The Ramsey Show - App - I'm Scared to Spend My Cash on a Car (Hour 2)

Episode Date: August 3, 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. The paid-off home mortgage has taken the place of the BMW as the status symbol of choice. My co-host on the air today, Rachel Cruz, number one best-selling author a couple of times over, and Ramsey personality, also my daughter. And she is launching today. We are launching today. Know Yourself, Know Your Money.

Her new book will be out in January, and the pre-sales start today. And there is the cover for you YouTubers. We'll put it on camera for you and the um rachel this will be the third bestseller without a doubt talk about know yourself know your money yeah i was excited to to write this because i think i said in the in the first hour but it's just true that we you know know, have spent, you've spent, you know, close to 30 years. I've spent 10 years, a decade of my life helping people on how to handle money. This is how you do it. This is how you budget. This is how you get out of debt. This is how you prepare your life for the future and get your money under control. This is how,

how, how, how you become a millionaire, how you become a millionaire, all of it. And I realized, man, we only talk about the how all the time, but what if I kind of dug into the why, kind of go under that foundation and figure out, okay, why do I handle money the way I do? And that self-discovery, I think, really helps people. bad habits. You can amplify the good habits. And you really, it takes you just kind of on this fast forward course, pushes you further into life change and helps you win with money faster. And that's kind of the exciting part. It's kind of a different take on what we've done with money around here at Ramsey Solutions. But it's all new stuff, all new content, obviously, through this lens of the why, asking that question. And so walking people through everything from their household growing up to their, gosh, their dreams, their fears,

their tendencies, understanding, you know, even why you save the money you save. Why do you spend why you spend? Why do you give the way you give? Or if you don't give, you know, all of those questions are answered. It digs in. And once you know why, it not only helps you to adjust your path and make sure that it adds fuel to your engine on the path, you go faster. But I think the biggest thing it does is anytime we know ourselves better, it helps us in all of our relationships. Yes. And particularly with money, the key one is for those of you that are married, your spouse. And for those of you that aren't married, picking your spouse. Yeah, yeah. You know, for everyone, yeah, and that's a great point because the relational aspect in the book is huge.

I mean, everything from understanding your parents and even how to go about talking to them, your friends, even talking to your kids about it, but especially your spouse, for sure. Like, that's the one relationship, obviously, that is the closest in your life. That when you're doing money, you're a team and you're working together. And how opposite people are. I mean, and you know this. If you've done, you know, if you've tried to budget together, you realize, oh, wow, one of you is kind of a spender, one of you is kind of a saver.

One of you probably loves doing the budget, the other doesn't. And that's the tip of the iceberg. Like, we've talked about those kind of things in the past. We've talked about the free spirit and the nerd forever. So this kind of gets even deeper with understanding even more of even those tendencies, too. And you kind of enjoy this just over the years. I mean, when we first did the disc, you were reading that book to you that Gary Smalley wrote, The Treasure Tree, when you were a little kid. You're like, you kind of like understanding why i think people do

the way they do and why you do the way you do and then this come out and then i remember the first time i uh i was telling ian cron he was on talking about the enneagram last week and i remember i said you know he said well when's the first time you heard about it i said well i heard about one time on a trip i was on with some people and then two weeks later we were at the lake house and rachel was just going on because you just enjoy that whole introspective thing oh it's so fascinating and even chip dodd's book voice of the heart understanding the eight emotion i mean all of it i'm like oh wow it's chapman's the love languages yes all of that stuff i think it's just i do i think that stuff is so

fascinating they give you a framework and a tool to look at yourself and go, okay, I can be a better version of that. Yes. Not a toxic version of that. Yep. I can be a better version of a saver, a better version of a nerd, a better version of a free spirit, a more mature version. Yeah. Because an immature free spirit is just a princess, you know. But you can be a spender.

I'm a spender. My nature is spender. I'm a free spirit. And I'm a nerd nerd but i'm an unusual mix of the two but that kind of stuff gives you tools to go okay that's what's going on and now i can stop doing a negative behavior and enter a positive behavior and not have to change who i am no absolutely and then you do i mean we're talking about the relationships in your life but you start to have empathy for others, right? Like the way the Enneagram kind of like enlightened me where I was like, oh, like my husband's a five on the Enneagram, like the rarest number of anyone. And I was like, oh, and I read all this stuff about, I'm like, that is so, I get him now.

