The Ramsey Show - App - It's Just Pitiful for Parents to Beg Kids for Money (Hour 1)

Episode Date: December 20, 2018

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Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us, America. It's a free call at 888-825-5225. That's 888-825-5225. Starting off this hour is going to be Kristen in Greensboro, North Carolina. Hey, Kristen, welcome to the Dave Ramsey Show. Hi, Dave. It's an honor to speak to you.

You too. Merry Christmas to you. Thank you. How can I help? I'm calling today um because my husband and i are recent graduates of fpu and we are now in that precarious position of trying to pay off his student loans um he just earned his doctorate and the result of that is about 150k in student loan debt so what's his doctorate in it's in communication studies it's in what communication communication studies okay

what's he gonna do teach he yeah he already is teaching actually okay what's he making uh about 42 i'm sorry professors don't make 42 with PhDs. It's a contract position, so he's just starting out, unfortunately. Yeah, like 142 is what I'm going to be making. So when's he getting that job? He's already started. No, the $142,000 job. Oh.

You don't go spend $180,000 to work for $42,000. Right, yeah. So, and with my salary added on to that, we're at about $72,000. Okay. I really got to stay on this career thing because I'm really disturbed. You are telling me that he is going to be making north of $100,000 as a professor. I hope someday, yeah. No, darling, that's starting out.

Yeah. I mean, really, a Ph.D. in communications, teaching communications in an institution of higher learning would pay north of $100,000. That's the going rate. I mean, that's the going rate. Why in the world would you do anything else after going to all this trouble and spending all this money? What's your hesitation? I don't understand. He tried.

I mean, we've tried to find positions that were better paying than this, and this was really the only thing we were able to line up, I guess. He was on the market for quite a while, and there's just a lot of people applying for the same positions in his field. Okay. Well, we've got to work on this because you guys have spent so much money on this that you you don't have a choice he's got to go make more money than this yeah and so he's you know his job hunt is ongoing until he lands something north of 100

i mean it's not this isn't you know you have that. I mean, and you have to go get that and do that. That's just not, you know, it's absolutely crazy to say I spent $180,000 to make $42,000. Yeah. We're just not, I can't live there. I mean, obviously, interest will continue to build, so there's that concern as well. Yeah, but the concern is that making $70,000, you guys have $200,000 in debt, and you shouldn't be making $70,000. You ought to be making $170,000.

Yeah, yeah. That's the concern, and that solves a lot of your problem. I mean, because right now you are facing a huge mountain with a tiny shovel. Yes. And, you know, what we need is a big shovel to attack a big mountain. And that's why I went there is just for you. I'm not trying to shame you or something, but, I mean, you guys have really got to get your –

you need to get some professional career counseling and coaching and find out how in the world you land professorships and what the process is because just throwing your name out in applications and saying, oh, there's a lot of people in the world you land professorships and what the process is, because just throwing your name out in applications and saying, oh, there's a lot of people in the field, so I can't win. That's not okay. You guys got to go make some money. And he has the ability to do it.

He's got a freaking PhD. And that solves everything you got then. In the meantime, you're going to tread water, because you're not going to make big progress with the ratios you're giving me of shovel to hole, a $200 thousand dollar hole with a seventy thousand dollar shovel um and the good news is is that he should be making a whole lot more and so that is the answer to you guys dilemma is uh let's get him employed as he should be and spend all of our time on that so you can do this. You can do it.

I wish I could help you. You know, maybe have him call Ken Coleman Show. Ken may have some insight on how to land a Ph.D. into a professorship. I don't. I've never done that. But I work with enough Ph.D.s in professorships that I know that, you know, that is a typical income. All right. Maurice is with us in Detroit, Michigan.

Hey, Maurice, welcome to the Dave Ramsey Show. Hey, Dave, how are you doing? Better than I deserve. What's up in your world? I've got a question for you about debt settlement. My wife and I, we called one of the companies to see if we can settle a debt. Pretty much, it just actually rolled into collections. She had got sick over the summer before we got married.

And I guess, you know, with the hospital, somehow they ended up transferring it over to the collections agency without going through the proper authorization. Because they were supposed to get authorization to do the procedure on her, and they never got it. So they said that they was going to put it in review. And I guess somehow they never got back with my wife about the review. I'm sorry, did they do the procedure? Yeah, they did the procedure.

