The Ramsey Show - App - Is It Better to Invest or Pay Off the House? (Hour 1)

Episode Date: February 7, 2019

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Music Music Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studio, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. Nicole starts off this hour in St. Paul, Minnesota.

Hi, Nicole. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call. Sure. What's up? I have a question in regards to life insurance, and I've been listening to you for about three weeks now. My husband and I just started FPU at our local church, and we haven't quite gotten to this part of the process.

The question is, does our son have some special needs? And by medical standards, he is likely going to be considered uninsurable. We purchased his whole life policy. It's approximately $10,000, so not very large. When he was first born, he's now 10 years old. The premium is $210 annually, and we have about nine years left before they consider it, quote, unquote, paid in full. I'm just thinking for the future. Obviously, we're hoping to do our debt snowball and everything else and change our family tree, but do we keep this small policy for him for once he

reaches an adult? He is very high functioning, appears very normal, but again, is likely considered uninsurable by medical standards. Is he going to be living with you the rest of his life? Absolutely not, no So he's high functioning to that level He is His diagnosis is a type of brain damage

That is considered unchanging It's an unknown cause And it's not going to get worse or anything else He goes to normal school He's playing sports. He's from the outside looking in. Here's the thing. We need to take care of the issue of his final expenses should, God forbid, something happen.

That's the core need, right? Correct. Okay. So the question then becomes, what is the best way to do it? Because you're getting screwed now. You have a horrible product. Okay. And is there another way to do it other than getting screwed?

That's what it comes down to, other than just getting taken to the cleaners, which is what's happening now. In other words, if you take, what did you say, $250? It's $210 annually, so about $17 a month. Yeah. If you take that and invest it, you would have $10,000 in no time, as an example. Okay? So here's what I would do if I were in your shoes. If memory serves me correctly, when you buy a term insurance policy minor children are covered

without medical meaning that regardless of their medical condition so an uninsurable child can be covered with a child writer on a term policy typically even if they're uninsurable okay so as he's a minor until you have some some money, that would take care of it. And then as you build wealth, I would just always have $10,000 sitting in my investments, in my account, that is earning a good income that is earmarked emotionally for that horrible event, it occur okay but i no i would not keep i would not my plan would not be 25 years from now to still have this stupid product um i would just self insure by having the money in the bank to cover a funeral god forbid um ten thousand dollars is the number we're talking about and in the, see if a child rider will cover him as you buy your term insurance, a child rider on your term insurance.

I think it will, but don't cancel this until you find that out. Let's say I'm wrong and you can't get a child rider. Until you have $10,000 cash earmarked, then keep the ripoff whole life policy. Okay. But, you know, basically they fed on your emotional need here to take care of him, and with what you've been charged, it's $10,000 in no time. So, you know, I would rather you have just a simple mutual fund that says, I'm putting $100 a month aside or I'm putting $50 a month aside until it gets to $10,000. And then, you know, that mutual fund has just got kind of got his name written on the outside of it in a sense in your mind.

And because you're going to get there really fast if you're not getting ripped off like you are now. And so I'm going to shut that thing down as fast as I can shut it down. At a minimum, it'll be when you get $10,000 saved. Even if that's your emergency fund, I would shut it down at that point. But, no, I would not keep that odd infinitum. Evan is with us in Sarasota, Florida. Hi, Evan. Welcome to the Dave Ramsey Show.

Hey there, Dave. How's it going? Better than I deserve. What's up? Hey, I'm 26 years old. My wife and I were just blessed enough to save enough cash and buy our first home. We are working out of debt and about to be out of debt other than our house here pretty shortly.

And I just had a question for you. I'm reading one of your books, and I know I want to accelerate my mortgage payoff, but I also want to start investing. And I just wanted to ask you, you know, with the money that I have up and above my bills, does it make more sense to aggressively go in on my mortgage, or is it going to make me more money to invest, and how I kind of split that up and what you would do, what you would recommend. I'm not sure which book you're reading, but we teach a thing called the baby steps.

