The Ramsey Show - App - If You Want to Be Stuck in the Middle Class, Keep a Car Payment! (Hour 3)

Episode Date: January 16, 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'm Dave Ramsey, your host. This is your show. Thank you for joining us, America. It's a free call at 888-825-5225. That's 888-825-5225. Chris is going to start off this hour in Flint, Michigan. Hey, Chris, welcome to the Dave Ramsey Show. Yeah, how are you doing, Dave?

Better than I deserve. What's up? Not too much. I wanted to get your opinion on something. I'm in about $65,000 worth of debt, and I just kind of started your budget yesterday, everydollar.com, and we have about $97 worth of extra money per month, and honestly, I just don't know where to start as far as paying off the debt. Okay. All right. and honestly i just don't know where to start as far as paying off the debt okay all right well we have a system that we call the baby steps baby step one is the first thing i want you to save

up a thousand dollars and you need to do that faster than you're talking about i want you to do that like in a month have a garage sale let's scratch this some dollars together have you got any money in savings no we don't okay time. Okay. Time to get $1,000 then. Get a little bit of distance between you and problems. Not a lot, but a beginner starter emergency fund. Then the second step, maybe step two, is to pay off your debts, which is what you're calling about. You list those, smallest to largest, pay minimum payments on everything but the little one, and attack the little one with a vengeance. When that one's gone, you attack the next one down. When that one's gone one and attack the little one with a vengeance

when that one's gone you attack the next one down when that one's gone you attack the next one down every time you pay off one you don't have those payments anymore and you get to attack the next one down and what you're going to find is the more passionate you get about getting out of debt the more you're going to adjust your monthly budget and the deeper you're going to sacrifice. The deeper you sacrifice, of course, the more money comes to the program. Right now we're at $97, and we've got to increase that. Right, yeah, and my wife has also got a second job, and I'm working on getting a second job

as well. Okay, and that's going to increase it. Yeah, that's good. Very good. And how much debt have you got, not counting your house? About $65,000. And what's your household income? Around $75,000.

Okay. Yeah, we're going to find more than $97 to go towards this then. Of the $65,000, how much of that is cars? About $35,000. Oh, you're awfully deep in cars. Yes. What's the most expensive car? The most expensive car is around $25,000.

Yeah. You're probably selling that one. Okay. Yeah, you're probably going to get rid of that one. That's where you bid off more than you can chew a good rule of thumb is to not have things with wheels and motors all added together because things with wheels and motors all go down in value okay and if you and you want to go you want to be buying more things that go up in value than go down in value so all the things that have wheels and motors added together should not be more than half your annual income, and you're over that.

So, yeah, you're probably going to sell the $25,000 car. You don't have to decide that today, but that's probably what's coming in order to get this thing moving, and that cuts down the time that your get-out-of-debt plan takes, and it gets you back in control again. But that car is over the top, sounds to me like. So you have to work on it. You look at it. But that's how you're going to get started, exactly.

And welcome to the journey, brother. You can do it. Nick is with us. Nick is in Omaha, Nebraska. Hi, Nick. How are you? I'm good, Dave. How are you?

Better than I deserve. How can I help? So I'm starting a new job here that I just got in probably the next week or so, and I'm going to be making about $1,600 a month. And I was wondering what your thoughts are at 18 years old on whether or not I should be contributing to my 401K. Okay. What are your plans for the next few years, college or just working the job? So I'm a freshman in college. I plan to get a four-year bachelor's degree in management information systems.

And how are you paying for that? So this job, actually, the income will allow me to pay for it in full. And then also it has a 50% reimbursement of tuition over the next four years. Wonderful. Very well done. Good for you. What are you doing? What's your job?

So I'm going to be working at my local Apple store as a technical specialist. Awesome. I didn't know Apple paid. They'll pay half your tuition, huh? Yeah. So it's an in-state school. It's roughly $10,000 a year. So they do a $5,000 reimbursement every year.

Yeah. Very cool. Good for you. That's awesome, man. So I'm going to do that for sure. And no, I'm not worrying about 401K right now. Nick, the best investment that you can make mathematically, this is not philosophically. It is true philosophically also.

But mathematically, the best return on investment you can get is getting this degree and getting it without debt. You will make more from the money. Let's say this degree costs you $30,000 out of pocket or whatever it's going to cost you, your return on that $30,000 investment is much higher than it will ever be in a 401k or in a mutual fund because you're going to be making so stinking much money after you get this degree compared to what you're making now. You see what I'm saying?