So what is up for review? It was supposed to be, I guess, according to what my wife was saying, she was saying that they were supposed to get authorization to do the procedure, I guess, through the insurance company. Right. So somehow she found out that they didn't't do the uh that they didn't get the uh information through to the insurance company so basically they said they were going to review it because they said she was right you know we didn't get the authorization and they

agreed with her that they were supposed to do that and they said it was going to review it and the next thing you know it got sent over to collection yeah how much is it it's uh eleven hundred dollars okay and uh what should it have been with the insurance, if the insurance had paid what they were supposed to pay? I'm not sure exactly what it should have been. I would have to ask my wife that to get more information on it. So Collections is offering you what? Well, they want us to pay the full amount of what it is for the actual deal. Not a chance.

Not a chance. Here's the deal. Your Bozo Hospital didn't turn this in for insurance properly, what it is for the actual deal. Not a chance. Not a chance. Here's the deal. Your Bozo Hospital didn't turn this in for insurance properly, and they did the procedure anyway. It's on them. It's their fault. We will give you $200 and settle this debt.

Okay, okay. Yeah, because I had talked to them yesterday, and I ended up talking to the manager at the collections company, and he said, you know, and I did everything that you know that you teach, you know, basically, you know, get it in writing. He said, oh, no, we don't do anything in writing. Well, then you don't get any money. Right, right. And then he turned around and said, and then I said, you know, I want to get, you know,

either a money order or some type of certified check. He said, oh, no, we only do electronic. I said, are you guys kidding me right now? Yeah, that's why we tell you this every day, because you can't trust these guys. So, no, I mean, you can do a money order, or you can do a prepaid debit card, or you can do whatever, but no electronic access to your checking account. It has to be in writing. And, you know, about $200 is probably whatever the insurance company wouldn't have paid that you should have paid.

And the rest of it, the hospital needs to eat. Okay. And if you can't get this through with collections and schedule a meeting over at the hospital with one of the people in the business office and let's have a little meeting, a little come-to-Jesus meeting here, because this is not right. I mean, you should not owe $1,100, so I'm not willing to pay $1,100. How's that? You know, that's the truth.

You know, this is a reasonable person hearing this case is going to have that reaction, including people that work at the hospital. I get asked all the time, when in the baby steps is the right time to buy life insurance? My answer is typically now. Life insurance is not part of the baby steps because it's needed when your family has debt and not enough savings to provide for their financial needs. That's when they're at the highest risk. And no matter where you are in your baby steps, it's a necessity, not a choice. This includes working husbands and wives, as well as stay-at-home

parents. It's pretty expensive to replace those stay-at-home parent responsibilities. I only recommend term life insurance since it's the most affordable way to get the right amount of coverage and not break your budget. Go to Zander.com or call 800-356-4282. These are the guys I personally use. Term life insurance is inexpensive and your family needs this no matter where you are in your baby steps. That's Zander're here. Allie is with us in Los Angeles. Thank you for joining us, America. We're glad you're here. Allie is with us in Los Angeles. Hey, Allie, welcome to the Dave Ramsey Show.

Hi, thanks, Dave, for taking my call. Sure, what's up? So my wife and I are doctors. We're both in Baby Step 2. We have a ton of student loans, and she's finishing her fellowship, so we were looking around at other job opportunities and came across one that looks like a golden handcuffs type of situation, but they're giving a lot in student loan assistance and repayment.

So we're thinking strongly about taking it for a lot of reasons and just wanted to know what Baby Step 2 would look like if we did get into a golden handcuffs type of situation. Cool. Tell me the deal. So they're giving us $275,000 in student loan repayments over five years. Five years sounds kind of a lot, but, I mean, it could be a potential long-term situation for us. Both of our salaries would go up also. We have $330,000 in student loan together, and we paid off $150,000 in the last 10 months. And what will your incomes be?

So over here, our incomes right now are $380,000, and over there combined, it's going to be $600,000. Okay. All right. Okay. Yeah, I would take – if you want to do the deal, I would take the deal. There's nothing wrong with it. I mean, if you want to work there. The way I would handle it as far as your baby step two debt snowball goes is whatever you – the $275, obviously we're going to let them pay that. And they're going to pay one-fifth per year for five years, correct? Yeah, they pay directly to the student loan.