And the baby steps are when you're out of debt everything but your home. That's baby step two. Baby step three is to have a fully funded rainy day fund, an emergency fund of three to six months of expenses. Once you've done that, then you do baby steps three, four, five simultaneously, or four, five, six. Baby step four is where you start investing well at 15% of your household income. No more, no less, 15% of your household income. Then you start on kids' college if that's appropriate.

If you don't have kids yet or you don't need to buy college for some reason, then you move on to baby step six, which is pay off your house. So the answer would be once you're out of debt and you have your emergency fund in place, to start investing 15% of your income and everything above that goes on the house. Does that make sense? It does. And so you wouldn't recommend any kind of investing until I work myself all the way out of debt. And, I mean, that could, I mean, other, but my question is,

No, I would not. Is that not the right time to invest? Wait a minute, I'm sorry. All your way out of debt except the mortgage? Right, right. Right, yeah, you need to get out of debt. How much debt have you got? Well, we're about to have none. We just have our house. The mortgage, I think... Okay, then that's what I'm talking about. Once you've done that, then you don't do anything until you have

your emergency fund of three to six months of expenses. You'll do that very, very quickly. Because you don't have any payments but a house payment very soon, right? Correct. Okay. Then you put 15% of your household income into investments in retirement. That's investing. Okay? All right.

And then everything above that, you pay on the house. That's what the Total Money Makeover will teach you, and that's going to be your shortest path to becoming an everyday millionaire. So good question, dude. Thank you for joining us. This is The Dave Ramsey Show. You know what I've learned after talking to so many people who have been victims of ID theft? They feel violated and they have a sense of fear and intrusion. It can be overwhelming.

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Hi, Dave. It's a privilege to speak with you. You too. What's up? My question is about paying off our house. My husband and I are 61 and 63, and he's retired. We have about $720 in our IRAs, and we owe about $150 on our house. I was just wondering if you thought it would be a good idea to take some money out of our IRA and pay off our house.

$720,000 in your IRAs? Correct. Okay, making sure I heard you right. I thought you said $720. Okay. That wouldn't be much help. Okay. sure i heard you right i thought you said 720 okay it wouldn't be much help okay um so it's going to take you about 200 with taxes there's no penalties because you're over 59 and a

half correct um and that'll leave you with about 500 000 and what else do you have to eat on in retirement who are you still anybody still working i'm still working i work part-time and he has a my husband has a pension and is collecting Social Security, so we're bringing in about $100,000 a year. And you have no trouble living on that, right? No trouble, no. Because everything else is paid. Particularly with the house paid.

Yeah, with the house paid, you probably ought to start doing some investing, really, right? Well, we have to. You can't do retirement investing, but you can probably just do some mutual fund investing, really, right? Well, you can't do retirement investing, but you can probably just do some mutual fund investing. Correct, yes. You can do retirement investing up to, actually, you can do a couple of Roths if you are earning $15,000 a year. Are you earning $15,000 a year?

I'm making about $35,000 a year. Yeah, okay. You can do two Roth IRAs if you wanted to. Right, right. And just, you know, that throws some in there growing tax-free to start to put some of this back, in other words. And because, you know, over 10 years, that'd be $150,000 plus growth, you'd have put it all back. Mm-hmm. So it's not mandatory, but I'd like for you, I always like for you to have the biggest possible nest egg so you can have the coolest possible life, right?

Right, right. So, yeah, I'd pay off the house tomorrow. So take the money out of the IRAs and pay off the house. Yep, and then I'd start Roth IRAs immediately. You can put $7,000 each in, and I'd do those immediately into good growth stock mutual funds. As long as you're working, I would do those. And I'd probably do some other investing because you're making $100,000 here, and yet no payments at all.

I mean, I want you to enjoy your life, but let's, you know, always like to be giving, always like to be investing, and always like to be enjoying. Those are the three things you can do with money, and you really ought to always do all three. Michelle is with us in San Angelo, Texas. Hi, Michelle. How are you? I'm Michelle. How are you? I'm good. How are you? Better than I deserve.

