The Ramsey Show - App - Life Insurance Policies Are a Horrible Savings Plan (Hour 2)

Episode Date: January 14, 2019

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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 am Dave Ramsey, your host. This is your show. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225.

Darling is in New York. Hi, Darling. How are you? What's up, Dave? How are you doing? Better than I deserve. How can I help? Glad to hear that.

All right. So me and my wife, we have a mortgage situation. So me and my wife, we just started at Baby Steps and currently are on Baby Step 2. Now, we own a two-family house in which we live. It's me and my wife, one house, and my sister, my in-law in the other house. So we are unsure on how should we attack or approach to pay off the mortgage when we get to baby step four, five, and six if our co-owners are not on the baby step, on the plan like we do. How do we approach that situation?

So what does your partnership agreement on this house say? It's 50-50. Everything is 50-50. Right now, the balance in the New York market is very expensive. The original loan amount was $648. Right now, we're down to $599,000, and we've been there for four years. And that's the end, but all of the reduction has been 50-50 to this point? Correct. Okay, and this is whose relative, yours or your wife's, or who?

It's me and my wife in one house, and my sister and my brother-in-law in the other one. Okay, so let's pretend that your wife inherited $300,000, and you wanted to pay that on the mortgage. What would your partnership agreement say about that? Well, if we apply that $300,000 to the mortgage, I guess they'll be responsible for the rest. That's what I'm thinking. But is there a written partnership agreement? No, no, no.

Okay. You need one, desperately. Because if you pay down on this mortgage, number one, you've got to be able to have a written document that says you get your money back. And then number two, the other problem you've got is if you pay half of it off, there's still a mortgage. If they don't pay it, you get foreclosed on. Correct.

So far, I know for sure that won't be an issue. We have a very good relationship with them, you know, with family. It's not a relationship. They could both lose their jobs. They could both get sick. One of them could die. Things can happen that even if they had good intent and good integrity, that a situation happens where they're unable to pay their portion.

Not unwilling, but unable for some wild reason. And, I mean, if there was a car wreck and cancer, I mean, you can get yourself in a real pickle here. And you're there now. I mean, you've got all that exposure now. This is why I don't like partnerships in general. So I don't know how to tell you what to do unless the state or the county allows you to split this home's ownership down the middle and maybe create what some areas would call a zero lot line or a condominium

to where they own half and you own half, and they're standalone properties, and your half could not be foreclosed on. But otherwise, you're in jeopardy at all times that they're still dead here. And it's not a matter of what they would like to do or how much you trust them. I've met all the people that all the things went wrong in their lives that never thought they were going to go wrong in their life. And you can't control all the outside variables. So, you know, you guys need a detailed written partnership agreement if you're going to stay in this deal. And you need life insurance to buy the other one out in the event one of you died as a part of that agreement.

That's called key man insurance in this agreement to where you're each other's beneficiaries, meaning if your brother died or your sister died, that money be left to you to buy them out, buy the other one out. And you need agreements on what happens in the event of divorce or death or disability or drug use or disinterest or default. All the big D's, we call them, that screw up partnerships. And so, yeah, I do not know of a way to tell you how to protect yourself completely in this situation. But if you're going to stay in it, and I suspect you are, I wouldn't be in it.

But if you're going to stay in it, then you're going to have to have a detailed written agreement and you need some key man life insurance as a bare minimum. Nick is with us in Lubbock, Texas. Hi, Nick. Welcome to the Dave Ramsey Show. Thanks, Dave. Thanks for having me. Sure.

What's up? Well, my wife is finishing up her last semester of school before she gets her undergrad. And she has awarded enough in Pell Grants and scholarships to pay for the semester. However, she only has five credit hours left. And so she does not qualify for the federal Pell Grants, and she's disqualified for the school awarded scholarships. Is there any way that you know of to be able to negotiate with the school or talk to the school about getting at least the scholarships? I understand

the federal aid, but getting the scholarships put on her account so that we can make sure that we cash flow the last semester. Well, I think you go sit down with the administrative office and say, we're going to quit. We're going to leave your school if you don't work this out.