And so, you know, hopefully that book has that same perspective. You get him more. Yeah. Yes. Yeah. Oh yeah. Like, oh, I understand that now. There's finally an investigator?

Yes. Oh, I didn't think of, I interesting okay that does make sense yes so he does investigate everything he does yes yes and you know everything from um yeah but when it comes to your money that's what that's what the book is it's just it's just unpacking why you handle money the way you do and what to do about it so it's if you want. If you want a glimpse into some of what she's talking about and what she and her research team have dug up, and it's really insightful stuff, you can take a free, catch that word, free money quiz right now, and it'll give you some insights, give you kind of a sneak preview. Yes. Insights. A little test. Money quiz. One word. Text that word money quiz to 33789 to 33789. If you pre-purchase the book of course when we launch a book around here we always give you lots of goodies to do the pre-purchase. It helps us with our marketing

and helps with the pre-sales and all of those things work together. So if you want to know yourself know your money discover why you handle money the way you do and what to do about it, preorder before January 5th, and you will get. The book comes out January 5th. You're not going to get it until then. But you'll get Know Yourself, Know Your Money audiobook as read by the author and Know Yourself, Know Your Money e-book and an exclusive video lesson from Rachel, about $50 in bonus items.

The video lesson will come early. The other two items will come January the 5th because the book doesn't release until then, and so the audio book nor the e-book will release until then. DaveRamsey.com is where you can get the book or RachelCruz.com. Be sure you do. Know yourself. Know your money okay when you were working on this what was one of the things that you did not anticipate that you discovered and you went oh wow that's so

interesting oh man um i think unpacking i think what one one learning I had was when I was doing the fears section. I kind of unpacked six money fears. And there were fears that I've heard of and I've heard people talk about them. And I was kind of, you know, I jotted notes down for sure. And then I ran them through my team to be like, okay, have y'all thought of any more? And the one that kind of came the last bit, but it was so good and so true, was the fear that you don't want to end up like your parents. And unpacking that for so many people. For people that had negative money households that they grew up in.

Yeah, and a lot of people did, and a lot of people did. And so kind of unpacking that was a really interesting one. Most people are broke, so most people come from a household that had a negative money experience. Yep. And so I don't want to end up that way. It's not like I hate my parents. No, no, no. It's not like I'm dishonoring them. I just don't want to be up that way. It's not like I hate my parents. No, no, no. It's not like I'm dishonoring them.

No. I just don't want to be broke. The subject, yep. Yeah, that's it. Know yourself, know your money at DaveRamsey.com or RachelCruz.com. This is The Dave Ramsey Show. folks i love telling you about well-made well-thought-out products today i'm talking about grip six belts i don't know about you but I'm not a fan of traditional belts. They never fit right and they're uncomfortable. Grip6 belts are unique. Owner BJ designed a truly modern minimalist belt

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That's GRIP6.com. John is with us in Arlington, Virginia. Arlington, Virginia. I'm sorry. Hey, John, how are you? I'm doing good, sir. Thank you and Mrs. Cruz for helping us. I appreciate that. Sure. How can we help? I'm having some trouble cutting loose of some money for a new-to-me truck. I've always made plenty of money, and I always spent plenty of money, even better than I made it. And I sort of got myself together, and now I've got the money,

and I'm just having a little bit of issue releasing it. It's kind of odd. How long ago was it since you had a spending problem? Probably 2007. And then about a year ago, a friend of mine got in financial jeopardy and I revisited a bunch of your work and I signed

her up for the Financial Peace University and I got the every dollar budget and I had to learn how to use it so that I could help her use it. You might find this hard to believe, but your system was better than mine. Shocked. Shocked, I know. If only there was a system to help people with their money.

You're good. It got her. How much is the truck? How much is the truck? The truck is a fortune. It's $56,000. It's $56,000. It's $6,000? $56,000, sir.

