The Ramsey Show - App - Never Buy Investments at a Credit Union or Bank (Hour 3)

Episode Date: December 25, 2018

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🎵 Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us, America. We're glad you're here. Open phones at 888-825-5225. You jump in.

We'll talk about your life and your money. Reggie is with us to start off this hour in Charlotte, North Carolina. Merry Christmas, Reggie. How can I help? Merry Christmas, Dave. Thanks for taking my call. Sure. What's up?

Quick question. I need to get my income up. I'm 22 years old. I became engaged about two months ago. So I read your total money makeover, and according to that, I need to get my income up. How would I go about starting a home cleaning service? What are the first things that I'll need to worry about? Do you know how to clean a home?

Yes, sir. Okay. All right. So that's the first thing you've got to know. You have to know how to do it. So you're going to start a maid service? Yes, sir. Okay.

And you're going to go in and do the cleaning? Yes, sir. Good. Okay. All right. There's not a lot you need to know other than you need to be able to do the work, and you need to be able to convince the people that you can do the work, so they will pay you to do the work.

Other than that, you've got to figure out a pricing strategy, and what are you going to charge and how. A lot of people just charge by the hour. And then you need to find out what a lot of other people are charging in your area to clean houses. And you're talking about residential, right? Homes. Yes, sir. Okay. Yeah.

So just, you know, jump on Craigslist and jump on a couple of other things and try to surf around and figure out what people are charging by the hour or are they charging by the square foot or how are they charging. And then you've got a way to price it, and you price yourself a little bit low but not super low. But in most areas, you probably make $20, $25 an hour doing that. Okay. And sometimes you can just say, well, I'll clean the house, you know, half day, this

or that, or whatever, or Saturdays, or whenever you're going to do it. I don't know when you're planning to actually do the work, but you just got to figure out a way to price it, and then you got to come up with customers. You got to find people to get you to do it, to let you clean the house, and then that are willing to pay you. And then once you've got one of those, then ask them to tell everybody they know. And if you have a customer that's highly influential, that will spread the word to that lady of the house or whatever will tell all of her friends that she has this great young guy who's got a does a fabulous job and he's very reasonable and he shows up on time and he's nice and he's polite and he's clean and he does a good job and all that kind of stuff. Then she spreads the word. You'll get work. You'll get work.

And, you know, because word will spread. But you just got to get – and if you find somebody that's very influential like that, give them, you know, agree to clean their house for free a couple times if they will help you get other – every time they get you a new customer, you'll do one half-day cleaning or whatever, however you're going to price it free or however. Give them a break in return for giving you more customers, and then you'll just grow the business hand over fist. Getting the first one is the hardest part, but set your pricing.

Decide whether you're going to furnish supplies or they're going to furnish supplies. The lady that cleans our house, we furnish the supplies. She just furnishes the labor. And, you know, so it's just a very simple agreement. But, you know, you've just got to find somebody that's steady and that's predictable, and then you've got to show up when you say you're going to show up five minutes early and stay five minutes late and do a great job while you're there. And don't stand around yakking all the time.

Get your work done. Jake is with us. Jake's in St. Louis. Hi, Jake. How are you? Hey, Dave. Merry Christmas. Merry Jake. How are you? Hey, Dave. Merry Christmas. Merry Christmas.

How can I help, sir? Hey, just started listening to you about a week ago. And my wife and I have the first baby step done working on baby step two. I have some pretty small loans that equal about as much as my car loan is. But it will only open up maybe $20 a month in payments. Should I try to go ahead and pay off my car? Nope.

It's only $2,000, so it shouldn't take me too long, but my car payment's about $170 a month. Yeah, and how much are the other loans? It's about $2,000 for the car, and the other two equal about $1,800. Okay. Now, you need to pay them off smallest to largest,000 for the car, and the other two equal about $1,800. Okay. Now, you need to pay them off smallest to largest, regardless of the interest rate, regardless of the payment.

List your debts smallest to largest and pay them in that order. The good news is $4,000, and you're completely done. Is that what you're telling me? No, no, no, no, no. That's just starting. Oh, that's the first three? Yeah. I got a whole bunch. My wife and I together have about $90,000 of student loans, pretty much.