Do I need to take more classes? I mean, if you need to take more than five credit hours in order for it to all be free, take more hours. But you don't need them to graduate. I understand that. But I'm saying if they require that you just be a full-time student and five hours doesn't qualify you, then go be a full-time student. Take extra hours. be a full-time student and five hours doesn't qualify you then go be a full-time student take extra we can't afford the full-time students without student loan that's the problem okay uh

how did you get the agree how did what number of hours was she taking when she got all the uh other pell grant and got this got the scholarship before uh she was a full-time student she was 12 hours and this was just last semester that she got awarded and so that's why i was thinking about going but last semester did she carry a full load yes she did okay and that's that was the basis for her award right yes and she went for free no she got a substantial decrease in tuition, but no, not for free. With the federal grant and the tuition and the scholarship, you still had to borrow money? Yes. Oh, I thought you said you got everything covered before, and now it's not covered. She has $3,100 in scholarships and Pell Grants awarded to her if she were taking full load.

I see. Does that make sense? And what is a full load? 12 to 18 hours. Okay. So she picks up seven more hours in order to be in a full load, and she gets it all, but the $3,100 doesn't cover the 12 hours. Right. Right.

Yeah, I think you've just got to sit down with the administration and see if you can get the scholarship of the five hours in so you can cash flow the balance. That's what I would do. I think sometimes, I mean, it's up to the school on what they do on that. They can decide to do this. Now, Pell Grant, you're not getting any of that money. It's gone. This is The Dave Ramsey Show.

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Visit puretalkusa.com or call 844-862-3677. Enter promo code SAVEDAVE and receive 50% off your first month. That's puretalkusa.com. Thank you for joining us, America. We're glad you're here. Valerie is in San Bernardino. Hi, Valerie. How are you? Doing well.

How are you, Dave? Better than I deserve. How are you? Doing well. How are you, Dave? Better than I deserve. What's up? So we have a question on what you think we should do with our house. So we own a house in Colorado Springs, Colorado, and my husband got a job opportunity out here in California. And so we actually came out and we lived in a company home for a year and a half. But now we had to get out of the company home and we're renting a house because we're still on baby step number two. And the housing market in Colorado has just exploded.

So we're wondering, because we're renting it right now, if we should sell it and then take the rest to pay off our debt and build our baby step number three. Why would you keep it? Well, because it's a good investment. Okay. Yeah, but let's pretend you had never lived there, and you were renting a house in California, and you were trying to get out of debt.

And I said, hey, why don't you go buy an investment property in Colorado? That would sound kind of absurd. Right? I've never thought of it that way. I mean, all I'm doing is putting it backwards. You got into this Colorado deal by default, not by a plan. And so if your only reason for keeping it is in quotes, an investment, end quotes, you would not do that because you would do your investing elsewhere

and in a different way given your current life. So, yes, I would sell it immediately, use the money to get out of debt, build your emergency fund, and if there's enough for a down payment, then start talking about buying a home in your new area where you live now. So, good question. Emily is with us in Birmingham, Alabama. Hi, Emily. How are you?

Hey, I'm good, Dave. How are you? Better than I deserve. What's up? Hey, my husband and I, we're sort of new listeners to your show, and we are preparing to start saving for our daughter's college. She is six, and we're right now sort of trying to decide between investing in a 529 plan or in my husband's personal investment account

where he thinks he can get a higher rate of return because he's been doing well in that. So the 529 plan, we're looking at maybe getting about an 8% return, we think, over 12 years. And then he can hopefully get maybe between 15% and 20% in his personal investment account. Okay. I would do a 529, and I would select better mutual funds than he is using to compare to his bad self. Okay.