Yeah, $55,000 a year for five years. Yeah. Which is $275,000. Okay. I think that's right. Yeah. Right. And so what I would do is I would put, number one, I'd pay down to that or approximately

to that, a little above that, and then let the 55 hit and then let the 55 hit and then let the 55 hit. Okay. But as far as a sidebar, I would go ahead and pay myself into a savings account the amount that is outstanding. And so, like, after the first year, you would owe 220 right and so i want 220 000 in a savings account okay and uh and and that way if at any moment this situation becomes untenable say for instance an ethics situation or a whatever situation is there patient care you can't abide or whatever right uh and you want out of there then what i would do is you just write a check because you got the money right and if it go if you play it

all the way through and they pay it all off well you got 220 000 to do something with god or each year you could reduce the amount in that savings account by the amount they reduce it but i want whatever your outstanding student loan is at the moment i want that in that savings account by the amount they reduce it. But I want whatever your outstanding student loan is at the moment, I want that in a savings account as quick as you can get it there. And then I move on to baby step three after I get that 220. Okay. You see how I'm working that? I'm just pretending like you're paying off the debt, but you're not.

We're going to let them pay it off. And so as they reduce it, then you can reduce that account and use it for other things. Awesome. Perfect. And you're making great money. Congratulations. What kind of medicine are you practicing?

I'm primary care. My wife is a pediatrician. Oh, cool. Wow. You guys are doing great. Thanks. Great incomes. And where will you be moving if you do this?

To the state of Washington. So we get the state income tax bonus also. So 10% more in that regard. Yeah. Amen. The income tax bonus in that I don't have California tax. Boom. Just like that.

Well, very cool. Very cool. Congratulations, man. Get after it. That's how I would handle it. Well done. Amy is in Detroit. Hi, Amy.

Welcome to the Dave Ramsey Show. Hi, Dave. Merry Christmas. Merry Christmas to you. What's up? Thanks. My husband and I are on Baby Step 2. We'll be done with that in about 11 months.

And we've stopped his 401K investment. But I am about to start a new job that has a match of 6% in a 401K. I've never had a 401K before. I've always worked part-time. So I'm wondering, do I go ahead and at least do the match for the next 11 months? No. No. Okay.

We completely focus on getting out of debt until we're out of debt. What you focus on in life is what you went at. And that's how you got married. You focused on him or he focused on you. So true. Yeah. And what we focus on. And it's how you got married. You focused on him or he focused on you. So true. Yeah. And what we went, what we focus on. And it's only for 11 months.

Like this time next year, you're going to be in your 401k and you'll be getting the match. It's not really going to substantially change where you end up wealth-wise, you know, 20, 30, 40 years from now. It's not. It's tempting. And I'm such a math nerd. I really, you know, it always makes me cringe just a little bit to say don't do the match even. But what I have figured out is that this whole thing of winning with wealth, this whole thing of winning with getting out of debt is so much more about behavior than it is about the math.

And so the power of focus is a behavior element and let's just do that just completely dialed in laser focus and don't don't think about anything else don't do anything else with money this is what we're doing we're getting out of debt we're getting out of debt we're getting out of debt as soon as you do that you know you finish your baby step three and you knock your emergency fund out and then boom we're right on to baby step four now we're going to get that match and you're going to be there in really really, 11, 12 months or something like that. So you're perfect. And congrats on the new job.

Merry Christmas to you. Casey's with us in Fort Worth, Texas. Hey, Casey, welcome to the Dave Ramsey Show. Hey, thanks so much for taking my call, Dave. It's an honor to speak to you today. You too. What's up? Hey, I've got a situation I need your advice on. I'm a long-time

listener, and I'm having some problems with my father. He filed bankruptcy in 2013, and he was on this great path. He went through FPU and everything, but now he's back into credit cards. He's back into making these terrible choices. And now I'm in college, and he's asking me for money and trying to fund his bad habits. How old are you? I'm 18. That's so sad. How dysfunctional and screwed up is this?

Yeah. And even worse is he went and went and cashed out his whole life policy at his age. And now he can't get any more insurance. And he has about $15,000 in debt. And so when he passes on, I'm going to have to take care of that. I needed your advice as to what to do because I'm kind of stuck. I'm so sorry your dad's a guy like that. I was being nice. I can't believe it.

That's just awful. That's hard for you. It's really hard for you. Here's the thing, dude. You're 18 freaking years old. Your old man should not ask you for anything. That's completely out of line. It's completely out of line.

