The Ramsey Show - App - Learn How to Manage Money Like a Millionaire (Hour 2)

Episode Date: October 10, 2018

The show about you

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 am Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. That's 888-825-5225. Danielle starts off this hour in St. Paul, Minnesota. Hi, Danielle. How are you?

Hi, Dave. I'm doing well. How are you? Better than I deserve. What's up? Well, I have a question for you. My husband and I have been on the debt-free journey for about a little over two years now, and so far we've knocked out about $70,000 in debt. Excellent. And he had a student loan that fell into collections. And so we called to settle the debt, and we did everything that you say not to do. We settled it over the phone. And our excitement, we called in with one amount, and they actually knocked several hundred dollars off of the price for us.

And in the moment, we were so giddy and happy that we jumped on that, settled it, gave them our bank card information, and then realized pretty soon after what we had done. And so we've been calling them back and started the journey of trying to get it and writing from them. And they keep assuring us that, oh, the balance is zero, the balance is zero, but they're giving us a runaround and we can't get it in writing. And I'm feeling a new urgency to kind of protect ourselves right now because we're expecting our first baby this spring. And I just have this feeling, given Murphy's Law and how these people operate,

that this is going to come back to bite us and it's going to be just as we're bringing the baby home from the hospital. Okay. And so, so far there's no results. You're just afraid that they're going to just decide to change the balance. Exactly. I've been watching our bank account and nothing suspicious has happened at all, but I'm waiting for the other shoe to drop. Go ahead and put a block on your bank account regarding that institution.

Okay. You can block it. Call your banker, and they can block a certain person from a certain group from accessing your account. That should help there. And do you have a screenshot of your account on the web that shows zero? We don't have that. I have a screenshot of the payments coming out of our bank account,

but I don't have a screenshot of – no, not yet. Did you or do you have access to the account online, the account with them, the student loan people? Yes, I believe we still do. Okay. Yeah, open it up and take a screenshot of it showing zero. Okay. And put that in your file.

And then I wouldn't worry about it anymore. I don't know that that'll stand up, but at least you've got a basic good reason to argue at that point. And I don't think you're going to get anything out of these guys. I think they just obviously don't care, right? Right. Who are you dealing with, Navient or Sally Mae? Yeah, this is Navient.

They're supposed to be more responsive than that. I mean, we've been hearing the Navients doing a better job than Sally Mae by and general. Basically, the people of Sally Mae, most of them don't have two brain cells to rub together. I'm a little shocked at Navient that they're this unresponsive. So, you know, I'd call and try to get a supervisor or whatever on the phone, try it one more time. But big thing, before you do that, get a screenshot, a hard copy screenshot. Print it off on your printer of the zero balance showing with your account number clearly there and so forth. So if they ever try to come back and collect on that account, you go, no, it was a zero balance.

You just can't make this up. And hopefully you can tie it down that way. But it's a sad thing. You know, that's why we make you get it in writing and make you not allow access. So put a block on your account. Take a screenshot. Once you've done those two things, then take another run at them, and then I would lay it down and forget it and move on.

Angela is in Lansing, Michigan. Hi, Angela. How are you? I'm good. How are you? Better than I deserve. What's up? So I have a question.

My husband and I just started the Baby Steps last month. He works full-time. I'm a part-time employee right now where I'm at, but last year I actually started my own videography business. And I don't have any debt from the business and everything I make from that business, I invest back into gear so that I can increase my production value eventually because I'd like to become fully employed through that venture. But I was just curious what your thoughts were on taking that money that I earn out of my business and not applying it to our debt, but to applying it back to the business itself.

How much are you making and how much are you plowing back in? Honestly, I really don't make a whole lot. I make probably on a good month between like $300 and $500. So you're spending $6,000 a year on gear? No, no, no, no. I don't buy gear unless I have money from it. I know, but I'm just saying you're making between $4,000 and $6,000 a year and you're plowing it all back into gear.