$56,000. Okay. $56,000. Nice truck. Okay. Yeah. You might be familiar. It's a Roush F-150, so you may be familiar with that.

Yeah, I had one. I got a Roush Raptor now. So, yeah, it's a beast, man. It's a wonderful truck. All right, so what's your household income? About $160,000. Okay. And you have the $56,000, and how much other money do you have?

What's your net worth? I've got about $700,000 in a 401k and about $70 in other retirement. Okay. And my house is paid for. My house is paid for. Okay. Yeah, John, I think you're good. What's your house worth?

House worth about $475 right now. So you're a millionaire? I suppose, yeah. I don't know that I'm, yeah, yes. It you're a millionaire? I suppose, yeah. I don't know that I'm, yeah, yes. It's not a feeling. It's a math thing. It's a math thing. It's not a feeling.

Yeah. $700,000 plus $400,000 is $1.1 million. You're a millionaire. Yes, sir. Well done. I'm proud of you. Thank you. Thank you.

Yeah, I mean, at this point, John, it is funny, though, because as much as we push people to sacrifice their life to get out of debt and get their money in order, the moment that they have to release it and even, I mean, you're much further along than even some people we talk to. But even people that are starting baby steps four through six to be like, hey, we saved up money to go on a trip. Are we okay spending a couple thousand dollars on this trip? Like, oh, you know, it really does become this weird emotional thing that you can let go of the money there, that the facts are there. And for you, you're even further along than those people. I mean, your house is paid for. You're good.

You have the cash in the bank. Your retirement's good. I mean, everything is lined up that you are 100% free to do this. And it kind of takes some practice to kind of get that spending muscle back in, if you will, because it's like you haven't been using it as much. Yeah, and what you've told yourself is no one, you like extend it out to everybody, no one should ever spend on a truck, right? And now you're the guy doing it, you know? And so, but, you know, but the thing is no one that's broke should.

All right, so the way I analyze it nowadays is if I get ready to buy something that feels emotionally weird to me and I've got, you know, you know, you got plenty of wealth. I got plenty of wealth. We're OK. We're doing good. All right. Is I ask myself if if I if the thing without any insurance just burned down in the driveway. Would I still be okay financially right yeah your net worth would drop 0.05 percent

if you lost 56 000 it would be nothing you wouldn't even notice it out of a million two right that's right and so that that helps me always is like you know in other words if i wanted to just set fire to that much money in the front yard just to watch it burn it really wouldn't change my life it'd be kind of strange but it wouldn't change my life they'd question my psychology but you know my sanity the old man has lost it but yeah but the uh but no longer has a radio show burning cash in the front yard but yeah he's out there burning cash in the yard again yeah but i mean if you that's how i look at i look at it emotionally like that have i hurt my family have I been as a ratio to my situation unwise no because if I could just burn that much cash in the driveway and it didn't bother me I mean it didn't didn't affect my life

then I'm okay and you're in that case dude I mean fifty six thousand dollars go buy your truck thank you thanks you guys do a lot of good enough you. And I'll tell you one other thing I do as an antidote is I always make sure that if I'm going to increase my spending, I also increase my generosity. Yes, sir. And that just gives me emotional permission. Okay. Well. Well, it does. But I was also going to say, it was interesting. One of the stories in the book I talk about is, it's actually, it was a family friend,

but that he was like, I mean, multimillionaire. And he sold his company and then went back and started working again. And, you know, I remember talking and being like, oh, okay, is that because you just didn't want to be bored or whatever? And he was like, no, no, no. I just don't want to end up back where I was. I just don't want to end up back where I was. And don't end up back where i was and i thought that's so interesting because you're fine but it's like this this this fear of like i got like 10 million dollars so he's fine yes totally totally but that was one of the antidotes i write about though is that giving aspect it's true because if you're

that kind of tight and scared to do this you're probably that tight and scared to give and so yes i think you're exactly right playing off of that though it's like as you're probably that tight and scared to give and so yes i think you're exactly right playing off of that though it's like as you're spending more and your lifestyle increases so should your giving and it kind of just like opens up your heart in all those ways and it's percentages you know if you if you're if you're gonna increase your lifestyle five percent increase your giving five percent and you know and when you do five percent of a lot of money it's a lot of money right so you still get to do a lot of stuff. If it's 8% or 12%, it doesn't matter.