Yeah, my mutual funds have performed a lot better than 8% over the last 20 years. They're up over 12%, and just good growth stock mutual funds. Guys buying and selling in their own account, on average, multiple studies done on this do not average anywhere what he's saying, more like 7%. people buying and selling single stocks on their own accord average about seven percent um and the reason is is one miss and it offsets all of your gains so people making the kind of money he claims to be making are pretty much fishing stories i don't believe him he might have done that for one year he might have done that for

two years i don't think he's going to do that over 20 years if he does he should be running a multi-million dollar mutual fund well there's a good idea yeah so i mean if he's that good if he's that good at selecting stocks he should be in the business because uh the number of people that can maintain a 15% to a 20% rate of return year in and year out is almost none. You just can't find it. It's not possible on average. Now, again, you can have those spikes. If you just had it in the S&P 500 last year, I mean, in 17, you would have made 19% of your money in 2017. So you can make that in a given year because the market makes that

but then the next year you know 2018 sucked and make anything so um i don't think we lost money i don't think we made anything so you you know so your average for two years then and that of the stock market in general for that two years which is way up and way down, but the average is right at 10%. And so that's better than the 8% quoted, but a lot worse than his 15 he thinks he's making. Stephanie is with us in Philadelphia. Hi, Stephanie, how are you? Good, how are you?

Better than I deserve. What's up? So we have a six-month-old baby girl, and I'm debating whether or not to add her to my life insurance policy as a term rider or if I should go with the Gerber Grow Up Plan, which I know you aren't really a fan of the Gerber Grow Up Plan, or if I don't even need to insure her at all. Do you know why I'm not a fan of the Gerber Grow Up Plan?

No, I do not. Okay. Well, that's important information because you don't want to do something just because some guy on the radio said you want to do it because you understand it and you don't do it. The Gerber Grow-Up Plan is more of a savings program inside of a life insurance than it's a whole life life insurance policy for a child than it is a life insurance policy. Okay. And so it ends up becoming, quote, unquote, a way to save for their future

at a very, very low rate of return. It is a high-fee, high-marketing-hit product. And so basically you could do better putting your money into a cookie jar than putting your money in that for a savings and getting a tiny bit of life insurance. Now, the point on infant or child life insurance is if, God forbid, something happened to your child, what do we lose other than obviously our heart is broken, right? But financially, what do we lose?

We do not lose an income because they don't create an income. But we have the expenses of their final expenses, the burial, the funeral and so forth. Right. And and so what what I always did and what we recommend for that reason for other people is until you have your emergency fund fully funded, which in almost every household is over $10,000. That's the three to six months of expenses that we recommend for an emergency fund. Have you heard that before? Yes. We're only on baby step two, so we are nowhere near that yet. So when you get your emergency fund fully funded, let's say that it had $15,000 in it,

then you can afford to self-insure through, God forbid, the funeral of a child. You could pay for a $10,000 funeral, and you would not be in debt to do that. And again, we're not talking about the heartbreak and the emotion. We're just talking about the actual dollars and cents of the horrible situation. So once you've got your emergency fund in place you don't need insurance until then you might want to do a term rider and what are they quoting you on a term rider on your child it's like ten dollars additional per month 120 a year for how much coverage i think it's 25 000 if i'm correct okay that's a little rich it's a little more coverage than you need think it's $25,000 if I'm correct. Okay. That's a little rich. It's a little more

coverage than you need, and it's about double what I'm accustomed to. I usually hear between $50 and $100 a year for it, but it's usually half the coverage. So I don't know if they have another option in increments. They probably do. Okay. Yeah, I would look at a $10,000 or a $15,000 rider and try to get that down around $50, and I would do that until you got your emergency fund fully funded, and then I would self-insure through this potential tragedy. And so, I mean, yeah, that's exactly how we did it, and it's what I would recommend.

Open phones at 888-825-5225. That's 888-825-5225. Any time you hear a life insurance product start telling you that you're saving money, this is a savings plan, you're going to have money inside the policy, there's going to be cash value buildup. Anytime you hear a phrase anywhere like that, you can cash the policy in later. It's more like owning a home than renting a home. Anytime you hear salespeople start saying any of those kinds of things, that includes the Gerber plan, you run.