Planning to, yes, yep yes yep okay all right and then what is your uh what is your what's your husband make a year and what do you make at your main part-time job um he makes 60 a year and i make 15 at my part-time job okay so you have a 75 000 household income this is four thousand dollars um it's not the end of the world because it's not a big enough number. But if you start making more, I would limit it. Okay. Give yourself a block because the problem with the photography world, it's like the computer world, there's never enough.

No matter what you buy, there's another one you know and if you don't try to steer clear of the gear it doesn't you know what i'm talking about you giggled you know exactly what i'm talking about there's never enough and so there's always another one and so you need to just as a good business practice put some kind of a limitation on there. Absolutely. You know, $4,000 a year, $5,000 a year, I don't care what it is, $500 a month, $400 a month, not to exceed. You know, or 40% of my profit not to, you know, some kind of a percentage and or a money amount that at some point you start making money with the business because it's not a business until you make money. Right.

And I mean, it's brand new. It's only been a year. Last year, I took a $2,000. There's a lot of brand new businesses that actually make money. You right now have a hobby. That's fair. Well, you've never had a profit and it's a hobby till you have a hobby. That's fair. Well, you've never had a profit, and it's a hobby until you make a profit. Right, and I mean, that's the goal down the road, though.

That's why I would like to get a little bit better production. You just have to do something to avoid your addiction to gear. And it's okay to have gear, and it's okay to plow money into gear. I've got lots of gear around here, and we buy a lot of it. But there's no end to the appetite for that stuff in that world. And so just put yourself a limit for your own sake. I'm going to send you a copy of Christy Wright's book, Business Boutique, Equipping Women to Make Money Doing What They Love.

It sounds like you're doing just that, and we want to help you with it. Thank you for calling in. This is The Dave Ramsey Show. One question I get asked all the time is, do I need life insurance? Listen, the whole point of life insurance is to replace your income for someone who counts on you. So if you have a spouse or you have kids, yes, you need term life insurance. It's the only way to protect them until you're out of debt and have built up your wealth. You're only digging a deeper hole if you waste money on cash value plans since it robs you of the ability to make real progress. And that's why I send you to Zander Insurance, and I have for 20 years. That's where I get all my insurance, and they only offer the plans I recommend.

It is not expensive. It's not complicated. And Zander will be there as your guide every step of the way. Visit Zander.com or call 800-356-4282. You need to get this taken care of. I can give you the advice, and I can tell you where to go. But it's really up to you to take that important step to get your family protected. That's Zander.com or 800-356-4282. Thank you for joining us, America.

We're glad you're here. Well, you've heard us say it so many times on this show. Money fights and money problems are the leading cause of divorce in America. If you and your spouse are facing some of these money stressors, well, you're not alone. That would just make you kind of normal. But normal sucks, and we don't want to be normal. So last year, we created a new event with Rachel Cruz and Les Parrott, the Money and Marriage event. It's now been in 10 cities, and it's been hugely successful. We're selling 2,000 to 3,000 tickets in every city.

It's a sellout everywhere we go. It's very cool. I say we. I'm not there. But it's Rachel and Les, and they do a great job. So we're going to add some new stops to the list. Here's some upcoming cities early next year. We've already told you about valentine's day

in nashville right february the 14th money and marriage in nashville and if that's like a destination thing if you want to fly in and join nashville it's a hot city right now with some uh i'm gonna talk about the temperature i'm talking about it's a lot of cool stuff going on here and a lot of um oh a lot of the food seems incredible, all that. Nashville, February 14th. We're going to do, listen, brand new announcement today. Money in marriage event, April the 1st. Not kidding.

Not April fools. Kansas City, April the 15th. Des Moines, Iowa and Dallas, May the 16th. You're getting your own money in marriage event. And it's all about dedicating a fun night out with your spouse to reconnect, realign on the goals, wear your rib pads because you may get elbowed, get the relationship going, get the finances going, get them both going in the same direction.