Our car is $2,000, and then our credit card is about $1,800, and all the rest is student loans. You have $90,000 in student loans. Oh, who's the doctor? Neither one of us. What do you all do for a living? I'm a project engineer, estimating assistantating assistant she's a dental hygienist and what's your household income um about 56 000

wow that's a lot of student loan debt to create no more income than that how long have you guys been working how long you been out of school uh just about two years okay all right yeah i'm probably picking up some extra work then you need some extra income like How long have you guys been working? How long have you been out of school? Just about two years. Okay. All right. Yeah, I'm probably picking up some extra work then. You need some extra income to throw at this. Yeah, I've been applying. Yeah, good.

Good. And even if it's just delaying pizzas or whatever. And just make a change. And, yeah, the $90,000 is a big one but no just list your debt smallest largest let's work the debt snowball and work it the right way and you know if you need to get your income up considerably so that you can do this in about three years and but you can't do that with what the numbers with the numbers you're giving me right now it's going to take you a little longer than that right now but i don't project that to be your future income.

So I see you getting out of debt faster than that. But try to dial up the income and down everything else to where you're on about a three-year schedule. That's the plan. But definitely list your debts smallest to largest. And, you know, the first $4,000 is not your problem. It's the $90,000. So you're going to knock that first $4,000, you know, the first 4,000 is not your problem. It's the 90. So you're going to knock that first four out fairly quick,

and then you're going to start, you know, you're going to hit the wall when you hit that 90. It's just like, ugh, I just got stuck. And then it's going to feel like no progress at all. That's when you're going to have to really have the character to push on through and to stick with this. So, hey, good question. Thank you for joining us.

Open phones at 888-825-5225. Nathan is on Twitter. Dave, do you listen to any podcasts? I listen to ours for two reasons. One is I love the content, especially Entree Leadership. It's our biggest podcast probably. And I listen to ours also, not only the content, especially Entree Leadership. It's our biggest podcast, probably. And I listen to ours also, not only the content, but just to be checking on my team, right? And most of the time when I crank it up, I listen to preachers, pastors that are friends

of mine. Michael Easley has one called In Context, and Michael and I have been friends for years, and he's doing a series on leadership right now that's really good. And I'll just plow through it. And I listen to Andy Stanley. He's a pastor. Tim Keller is a pastor. You know, those kinds of folks are who I dial into.

I think the only mainstream one I dial up anymore is I've gotten hooked on this NPR one. How I made this or something like that. It's really good. It's interviewing people about how they grew these big companies and very intriguing stuff. Guy's a good interviewer too. So it's fun. Fun to listen to. Yeah, you can, podcasts are awesome. And you can learn a lot

that way. My wife listens to a bunch of them. So it's a great way to get content and multitasking. There's nothing smart about smartphones if your wireless plan is blowing your budget each month. Pure Talk USA offers smarter wireless with unlimited plans starting as low as $20 per month. You never pay data overage fees, and we never turn off your data. No contracts, no hidden fees. And if you're thinking our low cost means less coverage, think again.

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Our question of the day comes from Blinds.com. Find out for yourself why Blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code RAMSEY and you'll get the best deal at Blinds.com. Hannah is in Missouri. She says, is it necessary to hire a financial advisor when investing? I can open a Roth IRA and college fund at my local credit union. What does a financial advisor do that makes using one worthwhile?

I would never buy investments at a credit union or a bank. Ever. They're bankers. It's a whole different skill set. No chance I'm buying that. I don't buy mufflers at the transmission store either. And I don't buy shoes at the hair salon. I mean, think about it.

No, no, no, no, no, no. You're going to get a simple savings account if you go into the financial institution, or you're going to get bad investment advice from somebody that doesn't know what the flip they're doing. Never do that. What does a financial advisor do? A good mutual fund financial advisor like our SmartVestor pros that we recommended on the SmartVestor program as an example. What do they do? Well, a good one, the only ones we recommend, has the heart of a teacher.

Now, about 85% of the people in the investment sales world are salesmen. About 15% are teachers. You're looking for the teacher. If you feel like you got slimed and you need to take a shower after meeting with somebody, then you did not find a teacher. You found a slime ball, a pushy salesman. And they're everywhere. But that is not who you want.

What you want is a teacher. The reason is that you are going to make your own financial decisions after being taught. But you can learn a lot about any given subject from a subject matter expert. I don't do my own taxes. I have a tax professional. I know a lot about taxes. I'm really good with math. I could probably figure it out, but a tax professional can help me through the complications of it and make me more money, keep me from sending the government money that I need to send them.