You run. Because none of the investments inside of life insurance policies are any good. They're all a horrible rate of return. You lose the money when you die. It's a disastrous product. So you never, never,

never, never save money inside of a life insurance policy. You can do what you want, but that's what you should do. 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. In the lobby of Ramsey Solutions, Saul is with us. Hi, Saul. How are you?

Good, Dave. How are you? Better than I deserve. Where do you live? Lubbock, Texas. Welcome to Nashville. One of our top guys here is a Lubbock, Texas guy. He said it's so flat there you can watch your dog run away for three days. That's about right. Love that line.

Welcome, man. Good to have you. Thank you. So how much debt have you paid off? A little bit close to $48,000. Way to go. And how long did this take you? Seven months.

All right. And your range of income during that time? Went from making about $60,000 a year to close to about $130,000 a year. You doubled your income in seven months? Yes, sir. How? Graduated nurse practitioner school. That helped and got every job that I could.

Wow. Yeah, you did. You did do both. You got a great career and you maximized it. Yes, sir. Well done. Congratulations. So $48,000 in the student loan debt?

Student loan debt from when I went to undergraduate school initially. Essentially, that was debt that I incurred when I went to school in the early 2000s. My parents initially took out a lot of student loan in my name, and there was credit cards in there. So by the time I got to paying that off, it was quite some time later. So that's where that initial debt came from. How did you get through nurse practitioner school without debt? Joined the United States Army. Gave them a couple years of my life.

There you go. Time overseas in Afghanistan, and they paid for my nursing, my bachelor's in nursing and my nurse practitioner. Wow. That's wonderful. Well, thank you for your service and it worked out for you, huh? Yes, sir. Thank you for the support. Very cool. Very well done. And so you're no longer in the service? I'm on reserve status. I actually had drilled this weekend and caught the red eye to come here to be here this morning. Oh my goodness. Wow. Well, thank you so much again. Congratulations. So what made you seven months ago decide you're going to get this debt knocked out this fast? Well, like I said a little bit earlier, essentially my parents, my entire adult life had used my identity to take out student loans in my name when I went to school the first

time and credit cards and store cards of all kinds. So when I graduated school initially, I had a little bit over $55,000 worth of student loan debt, credit cards I had no idea even existed. So when I went to join the Army after graduation initially, I couldn't even get a security clearance at the time because I had so much debt built up, but paid off enough to get into the service and just been on the journey ever since. So you chose, instead of turning it in as identity theft, to pay it? Yeah, my family, you know, close-knit family, no matter how much I might have pressed my mom or my dad about the student loan debt or the credit cards or any of it, there was, you know,

we're family, so, you know, in spite of the numbers that didn't make sense about how much school really did pay for or cost, I just let it ride for a long time and just let it kept on going until I decided to do something about it. But the credit cards you didn't use at all. No, no, I didn't. And you paid all those. Paid all those off, came back from a deployment from Afghanistan in 2010,

came home. When you leave as a single soldier, you have to leave your life. Your life goes on even though we're deployed. So being a single soldier, knowing everything my parents had done, I was like, you know, they're not going to do anything while I'm deployed. I'm in a combat area. They're not going to do anything like that. So what had happened was I had my moment of being sick and tired.

And being sick and tired when I came home from that deployment you know all my fingers and all my toes and I'll never forget my dad sat me down and told me son we borrowed some money from you and looked at my bank account statement and that was code for by the way while you were deployed we were using your checking account as an ATM machine and didn't have anything to show for it so at that point I really had that sick and tired of being sick and tired moment where I just looked at my life and said, I'm a college graduate, I'm a combat veteran, I'm a sergeant in the United States Army, and I don't have anything to show for it other than a mountain of debt and a piece of paper on the wall. And none of the debt's your fault.

So have you done something to stop them from doing this anymore uh in 2010 i had i talked to my parents and i told them you know i will not drown with you anymore i told that to my mother my father and their travel agents for guilt trips so that was kind of hard to do initially packed up all my stuff moved away changed the phone number and i decided that i wanted better and stopped stopped it when i decided to do something about it, even though I should have done it a lot sooner. Yeah. So they've not stolen your identity since 2010?