But the point is that you're not making $56,000 a year and have $110,000 in student loan debt and calling me up wanting to lease a $56,000 truck, which is most of America, which is why we have a career. Right, right. That's normal. America is just plain straight we have a career. Right, right. That's normal. America is just plain, straight-up money stupid. And so I've been there, too.

I know what stupid looks like. I've got a Ph.D. in the UMB, so I can readily recognize it. John, you've done a great job. Very proud of you, sir. Very, very proud of you. Jessica is next. Jessica's in San Diego. Hi, Jessica.

How are you? I'm good, Dave. How are you? Better than I deserve. Jessica's in San Diego. Hi, Jessica. How are you? I'm good, Dave. How are you? Better than I deserve. What's up? Good, good. Okay, so my husband and I are on Baby Step 6. Good.

And we're looking at refinancing our home from a 30-year to a 15-year fix. And a lower interest rate? Yes. We'd be going from a 3.65 to a 2.375. So my question is about your rule of spending the 25% of your income on the mortgage. And we've done the math with our budget. And if we go with a 15-year loan, we'd be increasing our monthly payment by $600, but still saving about $2,000 to $3,000 each month. And the ultimate goal is to use this first home as a stepping stone to go to our next home.

That would be more of% of our gross income, but about 40% of our take-home income after taxes and insurance and investing are taken out. Okay, taxes and insurance and investments don't count in the equation. They don't. No. It's 25% of your take-home pay after taxes is what it amounts to. And so you would be at about 30%. Is your income steadily increasing? Yeah, I would say so.

So it's not going to be there for very long. It'll be back down to 25% soon, right? I would hope so, yeah. Not a big deal then. The whole point is just don't lock yourself into a situation where your house poor and you're not going to you're going to be just fine this is the dave ramsey show Thank you. Thanks for joining us, America. Rachel Cruz, my co-host, Ramsey personality, number one best-selling author.

On the debt-free stage to do a debt-free scream, Tim and Teresa are with us. Hey, guys, how are you? Good, how are you? Welcome, welcome. And how much have you guys paid off? We paid off $165,000. How long did this take? Two years.

Wow, good for you. Where are you guys from? We live outside of Chicago, Illinois. Ah, well, welcome to Tennessee. Thank you so much. Thank you. And what was your range of income during that two-year period? It was $165,000 to $218,000. Nice. What do y'all do for a living?

So I'm a supervisor and a volunteer firefighter at an oil refinery. And I'm an occupational therapist. I work on faculty in a master's program for occupational therapy students. Very good. Good for both of you. Well done. Thank you. So what kind of debt was the 165? Mostly student loans, mine. About $80,000 of that was student loans.

We had a vehicle that we bought before we realized we maybe shouldn't have. And then a loan to a family member that we had to pay off as well. How much did you owe the family? $54,000. Oh, a third of this. Wow. That probably felt good. Yeah.

Like you said, Thanksgiving dinner will taste a lot better now that we don't owe her any money. Yeah. Very nice. Very nice. Oh, my goodness. So what started this journey two years ago? I would say, you know, Tim's family is from near where we live in Illinois, and my family, it's about 800 miles away on the East Coast. And we were having a discussion about

when we could afford to go back home to visit my parents and my sisters. And visiting family is really important to me, but it's just with all of the kids that we have had, you know, it's a significant expense. So, you know, Tim looked at me and said, you know, if we didn't have these student loans and this debt that we have, we could go home whenever we wanted. And it just hit me then that, you know, some of the poor choices I made in graduate school to not be as responsible with money as I should have

and have accrued all those student loans was not just affecting me, but it was affecting my husband and then affecting my kids and their ability to go see grandma and grandpa. And so that was kind of what really made me tired of the debt and said, I've got to do something about this. And yeah, so that's kind of how it got started. Okay. How'd you find us?