And, again, Rachel Cruz, Dr. Les Parrott, they teach couples practical tools. It's a lot of fun. These events really sell out fast. So go ahead and get your seats before they are gone. The last one they did last week in Irvine out in California was a complete sellout. We were talking about it in another hour with Rachel. So Nashville, February 14th, Kansas City, April 1st, Des Moines, Iowa, April 15th, and Dallas, Texas on May 16th, the Money and Marriage event. This coming weekend in Kansas City, we have our SMART Conference, which is the all-day-long conference.

And it's everybody, all the Ramsey personalities, Ken Coleman talking about career and finding that job that you love meg meeker talking about parenting one of the leading parenting experts in the world literally one of the best communicators i've ever seen on the subject less parrot on marriage same thing and rachel cruz will be talking about love your life not theirs christy wright will be there talking about uh taking back your time and of course henry cloud on boundaries anthony o'neill talking about taking back your time. And, of course, Henry Cloud on boundaries. Anthony O'Neill talking about teenagers, four things you need to know about your teenagers. Of course, I'll be speaking.

And, I mean, it's everybody. Chris Hogan on millionaires. I mean, it's going to be a lot of fun. It's this coming Saturday in Kansas City, and it's completely sold out. Thank you. Thank you very much. Now, that means that we have sold the 6,000 seats. I think we're at like 6,010.

We will keep it open for a little while. We always sell a few extra tickets because some people just don't come. And we'd rather have people in the seats. And so we oversell it a little bit. So you can still get a ticket, but it is sold out. Thank you very, very much. The same is true for Business Boutique 3-Day, the big three-day event with Christy Wright, November the 1st through the 3rd here in Nashville.

I'm actually one of the speakers at that this year, and that one is sold out. But again, we will continue to keep it open and sell a few extras, but we're up over the number. I think it's a 4,000-person number or something like that. We've got it all sold. Thank you, thank you, thank you. These events are, you know, everything's on fire right now. It's a pretty popular time, so thank you. Kartik is with us in Raleigh, North Carolina.

Hey, Kartik, how are you? I'm good, Dave. How are you? Better than I deserve. What's up? I'm actually kind of like partially followed here, baby steps without knowing about the steps. I'm on a work visa right now,

so I don't have a lot of options for a long-term investment because I'm not sure exactly when I would be asked to leave the country. I'm officially debt-free. I don't have any debts, no auto loans or anything like that. For 1K, I invest the minimum. Like I started at 6% to have the company match, and right now I'm at like 10% right now. So that's the minimum amount that I'm putting in 401k. Other than that, I have savings in my savings account and in form of certificate with compound

interest. Nothing more than that. After listening to your show recently, I'm starting to think maybe that's not the right way to get extra. So I may start to think about short-term investments without having long-term commitments to it. So, yeah, that's my point there. Okay. I mean, the problem with short-term investments is it's very, very hard. You know, a short-term investment is basically a savings account,

and it's going to pay, you know, 1% to 2% right now. You know, and when you do long-term investments and then you pull them out short-term, as you said, you can get the market could move down on you, and you could actually lose some of the money. So if you want to position some of it in long-term investments with the idea that, the hope that we're going to make some more, but the idea that we could actually lose some, I want to take some risk with some of that, that's an okay thing to do.

But, you know, basically if you know you're going to need the money, and the actual principle is very important to you, you know, there's not an intermediate investment that I'm comfortable with that I use. So I'm pretty much either putting it in a savings account or I'm investing it. And sometimes I'm investing it knowing that it may only be in there a year and it could be down in a year. But I'm going to take that risk just because that's money that I have a little bit of margin with, meaning I can afford to lose a little bit of money.

And if that's the case, then it's okay. But that's what we're faced with. Zach is in Minneapolis. Hey, Zach, how are you? Hey, Dave, how are you doing? Better than I deserve. What's up? Hi, I'm currently in college, and I paid cash for my first semester and I'm planning on joining

the National Guard. But I'm wondering if I should continue going to this college after I join the National Guard or if I should go back to my hometown and just live with my parents so that I'm basically getting paid to go to college. Okay, when you go back to your hometown to live with your parents, you would go to a different college? Yeah, I'd go just to a university that's within 20 minutes of my parents' house. Okay. If you don't go back home, you would stay where you are, obviously, and you would, can you pay cash? Yeah, if I save the money that I'm making during the National Guard and I work on top of that, I should be able to cash flow it. Okay, and how much do you like finishing school?