No, I've got a Xander account, and I've watched that thing like a hawk now. I bet. Yeah. I'm so sorry. What a heartbreak. But you took responsibility for every bit of it, even though it wasn't yours, and cleaned it all up in the last seven months. Yes, sir.

Congratulations. So what is the key to getting out of debt, Sergeant? I would say two things are the biggest thing. One, and this is first and foremost, is the mindset. We talk about that in the military a lot. You can be a Viking or you can be a victim. And when I realized all this was happening, I cried, I was upset, and I could either stay there in my pity and be sad and cry, but the debt wasn't, I was upset and, you know, I could either stay there in my pity and be sad and cry, but the debt wasn't going to go anywhere. I needed to take action to do something about it. And I decided to be a Viking and go out there with that warrior mentality and get it done. And then having a big why to keep you motivated as well. I mean, when you come back

from a deployment, anybody that's ever served in the military overseas, take a real big stock of your life because there are men and women that do not get to come home. And I was, in spite of everything I might have come home to, I got to come home at least. And I think we honor those that don't get to come home by living the best life that we absolutely can. So that was a big part of it as well. And I suspect it makes you appreciate the opportunities that a lot of people take for granted. Yes, sir.

I mean, that you can walk up and down the street and buy anything you want to buy. You walk into a Walmart and there's more stuff there than an entire country has in other places. And you can go, I mean, and you've got the freedom to make choices in your own life and economic opportunity all around you. And I suspect you see that through a different lens, don't you? It changes your perspective on a lot of things when you kind of see that. So coming home, you take stock of what's really important versus, you know, things that aren't so much.

But, yes, yes, it does. Very, very cool. Well, congratulations, sir. Thank you. We're very proud of you. Very, very proud of you. Who was your biggest cheerleader? I would say my girlfriend and her parents, Katie and Glenn.

They were really big supporters. My girlfriend was really excited and we talked about it and why I wanted to do it. And, you know, before we decided to, you know, get married, even though you say you don't have to be out of debt to get married, I was like, this is something I want to do on my own so we can just have a clean slate and start a whole new life. And now you do. Yes, sir. Very well done. Well, we've got a copy of Chris Hogan's Everyday Millionaire's book for you. We think that's the next chapter in your story, sir. You will be not only debt-free, but now on your way to being a millionaire nurse practitioner, completely paid for, no debt at all, making $130,000 and a bright future.

We're very proud of you, sir. Very well done. Thank you. Thank you again for your service. Saul from Lubbock, Texas. $48,000 paid off in seven months, making $60,000 to $130,000. Count it down. Let's hear a debt-free scream. Three, two, one.

I'm debt-free! Yeah! Woo-hoo-hoo-hoo-hoo-hoo! I love it! Well done. Very well done. I love it! Well done. Very well done. Awesome stuff.

Great job, sir. Open phones at 888-825-5225. You jump in. We'll talk about your life, your money. 888-825-5225. All right, let's go to, well, let's not do that. Since I'm running up on time here, I'll just watch what I'm doing a little bit. Steven on Twitter says, Dave, I'm thinking about buying a zero-turn mower for my yard.

They're offering 0% financing. I normally don't finance anything, but my interest rate at the bank is 2%. I could pay cash. It looks like I should finance. What do you think dude if your best investment opportunity is borrowing money on a zero turn return mower you might be a redneck seriously you've got to be kidding me you're gonna borrow money on a lawnmower in order to leave money in the bank at two percent no no no no no no don't get caught up in that stuff so here's the thing you write a check and you buy the lawnmower for cash assuming you're out of debt or you don't buy the lawnmower and

you don't do that if you're getting into your emergency fund to cover that. So, there you go. Wow. Open phones at 888-825-5225. We'll be right back. Thank you for joining us, America. Stephanie is in Spokane. Hi, Stephanie. Welcome to the Dave Ramsey Show. Hi, Dave.