That's so pitiful, it's unbelievable. And as crazy as it sounds in your mind, it sounds triple crazy to me that he would do that. That he would be that twisted up and screwed up now your job is not to fix him that's his job he's supposed to be a grown man and we're gonna let him fix himself you can't you can't tell people what to do you already know what he's supposed to be doing you've already at 18 years old identified several things that he should be doing that he's not and he hadn't figured that out at his age. So you've got to just be kind and very firm.

It's your dad. So we'll honor his position of fatherhood, but we will not honor his behaviors. I mean, you can honor your father and mother. You know, the Bible says honor your father and mother. You can honor your father and mother without honoring their misbehavior. Yeah. And so I honor the position, but I'm not honoring the behavior. No, you're not giving him any money. And the problem is you're tempted.

I can hear it. You really want to give him advice. He's not going to take your advice. You just, you know, what I would just say is, Dad, go back to the FPU. I can't help you, Dad. I'm an 18-year-old college student. You shouldn't even be asking me. That's just wrong.

Go back to FPU. That ought to be your answer. Dad, really, dads don't do this. They don't ask 18-year-old sons for their help who are in college. You shouldn't be doing this. You should be in FPU straightening your life out. I can't help you. I'm so sorry, Dad.

And the answer is no. No. No. And the problem is anybody that would even ask this is not going to hear the no. So you're going to have to tell him more than once. You can do it kindly and calmly and very firmly. And you have to, Casey. You have to.

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It's Christians financially and spiritually supporting each other. It's what Christian Healthcare Ministries has done for over 35 years. And our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org In the lobby of Ramsey Solutions, Clark and Amanda are with us. Hey, guys, how are you?

Hi, Dave. Hi, Dave. So nice to meet you. You, too. Welcome. Where do you all live? Gulfport, Mississippi. Very fun.

We went all the way to Nashville to do a debt-free scream. Yes, sir. Well, thanks for being here. Merry Christmas to you. Merry Christmas to you. And how much have you paid off? $80,000. I love it.

Wow. Amazing. And how long did this take? It took us 36 months. Very cool. And your range of income during that time? We started off taking home $80,000 and currently $92,000. $92,000.

Great. What do you all do for a living? I'm an auditor for the federal government. And I do IT, work for executives at a ship building down in Pascagoula. Very cool. Good. What kind of debt was the $80,000? Oh, we had a little bit of everything.

So we started off with a TSP loan from Amanda. That was $4,500. And let's see what else. And then our credit card. Yeah, our credit card. For $11,500. $11,500. And then our SUV.

SUV was $26,500. And then his student loan. My student loan was $37,500. Okay. But we did it together. I love it. Very cool. Done the stake together.

See, you're kind of normal. A little bit. Credit cards, car payments, loan here, loan there. A little bit of everything. How long have you two been married? 11 years. That's a December 1st. I'm proud of you.

Good job. So what happened 36 months ago? I mean, the switch flipped, baby. It did. Well, our story began a little bit before that. I learned about you by checking out the Total Money Makeover audiobook, and

I thought I was working it correctly, but I think Clark introducing us to trying out FPU really solidified the plan. So, 36 months ago. Yeah, so we were pregnant with our third child, and we were, of course, doing all the things, so we were pregnant with our third child. And we were, of course, doing all the things we thought we were doing right.

But I was talking with one of my coworkers who also goes to church with us. And he mentioned he was going to coordinate an FPU class at our church and that we should join in. So I come home and tell her. And she was kind of reluctant at the time, but we did it. Because I read the book. Yeah, we did. And it kind kind of reluctant at the time, but we did it. Because I read the book. Okay. And we did it, and it kind of worked out okay for us. Okay.

Well, congratulations. Yeah, I mean, you got in there, and a little bit of reluctance, but you don't know what you're getting into. It's weird. Somebody's about to get into your business, you know, talking about your money. But then you turned it around. I mean, y'all got after it. Yes, sir. Was it hard? At times. Yeah. It was, got after it. Yes, sir. Was it hard?

At times. Yeah. It was, but, you know, we worked. Was it worth it? Oh, definitely. Yeah. Definitely. Working together. What was the hardest part of getting out of debt?

I would say the hardest part, you said, was delaying gratification. Yeah. Saying no to ourselves, the society and cultural norms of getting everything that you want when you want it, even if you don't have the money, you know, delaying that, missing opportunities on buying land or buying a house. But we knew if we worked your plan properly in the time that it will become fruitful, we will get to that point.