What's up? My husband and I have three kids, and we just started FPU and the Baby Steps. We're still working on saving our first $1,000. And he has some insurance for himself and some kind of, like, kind of things through his work because he works for the city. But for myself, I don't have any health insurance and I don't have any life insurance whatsoever. So I didn't know if we could try to start that now. Do the kids not have health insurance? My kids have like the CHIPS program, like government health insurance? My kids have, like, the CHIPS program.

It's like government health insurance. Okay. And what is your household income? My husband makes about $4,000 a month, and I make about $3,000 a month. Okay. And can you and the kids not be added to his health insurance for a little bit of premium? I'm sure we could. He just always filled all that out on his own, so until we started all this, I just always assumed it was something that was too expensive.

Okay. Well, it's not you need health insurance on you and the kids today there's two possible ways you buy it number one is through his work adding to his policy and price that and price that against going to a good independent insurance agent and get a health insurance quote locally something like a blue cross blue shield type quote okay so buying it in the open market what will it cost you for you and the kids and buying it from his work what will it cost you for you and the kids and buy one of them this week okay you guys walking around without health insurance is ludicrous. You're going to get hammered. The number one cause of bankruptcy in the U.S. is medical debt due to not carrying insurance.

You have a $35,000 minor event in a hospital, which if you drive by a hospital, it's $35,000, right? And that bankrupts you guys. I mean, it puts you in, $135,000 puts you under where you can't get out, you know? And all of that because you're not spending $500 a month or whatever this is. So you go get health insurance right now. Now, as far as life insurance goes, you should get it, but I'm not as panicked about it as I am. I want you to get it in the next six weeks, but I want you to have health insurance within a week. Okay.

Now, life insurance, find out how much he has on him at work, and you should have 10 to 12 times his income on him and 10 to 12 times your income on you in 15 to 20-year level term insurance. Go to ZanderInsurance.com and price it. It's not that expensive. How old are you guys? I'm about to turn 27 And he is 29 Either one of you smoke?

He did He does or did? He does He does, okay It's double for him And if you're obese If you're overweight It's going to be more expensive

Those are the two biggest things That will cause your pricing To go way up on life insurance And so when you figure out What it's costing him to smoke It will give him yet another incentive Those are the two biggest things that will cause your pricing to go way up on life insurance. And so when you figure out what it's costing him to smoke, it will give him yet another incentive to quit. But, yeah, go ahead and price Zander Insurance and jump on DaveRamsey.com and click ELP for health insurance, and there will be somebody in your area selling health insurance too. And let's get those two things in place within six weeks, as soon as you possibly can,

because they're not that expensive, and the downside of not having the basic kinds of coverage is really, really ugly. And that's not a baby step. That's an immediate, both of those. Eileen is with us in San Bernardino, California. Hi, Eileen. How are you? Hi, Daveave thanks for taking my call sure what's up uh okay i'm 63 and retired uh i collect a pension of 26 61 a month and social security of 254 i also have a deferred compensation account that I collect $312 a month for net for about another four years. What I'm thinking about doing is cashing out the deferred comp account and paying off my debt with that. My house is paid off and the amount that I would get

after taxes would leave me with about $1,000 of debt. Okay. And how much debt is there? How much is in this deferred comp? $19,507. Okay. And when you do this, do you have any money? What do you mean?

Are you broke? No. I mean, have you got money somewhere else? Right now, I'm paying all of our household bills. No, no, no, no, no, no. After you cash out the deferred comp, do you have another nest egg or another savings account? No. Okay.

So you're broke at that point. You have paid for a house. You got an income. Zero money. Right? Right. Right. So very, very quickly then, you need to build your emergency fund.

And very, very quickly after that, you need to start thinking about having a nest egg beyond that and what you can do to create for retirement. Because I don't want you walking around with $3,000 worth of income as your only thing between you and trouble. That's going to get you in trouble. But, yeah, I would cash that out and be out of debt. I agree with you. But then let's build your emergency fund, your grandma's rainy day fund, as soon as possible, because we want to keep Murphy away from your door. This is The Dave Ramsey Show. Why in the world would you trust some random guy in a cube when getting your mortgage? Do you really think he cares about your long-term money goals?