How are you? Better than I deserve. What's up? Well, so my husband and I have kind of been loosely working through the baby steps for the past five years. And we're finally debt-free. We've been debt-free for a couple years now, paid off our home, vehicles, everything. And now we're looking to get into the rental game. So I guess my question for you was, there's a house in our neighborhood that I've always loved.

It's going up for sale. It's in our budget, and we could rent out the home we are in and make more than enough money to cover the mortgage on the new home, basically let the renters pay for it for us. I wasn't sure what you thought about that. I don't think renters ever pay for houses. You don't think so? Okay. No, because they don't always renters ever pay for houses you don't think so okay no because they don't pay they don't always pay they tear up stuff uh you get into all kinds of problems where the

rent of this dream of the renter is going to pay your bill doesn't work i love we have rented i love we have rented it so have i we have yeah we've rented this home for about three years and had had pretty good luck with a few different renters. So when my husband got relocated for work for a short period of time. And I like the idea that it would be close. We could do it ourselves. I like all of that. I don't like a mortgage. I wouldn't buy it until I can pay cash.

I did not buy. I mean, once I got out of debt, I wasn't going back in. I know. That's the thing that's scary. Yeah. It's not scary. It's just dumb. I wouldn't do it in. I know. That's the thing that's scary. Yeah. It's not scary. It's just dumb. I wouldn't do it.

I would pay cash. I would pay cash. And, you know, you should be able to. You don't have a payment in the world. Have you not built? How long have you had your home paid off? It will be two years this fall. And we're both in our late 30s.

Great. So how much have you saved? Well, we've been dumping everything into our 401Q. We've completely maxed that out, like you said. Yeah, but you don't even have a house payment. No, and then I have $100,000 in the bank plus another $20,000 I've set aside for the kids. So we've got our emergency fund, we've got savings,

we've got a nice big 401K. How much is this house you're wanting to buy? It's about $325,000. It's about the same price as the home that I'm in, maybe about $30,000. It's a pretty expensive rental home in Spokane, isn't it? Well, the rental home, the home that I'm in right now is worth about $300,000, and we've rented it for $2,000 in the past. It could probably make a little bit more than that. Is that not the upper end of the rental market, like to the extreme?

That is definitely. I'm actually south of Spokane in the Kennewick area. So we have a demographic where there's a lot of highly educated people coming here to work in the area for a year or two at a time. Yeah, okay. Well, I mean, I own a few rental properties that are on the upper end like that, but this is definitely an expensive rental property in Spokane. Right.

Because the average home price in America today is about two and a quarter. In Spokane, it's less than that. Okay. And if you're above an average home price in your area, you're in the higher-end rentals. I prefer from a residential single family to be above average because of the clientele. But easier to work with, more reliable, and all that. So anyway, you do whatever you would like to do. You've already saved $100,000. You're 30 years 30 years old you're doing good i couldn't go back in debt

and i'm not going to recommend you do uh and so if i what would i do if i were in your shoes i'm going to pass on this one i'm going to set aside what portion of this hundred thousand is my emergency fund and the rest of it is set aside for us. We're saving aggressively to buy our first rental in cash. When you own rental property and you have zero debt on it and you have zero debt on your personal residence, you have zero debt anywhere, it changes the game on your wealth building. It changes how you rent, who you rent to. You know how big a hurry I am on our properties to fill them?

Not at all. I'm not desperate. I'm not motivated. I simply am trying to maximize the return on the investment. And the best way to do that is put a high-quality renter in there. And so until we find one, we don't put somebody in there. We take our time, just like we do when we're hiring people here at our company. We don't just do one little interview and everybody can fog up a mirror we hire them i used to do that crap and i

got crazy in the building and if you do that stuff with renters they'll tear up your house so instead you do you take your time you do more in-depth research on the person you're that you are committing a heavy asset here too and it's not to be snobbish or anything it's just you are trying to have a pleasant experience for them and for you and you put people in situations where they can afford it then they have a more pleasant pleasant experience and uh and you as a landlord do when i don't have any payments i am much more patient it changes everything i don't know if you're gonna do this or not because it sounds to me like you've got house fever.

