The Ramsey Show - App - Mark & Tiffany Paid Off $1.15 Million in 8 Years! (Hour 3)

Episode Date: October 12, 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. You jump in, we'll talk about your life and your money. It's a free call at 888-825-5225 thank you for joining us we're glad you're here ashley starts off this hour in baton rouge hi ashley how are you hi dave how are you better than i deserve what's up okay so my husband and i have four rentals that are paid for and he came home home earlier this year, February 1st, about a fifth one.

But we mortgaged this one. Well, we're in the process of mortgaging it. We have a construction loan now, and we are in the process of turning it into a regular mortgage. But I just have a bad feeling about it, and I'm thinking we should sell it and wait until we could get another one without mortgaging it I just don't feel good about it okay but he I asked him if

he wants to sell it and he doesn't it's like it's up to you you know because I'm the property manager he said it's up to you yeah But he bought it without talking to you? Oh, no, no. He bought it. I agreed on buying it. Like, we bought it together. Oh, okay. So you agreed on the purchase, and now you're kind of thinking you don't want the debt. But the rent is $1,200, and the note, if we turn it into a mortgage, would be $400 and something.

Mm-hmm. So how much will you owe on the property? We would owe $92,000. Then you have a $400 mortgage? $457,000. Yeah, we did not escrow taxes or insurance. What did you do? An adjustable rate 30-year?

We did a 30-year. Well, we wouldn't do a 30-year. We haven't did anything as of today. Do you have any money? Well, we have, no, not really. Okay. And I assume you can sell it and make money on it, it sounds like, right now, right?

Yeah, we took money out the front to pay off debt, and now we could probably make about $10,000 to $15,000 selling it outright, but when we do the math, we can make that in two or three years with collecting rent, but not really because we would have a mortgage on it. So I'm just going back and forth. Yeah. So what debt did you pay off? We paid off, what was it? I think it was a Home Depot credit card and some other small things I don't remember.

Okay. Well, here's where I start. I start with the premise that is somewhere down inside of y'all but it's not there all the time my premise is is the shortest way to become wealthy is to have no payments and use your assets and your income to invest and grow things that have no payments um and so the shortest way is not to borrow, because if the shortest way was to borrow, you'd go do this deal like times 10. You'd do 10 more of these, right?

Yeah, and our friend is doing that. I don't want that. Yeah, because that exposes that there's risk involved. So you kind of felt that way at one point because you paid the other ones off. I did, and that's why we don't have any money. Like, I paid $13,000 on one and $17,000 on the other one because he works really hard. So what's your household income? $130 a month.

I mean, a year. That's good. Okay. And you have four paid for rentals, and then you have this one. Okay. Yeah. How quickly can you pay this one off if you really lean into it like you did before? If I really leaned into it, maybe two years, maybe three.

Okay. Yeah, I would think you could, yeah. That sounds right. And then what I would do is I would build up cash, and I would never buy anything else again. So what I would ask you to talk about tonight, turn off the television, sit down at the kitchen table tonight, look at each other and go, okay, do we want to sacrifice really deeply out of our lifestyle? We make $130,000 a year. We've got four paid-for rentals.

But do we want to act like we're broke people and pour it all onto this rental for two years? Is this rental worth that to us so we can knock this out really, really fast and then never do it again? Or do we want to sell it? But I don't want to keep it with no plan to pay it off fast. Okay. And then here's the other thing. No more Home Depot credit cards. No more signing up for debt on rentals.

If the best way to do it is to live debt-free, then actually live debt-free. Yes. Stop it. Yes. You've got to decide which way you're going to be. It's like you've got one foot on the boat and one on the dock, philosophically. Yeah. So, you know, decide.

Because I think you were really doing good until we got to Home Depot and then borrowed money for a rental, and then you kind of, like, lost your mind for a minute. We were. That's what it sounds like. But now you can clean it up. I mean, you cleaned up the Home Depot. It's moved over to this deal. Now we can clean it up by either selling it or we can lean into it for two years and have no life and clean this thing up and is this rental worth it do we love that rental

that much i you know i don't know if you do or not you might i like real estate i might do it but i wouldn't do it again the next time you get ready to buy something at home depot pay cash for it the next time you get ready to buy a rental you Depot, pay cash for it. The next time you get ready to buy a rental, you pay cash for it, regardless of what you do with this rental. But I would do one of the others. That's what I would do. So, hey, thanks for calling in. Sounds like you guys got a lot going on. I mean, you're making good money.