Yeah. That return on investment is better than the return on investment of a 401k. So it appears you have the cash flow worked out to cash flow the degree with the reimbursement and not have any debt. And that's great. But any money you would have put in the 401k is extra money just in a savings account. And that savings account is called Nick Insurance. We want insurance that Nick gets through his degree and he does it without any debt. And when you graduate and you have a pile of money that you didn't use in this account, you'll be okay. You can start investing then and you'll move on up

and you'll have no debt. But in case there's a bump in the road. There's nothing better than a pile of money to cover a bump in the road. Makes sense. That makes sense? Yeah. Thank you for the call, man. Proud of you. That's a good track you're doing. I like that.

You're going to make good money, and you've obviously found something you like doing. I can tell by the way you're talking about it and the way you've pursued it. You're way ahead of the curve at 18, my brother. Proud of you. Well done. Open phones at 888-825-5225. Pablo is on Twitter. Dave, I just qualified for a car loan with 3.88% interest up to 72 months.

Is this a good rate? Pablo, is that a joke? I mean, you just tweeted Dave Ramsey and asked if a car loan had a good rate on it the only car loan that i'll ever have again is none no car loan car payments are the mantra of the middle class if you want to get stuck in the middle class and never build any substantial wealth. Just keep a car loan your whole life. That's straight up stupid, man. No. If you don't have the money to pay cash for the car, you don't get to buy the car.

Ha! That's how that works, Pablo. This is the Dave Ramsey Show. Thank you. I get asked all the time about what people need to do to improve their family's money situation. Two of the most overlooked things are term life insurance and disability insurance. Both plans make sure that you have income to pay bills and take care of yourself and your family if something were to happen. For term life, you need to carry 10 to 12 times your income, and I recommend 15 or 20-year plans for most families. Stay away from cash value or return of premium plans. They're just a ripoff. Disability

insurance is just as critical. How are you going to pay your bills if you're unable to work? Disability is the leading cause of bankruptcies and foreclosures, and that's why I send you to Zander Insurance. They've been helping my listeners find the right plans at the lowest cost for almost 20 years. Call 800-356-1780 or visit zander.com and compare online. That's 800-356-1780 or zander.com. Thanks for joining us, America. We're glad you're here. Arnita is with us in Jacksonville, Florida. Hey, Arnita, how are you? Good, Dave.

Thanks for taking my call. Sure. What's up? I just learned about you over the last two weeks, and I'm motivated to pay off debt. Good for you. So here's where I stand. I got about $35,000 in retirement, $74,000 in the money market account. The income is $50,000.

So do I take the money from the money market account and pay off the debt that I have, or can I just work my behind off? No, I just pay it off. How much debt do you have, not counting your house? Not counting the house. I have 15 for a car loan and 82 for a student loan. Oh, okay. And you make 50 a year. Right.

Okay. All right. Yeah, I pay off the car, and I put the rest on the student loan down to $1,000. That's going to feel really scary. How'd you get the $74,000? Just saved it up over a period of time, which leads me to one other question. Should I take that? Do I leave that there, or do I move it maybe to – because I have the IRA account, which has the $35,000.

Yeah, I'm going to leave the $35,000 loan. I'm going to clean out the $74,000 and put it on the debt. Okay which has the $35,000. Yeah, I'm going to leave the $35,000 alone. I'm going to clean out the $74,000 and put it on the debt. Okay. Down to $1,000. $1,000 is baby step one. And then that will leave you about $20,000 in debt. And you've got to knock that out like you used to knock out savings. You're going to lean into that debt as hard as you can lean.

And you're going to knock that debt out in about a year, year and a half. Okay. And then once that debt's gone, then I want you to take that $1,000 account and raise it back up to three to six months of expenses. Okay. So that way you've got your rainy day fund, and then only then start your long-term investing with your IRAs and your Roth 401Ks or whatever's available to you on that.