I think you're probably going to go buy it in spite of this, but I wouldn't. I would not. I would not. Rolls is with us in New York City. Hi, Rolls. How are you? Hi, Dave.

How are you? Better than I deserve. What's up? All right. I have a little bit of a situation. Currently, right now, me and my wife, we're about $45,000 in debt, like school loans, basically credit cards. But we're planning to pay that back within the next six or seven months. But my parents actually own a home that they are willing to give to me.

Well, the house is worth about $360,000, but they're willing to give it to me for about $260,000. Wow. Yeah, which will leave me with $100,000 in equity once I purchase the home. Yeah. But I just wanted to see if this was a good idea to do this, but I wanted to be debt-free before I even go into that transaction. I'd pay off the $45 in the next six or seven months and then jump into that. Yeah.

But I just wanted to run it by you to see if it was a good idea or a bad idea. If you're debt-free and you have your emergency fund of three to six months of expenses in place, I think it would be a wonderful idea. Assuming the house payment is something you can handle, what's your household income? Well, me and my wife together, our annual income is $93,000. Okay. Well, me and my wife together, our annual income is $93,000. Okay. Well, I think you can probably afford a $260,000 mortgage on a 15-year fixed.

It'll be less than a fourth of your take-home pay. Okay. Well, also, the home is actually rented. Well, you'd have to get that. I'll be living in one part of the home, and the rest of the three floors will be rented. Well, that helps, but I still want you to be able to afford the payment. Oh, yes, yes. And I still would not close on this house until you get your debts paid and your emergency fund in place.

You got that part? Correct. Well, my debts are being paid right now. We're working on that. And your parents are willing to do this six months from now, right? Correct, yeah. It's going to be about six months to a year from now. Perfect. Well, that's a good plan. I don't see anything wrong with it as long as it's a house you and your wife want to live in.

And I mean, it sounds like you're living with a renter nearby. The good news is your renter is close by. The bad news is your renter is close by. And that's what you're going to be. You know, you're going to set some very healthy boundaries for yourself and for them. You can't be up there pestering them all the time and they certainly can't be uh not pestering you i mean they can't certainly be pestering you all the time either so uh you know you've got to have some clear healthy boundaries there but if you do that uh lots of people do the situation you're talking about it certainly helps the cash flow and uh it makes the deal pay off very, very quickly.

It might be a little less appealing to your wife if you want to ask her about that, but that's part of the process. Hey, thanks for calling, man. Open phones at 888-825-5225. Our question is from blinds.com. They have a 100% satisfaction guarantee. Even if you goof up, they'll remake your blinds. Use the promo code Ramsey to get the best deals at Blinds.com.

Kohl's in Washington. We're working through baby step two, getting out of debt, working on our last credit card. I'm a government employee currently working without pay. Talked to our lender about the mortgage and to the credit card company about our options. But we're not sure if we need to pause, stop, or what we need to do to plan and for how long. What advice would you have for us? I would say, you know, the vast majority of your income or all of your income, however much of it you're receiving from the federal government, is not coming right now. And until those checks start coming, you stop your total money makeover. You do not pay any extra on anything.

And then you take the income that is coming in. If your wife is working coal and you take her income and you say, what can we pay? Here's the order you pay things that you want to pay. Food, lights and water, mortgage, car, gas, and that's it. And I wouldn't pay anything else until I got that paid, and then you pay minimum payments at the most beyond that until you save up enough money and you're just sitting on some cash. When the shutdown is over, take the cash and pay off the credit card,

and you're out of debt. This is The Dave Ramsey Show. Hey guys, it's Blake Thompson, Senior Executive Producer for The Dave Ramsey Show. This hour's over, but you can find more great content on our YouTube channel. Catch the most watched Dave Ramsey's death-free screams in the very popular Everyday Millionaire segment. Go to the Dave Ramsey Show YouTube channel and click subscribe.