There's a lot of stuff you could do here that's very cool. Thank you for joining us. Joshua is with us in Chattanooga hi joshua how are you hey dave i'm glad to be on your show today how are you doing well i'm honored to be with you sir how can i help all right let me tell you what i've been doing for the past year and about our current situation i'll tell you what before you that, just tell me what your question is. Okay. Well, I have a car that I could sell right now to combine with our savings and pay off my student loan debt.

Okay. What is the car worth? The car is worth approximately $17,000. Okay. Is there anything special about the car, or is it just a car? It's just a000. Okay. Is there anything special about the car, or is it just a car? It's just a car. I commute a lot, and I do need something that's reliable. Yeah, I got that.

But your $17,000 car is paid for. You can put that with the cash you've got. How much cash have you got? I have $30,000 cash. And how much student loan debt do you have? I have $32,000. And And how much student loan debt do you have? I have $32,000. And what's your household income? Right now, my wife and I combined bring home about $6,000 a month.

Okay. No, I mean, I wouldn't sell this car. The car's not out of line. It's a $17,000 sale to solve a $2,000 problem. You got $30,000 in cash. So what I would do is write a $29,000 check towards that student loan, and I'd pay off that other $3,000 by Christmas, and I'd keep my car. Does that make sense?

That does make sense. You would drain our savings that far? Yes, sir. And that would scare you a little bit. And what that fear will do is drive you to rebuild that emergency fund by living on a very tight budget very quickly. But what we teach people to do is start with $1,000 and above that, be debt-free, and above that, then rebuild their emergency fund. That's the first three baby steps. Thanks.

Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has debt and has struggled to make ends meet. But they're starting to make headway with their budgets and smarter decisions with money. They have dreams and plans, and the only real difference is that one family has the right amount of term life insurance, and the other doesn't. Big difference. If one of the parents die, and that does happen, their well-being would be destroyed.

Paying for the mortgage, utilities, food, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is. Be the family that takes those deliberate steps to be different and responsible. It really does make you the hero of your story, and it puts you on course for better things ahead. Thank you for joining us, America. We are glad you're with us.

Chuck is on the line in Pittsburgh. Hi, Chuck. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call. Sure. What's up? Well, my wife and I have paid down about $140,000 in debt over the past two and a half years. Good for you. But we've only got about $215,000 left to go because we have our mortgage and we have three rental properties that we have mortgages on. And in those two and a half years, we've had a son graduate high school. He's in college. We've been paying about half the tuition. He's been taking out loans for the other

half. And I stopped contributing to a 401k and I've got a beginner baby step saved, but I just feel like I'm not sure what to do next. I feel like I'm not doing everything I could do for my family right now. What's your household income? About $100,000. Okay. So can the two of you, you and him, cash flow the school and stop the student loans? If we're not as aggressive on these rental properties as we've been for the past couple of years. Okay.

If you, I mean, it's a matter of choice for you. I personally wouldn't put my kid into debt. I would rather get them through school debt-free and then work on the rentals. Is there a reason that plan doesn't sound good? No, it does, but I guess I just needed to hear it, because he's got two younger brothers that are going to be going to college, too, here in the next few years. Well, baby steps four, five, and six are simultaneous.

Four is 15% of your income into retirement. Five is kids' college, which you earn cash flowing in this case. And six is payoff mortgages, you know, rentals and house and so forth. But really, you know, in your case you're going to really, you're going to delay working on six much in order to

fund these colleges. Or, in a sense, you're borrowing on student loan debt to pay on your mortgages. Yeah, which is stupid. In an indirect way, that's what's occurring. You follow me? So I should just, since we're out of our consumer debt, we should just save up a three, maybe four-month emergency fund, and then...