Well, you did it. Yeah, that's so cool. Thank you. Very cool. It's great numbers, too. I mean, this is legit. You pounded this thing. You kept the truck and everything. You. That's so cool. Thank you. Very cool. It's great numbers, too. I mean, this is legit. You pounded this thing. You kept the truck and everything.

You kept the car? Yes. Yeah, we did. We had one car paid off already, and we just had the one car note, so we tried to knock that one out pretty quick, too. And we kept it. And we still have it, so yeah. Gotcha.

Okay. Well, well done, you guys. Thank you very much. Very, very fun. I love it. This is absolutely fabulous. Thank you. Thank you. Thank you.

Very good. Dave, if we could share, we even got our son on board, and we had him involved in the coloring sheets, keeping our progress. We said from the very beginning, we're going to meet Dave. We're going to meet Dave. And three years later, here we are. The little two don't know very much, but the eldest, he really grasped it. And we even applied the 401 Dave plan.

And he earned and saved half of the cost of an iPad that he purchased himself with help. You matched him? Yes. And he became a little entrepreneur selling marshmallow pops at the ladies' craft fair at our church. There you go. There you go. I love it. Hey, everybody's in.

Everybody's changing. This is good. This love it. You know, like you said, change the tree. Hey, everybody's in. Everybody's changing. This is good. This is good. You guys are so intentional. Very, very well done. Very cool. So who were your biggest cheerleaders?

I'd say both our parents were. Definitely. And then we have, you know, a couple friends from church that also have been through the class and paid off debt and actually graduated. So, you know, we have a couple of those. And she has a co-worker that actually lives in a period. A couple of co-workers, too, have been on board cheering me on and cheering us on. So, yeah, we have a lot of good cheerleaders. And we couldn't have done it without them.

I knew it. There were times when we were like, ah, just quit. But, you know, we stuck with it and had a lot of help. Gotcha. Okay. Wow. Way to go, guys. Way to go.

Absolutely amazing. Good for you. So you brought the kiddos with you. We did. We did. Come on back. And what are their names and their ages? We've got Tristan, who's nine.

We've got Claire, who's four. And we have Lily, who's three. And it's Tristan that's the entrepreneur. Yes. And we didn't want to miss your last class, so we even showed up two days after I gave birth to Lily and she's your youngest FPU graduate. I love it. Very cool. We'll get our certificate. Yes. Yeah. Very good. Way to go. Well, how does it feel? Oh my gosh. Unbelievable. It's surreal. You know, surreal. Good for you guys. We're proud of you. So proud of you. You're heroes.

Thank you. Well done. Well, we got a copy of Chris Hogan's book for you, Retire Inspired. That is the number one bestseller. And, of course, we're also going to give you a copy of the new one, Everyday Millionaires. It'll be out in January because that's your next chapter. You're going to be everyday millionaires now. Yes, sir.

And you're making almost $100,000 a year. You don't have any payments. Woo-hoo! Yes. Yeah, baby. So have the kids been practicing the debt-free screen? Oh, yes, sir. Yes.

Tristan, are you ready, man? Are you ready? All right, here we go. Good deal. $80,000. Clark, Amanda, Tristan, Claire, and Lily paid off in 36 months, making $80,000 to $92,000. Count it down. Let's hear a debt-free scream!

Three, two, one. We're debt-free scream. Three, two, one. We're debt-free! I love it! Well done, you two. Very well done. Wow. That's amazing.

Good job. You can do this. You can do it. They's amazing. Good job. You can do this. You can do it. They did it. I mean, they're a typical American family. They had the typical debt. They had the typical income. They just decided after 11 years of marriage, it's time to change.

You could do this. You've just got to decide. And then you've got to take the steps and do the hard work. But it is up to you. No one's coming to fix your life. It is up to you to fix your life. Michael is with us in St. Louis. Hey, Michael, welcome to the Dave Ramsey Show. Hey, Dave, Merry Christmas. Merry Christmas, guys. How can I help? So I've got a unique situation. I'm 37 years old, and I was blessed to be able to sell a business,

and I've got a $3.5 million net worth. My question is on real estate investing, and I did it. I listened to your advice and didn't do anything as soon as I got the money, so I gradually have about $2 million in good mutual funds. But I've got about $1.3 million just in cash. And my question is on investing. Is it okay just to leave that in, like, a money market fund or a CD ladder? Because we're going to move in a year or two, and I want to invest.