Excuse me? What year are you in school? I'm a freshman. Oh, so you've got three and a half years to go or whatever? Well, yeah, and then I'm actually technically have sophomore credit, so I can graduate in about two years. Okay, so you've got two years to go. What are you studying? Finance.

Okay. And why would you stay where you are? Just because it has a better business school recognition, I guess, for the state. Mm-hmm. Okay. The other place is what, a community college or just a university that's local? Yeah, just a local university and not as – right now I'm at the University of Minnesota, which is a lot bigger, I guess, too.

Right. Okay. All right. Well, if you actually get the knowledge, the reputation of the school really doesn't matter much in 99% of the jobs out there. Okay. If you actually get the knowledge. Now, if the actual quality of the education is lower, then that's a different discussion, okay? But I would not stay someplace merely for its reputation but if there's other

reasons that you want to stay in that location you like it there you want to stay in that area you you know you've enjoyed the uh the experience of being there and you're willing to work to pay for it if you can pay cash for it i'm okay either. There's not a financial problem either direction. It's just a matter of where you want your degree to be from, where you want to live for the next two years and study. And, you know, at your age, I likely would have stayed where you are because I'm going to work just to be out on my own. That's how I was. But you might not feel that way. And that's okay.

So you're just trying to, what's the payoff of the extra effort? And is it worth it? That's what you're asking. This is The Dave Ramsey Show. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major healthcare costs. Christian Healthcare Ministries is the original health cost-sharing ministry.

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if you mismeasure the blinds or you pick the wrong color, they will remake your window blinds for free. They have site-wide savings happening right now, plus you can take an additional 5% off at Blinds.com slash Ramsey. Always use the slash Ramsey because that

slashes the prices. Oh, did you see the way I did that? Yeah, that's cool. Blinds.com slash Ramsey because that slashes the prices. Oh, did you see the way I did that? Yeah, that's cool. Blinds.com slash Ramsey. Today's question is from Jessina in New Jersey. Dave, we're having a very hard time trying to get on track with everything, including starting our emergency fund. What can we do when we are so behind that we cannot even catch up? We're about two months behind on all bills. It's causing a lot of stress on our marriage, our kids.

We're tired of living this way, but we feel like we're in so much debt, in so deep, that we can't get out. Yeah, Justina, it gets really, really scary when you're in a situation like that. And part of what's scary is the sense that you're stuck. Part of what's scary is you're overwhelmed. And let's stop and pull one segment out of this thing and talk about that for a second. We're too much behind on our bills, and it's causing us so much stress on our marriage and kids. Being behind on your bills should not affect your kids. They shouldn't know about it.

You don't need to tell your five-year-old you're behind on the lights. That's not their problem. That's your problem. And you can tell the kids no but you don't have to give them a big long reason why no is a complete sentence no but don't pass off the uh you know don't pass off the stress to the kids now let's look at the rest of this what do you do when you're completely overwhelmed and terrified and feel stuck i've been there some of y'all know what i'm talking about you've been there too haven't you it is no fun okay here's how you fix it

you have to begin to take control of what you can take control of. You have an income. Let's make sure that that first is being controlled. And that's called the budget. Now, you do not have to be able to pay everything to do a budget. All a budget is is you're telling the money that you do have where it is going to go. And so when you can't pay everything, which catching everything up in one month would be paying everything, right?

When you can't pay everything, then you've got to say, well, the money that we have, we're going to do the most we can do with that. And for this month, that's all we can do. So you prioritize it. You make enough to buy food. You do not make enough to eat out. So we're not going to restaurants, but we are going to the grocery store and we're going to feed our family and we're going to cook from scratch because it's healthier and it costs less.

So there we go. Food. You make enough to do that. Check. Put that one down. Put a food budget down. Write that number down. You can do that.