Yep, and then let's stop taking out student loans. Yeah. And clear them out, and then do the same with the other two. But if you can find cash flow above taking care of these college issues between the three kids, if there's money above that, then we start throwing it at either your mortgage or your rentals, one of the two. It sounds like the rentals are tiny. Yeah, they're about $60,000, $70,000 a piece. They're not huge, but they're still there.

And then your house is tiny. Your house mortgage must be small. Yeah, they're all about $50,000, $60,000, $70,000 a piece. Okay. They're more like $50,000 because you said $215,000. Yeah, yeah. And $4,000. Yeah, one's only $25,000.

I was going to write them a check like a year from now, and that was going to make me feel good. But then my son is still having to take out a loan. Yeah, and that's the little rental. Okay, I knew there was one in there somewhere to make that math work. All right. Yeah, still, I'm just going to plink along on those minimums and take care of college without debt first. Once we've got college without debt, then we find money. We throw it at the probably going to knock that little 25 one out,

and then I'm going to next knock my house out because it's pretty even with the other ones. And then how about first of the year getting back in the 401K or not? Oh, I'd get back in the 401K at 15% now. Now, okay. Yeah, well, no, as soon as you get your emergency fund. Right. Yeah, your emergency fund is baby step three and then baby step four is 15 of your income into retirement then we'll take care of college and then if we find some more

money we'll keep while we're doing those other two things we'll start throwing it at the rentals in the house that's your order of attack baby steps four five six in order actually three four five six because you're finishing out the emergency fund in order. Right. But it's not like, but 4, 5, and 6 are all simultaneous. 15% were taking care of college, and then if there's money left, we keep going down the list, and the next thing on the list is mortgages. Gotcha. So there's still a prioritization even though it's simultaneous.

Is that logical? Yeah, I guess I was just trying to jump ahead to 4 and skipping three, or two and three, I guess, technically. You were skipping five. Or skipping five, I mean, yeah. Yeah, and you skipped three, too. So, yeah, you're jumping around. We just put you back in order. That's all we did.

You can do it. Good plan, man. Thanks for calling in. Lisa's with us in Harrisburg, Pennsylvania. Hi, Lisa. How are you? Hi, Mr. Ramsey. It's an honor. Honor to talk

to you. How can I help? I have a question for you. Okay. We have our house currently on the market right now. We listed it in July for $215. Side note, there's not an ELP in our area. We just lowered it down to $199.

We've had only one showing. We've had hundreds of hits online. What we're struggling with here is we paid $150 for the house. The average days on the market in my area is $369. Good Lord. What is wrong with the area? Well, it's sort of a weird situation. It's rural Pennsylvania.

We have like an elite area about 15 miles from us, and those houses are selling for about a half a million. And so that's a vacation because it's on a lake. We're on water and we're on a stream, but our realtor is saying that our house is kind of out of the local market, so we're waiting on a vacationer. Yeah, so you're not in Harrisburg proper then. No, no.

I'm in like northeast PA up near New York border. So your biggest problem is you have a very limited market yes i mean 369 days on the market is unbelievably long in this current environment that we're in i mean and all that says is you're in a very rural setting um and it's not true resort it's sort of adjacent to resort stuff. Right. And you just have a limited market. I don't know what to tell you other than is there anyone in that resort area, if you drive up in the area that is true resort and you're like fringe resort,

is there a realtor up in that area that's moving a bunch of that property that you see their signs everywhere that kind of specializes in that so that if they had a client that really didn't want to quite pony up for that area but wanted a half step down they knew you were there i mean they're they're reaching out to our realtor they're just not not purchasing i'm talking about your the real estate agent in that area, is there someone who dominates that resort area? The higher end stuff? Not really, honestly. I mean, we kind of stepped out to our nearest town to get kind of a highfalutin realtor. I mean, we had a professional photographer.

It looks gorgeous online. It's so rural, it's kind of like everybody's second job. So why are you moving? We need to get it. We have an hour drive to work. We can't do it anymore. Yeah, okay. Three kids. Yeah.

We're on the road four hours a day. My husband didn't know how significant. Like, did we just say, oh, well. I don't think price is your problem. You've got a marketing problem. You don't have anybody looking at it. They're looking at it online. No, they're just lurkers.