Well, he doesn't. Those companies care about getting you into whatever home loan program they're pushing that week. When it comes to ordering a cheeseburger, the meal deal works fine. But let's get real, people. We're talking about the largest investment you'll probably ever make, so don't be naive and trust an order taker who pressures you into a prepackaged loan. My friends at Churchill Mortgage have been helping my listeners for over 25 years. Call Churchill Mortgage and get custom solutions from an expert within 10 minutes.

It's simple. They'll shoot straight with you and quickly show you the real way to save money. Call 888-LOAN-200. That's 888-LOAN-200. Or visit ChurchillMortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard. Redwood, Tennessee 37027. This is a paid advertisement. In the lobby of Ramsey Solutions, Paul and Allison are with us.

Hey, guys, how are you? Hi, Dave. How are you? Welcome. Where do you guys live? Atlanta, Georgia. And all the way to Nashville to do a debt-free screen. Yes, sir. Love it. Cool. So how much have you two paid off? $90, Georgia. And all the way to Nashville to do a debt-free screen. Yes, sir.

Love it. Cool. So how much have you two paid off? $90,000. $90,000. And how long did this take? Took eight months. Whoa.

And your range of income during that time? We started at $150,000 and we ended at $155,000. You guys are killing it. What do you all do for a living? Well, I'm a registered nurse. And I work in IT. Ah, great careers. A couple smart people.

Wow. Very good. Love it. Love it. Very good. So what kind of debt is this $90,000? So the debt was a whole lot of life. Student loans, which were the majority of it.

And then the rest of it was credit card consumer debt. Okay. Did you have money in savings? I did. How much? I had about $45,000. Ah, okay. This is making more sense.

I'm thinking, I don't know how you do 90,008 months on 150. I couldn't make the math work. I'm feeling better now. Good. Good for you. So how long have you two been married? We've been married for almost two years. April will hit two years.

Okay. So a year into marriage, something happened. Yeah. You know, I got to the point where, you know, we got married and probably about six months afterwards, I just wanted advice and guidance on how to live life, how to manage finances. And we were seeing different investment professionals and we're just kind of being strung along. And we'd actually visited with a friend of ours in Dallas, Texas. His name is Brian Lee.

And he had talked about your plan and how he had implemented it within his own marriage. And that took me back to about seven, eight years ago where I had read The Total Money Makeover as a grad school student. Wow. So I was doing a lot of Dave Ramsey-ish, saving, investing, credit card debt, and then it was just talking to him and having him walk me through, hey, look, that money you've got in the savings, throw it at your debt, and then bring it down to $1,000, and then from there, with gazelle intensity, just knock down the debt, and you'll build it back up.

So he turned into your own personal financial peace coach. He essentially did. Yeah. Do the baby steps. Just whips you right into shape. So, Allison, where were you in all of this discussion? Actually, when the conversation was happening, I was in another room getting ready, and I heard them talking about it.

And all I was thinking was, in regards to my husband, is he really going to do it? Are you really going to empty our savings when we get back home? And lo and behold, that's what happened he me and him started talking about it he said you know i'm i'm just going to do it and he said what what do you think and i said well it's it's a scary feeling but i think we can make it and we did well you make great money and you both you know you're both obviously smart uh and so you know when you sit down and you look at it, you can see your way through this. Because you know it's a temporary thing, right?

Absolutely. We'll get it right back. But we've got to do something different to get something different. Correct. And it's time to try a new plan of attack. Very cool. So what do you tell people now that you did it? You're successful.

Now somebody comes to your house to visit, what's the secret for your next friend so you pay it forward to getting out of debt? The key thing is just being intentional, having a game plan, coming up with goals. We started off at Financial Peace University once we knew that we wanted to make this journey. So following the nine-week course online, motivating each other, making sure that we utilize every dollar to have a written budget each and every month. Instead of our money going, we were telling it where to go. And finally, just watching the Dave Ramsey YouTube channel.