You make enough to pay your lights and water, and if you're behind on them, you catch them all up this month before you do anything else after you eat. Get current on your lights get current on your water now if you have a 600 a month cable bill because you have nfl super duper pooper scooper or whatever then cancel all that crap but i'm talking about water and lights and gas to heat okay now i don't really give a rip whether you can see downtown abbey or not but i am more concerned about you having lights and water on and gas to heat if it's gas

heat okay so you pay your basic necessities food and utilities you make enough to do that and get current on them right now. Number three is shelter. Now you pay your rent. It doesn't matter if you pay your rent and you can't sleep there because there's no heat. So you got to put heat in the place. Okay. So you pay your rent. If you're behind on your rent before you move on to number four, you catch up on your rent. Number four, transportation. You get current on the car and you keep gas in the car. Now, if that takes all your money and you can pay nothing else this month, oh well. Now, I mean, but think about this. If you got a place to live that's current, you're not going to get evicted. Your utilities that's current, you're not going to get evicted. Your utilities are all current, and they're not going to get cut off. And you have food, and the car is not going to get repoed, and it's got gas in it so you can go to work.

You live to fight another month. That's very essential that you get through those. And you do make enough to get through those but you've been feeding the other monsters and the other monsters are the people that call and scream at you and in order for them to not scream at you you pay them don't pay them master card is not in front of your children eating master card can jump in the creek discover bondage can sit over there and suck its thumb we're not giving them any money american express can definitely bite my ankle seriously right they can sit over on the sidelines right now until you get your food shelter clothing and utilities and transportation

taken care of call the student loan people tell tell Sally May she is on hardship deferral. She's not getting a dime. Then you begin to continue to work down the list, and you get to who you can get to in order of importance. And you just work the list and work the list and work the list. Now, if you got a big pile of debt and you don't see any hope past those things, then it's time to start talking about what we can sell and what we can do to create an income.

I mean, you may have to amputate the Tahoe. You may have this big stinking car payment that's killing you. You may have to take like six extra jobs and drive for Uber or deliver pizzas or clean somebody's toilets on the weekends. I don't know what you're going to do, but my grandmother used to say there's a great place to go when you're broke to work. Increase the income. Make the money behave.

Take care of your necessities first. We call that the four walls of your house. When you have the four walls of your house protected, the people inside are safe and they're dry. Then you live to fight another day. The powder's dry to go to battle, as they say. You got to have the gunpowder dry or it won't work, right? So we got to have a plan. We get all those things laid out.

It's step by step by step by step. See, I'm feeling better about your situation already. Because I don't even know your numbers, but I've done this for 30 years, and I almost, I'd say 99.9% of the time I sit down with someone that has a job, they can take care of food, shelter, clothing, transportation, and utilities. And by the way, you don't need clothing. You've got clothing. Just wear what you've got.

And if you've got to buy the kids a pair of shoes because their toes are coming through or something, that's fine. But you only be buying a bunch of clothing. Your clothes. Most of you got enough clothing last. We're not trying to make a fashion statement right now. People were trying to survive. So I don't care. You'll get to that stuff later. I'm talking about this month where you don't feel hopeless anymore, where you have a sense of traction, where you see a light at the end of the tunnel that's not an oncoming train.

And when you've got food, your lights and water are current, and they're not about to be cut off. You've got your rent current. You're not about to get evicted or foreclosed on on your home. Your car is not about to get repoed. You've got those basic things done and you can get most of that done in one or two months if you quit paying everything else i mean you get behind on your credit cards further well so what we'll get back to them later we get behind on sally may further so what what's she gonna do just get uglier well get ugly i hang up the phone i can

stop you from talking. Just, you know, hit that little end button. They quit talking. It's an amazing thing. And don't take a bunch of crap off these people. You do the best you can do. But work extra, sell stuff, get this budget balanced, get your every dollar app. It's free to download onto your phone. You can do this.