I had seen your name mentioned in some like mom groups on Facebook and here and there. And I just decided to investigate. I started listening to the podcast on my commute to work a couple of times a week. And then I had to convince this guy to get on board. Oh, okay. So what did that look like? Was it? It was not easy. I was terrible with money or have been in the past. He's very good with money. He's a good saver, all of that. So at the time, we had separate bank accounts for the first six years of our marriage. Every bank account was separate.

We tried to divvy up who paid for what. When we went out to dinner, we'd say, who's going to pay for this? And we thought it was working for us, but it really wasn't. And so his attitude was kind of like that he was good with money and I was the problem. And I had to fix it myself. And I had to tell him, I said, just like on a sports team, you're only as good as your weakest player. And I'll own that I am the weakest right now. That's fine.

But it's not an issue of me not trying hard enough it's an issue of i need help and we need to figure out how to do this together um and so the other thing that helped was sitting down and doing the math you know doing the budget showing him that it would be possible he didn't believe it was possible in two years and um the math doesn't didn't lie so yeah it's right there okay that's interesting, the point about combining your accounts, combining the idea that you're a team together. Because that's the one piece I know for me, the pushback, the number one pushback I get. Yes. Oh, people hate when I say, you need to combine accounts.

You are a team. So talk me through that side of just your marriage and you guys. How much did that change your perspective? There was a lot of trust that had to develop for that. And I think that was probably the most difficult thing for me because I was a saver, she was a spender, right? But I think, you know, especially over time, the first couple months of it was rough,

but the numbers didn't lie. And the trust got better and and more frequent and just it became natural and then after that it was okay how fast can we do this right yeah right you guys feel like you have a stronger marriage today than two years ago two years ago yeah absolutely that's awesome yeah yes yeah and i would say that um like we just it was hard for me like those student loans were mine. I didn't want Tim to feel responsible for it. But the reality was, like, we have four kids.

We, you know, I work part time. We're trying to manage this household together. We needed to manage our money together and just accept that we were one unit. And then I think the most remarkable thing for me was to see how much power our money had combined versus separate. That's when things started changing is when we put it together and just had one powerful weapon to pay off this debt. Did I mishear something? I kind of think I heard Tim say part of what made him able to do that was he started believing that he could trust you. Yeah.

Yes. You became trustworthy. Right. Yes. You became trustworthy. Right. I had to show him. You know, I had. That doesn't mean, I'm not saying you have to prove yourself to your husband or something like that. That's not my point. No, I did.

But my point was it is easier for people to trust actions instead of words. Yes. And so the fact that you were really doing this, it wasn't just your latest grand scheme. Right. Exactly. You were doing it and you were actually living this. And he goes just, it wasn't just your latest grand scheme. Right, exactly. You were doing it and you were actually living this. And he goes, well, I can go with that. Right, and every month

it got a little bit easier. Like every month when there was money at the end of the month to put towards debt, every month when we didn't overspend on our budget categories and every dollar, every month just kind of rolled into.

Trust is built. Trust is built and this works for us. And that's how we kind of continued on. You know, we're good at following a system. Once we got the system, it worked. It just was the initial convincing. Well, both of your businesses are systems. Yeah.

Your careers are systems. Your systems people. And how are the kids? I see four. Yeah. Four and five due in November. Oh, by the way. Wow.

How was it doing that? Because you guys are, you know, you're being parents full time, hands on little ones, all of it. How was that? I'm actually thankful we did it while they were young instead of when they were older. You know, when you have young kids, a lot of time is spent at home anyway. I also think it's pretty easy to convince kids that anything is magical and exciting you know so like Friday nights we make pizza at home we watch a movie together and so Friday night pizza night is a big deal in our house and they think it's a big deal and they don't know that it's a

budget deal right yes exactly they don't they don't know that it's partially to save money and and all of that they just think it's fun and they have great family memories of Friday night pizza night. So little things that we might be doing to save money can still be made magical and exciting for the kids. And now when they are older, we're going to be able to do stuff that costs money and they'll remember that. So what do you tell people the key to getting out of debt is? You did it. You're successful. You paid off $165,000 in two years. You're heroes. I'm proud of you. Thank you.