They're not clients. They're lurking. They just liked the picture, flipped through, and then when they realized where it was, they walked away. They were not clients. The location killed them. It was not the house. And it was not the price. Yeah, because our neighbor's house, I mean, the closest neighbor, same setup as ours,

his sold for $189, half the size of our house, but doubled a lot. Yeah, but he found a buyer. I mean, you just don't have any potential buyers much, and that's what I'm trying to do is fix the marketing side of this. This is a really tough one. I mean, do I pick another realtor? Yes. And that's what I was trying to get you to do is to go up there and look at the resort

area. Who's moving those half-million-dollar houses that when someone comes to look at that half-million-dollar house and says, gulp, I really can't afford it, but I love this area, they go, oh, I got this place down here in the fringe at under $200, and it's the sweetest little house, and you've got to see it. And that's who your realtor is, the person that can do that. That's the people that are gathering the leads in the upper area, and they can funnel them down to you for the people that don't want to spend enough to be in the other area.

And that's your best shot. You just need more potential buyers. You haven't had a good potential buyer. And it's probably not your realtor's fault. They probably just don't work this area, and they don't have potential buyers, you haven't had a good potential buyer. And it's probably not your realtor's fault. They probably just don't work this area. And they don't have potential buyers for it. It's a very unique

semi-rural, semi-resort situation. Oh, I'm sorry. This is the Dave Ramsey Show. We'll be right back. In the lobby of Ramsey Solutions, Mark and Tiffany are with us. Hey, guys, how are you? Hi, Dave. Hi. We're so good. Welcome, welcome.

Where do you all live? We live in Greensboro, North Carolina. Cool. Well, welcome to Nashville and all the way over here to do a debt-free scream. Exactly. Fun. How much have you paid off? We paid off $1.15 million.

Okay. That would be the most this week. $1.15 million. Okay. And how long did this take? Eight months. Okay. Now, this is a story.

And your range of income is? It's about $800,000. Okay. Now, this is a story. And your range of income is? It's about 800 grand. Okay. My goodness gracious. All right. So, what in the world? This is bizarre numbers. Yeah, Dave.

It's a long time coming. So, we were the Joneses. So, you know, for a long time, we had to have the new everything and the nice everything. Luckily for us, plus for us, that we had a decent income to support all that. Well, I'm just, I'm an IT sales guy. And Tiffany? I stay home with these two little ladies. Awesomeness.

Yes. Okay. And so, yeah, for a long time we got caught up in that. And I listened to your show probably for about eight months leading up to this. And, you know, for me it was pride and ego. Just, you know, I'm too sophisticated for that. That's for other people. And I came to realize through a lot of prayer and a lot of just listening and thinking and knowledge and reading that this was the right way for us. So we sold a lake house.

We sold a beach house. And we were beans and rice for eight months, much to the chagrin of my family. But we made it through and knocked it out and so excited. My goodness gracious. So $800,000 is your typical year's income? Yeah, I mean, I guess over the last 10 years, this ranged between $8,000 and $1.2 million around that. All right.

You're obviously slaying it. Well done. So how much of the $1 million and some change was the sale of the houses what the lake house bring what the beach house bring so the the uh the net off the lake house was only like 150 but the beach house was paid for and it was about 470 okay but the net i mean the 1.5 included the payoff of the mortgage of the other one right yeah sure okay so what was the total on the two properties well it's because that would have reduced the whole thing by the $470,000 and would have reduced it by the other, right? Yeah, so the sale of the property was $780,000 on the lake house, and we owed about $120,000 less than that.

Okay, all right. But that $600,000 or so is included in the $1 million paid off, right? Oh, sure. Okay, all right so the a big chunk of this then if i'm hearing this right was done with the sale of these two properties oh yeah okay oh yeah wow yeah getting rid of all of the all of the extra stuff which was a challenge whenever you were when you were me and i and we were used to doing it we used to in the summers being able to go to the lake. And so Mark got me on board finally. What made you decide?