That's how you eat an elephant, a bite at a phone. You can do this. But it's how you eat an elephant, a bite at a time. You see, I gave you a step-by-step clear path. The next thing you do is you get current. And then, and only then, once you're current, that you start your baby steps. But you've got a little while before you do that. It might be three months before you get there. Sell stuff, extra jobs, take care of the necessities first this is the dave ramsey show daisy

hi mr ramsey so nice to speak with you. You too. What's up in your world? Well, I wanted to hear advice on what you would do if you woke up in our shoes. We own a property that we want to build a house in, and we were looking to borrow $300,000 roughly, and we wanted to put the 20% down. We have about half of that now, but we own the land, so they told us that we would be able to use the land as a down payment. And our land is roughly worth about $50,000,

and we were wondering if you would recommend us to do that and just put an additional $10,000 to make it 20%. How much do you have to put down in cash? Right now, about $30,000. Okay. And that's set aside for your down payment on your house? Yes. We have our emergency fund, and we just started listening to to you so we started paying everything down all we

owe is about four thousand on a car um and two thousand on a credit card okay do you own a home now no okay um the first thing i would do is i would not buy a home until i was debt free and had my emergency fund in place yes so that means you need to write a check today and pay off your car and your credit card and cut up your stupid credit card okay okay now you're debt free right okay yeah okay and that was four and two uh yes so six thousand so i'm down to twenty four thousand right yes okay and your land is paid off and it's worth sixty $60,000. About $50,000. About $50,000. And we need $60,000, so you need $10,000.

That's where you're getting your 20%. I see what you're doing. Okay. Well, we're going to put $14,000 in the emergency fund. Okay? Okay. So now you have an emergency fund. You put $10,000 with the land. You get a construction loan with a takeout loan, a permanent takeout, and your budget cannot exceed a $300,000 value.

That does not mean a house that you spend $300,000 on the house. Okay. The value of the total package can't be more than $300,000. Does that make sense? Oh, okay. So that means you're building a $240,000 house maximum. Oh, okay. Because the package is worth $300,000, and that gives you the 20% down.

If you spend $300,000 on the house, now you're at $360,000, and you don't have 20% down anymore. Oh, okay. You see have 20% down anymore. Okay. You see how that works? So you get a construction loan that is tied to your new mortgage that is your final mortgage. It's called your permanent mortgage. That's the mortgage that takes out your construction loan. And so your construction lender will require a takeout letter where your permanent mortgage is already approved.

Sometimes you can just package all that together. And with increasing interest rates, I probably would package it all together. Check Churchill Mortgage. They can probably help you with that. And you can go ahead and lock in your interest rate on your permanent mortgage because these mortgage interest rates are ticking up. And a good idea to lock them in when you can. By the way, if you haven't refied and you've got a higher interest rate loan, folks, this would be the time to call Churchill Mortgage.

It is ticking up, and I would lock in rates. If you're in the middle of a deal right now, lock your rates in. And I probably would lock them in like 20 minutes ago, like four days ago. Probably would lock them in, period. But we are in a rising interest rate environment. Nothing to panic about, but it is going up, Probably would have locked them in, period. But we are in a rising interest rate environment. Nothing to panic about, but it is going up. And so you might as well take advantage of the lowest possible rate you can get your hands on for refinance or for buying,

or in her case, for building. And that's by locking in current rates, because I don't think you're going to see rates come back down dramatically, you know, in the foreseeable future, in the next, say, six to 12 months. They're probably going to go up. And so given that environment, you don't have to be an economist to figure this out. It's fairly easy to look at the trends. Then I'm going to lock everything in as fast as I can and get in touch with Churchill Mortgage today and get this done.

Barbara is with us. Barbara's in Salt Lake City. Hi, Barbara. How are you? Hey, Dave. Doing great. How are you doing? Better than I deserve.

What's up? So we are a month and a half away from being done with Baby Step 2. Good. And, yeah, super exciting. But I don't want to lose that momentum that we've had just going towards this debt. Mm-hmm. And going into Baby Step 3, there's like a few curveballs, I guess, that are happening. So we want to obviously do Baby Step 3, but my husband is also wanting to go back into school to get his bachelor's so he can get a better paying job.