I don't do my own estate planning. I know a lot about estate planning, but I don't do my own. I have a lawyer that is a professional estate planner. He spends all day every day at work studying estates and estate planning. He knows more than I do. He's a subject matter expert. That makes him worth his money. I don't even work on my own cars anymore. I used to could work on a car back when the cars were actual engines but um i can't work

on them anymore you have to you have to reboot a car now you can't it's like a computer or something so i can't work on them anymore so what do i do i don't go i can lift the i've got a whole bunch of tools in my garage i could lift the hood and probably wander around in there and after a few days i could figure it out but it's a lot more efficient for me time wise and knowledge wise to have somebody that actually knows what the flip they're doing work on my cars they're doing it myself it's an interesting thing we hire professionals all through our lives why is it when it comes to investing that we think we don't need a professional It's an interesting thing. We hire professionals all through our lives. Why is it when it comes to investing that we think we don't need a professional?

I don't understand. Because there's all kinds of studies that show when you have a financial advisor that teaches you and is there to talk you off the ledge when the Dow Jones Industrial Average drops and it's in the evening news. They talk you off the ledge and keep you from selling, buying high and selling low. You're supposed to do it the other way around if you didn't know. You're supposed to buy low and sell high.

But that's what a financial advisor does. They actually are a subject matter expert. I know a lot about investing. A lot! I easily could do my own investing and I don't. I use one of our SmartVestor Pros. Why? Why would

I do that? Because the guy that I work with has been in the business for 30 years, 20 years. He studies mutual funds all day long, every day. I don't. He can sit down and go, this mutual fund is this, this mutual fund is this,

and he can pull up the software that he owns and run the hypotheticals, and there's what we've got, and here's what the history is, and it takes a huge time savings for me. I don't want to spend my whole life studying mutual funds. I really don't want to. I don't like mutual funds that much. I don't have to study them all day, every day. I'd rather do something fun. That sounds painful to me. That's why you use a financial advisor. They know more than you, and they can coach you and teach you. They are subject matter experts. And we use subject matter experts in every area of our lives. So just go to DaveRamsey.com, click SmartVestor, put in your info, drops down

a list of SmartVestor pros in your area that we are recommending. And they'll sit down with you with the heart of a teacher and walk you through the process. Sydney's with us in Sioux Falls, South Dakota. Merry Christmas, Sydney. How can I help? Merry Christmas, Dave. I have a question for you. I am working on repaying back my student loans, and I have about five student loans through Sally Mae, and I didn't know if I should try

working them from the bottom, or I tried to consolidate not having very much luck doing that. What are your interest rates? Between, let's see, 9.5% and 10.62.5%. Pretty high. Yeah, very high. With a refinance and a consolidation, you might get lower rates. Have you got any lower rates? Offers?

No, because my debt-to-income ratio is too high. So I can't get them by myself. Well, if they're Sallie Mae loans, there should be a Sallie Mae debt consolidation that leaves them under Sallie Mae. It shouldn't affect your current debt. It shouldn't be a big deal. We tried about six months ago to work with them to try to consolidate them,

and they said they didn't do that. Who didn't do that? That Sallie Mae didn't do it. Oh, they don't do it. No, there's consolidation companies out there that'll do it. Okay, so what you're looking for is you want to stay a Sallie Mae loan, and you want to put them all together if you can get a lower interest rate on the total. Right.

If you lower the rate. There is no reason to consolidate them unless the rate is going down. It doesn't accomplish anything you can pay off five loans exactly the same speed as you can pay off one loan that is equal to the total of the five if the interest rate's the same you'll pay it off in exactly the same but the only so the only reason to consolidate is to get a lower rate these rates sound a little high they're very high yeah they're from starting about probably six years ago now. Okay. Somewhere in there.

Yeah. And what's your household income? I make about $35,000 a year. I just started a new job 20 days ago. Okay, and what's the total of these loans? What are they total up to? They are $24,000. Okay, and you're single?

Yes. Okay, cool. All right. Yeah, it's going to take you a little while to dig through that, and you're probably looking at working some extra jobs while you're doing that to add to this income to plow out of there that much faster. $1,000 a month more income would change your life right now. That would move the needle really fast on some of these loans.

But if you cannot get them refinanced or consolidated at a cheaper rate, then just list them smallest to largest and work them as a debt snowball. And that is going to be the best way to go. But consolidation just to have one loan at the same interest rate mathematically creates nothing. It doesn't change anything at all. And so it doesn't move a thing. So, you know, I don't care if you have one loan or five loans. The only reason to have to go cheaper is to, or the only reason to go through the consolidation process is to get something cheaper.