I was glued to that pretty constantly to the point where it was a little irritating to her. But just hearing the debt-free screams, the stories. Hey, I don't watch it. It's okay. Hearing the debt-free screams, the people calling in and getting answers to my questions really was motivating. And then we had a friend of ours as well, Autumn Grisby in Dallas, Texas, who made the trip out here to come support us.

Wow. Yeah. So having her as we were going through the baby steps and getting towards finalizing, paying off our student loans, being able to pay it forward to her, teaching her some of the things. She was very hungry and, like you say, hangry and wanted to learn more. And it helped us just stay motivated and encouraged. Wow, okay.

So who was your biggest, you're going to be all of us' biggest cheerleader, but who was your biggest cheerleader? Our biggest cheerleader, definitely Brian Lee and Brianna Lee in Dallas, Texas. They were the impetus to get us started with this. Autumn Grisby, who is here as well, was a cheerleader for us, and each other.

Each and every month, we sat down as a family unit, and we included our Lord and Savior, Jesus Christ, each and every month we sat down as a, as a family unit and we included our Lord and savior Jesus Christ and our decision-making and we were able to get through this in a pretty, uh, succinct amount of time. Amen. And I would say as a married couple, it actually helped bring us closer as having those conversations and discussing it and not, not fighting about money that we ever did fight about money, but it just helped us to stay on the same page where our finances are going. And even if there were times where one of us didn't understand,

mainly me not understanding what was going on, Paul always took the time to explain it to me and just reassuring and just being supportive of one another and going through this together. Y'all are just too nice. Y'all are just so sweet. I can't even see you getting mad at each other. Y'all are just like, Paul Y'all are just so sweet. I can't even see you getting mad at each other. Y'all are just like, Paul was supportive, and this is awesome. You'd be surprised.

You'd definitely be surprised. You'd be surprised. You guys are too perfect to suit me. Oh, no. You guys did great. Thank you. Okay, tell me what was the biggest fight you had the whole time about money. You know, I would say the biggest fight we had and the biggest discussion discussion was probably around the um the credit cards um

that was something that you know initially i was very very zealous and gung-ho i've got pictures of uh when we cut up the credit cards and you know i had to find a way to massage that a little bit more with allison you know i tend to be very you know black and white you know i'm disciplined i mean you're an IT guy. Yeah. It either works or it doesn't. It doesn't. Very straightforward.

Syntax or not. Correct. And just getting the understanding from her that we need to cut the debt. Even if we're not using their credit card, we have an emergency fund that will take care of that. So over time, we got to a resolution there. That's good. That's good. I love it.

You guys are great well in a sense both of you in your professional training your academic training have learned that if you follow a formula you get one result and so you have to submit yourself to the principles in medicine or or you're going to get a negative result and you have to submit yourself to the principles in it or you're the thing's not going. You know, and so you were kind of set up to win because all you had to do was just go, okay, this is the formula. This is the treatment plan. You know, this is what we're, this is the syntax.

This is the baby steps are how we do it. And okay, we got to do that. And if it doesn't work, we'll go back and do something else. But that's the plan. Yeah. That's perfect. Yeah. You guys are fun.

Very well done. So proud of you. Thank you. Well done. You're neat. How old are you two? I'm 32, just turned. And I'm 26.

Wow. You guys are killing it. We got a copy of Chris Hogan's book for you, Everyday Millionaires. You're going to be one soon. You are on your way. Paul and Allison, Atlanta, Georgia, $90,000 paid off in eight months, 45 out of savings, and the rest of it, they punched it. 150 to 155 income,

count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! We love it! Woo! Yeah, baby! Oh, man.

What a great couple. What a great couple. You guys watching on YouTube, they're Oh, man. What a great couple. What a great couple. You guys watching on YouTube, they're cute, too, which makes it even worse. They're smart, they're cute, and they're debt-free. They're just something else. That's amazing. Very well done. Very cool.

I love it. I love it. I love 32 and 26. 32 and 26. We're going to have to come up with a name for these superstar millennials. Because if you're not encouraged about millennials when you listen to this show, you're not listening. Because the number of, I mean, they're sharp.