I don't want to be a long-distance landlord, though. So is that okay to park that much money for that amount of time? You can, and what you could do is you could look at the stock market and say, if I move some of it over there, I'm taking some risk with it, because it could go down or it could go up. But what would be the, you know, sit and talk to a smart investor pro or whoever is helping you with your investing and say what is the typical thing on investing what's the typical thing on uh the range here that's happening and um you know what is that uh in other words if i put up

a million dollars and it goes down or it goes up, what's my probable risk? And you say, well, you know, you could make an extra hundred if you did that, and you could lose an extra 50, you know, if you did that. Versus making nothing and parking it in a CD ladder or something. But, yeah, that's fine. If you want to leave it in cash, there's nothing wrong with that. I've done that, and I've also parked it in a mutual fund, even though I knew I was riding the market a little bit, because I was willing and financially able, and you are able.

You just need to decide if you're emotionally willing to accept that spread, that possible shift. So, hey, man, congratulations. Ding, ding. This is the Daveave ramsey show Our question of the day comes from Blinds.com. Find out for yourself why Blinds.com is the number one online retailer of custom window covering. You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code RAMSEY to get the best deal.

Rules and restrictions apply. Today's question comes from Josh in Utah. He visits DaveRamsey.com. He says, we're almost debt free. We just need to pay off our house. That's a vision we've been working toward. I also have two completely paid-for cash-flowing condos as part of our retirement plan. The dilemma.

If we sell the condos, we can pay off the house. What should we do? Well, I mean, I don't know your numbers. If you have enough income to knock your house out while working baby steps four, five, six in the next, say, six or seven years or less, and you like the condos, I would keep them and just work your way through it. If you, and it sounds like, I'm guessing you do. The way the question is worded, the way this situation's positioned and all that, I'm guessing you do so um you know that's probably what i'm going to do if it's uh another situation where it's going to be

you know 10 11 12 years and you can sell those condos and be debt free in 20 seconds i'm probably doing that and then i'm just going to build up and pay cash for some rentals later with the fact that i don't have a house payment anymore, which obviously in that case would have been a very large house payment ratio to your income. But I'm guessing that you can probably hold those condos and knock this house out in a matter of 36, 48 months or something. I'm guessing, but I can't tell by, you know, obviously I don't have your situation in detail. So that's probably what I'm going to do in that case.

So open phones at 888-825-5225. You jump in. We'll talk about your life, your money. Chelsea's with us in Tampa. Hi, Chelsea. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call.

Sure. How can I help? Hey, I got a question. I recently came into some money after a car accident settlement. The total amount was $44,000. We took $24,000 of that, threw it into our debt snowball, got rid of most of our consumer debt. So our debt snowball is sitting at about $103,000 right now, and that's student loans, cars, and one credit card. We're interested in doing an addition on our house because we want to start a family. The addition, the part that we would contract out would be about $20,000,

and we would be able to cash flow the rest. We're wondering if the last $20,000 that we have from our settlement money should go into our debt snowball, and then we worry about how to fund the addition in six months, or do we put it aside, and then when we're ready to start the addition, we already have the money there? None of the above. I would throw this at the debt, and I'd get out of debt, and I wouldn't do an addition until I was out of debt. Okay.

That's not the answer you wanted, is it? Totally not. I don't know what you'll do, but that's what I would do. And here's why. You have to turn off all this other stuff or you're going to hang around with this debt forever. How much do you owe on the cars? $20,000 on one and $24,000 on another. So of your $100,000, $50,000 is cars.

Right. And what is your household income? It's $1, $50 is cars. Right. Yeah. And what is your household income? It's $115 right now. Okay. You're pretty steep in cars. If I woke up in your shoes and I wanted to do this addition, I might want to do it badly enough to not want these cars anymore.

So that's why I was thinking of taking it and just eliminating my car altogether. No, I'd sell them. Oh. So that's what I was thinking was taking it and just eliminating my car altogether. No, I'd sell them. I'd want the addition more than I wanted a car, because the addition is probably actually going to go up in value, and you guys have too much car. I mean, not a whole lot too much, but, I mean, you're right on the bubble. You should not own vehicles where things with motors and wheels on them, when they all total up to be more than half your annual income, and you're right there.