Because, I mean, I'm kind of thinking I might have tried to keep one or two of those, or one of those, the cheaper one, the $4.70 one, and just worked our way through, given your income. What made you decide to go so radical? I'm not saying you did it wrong. I'm just curious. Yeah, I mean, for me i i think about like eternity is all a lifespan and i think you know we're given maybe 90 years if we're lucky in that full eternity which is like a glimpse in time and then within that time i'm given even less of a time to make a generational impact on my kids and so for for us, it was, you know, I created a list of things that

brought me joy and a list of things that created a burden. And the houses were at the bottom, were not on the list of the joy, and they were at the top on the burden. And so I was like, you know, this is, let's keep it simple. But Tiffany wasn't that way on one of those houses. I was actually not that way for a while. One of my best friends actually said, don't you lie to Dave Ramsey. Don't you tell him that you were on board from the beginning. Well, I mean, with your all's income, I can say I might have sat there and argued to keep the Lake House or something, you know, the 470 which it was hard it was really difficult to to give up something that you know i felt like we were doing well and everything is we can do this but it also kind

of boiled down to they're getting older and we have you know what do we want to do with them as they get older and and what do we want to show them and so we had you know we kind of had to have a heart to heart because we needed to see what was important. And they're going to see that, yeah. Well, and the other thing, obviously, in terms of time spent somewhere, whether it's the beach or the lake, that kind of stuff, with the income you've got and no debt, you can do anything you want to. Yeah. I mean, you can go to the lake in Europe if you want.

I mean, you can do whatever you want to do. And it's not even anywhere near as expensive as those houses are. That's right. You are freed up to still have incredible family memories doing recreational type stuff is what I'm trying to say. Interesting. Very interesting. So a big pile of it was that.

What was the rest of the debt? So our whole debt is by virtue of paying those off, we were able to pay off the home that we live in. And so we used the cash derived from that plus cash flow and some savings to pay for our home that we live in. Okay, so it was just three properties. Yeah, that's right. That was all your real estate. I mean, that was all your debt was three properties. Okay. So the home you live in. Okay, so it was just three properties. Yeah, that's right. That was all your real estate. I mean, that was all your debt. That's right.

That was three properties. Okay. So the home you live in is worth what? 1.6. Wow. You guys are amazing. Congratulations. Thank you.

Well, and obviously holding that then and clearing that, that's a big part of the equation for you too. Yeah, because that's secured then. Amazing. Absolutely amazing. So you're sitting there with a net worth well in excess of $2 million now easily. Yeah, because that's secured then. Amazing. Absolutely amazing. So you're sitting there with a net worth well in excess of $2 million now easily. I'm guessing at 401Ks, but with this income, you've got to be loading that up.

So how's that feel? It feels great. And, you know, I'm kind of to the point of second-guessing even having so much of our net worth tied up in a house. But it feels great. You know, it's a first step in a journey. Yeah, yeah. Well, give yourself a couple, three years to think on that one. You don't have anywhere to go. You're in great shape.

Don't worry about it. Because your net worth is going to continue to grow, and that house is going to continue to grow because of your income ratios. I mean, it's just incredible. You'll be able to do whatever you want to do. So very well done, you guys. Thank you. Absolutely. How old are you two? I'm 41.

I'm 36. Wow. Yeah. You guys are on top of the world. And these young ladies, what are their names and ages? This is Abigail, and she's nine. And this is Amelia, and she's six. Oh, very cool.

Yeah. And one of my granddaughters is an Amelia. Oh, that's awesome. So Rachel's oldest is Amelia Jane. Yeah. So very cool. That's part of us coming to this show, too, is we need to draw a line in the sand. And this is kind of what the McDaniel family stands for.

And this is one of those anch mcdaniel family stands for and um this is one of those anchors in their life and our life and you know just that point of no return type thing yeah we're changing the family tree here yeah by so many different parts of this math and the actions you've taken and so forth what an amazing set of numbers and an amazing story wow thank you very very cool you guys are neat. Well, congratulations. Of course, we've got a copy of Chris Hogan's book for you, Retire Inspired, number one bestseller. I'm also going to throw in a copy of The Legacy Journey because you're going to enjoy it. Have you read that yet?