So have you read the book, The Total Money Makeover, yet? No, I have not. Like I said, I just learned about you two weeks ago. Okay, I'm going to give you a copy of it. It's the baby steps that we talk about. You hear me talking about those all the time on steroids. It's every detail about the baby steps, why we do them, when we do them, why the order is there, and the reason,

even though it feels very uncomfortable through parts of the baby steps. Like when I tell you take that $74,000 and take it down to $73,000 and put it on your debt, you can't hardly breathe when I say that. Right. Because you're a saver, and that pile of money right there gives you a tremendous amount of safety feelings, emotional feelings, and all that kind of stuff. It gives you much more peace than the debt gives you nightmares. Right, absolutely. And I know that, otherwise you would have already put it on the debt. Right.

If the debt nightmares were bigger than the peace, you would have already moved it, right? Correct. And so what I'm asking you to do, I know, is emotionally strenuous. But the fastest method between you and wealth is to get control of your most powerful wealth-building tool, not be giving all your money to a bank and be debt-free. When you don't have any payments, building wealth is fairly easy. Okay. Hold the money from the money, building wealth is fairly easy. Okay. Hold the money from the money market and pay off the debt.

Yep. Pay off the car today and then throw the rest of the student loan. It's going to leave about $20,000 on the student loan, if I did my math right. That's only $8,200 on the student loan. $8,200? I thought it was $1,000. No. Oh, you're breathing better than I thought you were breathing. Okay.

I thought you were down to nothing. Oh, my gosh. Yes, you're debt free by the thought you were breathing. Okay. I thought you were down to nothing. Oh, my gosh. Yes, you're debt-free by the end of the day. That's a no-brainer. That should be easy for you. Okay. Yeah, you're done today. Boom.

You're debt-free. Okay. You just got to write two checks. Right. Okay, so it's $23,000 out of your $74,000. We got you down to $51,000. That's still too much because your emergency fund should be three to six months of expenses and so your emergency fund should only be about 20 000 okay and it's 51 after we paid off all your debt okay so the rest how old are you i am 47 you own a home

i do my balance on that is 66 okay i000. Okay. I'm going to throw about $20,000 at your home. I'm going to pay off the other two debts for $20,000. I'm going to leave $20,000 in your rainy day fund, and then I'm going to make sure you're putting, because you've got no payments now but a house payment. How does that feel? Right. Pretty good. We're going to take your income now and make sure you're putting 15% for you.

That's about $7,600 a year into good growth stock mutual funds in your 401K. Do you have a 401K at work, 403B? I don't. I don't. I'm a substitute teacher. My husband, he's retired military. Okay. All right.

So he's got the good 20-year plan on the retirement? No. No. Oh, he's not retired from 20 years. Okay. All right. But is he working out other than that no how old are you two um he's 57 and i'm i'm 47 like i said why don't you work yeah he why don't he work well he's a disabled veteran oh oh okay yeah okay yeah that's the that's the reason for his retirement So he's got that income coming in. Good.

Tell him thanks for his service. Okay, good. And so you're working, and you're going to take 15% of your income and throw it into retirement in your 50s, and you're going to have no payments, and we're going to get the house paid off next over the next five or ten years so that by the time you reach retirement you're going to have a half million dollars and no house payments that's feel pretty good yeah i does yeah and do you have any survivor benefits on his disability if he passes before you uh yeah we we both have a hundred thousand dollar in policy so in term policy yeah that's life insurance but do you have survivor on his income? No, no. Okay.

All right, cool. All right, you're doing good. Yeah, you got, oh, man, I feel so much better. $8,200 instead of $82,000. That's just a lot better. Okay, good. All right, so, yeah, hold on. I'm going to have Kelly give you a copy of the total money makeover.

It'll shop you. It'll walk you right through this and reiterate what I just told you to do. After you've read it, you'll understand. And you can go over it with him, too, and the two of you line this out. You're going to be okay. You're going to you're gonna be okay but yeah you need to clean up the all we're doing here is dusting out the corners i mean it's not near as bad as i thought it was good good good good good good all right kevin is in seattle hi kevin how are you i'm good dave how are you better than i deserve what's up so i am working through Baby Step 2 and just started working through Baby Step 2.

And I currently am in school, about halfway done, and I have about $22,000 in student loan debt. I'm wondering a couple things. One, do I stop school until I can pay for it? So that way I'm not continuing with the student loan debt? Or do I drop school altogether? What are you studying? It's IT management. Okay. What do you do for a living?

