens and the magic happens when they ask you not when you not when you insert your foot into their door but when they ask you and they say hey anastasia you're winning at this show us what you're doing or i wish i could do that and you go well you can mom i can show you how would you let me and you know but that's gonna be a year from now okay a year doesn't sound as daunting as i don't know how long they have to do. You have a success story. You need to have a success story. Yeah.

And you need to talk about the times that you were scared and the times that you messed up, and I quit doing X, and I quit doing Y, and I started doing A, and I started doing B, and now I've got this feeling that's a whole lot better feeling, and then they're going to go, I want that. But right now, all you you got to sell is this guy dave ramsey out here squawking and you're like who's dave ramsey he's just a squawker you know and that's all that's all they're hearing right now they're just hearing they're hearing charlie brown's teacher it's all they hear right now so go win kiddo that's your best shot now if you got an uncle louis in there somewhere whatever his name is uh that you win kiddo that's your best shot now if you got an uncle louis in there

somewhere whatever his name is uh that you can get involved that's fine uh but really you got the powder butt syndrome and the only way to overcome it has become inordinately successful mike is with us in nashville hey mike how are you i'm good day how are you better than i deserve what's up well i love listening to your podcast and I've heard a lot of people do a debt-free scream, and I want to do that one day. Cool. I've been kind of smart with money, but I've been kind of stupid with money, too. A couple years ago, my boss gave each of the employers, if they went and wanted to get a house,

$1,000 towards a down payment. So I was able to get a house in West Nashville, and throughout four years, the housing market has skyrocketed. So that was the smart thing I did. The dumb thing I did is I had student loans and some credit card debt, and I took out about $40,000 in equity. And I have money that goes into a Roth IRA. I'm 35, and I'm just kind of worried about retirement one day as far as how to tackle the debt. So your question is what? What should I get rid of the Roth IRA right now and focus on the debt in the home equity loan? How much is your

home equity loan? About $40,000. Okay. And what is your income? About $50,000 a year. Okay. Now, I would refinance your mortgage and get a new first mortgage and roll your home equity loan into it. And then make sure you're living on a written budget so you're never going dead again. Make sure all credit cards are cut up so you're never going dead again. Plastic surgery is always necessary in these situations. And then start working your baby steps. Do you have an emergency fund of three to six months of expenses? Yes, I have that, and I have no credit cards.

I did the home equity thing pretty recently. Good, okay. Yeah, I would refi. Here's the thing. Here's the rule I use. I count a home equity loan as consumer debt. Regardless of how it got there, if it's less than half your annual income, this is substantially more than half your annual income.

And so it's going to take you a long time to clear that. So what I do is I either put the home equity loan in baby step six. What's your first mortgage amount? I owe about $121 right now on the house. Including the home equity or plus the home equity? Not including that. Okay, so $160, and now on the house. Including the home equity or plus the home equity? Not including that. Okay, so $160,000, and what's the house worth? About $264,000.

Great. Awesome. Yeah, I want to buy another house one day because I did so good with that one, but I don't know if I'll have the kind of luck I did with this one. Well, you know, just let's wait. Let's get things in order. You got your emergency fund in place. I'm counting this home equity loan and this house as your baby step six. And so if you want to lean on it and while you're putting 15% of your income into retirement is the answer to your question, baby step four, don't have kids college to worry about. Doesn't sound like, and then you're going to start throwing money at the house. Now, do we want to, you know,

above 15% of your income going into retirement, how quickly can you clear that home equity loan? If you can't clear it fairly quickly, then I probably would consider refinancing the house because that home equity loan is not on good terms. It's a variable rate in an increasing interest rate environment, and most of them have a balloon or a call feature to them that make them very, very dangerous. The home equity loan product is a garbage product. But if you can pay it off pretty quick, that's fine.

But if not, then I'd refi it, roll it into a new first, and then get about the business. Above 15% of your income paying on the house. Good question, man. Glad you're winning. Thanks for calling in. This is the Dave Ramsey Show. Hey, it's Blake Thompson, Senior Executive Producer for the show. You know you can listen or watch anywhere with the Dave Ramsey Show app on your smartphone. Catch the full show

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