That would be after baby step three. Okay. So that's my question, as well as we also want to start a family. So we need some type of, like, baby fund because we want to cash flow that. When you have a baby on the way, you will build up a baby fund. No need to do it before then. Okay. So build up the emergency fund first.

Emergency fund is first before you do anything and then you start doing other life goals i wouldn't worry about saving for a baby you don't really need to save a bunch of money for a baby um if you've got health insurance if you've got health insurance you know and you should have health insurance and um you know you've got your emergency fund in place and you know you'll be able to budget the diapers in believe me you'll work it out. But, yeah, you don't really need an extra baby savings account unless you just want to save up enough to cover whatever normal labor and delivery is out of pocket. Yeah, that would be it.

It would be around, I think we pay like $1,500 towards the labor and delivery. That's easy enough to do during the nine months. Okay. Yeah, so you can just do that whenever that happens, and whenever baby's on the way, you can just say, well, right now we're saving for that. And then, you know, anything you want to do that's an upgrade, a move on, whatever, comes after the emergency fund because it's not an emergency.

Him going back to school is not an emergency. This $1,500 for the baby is not even an emergency. You can cover it. It's a luxury to have that as extra savings if baby came on the way, right? If baby got here before you had it saved, you'll be all right. Okay. Yeah. That makes sense.

They're not curveballs. They're things that happen after baby step three. I like it. Thanks for the call. Appreciate you joining us. Open phones at 888-825-5225. Cliff is with us in Chapel Hill, North Carolina. Hi, Cliff.

How are you? Dave, I can't complain. How are you making out today? Better than I deserve. How can I help? Well, first off, I want to thank you for what you've helped me and my wife do. You've helped us pay off $65,000 worth of debt. Cool.

Yes, sir. Yes, sir. And my next question to you is we have our emergency fund built in place. Right now we have about a $30,000 down payment on our house. We've got land to build on. And also we're in an area that we really want to live in the rest of our lives. We've got a lot of family around here. Great.

So, yes, sir. So my question to you is, A, how much health can we afford with our income? And, B, the contractor that we've been talking to recommends a USDA loan. No. I know you're not a fan of that. Absolutely not. No, I would never do a USDA loan. No. It's a subsidized loan. No. You're not a fan of that. Absolutely not. No, I would never do a USDA loan. No.

It's a subsidized loan, and if you ever sell the house or go to refinance the loan at any point, you're going to pay back all the subsidy and then some. You can get really trapped in these things, and they're nasty bad. No, I never would do a USDA loan. I've had more problems with that loan working with people that are in trouble than any other loan I dealt with. Wow. Wow.

Stay away from that. As far as how much house you can afford, we always say, you know, put your down payment, whatever that is, into the formula, right? And then the loan amount on a 15-year fixed-rate loan, which today is about 5% interest, the loan amount on a 15-year fixed-rate loan is no more, the payment is no more than a fourth of your take-home pay. And that puts you right where you want to be. Sounds like you've done some really good stuff.

I mean, you can really do it. I mean, you've gotten out of debt. You built your emergency fund. You're doing really smart things. So, yeah, just get you the least expensive loan between FHA, VA, and conventional is a conventional loan, a Fannie Mae loan. And that's the least fees and the least interest rate. That's the one you go with. You've got a good solid down payment. You're in a good place to do it. And that's exactly how I and the least interest rate. That's the one you go with. You've got a good, solid down payment.

You're in a good place to do it. And that's exactly how I'd get about your business. Congratulations, man. You're doing it. You're doing it. That puts us out of the Dave Ramsey Show and the books. Our thanks to James Childs, our producer. Kelly Daniels, our associate producer and phone screener.

You're listening to the Dave Ramsey Show. Hey, it's Kelly, Dave's phone screener. We finished 2017 with a bang as the fourth most downloaded podcast of the year. Thanks to all of you for listening and helping us spread the word.