I've got your box set. Okay. You've got the box. I love it. Okay. Cool. But, I mean, because that's where you guys are, dealing with wealth rather than dealing with money, which is what that book's about. So, way to go, you guys.

Very well done. All right, Mark and Tiffany, Abigail and Amelia, $1.15 million paid off in eight months, making $800K. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt free. Way to go, you guys. Man.

Wow. What a story. Man. Some of you are shaking your head going, I should have such problems. I could get out of debt, too, if I sold my beach house and my lake house. Yeah, you could, but you know what? You've got a beach house and a lake house in your life, too. It's just not got that name on it.

And you might have $80,000 in income instead of $800,000. It's still the same ratios. You've still got to do something that's radically different and radically uncomfortable to get a radically cool result. The question is, are you going to be willing to do what they did? Wow. This is the Dave Ramsey Show. Our Scripture of the Day, Luke 8, 16. No one, after lighting a lamp, covers it with a jar or puts it under a bed, but puts it on a stand so that those who enter may see the light.

Eleanor Roosevelt said, It's better to light a candle than curse the darkness. It's true. Cheryl's with us in Gainesville, Florida. Hi, Cheryl. How are you? Good, sir. Thank you so much for taking my call today. My pleasure. How can I help? Hey, so my husband and I started Financial Peace University and completed that course in January, and so we're on baby step two,

and I called today to cancel my whole life policy that my parents purchased for me when I was a teenager, which was a long time ago. And so the intern, they didn't, of course, you know, wanted to throw up all these roadblocks of why I shouldn't cancel it, and so I just wanted to kind of review that with you. Okay. You went through Financial Peace University. You understand that whole life sucks.

I do, absolutely. However, this particular policy is very small and it's a premium offset, and that's what the insurance agency – I explained to the insurance agency that I'd like to buy it. It's a very small policy, so it just barely sucks because it's just little. Exactly. So you want to keep it anyway? No, I just wanted to go and ask,

because I'm going back. No, I told her to print out the form, and I was going to sign it on Monday. Good. Going back to the fact that it's premium offset, it doesn't cost me anything, and I'm going to have to pay, you know, $50 a couple. I'm sorry. It has a cash value in it, right?

Yes, it does. It's $3,000. Okay. And you understand premium offset is they're using the $3,000 cash value to pay the premium. Correct. That's not offset. You're using your savings account instead of your checking account to pay your premium. Exactly.

So there's no offset. They're getting their dadgum money. You can count on that. Right. They're taking it out of my paid-up dividends. It's not free, is my point. He made it sound like it's free. Right.

What she kept going back to is because of the juvenile policy, the rates are so low. Yeah, I know. And when you die, you know what happens to the $ policy, the rates are so low. Yeah, I know. And when you die, you know what happens to the $3,000? They're going to keep it. Nothing. They're going to keep it. So how is this a good idea? There's no way this is a good idea.

Cheryl, you do whatever you want to do, honey. But those policies are crap. And I wouldn't keep it 30 seconds. And I wouldn't have a big discussion with a stupid whole life insurance agent about it either. Matt's on the line in Los Angeles. Hey, Matt, how are you? I'm doing fabulous, Dave. Thank you for taking my call.

Sure. What's up? So my question revolves at a 25% rule that you use for the home mortgage. My wife and I bought a home about a year ago. And I'm one of those finicky people where I did not include the property taxes, the homeowners association, and the insurance as part of the payment to the bank. I do all of that separately. So my question is, are you supposed to include the HOA, the property taxes,

and the insurance as part of your 25% rule in the way that you teach. I generally just say principal interest, taxes, and insurance, HOA, no. But most people, as you know, are paying that as one payment. And the whole point is not whether it's 25% or 27% or 23%. There's no magic number there. The point is trying to keep people from being house poor. Okay. Where they got such a dead gum payment, they can't breathe.

And then they wonder why they're broke, right? Yeah. Well, we just started your class about six months ago. We actually purchased the house about a year ago. And if you do numbers like we did, we actually did a 30 year loan, but it accounts to 20% of our income. So we have about $40,000 left in debt to pay off, and then we are looking to actually refinance into a 15-year loan once the debt is paid off. Or you can just, if you've got a good interest rate, you can just pay that loan like it's a 15, and it'll pay off in 15.