IT management. Why won't they pay for it? The organization I'm at is a nonprofit, and so there's lots of experience, but they don't have the resources for that. I have been going towards project management. I make $67,000 in total, about $75,000 with my wife. Okay, and how much do you have? $22,000 in student loan debt.

What other debt do you have? Grand total is about $100,000 with my wife's student loan debt and medical bills and car payments. How much do you owe on your cars? One car I owe about $3,000, and then the other car I owe about $15,000. Okay. There it is. Okay.

I'm going to tighten up my budget and say I really can't make much progress on my baby step two, but I'm going to finish my degree. What's it going to cost to finish the degree it would cost um probably between another 10 to 15 it's an online school and i can and you make 75 000 a year yeah so if you pay minimum payments on everything and get on a beans and rice budget and stay out of restaurants you can cash flow the balance of your education you're not gonna make any progress on your debt while you're doing that, but you can finish your education, in which case your income ought to go up $20,000, $30,000 when you finish it.

You're going to have to leave that job. You know that. Yeah, I know. Okay. At some point. I mean, you've got to decide. But if you're going to finish this degree in order to further your career, it's not going to be at that place. They can't afford you once you to finish this degree in order to further your career, it's not going to be at that place.

They can't afford you once you've gotten this degree. But, yeah, $15,000, finish it. Cash flow it out, man. Stop paying extra on everything. Cash flow it out. You don't have to borrow more. You can do it. But if you're borrowing more in order to keep doing Baby Step 2 and debt snowballing, then you're just borrowing money to debt snowball.

That's dog chasing its tail. There's no need to do that. So just let it sit there and tread water until you get out of school and then hammer it. This is the Dave Ramsey Show. I love talking about companies that know how to do business right. You've heard of Grip6 belts, right? Well, if you haven't, it's the only belt you can get online with no holes, no flap, and no bulk. I'm talking weightless, and the buckles come in really cool designs and are interchangeable. I personally own a number of these belts, and they're so comfortable you forget you're wearing

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guys, how are you? Hi, Dave. We're great. How are you? Better than I deserve. Welcome. Where do you live? San Diego, California. Very nice. Very nice. And all the way to the other side of the United States to Nashville to do a debt-free scream. Yes, sir. Love it. How much have you paid off? $63,494. Love it. And how long did that take? 13 months. Good for you. And your range of income during that time? $110 to $140. Very good.

What do you all do for a living? I'm a graphic designer. I'm art director for Triathlete Magazine. And I work for North Coast Church. It's a local church in our area back home. Yeah. Excellent. Very good. What kind of debt was the $65,000?

Oh, Dave, it was a little bit of everything. We were pretty normal. We had two cars we paid off. I had a road bike I paid off, student loans, credit card, and we had a wedding we financed. Oh, so you just got married. About a year and a half ago. It'll be two years in September. Okay.

So a year into your marriage, you're a little bit less. You look up, and there's a pile of debt there, and you're going, there's trouble in paradise. What happened? Tell me what happened 13 months ago. You two catch fire like this. Well, five years ago, I took your class, and I didn't really take your steps as seriously as I should have. Or at all. Or at all.

Exactly. Exactly. And then we got married. We financed our wedding on this zero- interest credit card that was going to be up in a year and there was going to go 24% interest so we just like

we need to get on Dave's plan we have to do this okay so that that year burn on the fuse on the credit card right oh wow

that woke you up because we were behind so we got married September we did the Financial Peace University class in January oh you did it again

and yes well that was the first time. And when we got into the class, we were behind already on this year payoff, this credit card and interest. So I think that really motivated us. I got you. But Corey, you said you went through five years ago. Yeah, I'm on my own, but I didn't know. Yeah. Okay. All right. But the first time is a married couple right i got you okay very good yeah so that just so okay game on we're doing this now we're doing this the right way and when you when you when you went in you went all in man you did it this is that's some pretty serious numbers yeah we went all in we were working what account earlier seven jobs so we had our regular full-time employment wow and then we were both contracting extra work. Wow. Boom.

Extra work in your same fields or were you doing other stuff? Yeah, I was doing some contract graphic design work on the side. Yeah, and I run weddings and event planning on the side and also for former employers just still needed help, so I was working with them too. Good, good. A lot of extra work. Yeah, good part-time jobs though.

I mean, they're good paying, so well done. Wow, you got after it. Fun. How's it feel to knock that much out in 13 months? Amazing. Yeah, so good. Both of you side. The gazelles are tired, you know, but it was worth it.