Did you hear those people? They're IT, grad school. I mean, wow. And nurse. I mean, these are smart people. And they're doing smart stuff. And they're go-getters. And, you know, you have to be diligent.

And you have to be, man, boom, just like that. Love it, love it, love it. Well done. Woo! So when is your turn? Oh, yeah, you. I know you're there. I see you.

Driving along on the interstate, running along on the bike trail, getting your run in, listening to the podcast. When are you going to do it? I'm talking to you. Time for you to get your act together, baby. All these people are. What are you waiting on? This is the Dave Ramsey Show. Thank you for joining us, America. We're glad you're here. Open phones at 888-825-5225. Thanks for hanging out with us. Mariah is in Connecticut. Hey, Mariah, how are you? Hi, Dave. Thanks for taking my call. Sure. What's up? in September of this year. We already started paying off our debt, but we combined it,

which I know you don't agree with. So after hearing you several times saying we should get married, we finally got the hint, and we're actively planning our wedding right now. Good. So my question is, do we hold off on our debt snowball for now

and put all extra money on the wedding, or do we put some toward the debt snowball for now and put all extra money on the wedding, or do we put some toward the debt snowball too? Cool. Okay. So how much debt do you have? I have $9,000 on a car and $7,000 on a credit card. $16,000. And how much does he have? He has $41,000, on a truck and $4,000 on a credit card. And what do you make? After taxes, I make, I think it's $23,000. A year. Okay.

And what does he make? He would make $28,000. Okay. make uh he would make 28 okay after taxes for both of you so you about when you get married you will have about a 70 75 000 household income all right cool what do you do for a living um i work in an office i'm like a dispatcher yeah what's he do um he works at a body shop okay cool very cool all right and what are you thinking of spending on your wedding in september And what's he do? He works at a body shop. Okay, cool. Very cool. All right. And what are you thinking of spending on your wedding in September? We're budgeting trying to be under $10,000. Okay, cool.

So your idea is that both of you will put your individual debt snowballs on hold temporarily until between the two of you, you're able to put $10,000 into an account and then you will restart them. Yeah. Okay. Well, yes. Because you should be able to do that fairly quickly. Well, we also have second jobs right now.

Yeah. So you should be able to do this fairly quickly. So yes, I would tell both of you to have individual debt snowballs, but be informing each other and cheering each other on. I mean, we still have a budget committee meeting where we're looking at each other's budgets, and we're working this together, and he's working his, you're working yours. But temporarily, yeah, I would stop both debt snowballs, and both of you put as much as you can into the wedding account until it gets to $10,000, and as soon as it gets to $10,000, both of you restart.

Okay. And, yeah, and as soon as it gets to $10,000, both of you restart. Okay. And, yeah, I definitely would do that. And you're paying cash for your wedding, and then you're not going to be debt-free, I don't think, by the time you're married, especially now that we've pulled $10,000 more out of the equation. And so you'll be combining everything after the honeymoon and then really getting into attack mode, right?

Yes. All right. Have fun. Congratulations. Well done. Jared is with us in Minneapolis. Hi, Jared. Welcome to the Dave Ramsey Show.

Hi, Dave. Thanks for taking my call. Sure. What's up? So I'm currently a college student, and I'm accumulating approximately $6,500 in federal student loans every year. And I've done pretty much all I can to eliminate as much of that debt as possible. So last year I did PSEO, which allowed me to attend college for free.

And I currently live at home so that I reduce the cost of tuition. But I currently play a sport, and that takes up approximately 20 hours or so a week. And I'm wondering if it makes financial sense to stop playing that sport and instead work and be able to pay off the loans during the year and also work on professional development for my career after I graduate. What year of school are you? I'm currently a sophomore. Okay. And let me retract here and make sure I understood what you're saying. If you stay playing the sport, from this point forward,

you've got it figured out to pay cash, but you've got the old student loans laying back there. Is that right? You're going to accrue no more debt because you've got that part worked out. Is that right? So basically, I'm still accruing debt. Oh. I am working towards, I'm either going to get an internship or get a construction job this summer.