So for me, I guess communication and teamwork. Teresa had mentioned it earlier. You're only as good as your weakest link. So I think her and I being on the same page and doing it together helped. Because if she was doing her own thing and I was doing my own thing, it wasn't working before, at least for me. And I would say you just have to talk about money. You know, I was a person who would never check my bank account because I was too afraid of

what it looked like and what that number would be and if I was overdrawn or not, you know. And now I went to being a person who checked every dollar regularly and then we every saturday after breakfast would check in and talk about money and um we would have conversations monthly about the budget and so you just need to talk a lot about money cool let's get the kids into the shot for the debt free screen let's get them all in there it's marley flynn bridget and nolan right yes sir all right well there's beautiful family you guys we're so proud of you we got a copy of chris hogan's book for you everyday millionaires because that's the next chapter you're going to be there before you know it these guys are

incredible very well done tim and theresa and the gang 165 000 paid off in two years, making $165 to $218. Well done. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! Yay! Woo-hoo-hoo-hoo! Love it! That is how it's done.

A great family. So good to see them winning like that. This is the Dave Ramsey personality, number one bestselling author, my co-host today on the Dave Ramsey Show. Elliot is in, not there, let me try that. Elliot's in Dallas, Texas. Hi, Elliot, how are you? Hey, Dave, thanks for taking the call. Sure, what's up? So I'm getting married in May of next year.

I wanted to throw out some numbers for you and see if you could help me with a potential house purchase. Okay. So we make $180,000 combined. I'm debt-free. She has about $7,000 in debt that I'll pay off at the time of the wedding in May. I'm receiving a $50,000 gift from my father towards the house, and right now I save about $3,000 a month of my salary alone. I wanted to see kind of what range of house we would fall into okay so you have eighty six thousand dollars down give or take

yes okay um maybe a little more i mean you might get excited and end up with say a hundred down as an example so you're how much down is part of the house price equation, but then what we tell folks, Rachel, is a 15-year fixed rate. Yeah, and your payment being no more than 25% of your take-home pay with the 15-year. Yeah, and how old are you two? I'm 30 and she's 31. Okay, neither one of you own a home now? No, we rent right now. Okay. Neither one of you own a home now? No. We rent right now. Okay.

All right. There's no rush to buy a house instantaneously. So if you wanted to be married a little while, there's some wisdom in that. I tell younger couples, like the 23-year-old or or whatever getting married not to buy a house in the first year because it takes a year of being married in that situation to know how close to your mother-in-law to buy i mean you got to get to know each other you know but um you guys are a little bit older getting married so you know maybe we shorten that year down maybe it doesn't take a year for you to get to know each other but uh i don't know that there's a i know there's not a

law that says you have to buy a house the first month you're married. As a matter of fact, it might be really wise to lease for six months or something or stay in one of your two places for a period of time. And just really, you know, kind of let the dust settle on the marriage before you start making a purchase decision on a home. Because I promise you that as you get to as you go through your life you will make different decisions on that Rachel you and Winston have experienced that well I was going to just say I mean it's you know getting married that's a transition point for sure and anytime there is a big life transition making a large purchase right after it sometimes is not always wise so I think taking a deep breath yeah just kind of what you were saying I mean just a few months to

kind of get your feet under you and then look. But then you just run off the numbers. And for you guys, and that cash that you have may not have to go. I mean, yeah, putting it for a down payment, but be careful too that the mortgage lenders, sometimes they talk you up in how much house you can get because they see that cash. So making sure that you are pretty strict on what the numbers are with that formula that you know going in, this is the amount of house that we're going to get because they always try to talk you up. Yeah. So your take-home pay, not counting money coming out for 401k, not counting

money coming out for insurance, but I'm talking about after taxes, your take-home pay, about 25% of that on a 15-year fixed rate. Then plus your down payment gives you your house price that you would go for. So, good question. Well, this has been a wild year. It might have been a year of loss for you. It might have been a year that you've done really well. There's all kinds of money goals people have right now, and some of them have shifted in the last few months. Some people are saying never again, don't want to be there anymore.