It's so great. There was nights we came home and it's like, all right, good to see you. Ate dinner. Like, all right, back to work. So it's nice to be able to breathe. It's great. Yeah, very cool. Well, if you can do this at this stage of your marriage, brand new in the marriage,

you can do anything together. Yes, sir. I mean, you guys, that's a Herculean task you pulled off. Very well done. What do you tell people the key to getting out of debt is? Communication, the budget. We use the EveryDollar app, and it's just a lifesaver. It really, really helps us.

Yeah. Budget committee meetings are big. And I think especially after FPU ended, just staying plugged in. We watched your podcast. We went to the Smart Money Conference. So we're just trying to do a lot of things to stay connected and keep the momentum going. Because when you're around like-minded people, it's a lot easier, of course. Yes, yes.

So just staying with that. Good for you guys. Very well done. Did you have people cheering you on or saying you were crazy? We had a lot of people cheering us on. There's a lot of people that thought they couldn't do it. They're happy for us, but they didn't think this would apply to them because they didn't think they could do it. They weren't ready yet. No. And now they're saying like, oh my gosh, you did it and you did it faster than you expected. And it can

be done. Our first Valentine's Day, actually, I'm the nerd. He's the free spirit. We were four weeks into our class, and our Valentine's Day, we decided we'd have a fire pit in the backyard, a glass of wine, and watch your podcast. So we didn't spend any money. We were the people in our class that didn't spend any money. The last part sounded romantic, but it just went downhill.

It was like, why are we doing this? This is why we're doing it. Stay focused. And so a year later on Valentine's Day is when we paid off our debt. Oh, there you go. So it all comes full circle. We really celebrate. Oh, that's fun.

Well, congratulations, you guys. Beautiful. Well done. We got a copy of Chris Hogan's Retire Inspired book for you. We want that to be the next chapter in your story, that you become millionaires. You're well on your way. You've got great incomes. You've got a great ability to work together.

And now you've got no debt. Yeah, baby. I love it. So, Corey and Valerie, San Diego, California, $65,000 paid off in 13 months, making $110,000 to $140,000. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free!

Yeah! Love it! Well done, YouTube. Very, very well done. Man, that's exactly how you do it right there. It doesn't get any better. Mike is with us in Spokane, Washington. Hey, Mike, how are you?

Good. How are you, Dave? Better than I deserve. What's up? Well, I'm 60 years old, and so is my wife, and we spent 30 years doing it all wrong, and so much so that we started teaching our kids to not do it the way we did it. And currently, again, at 60, I have a $400,000 home with $200,000 left to go and $650,000 in my 401k between my wife and I. But I lost my job of 27 years ago, or 27 years due to a merger about a year and a half ago. So I had 10 years left to go on a 15 year mortgage and I refinanced it for 30 so that I could afford the payment. So now I'm making half

what I was making. We wanted to stay in this town where our kids and our grandkids in church are. And the question is, should we take money out of our 401K to pay off this house quicker, or should we even not put money into our 401K? Right now the household is about $100,000. Okay. All right. Well, here's the thing. We need to have the house paid for by the time you are retired.

You're 60, right? Uh-huh. So if we said five years, that's $500,000 coming into the house in five years. You've got $200,000 worth of debt on the house. And so we've got to do something here. Probably what I would do if I were you is I would stop investing and I would pour every dollar I can squeeze out of my budget on that house and let's try to pay that house off. I think you can pay it off conservatively in five years, probably could do it in four. Okay, because we're going to be planning on

retiring in about seven, and the real question was why would I take money out of or not put money into the 401K that's making 12 to pay off a mortgage that's only four and an eighth? Yeah, well, because of risk. Because of risk. Does the math work? The math works because you're leaving risk out of your math.

And you wouldn't borrow $400, 000 more on your house to put it into your 401k and if you wouldn't do that why not because of that math well no because that when i say it that way sounds absurd it sounds risky and what that ridiculous scenario i just presented to you is um made you you know borrowing 400 000 more on your house owing 600 on it no i wouldn't do that well why not if you could borrow it at four and invest it at 12 it makes sense it doesn't make sense because of that when i say it that way it activates your you know the risk which you feel in your heart and math you do in your head so now i would stop investing uh the 650 will grow substantially during this period of time and i would have a

goal of paying off the house in three to four years uh three years is 60 000 a year that's probably too tough but i think you can do 50 000 a year living on nothing because uh your income has gone way down now what did you do for a living before well i was an accountant making 120 i was a controller making 120 000,000 a year, and the reason I'm not still doing that is because, again, I don't live in Spokane. I'm like three hours out of Spokane, and I'm not willing to move. The town I'm in is about $50,000, and there aren't a whole lot of $120,000 jobs here, but I didn't want to leave my kids.