So this summer, I should be able to pay back all the student loans for this year. And by the time I graduate, I'll only have the debt from one year. So that would be my senior year. Okay. I'm not worried about you repaying student loans. I'm worried about you stop using them. Okay. If I can just get you to borrow no more money as soon as possible,

then you can pay off the other student loans from the past after you get out. But job one is to get you out of school with no additional debt. That's job one. And whatever answer to this question causes you to be able to do that is what I would do. And so if you can do that and stay playing the sport, then I would do that. But if you have to quit in order – because otherwise, if you call me up and you say, Dave, I'm going $6,000 in debt because I'm not working because I'm playing this sport.

That's like borrowing $6,000 to play the sport. Yep. And I wouldn't do that. But I think playing a sport in college is a wonderful thing. There's nothing wrong with that. It's obviously not a scholarship thing because it's not, you know, we're not discussing what it would do if you quit. So it's obviously you're playing for fun and for the discipline and for the enjoyment of the camaraderie and so forth, which is all really good stuff. I mean, collegiate sports is a good thing.

But every collegiate athlete that I know will tell you it was a good experience. Not every, but a vast majority of them. But again, that's plus or minus scholarships as a result of it. So if you have to borrow money because you're playing, no. But if you can figure out a way to play and not borrow any more money, yes. Jason is with us in Dallas, Texas. Hi, Jason. Welcome to the Dave Ramsey Show.

Hi, Dave. Thank you for taking my call. Sure. What's up? Well, we just started the program, which was offered through my employer, and we're on step two, three, and four, I guess, kind of in a weird place. We have a year's worth of emergency fund in the bank. How much debt do you have? $10,000 on a car payment that we just bought. And how much

is in your emergency fund? $75,000. Write a check today and pay off your debt. Okay. Then that brings you to baby step three, and you've got your emergency fund, and then that brings you to baby step four. Okay. Which is you start putting 15 of your income into retirement yeah all right um we had uh the reason i was calling is we had uh we have no 33k in savings and we were gonna we were debating back and forth whether to take uh that 10 000 and out of that and pay off that car or to take the 10 000 and and fully fund our IRAs for 2018. Yeah, you do not need an emergency fund of one year plus $33,000. Six months is fine.

And so when I changed that, now I've got about $75,000 above your emergency fund, minus your car payment, minus putting 15% of your income into retirement. You've still got money left over. Okay. If we cut the size of your emergency fund to a realistic amount, which is, in this case, I'm just going to call it half of $75,000 or $37,500, right? And then you've got another $33,000 on top of that. Am I hearing you right?

Yes, sir. Yeah. Write a check today, pay off your mortgage. Go back and get back into the materials on SmartDollar and get a clear understanding of how these baby steps flow and that will guide you to do exactly what i just talked about and that's the best way to do it uh leanna on twitter says please send settle a friendly debate is it better to get a 30-year mortgage knowing you can make the payments and pay extra on the principal i would never take out a 30-year mortgage under any circumstances.

You're better off to take out a 15. 100% of 15-year mortgages pay off in 15 years or less, or there's a foreclosure. People who take out 30 mortgages and promise to pay them off in 15, hardly any of them do it. Less than 10%. It's a wish. It's a wing and a 10%. It's a wish. It's a wing and a prayer.

It's a hope. But it's not going to happen. You have to set yourself up to win with built-in disciplines that make you do the things you have to do to win. And so never take out a 30-year mortgage. There's not a single circumstance I'm going to tell you to take one out.

Now, if you got one now, we'll have to figure out something else. That's a different thing. But we're talking about the concept of I'm getting ready to buy a home, buy a home that you can buy on a 15-year fixed, where the payment is no more than a fourth of your take-home pay. Stinking four, four and an eighth percent right now on 15-year. What do you want? My goodness.

This is the Dave Ramsey Show. Hey guys, this is Blake Thompson, Senior Executive Producer of The Dave Ramsey Show. Did you know over 15 million people listen to The Dave Ramsey Show every week? And a lot of those people listen to one of over 600 radio stations across the country. To find a station near you, head to DaveRamsey.com slash show.