That's true. We have the option to do that as well. Either one is fine. I don't know if I'd go to refinance cost if you have a competitive interest do that as well either either one is fine i don't know if i go to refinance cost if you have a competitive interest rate but it sounds like you're fine i mean because you're you're 20 is you're in great shape for right now you got to clean up this other debt but i mean the thing i don't want to have is somebody with a you know six thousand dollar income take home pay and and a four thousand000 house payment and wondering why they're broke.

You know, the whole point is big numbers here, not the minutia and not splitting hairs on it. And I'm not saying you're splitting hairs. You're being wise to ask for details. There's nothing wrong with that. But I'm saying my formula of 25% is not so perfect that if you're at 25.5%, oh, God, you've messed up everything. No, no, no. The point is just to not be house poor.

That's all it is. It's kind of a big number philosophy. In other words, big, chunky numbers, not fine-tuned numbers. Other things I do, I do fine-tune numbers on. But that's a good clarification. Thanks for calling in. Jackie's in Oklahoma City. Hi, Jackie.

How are you? Good. How are you? Better than I deserve. What's up? Okay. I'll just start off really quick. I am 27 years old.

I have a total of $25,000 that I owe. That's including my mortgage and excess debt. And my question is, would it be worth it to save and add on to my house or to save up and buy, or at least save up for the down, or if it would be more ideal to save up, just continue, continue, continue saving once we complete every single step and then buy our dream house later on. Okay, I'm a little bit confused.

Yeah, I know. I'm sorry. It's okay. You're wanting to add on to this house or move up in-house? No, add on to this house. I live in a great area. I work from home is why I physically need a space. And what is the house that you're living in worth?

Right now it's probably worth about $70,000. I bought it for $40,000. Okay. And if it's worth $70,000 now, what size addition would you do? How much money would you spend on the addition? I would want to spend about $20,000 grand just enough to add on an extra room just because i work with children that's good and um so the homes in your neighborhood on your street and in the next street over sell for what price range they sell for about um between 70 to 90

um the upper side of my neighborhood just because it's a really small street, it has pretty nice houses. I mean, they're pretty darn nice. And then my part is... Okay, so my point is, if somebody's looking for a house that's worth $90,000, it wouldn't be unusual for them to be on your street. Right. But you wouldn't come on your street to look for a $110,000

house. Right. Okay. So don't put more than 20 into it because 70 plus 20 is 90. And in order to be able to get your money back out, you don't want to overbuild the neighborhood. Okay. Right. So yeah. And yes, we're going to pay cash for the addition. And what's your household income uh it's about five thousand and my mortgage is about four hundred dollars a month yeah and your mortgage and all your debt is only twenty five thousand right right yeah so break that apart how much of that is mortgage and how much of that's other debt uh there's only three thousand in debt and then there's 22 in. Okay. And you're making like $70,000 a year. Right. Household income.

All right. Well, and so how quickly could you come up with $45,000 to be debt-free and have the $20,000 to do the add-on? Well, I can't do math myself, but I know that we plan on eliminating the excess debt within this next month. Yeah. We plan on eliminating the excess debt within this next month. Yep. And then we're going to kick off and start paying the full amount plus an extra full amount between the middle of the month. Let me ask you this. If it takes two years from today for you to be debt-free and you have the addition done and you paid cash for the addition, is that okay? Well, I mean, that's where I'm kind of confused.

I want to do what's best. I'll just ask you a simple question. If it takes two years from today, and you are debt-free, it's not a trick question. Is it okay with you if you have the addition completed and paid cash for, and you're 100% debt-free, and it's two years from today? Is that an okay plan? I think so, because I honestly love where I live. Good.

Then I think you can do that because that's $22,000 a year out of $70,000 and you paid off everything, house and everything, and you paid cash for your addition. You ought to be able to do all of that within two years. So I think you've got a great plan. I would become debt-free and then I would save up and add on to my house. No more than $20,000. Make sure you get contractor bids and write everything down so you know what you're getting into.

That puts this hour of the Dave Ramsey Show in the books. We will be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. 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.