Got you. Okay. Well, that's, yeah, I got you. That's the tradeoff you're making. And so, yeah, you're losing probably $50,000 a year in income by not moving out and then moving back or something, but that's okay. You just, you know, you lean into the house, get the house paid off. I'd work like a crazy person for the next three years to four years, get that house done. And then you start doing what you can do more and investing from there. You're at 650. You'll grow during that time, too, by the way. This is the Dave Ramsey Show.

One of my favorite parts of this show is hearing your debt-free screams. You guys are our heroes. You've kicked debt to the curb and you've saved for the future. Now we want to celebrate with you. If you have lived like no one else and are currently in baby steps four through seven, well, it's time to enjoy some money. And the perfect place to do that is on board our first ever live like no one else cruise in March. That's right. just a couple of months away. But get this, it's not too late to book your cabin, so don't miss your chance. This Caribbean cruise is going to be an incredible seven days at sea on a stunning new ship with amazing experiences.

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Sam is with us in Tulsa. Hey, Sam, welcome to the Dave Ramsey Show. How are you doing today, Dave? Better than I deserve. What's up? Well, I'm working with my employer, and I also have a side business, and I'm looking to figure out if I should continue my education and move up in my company or just take my side business further. How old are you? I'm 30.

What do you do for a living now? I'm a welder, and I'm looking to become a welding engineer. Okay. And your side business is what? A lawn service. Okay. So you said you're how old again 30 so when you're 50 what do you want to have been doing for the last 20 years um honestly i think about doing them both it's it's it's like it's conundrum to me you know like i make good money with my lawn service but also like the aspect of the welding the welding world so i'm i mean today you like them but i

want you to look a little bit further out i get that uh but i mean really what do you want when you're my age i'm 57 what do you want to look back and go, that was a good career decision. I was fulfilled. I'm glad I did that. I like running my own business. All right. There you go. That answers your question.

Okay. It might be that you run your own business welding. Yeah. I mean, yeah, that makes a lot of sense. Is it running your own business, or is it cutting grass? I like being a business owner more than just the cutting grass. Cutting grass, it's nice and all, but I like being a business owner. Yeah, the reason that's appealing is because you're the business owner,

but the actual – I would finish up your education and become a top-line welder with the idea that in five years I'm going to open my own shop. Okay. I think that's where you're going. That's great. And let me ask you this, too. The type of welding that you're doing now and you'd be doing for the next five years for someone else, would there be an opportunity to do that without a conflict, without stealing from your employer, in other words,

to do some side hustle welding? Yes. Yeah, let's do that instead of cut grass. Okay. And the side hustle then grows and grows and grows to the point that when you step out of your quote-unquote job into the side hustle, you won't even notice because you're making so much money on the side hustle. Okay, yeah, because that's what I was leaning toward because my lawn service has taken off in such a manner that I'm just like, wow, making money for myself is a lot better than working for somebody.

I agree with you. I've been self-employed my whole life i wouldn't know how to do it otherwise but and what and if you're that kind of person you're that kind of person there's nothing wrong with either kind but if that's who you are so here's the thing okay i want you to write down somewhere and put it where you can see it that at 35 years old you're self-employed welder okay doing something high tech high end where you're making serious bank not grunt welding yeah i agree okay you see you know you know the difference right yes sir making some bank and you're in high demand and they need you because of your specialization and your particular skills

because you're at the top of your game yes sir, sir. So my next question is, me and my wife, we bring in probably roughly around $100,000 a year, and we have about $30,000 left in debt before we get to baby step number three. Is it like should I space out my becoming, building up my side hustle, or how should I do that in terms of baby steps? Well, you're going to clear that 30 very quickly. The side hustle shouldn't be a thing that costs you a lot of money to get started. You may have a little bit of equipment costs or something,

and if you want to invest a little bit. But I wouldn't invest more than $5,000 or $10,000 in kicking the side hustle off. And, you know, you've got the lawn business running. Let's run that for a little while and get out of debt, use some of that money then to create the welding, you know, to cover any costs of the welding side hustle. But, again, the idea is that we're systematically going to get that going and build that business very intentionally so that that boat pulls up next to the dock and you just step in when you're ready to change from working from someone else

to doing your full-time self-employed welding business. Very cool. Very cool. Good for you. Hold on. I'm going to have Zach send you a copy of our book Entree Leadership, which is how I grew this business from a card table in my living room to where it is now.