And it's half of your debt. It's blocking you from doing this wisely. So, once again, you're trying to do too many things at once, which is how you got in this mess in the first place. Okay. And so, you know, I'm going to do one of two things if i'm going to keep the cars we're just going to throw 20 at uh at our smallest debt whatever it is and we're going to work our way through the rest of these debts as fast as we possibly can and then we'll save up our emergency

fund and then we'll save up and pay cash for the addition and that's the only way we're doing it or we're going to speed this process up by throwing 20 at the debts and selling a couple cars and getting you a couple beaters. Because I'd probably rather have a couple of beaters in the driveway and have the addition personally. But because cars go down in value and additions generally go up. But, you know, you've got to quit consuming. You're just, you're breakneck consuming around your place. And if you don't stop it, you're going to be broke your whole life. Hey, thanks for the call.

Open phones at 888-825-5225. Carter is in Cincinnati. Hey, Carter, welcome to the Dave Ramsey Show. Hi, Dave. God bless. Merry Christmas. Merry Christmas. What's up?

So it's a two-part question. My wife and I are kind of transitioning from baby step four to baby step five. My wife, with her work, has a 401K but no match, and I have a Roth IRA where I'm contributing the max to it. So my question is, should I convert her 401k to a Roth, or should I just try to balance out and open up a Roth for her? Because I know you suggest we open up Roths for both us and our spouses. Well, the first thing you do is you take matches wherever they are.

And so you have match on the 401k, right? We do not. They don't offer a match. Oh, you don't? Okay. Then the second thing we do is Roths. Whether it's a Roth 401k, if your Roth 401k has some good mutual fund options, that's fine to do. If they don't, then I'm going to start with a couple of Roths for each of you, which is $6,000 apiece. So $1,000 a month for the two of you, if that gets you to your 15%. You're on baby step four where you're putting 15% of your income away, right?

We've been doing that for a year, but I was under a false understanding. At first, I thought that they matched her 401K. We've been putting 25% of her income toward that Roth IRA, I mean, toward that 401K, and all this time they have not been matching it, not that they were. So now I'll find out they don't match. And yours doesn't either? My Roth IRA is just a Roth IRA. Oh, you don't have a 401k at work, okay.

No, they don't offer one for me. Okay. And is her 401k, does it have a Roth option? Yes, and that's what I've been doing. Gotcha. Okay. Well, 25% is not our number. It's 15% of household income if you were doing 25% there to get there. So what's your household

income? $66,000. Okay. And so you can just do, you can get 15% and put it into the two Roths, IRAs, that you control the options. That's probably what I would do, because all you need to be setting aside is about ten thousand dollars a year okay that's fifteen percent all right and for right now and then babysat five is kids college six is pay off the house early when you've gotten that done then you come back and you'll max out her 401k and both roths and do everything you can to keep the government's hands off the stuff but for right right now, saving a couple $5,000 Roths, which you're allowed to do more, but a couple $5,000 Roths, you know, that gets you to where you want to be right now.

And since there's no match over at the other place, that's probably what I'd do. It's just cleaner. You've got more control over it. You know, the 401K's probably got 10 or 12 options and you you know with the open market you got 8 000 options so just get in touch with smart investor pro or whoever's doing your roth ira already and pick out the four types of mutual funds growth growth and income aggressive growth international put about a fourth in each uh as ongoing you just set that up to draft out of your checking account and that will amount amount to about $830 a month, roughly.

It will get you to $10,000. You're allowed to do more, but that's all you need to do right now, 15% of your income. Your household income times.15 is your Baby Step 4. And so, folks, recap for the rest of you. When you get to Baby Step 4, after you're out of debt and you have your emergency fund in place, then what are we going to do? Then the next step is we're going to be doing our 401Ks or Roth IRAs. How do we decide what to do first? Matches first.

Because even if it's a traditional and not a Roth, you've got 100% rate of return on the mutual fund because they're matching. Before anything starts, you made 100% on your money. So match is always mathematically first, up to the match. The next thing is Roth. So you do it in a Roth if you can, if you got a Roth 401k. Match, then Roth, then traditional. And that's how this works. And I would go through it in that process.

This is the Dave Ramsey Show. Hey, it's Kelly Daniel, associate producer and phone screener for The Dave Ramsey Show. Did you know that in 2017, Dave Ramsey Show listeners paid off $50 million in debt? That's pretty impressive. And it could be you this year. Keep listening for more inspiration.