And some people are just trying to understand how they got where they are. And if you want to celebrate the pre-order launch of Rachel Cruz's new book, Know Yourself, Know Your Money, we are giving away cash every week in August. We're in August. Enter our giveaway right now and you have a chance. We're giving away $500 every week this month and a grand prize of $3,000 at the end of August. So anyone who enters can get exclusive deals on books. All of our products out there help you create some lasting money habits, go through your whole never-again process. Never again will I be caught with no money and a bunch of debt

when life happens like COVID-19, right? So if you want a preview of the new book, you can get that when you pre-purchase and when you sign up for this free giveaway five hundred dollars a week and three thousand dollars at the end of august all in the month of august no purchase necessary you have to be 18 or older to win go to daveramsey.com slash giveaway to enter and then enter every day to increase your chances of winning. DaveRamsey.com, $500 a week to celebrate the launch, the pre-order launch of Rachel Cruz's new book, Know Yourself, Know Your Money. Caleb is in Marietta.

Hi, Caleb. Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my call. My wife and I, we're on Baby Step 6, and we are aggressively trying to pay our house off. We just found out that we're expecting our first baby. Yay! Thank you. I know you've always taught with the Baby Steps that you would pause your debt snowball to save up cash for the baby. Since we're on baby step six, how aggressive should we keep paying down on the house or should we kind of apply that same philosophy to slowing down and saving up some cash? You have a fully funded emergency fund?

I got $15,000 in it. What's your household income? Gross $130,000, $140,000. So what's 15 000 represented months number of months of expenses that's probably about three for us if we cut back on expenses more so than we would on a normal day-to-day basis so it's on the slimmer side you'd have yeah you'd have to cut expenses and then it's still only three. Right. So you don't really have a fully funded emergency fund. Well, that's if we, you know, I've always based it off of if one of us lost a job. No, that's not how it's got to do with the circumstances. The emergency, because here's what's happening.

You're emotionally realizing that, so you're wanting to stop paying extra on the house because you realize your emergency fund's short actually i would love to stay aggressive i just don't know if that's the wisest thing to do or not yeah i would say caleb if i was in your seat i would probably bump up that 15 000 to at least get a cushion of like four to five where life is still the same. That's what Winston and I have always said, like our fully funded emergency fund, we have six months and we have it where like our life doesn't really change that much if income slows down at all. And so I would get that because the baby's on the way. So you don't have to go all the way up to six. You could say that four to

five range, but I think having a little bit of buffer is going to give you guys a little bit of breathing room and then going back and attacking the house so you you won't be pausing the house for much for or putting extra on the house for a long time uh just for a short time get a couple thousand more in there and then and then I'd move on and keep paying off the house yeah I think that's um that's the way to do it I think the emergency fund's light and so I I'm going to beef it up a little bit and then get back to the house. But the point is, as a principal, no, you wouldn't need to stop baby step six

because a baby's on the way. You wouldn't need to stop aggressively paying your house down if a baby's on the way. But what we discover is that really the emergency fund's light, so that would be a reason to do that so actually if baby wasn't on the way i'd probably still do exactly the same thing yeah so uh and some people they live a little bit more with the with the higher risk tolerance of like ah we'll figure it out if something happens i think we're good and that's him yeah exactly so i would wish

your wife was on the line because i'd be curious what she would say because she may be probably the opposite which like i would like a little bit of cushion in there. That's how I am at least. But I think it's smart to have that, again, we say fully funded. And again, I'd bump it up to four to five months just considering the baby. You know, one thing you can say is I have never in 30 years of doing this had someone say, you know, I really wish we didn't have a whole six months saved. It just never come up. You know, I wish we didn't have six months of expenses saved. Now, I do, I would say, I wish I didn't have 12 months saved.

Yeah, you should be investing it. You know, it's too much. But I wish I, you know, I just have too much money in savings. That just usually doesn't come up. Doesn't happen usually. Yeah. Rachel Cruz, thanks for hanging out. Yes, thanks for having me.

James Childs is our producer. Kelly Daniels, our associate producer and phone screener. I'm Dave Ramsey, your host. And we'll be back. Hey, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. This episode is over, but if you heard about an event, product, or service and didn't have a chance to write it down, don't worry. We list everything you've heard about during this episode in the podcast show notes or head to DaveRamsey.com. Thanks for listening.