I'll show you how to do it, man. Thanks for calling in. Patrick's in Macon, Georgia. Hey, Patrick, how are you? I'm good, Dave. How are you? Better than I deserve. What's up?

Good. Hey, got a quick question for you. My wife and I just moved about $23,000 from an old employer's 401K, and we moved it into a traditional IRA with one of the smart investors. Good. He recently left it up to us to say we can leave it there in the traditional IRA or pay the taxes and move it to a Roth IRA. We just want to know what the best move is to pay the taxes now at a higher tax bracket

or wait until retirement to pay those taxes. It's better to do it now, but only if you're debt-free, have your emergency fund in place, or putting 15% of your income into retirement and have some extra money above that. Yeah, we're all set there. I have my own 401k and own Roth. We just didn't know what to do with this one. You got some extra money then? Yeah, that's correct. We're not cashing out any of this money to pay the taxes. So what's the balance on this rollover? $23,200. Okay, and so you got like an extra five grand laying around then? Yeah, well, they'll withhold it and pay those taxes at the end. Who will withhold it? It's with the same investor from the traditional IRA to a Roth IRA. No, you misunderstood. I do not want you using any of this IRA balance to pay the taxes.

Okay, so unless we have that cash on hand to pay the taxes. Ding, ding. Okay. That's what we're talking about. Because effectively, mathematically, what we just did when I do that is you just invested another $5,000 into your IRA. That's right. Yeah. That's right.

Okay. And so that, but if you cash it out, it's a zero sum game because the amount you take out to pay your taxes would have grown to enough to pay your taxes. That's right. At the end of the term. Exactly. So it's a zero sum game. There's no gain in this unless you pay taxes with extra money, which creates the same mathematical effect of additional retirement investing.

So that's what I would do. of money, which creates the same mathematical effect of additional retirement investing. So that's what I would do. But only, again, if you're out of debt, you have, you know, it sounds like you are. You're in baby steps four, five, six, and that's when I would look at doing that. And I think if you scrape together that $5,000, and you don't have to do it this year. You could do it next year. But yeah, I would do it in the next 24, 36 months with cash out of my pocket. Good question.

Thanks for joining us. Teresa's in Dallas. Teresa, we're short on time. Go straight to your question. I was just trying to figure out how to know what is the right amount to spend on a new-to-me car when I happen to buy one sooner than expected. Okay. How much do you have in cash? So I have about $10,000 set aside, but I probably have an overfunded emergency fund of $40,000

that I could use some of. So what's a proper emergency fund? Probably $30,000. Okay. So you've got $20,000 for a car. What's your household income? $160,000 for a car. What's your household income? $160,000. Okay.

What's the car you're driving, and what's wrong with it? It's a 2011 Buick, and I think I blew the turbo yesterday, so it's probably going to cost like $2,000 to fix, and Kelly Blue Book says it's worth $4,500. Agreed. I'm with you. Okay, so how expensive a car are you thinking of buying? I was thinking somewhere in the $15,000 to $20,000 range is proper,

but I have a 45-mile commute each way to work. I'm with you. I like it. $15,000 to $20,000 sounds about right to me. Is there a particular type of car in that range that you recommend for reliability for that kind of distance? No. Whatever you drive, because of the miles you're putting on it, you're destroying it. I know, right?

In value. So just keep that in mind, and you need something that will stand up to the commute, but you're just burning money with that level of a commute. And that's okay. It's just part of your life. It's where you are. So just but whatever, you're just burning money with that level of a commute. And that's okay. It's just part of your life. It's where you are. So just admit that when you're buying the car. So you don't want to buy a $35,000 car because you're destroying it.

But a $15,000 will do. You're making $160,000 especially. That puts this hour of the day 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, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. If you would like to do your debt-free scream 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.