Cheaper interest rate. That would be your only reason for doing that. Hey, thanks for the call. Appreciate you joining us. Open phones at 888-825-5225. That would be your only reason for doing that. Hey, thanks for the call. We appreciate you joining us. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money.

This is The Dave Ramsey Show. I'm Mike Pearson. 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. Thanks for joining us, America. This is the Dave Ramsey Show.

Open phones at 888-825-5225. You jump in. We'll talk about your life and your money. It's a free call. Joyce is with us in Chicago. Hi, Joyce. Welcome to the Dave Ramsey Show. Thank you. Merry Christmas, Dave. Thank you so much for taking my call. Sure. What's up? I've been debt-free for five years this month. Yay! Woo-hoo! Yay! I'm single, and I paid off $54,000 in 19 months using your Baby Steps. So again, thank you for Financial Peace University and the Baby Steps.

Cool. They work. Thank you. Here's my question. I attend a small church of under 500 people, and my pastor wants to move to a multimillion-dollar facility, and he has requested that members submit pledges for the new building fund. I wanted to ask your thoughts about pledges.

Do you consider pledges debt? It would depend on how your pastor is structuring that pledge, okay, meaning that sometimes they are pretty legalistic about it, and they basically turn it into debt. It's not legally, it's not debt. Morally, it becomes a debt, because you are making a solid pledge. Other times I have seen churches ask for what they would call a faith pledge that says that if my finances stay the same or better, I am letting you know that it is my intention to give this amount of money during this period of time. That's a faith pledge. And then you would follow through because that's your intention.

I'm willing to donate this to the building over the next period of time as long as my finances don't change but if i lost my job i'm not going to feel morally obligated and i'm not going to be shamed shamed by you people if i don't meet this pledge you follow me that's a faith pledge or generally what people would call a faith pledge in church i don't have any issue with that i do have an issue with something that you you feel held to unreasonably if your finances were bad if something happened to your finances you lost your job as an example okay um and if you feel like you'd be held to it no matter what in those situations then yeah that starts to be a moral debt it starts to have that feeling and what that what it tells what tells you you that is it changes your relationship with your church.

You're there to serve and to help and to grow closer to Jesus at church. And that's why we're going to church. I'm not there for you to extract milk from me. I don't mind giving. I'm a big giver. I'm very generous. We tithe plus offerings. You know what I mean?

We love giving to God's work, but I don't want to be in a relationship with my local church where I've become obligated, but I don't mind helping them plan by saying you know it appears that we'll be able to do x or y during this period of time uh if something happens though i'm not going to be held to that if if that's you see the difference i do okay now the other part of this equation for me is and you can do whatever you want but i don't borrow money and you're who i got out of debt and if uh if they're doing this building campaign, multi-million dollar building campaign for a 500-person church,

and they're planning to go into debt to do it, then my pledge is encouraging my congregation to go into debt. I can promise you I'm not participating in that building program. Okay. Because I'm not going to encourage my congregation to go into debt uh at all i don't encourage anybody to go into debt and i sure wouldn't my local church because you can't find it in scripture you know the god does not use debt to provide for his people it's nowhere in the bible and uh so that's a decision you got to make uh now would i leave the church over that no no but i'm not going to give to a building campaign that involves debt ever ever and i'm not giving to my

relative to help them go into debt either i'm not going to give to anybody i love or anybody i don't love to help them go into debt. It's contrary to what I believe. By the way, it's contrary to what you believe. That's why you got out of debt. So you keep that part in mind. And that's part of the equation, but that's a little different than are you obligated or is a pledge of debt. Liliana is with us also in Chicago.

Merry Christmas, Liliana. How can I help? Merry Christmas, Dave. Thanks for taking my call. Sure. So I have a huge disastrous mess right now, and I never really looked at my finances this way before. And we're trying to figure out how to pay down our debt.

And we already saved our $1,000. That's in our savings account. And we started saved our $1,000. That's in our savings account. And we started our snowball. We also cashed out some whole life policies that we had. And we got $9,000 back out of that and canceled them. Good. You got your term life in place. Yes, we have that.

Good. So now with the $9,000, we started to pay off some of the debt that we had. But now looking at it and really budgeting, we're seeing that we're in negative $500 approximately every month. So my husband kind of freaked out and said, you know, we've got to sell our properties. We've got to cash in my IRA and take all the money out and just throw it into our debt. And my concern is that we're going to take a big hit on taxes at the end of next year if we do that. I agree. What is your suggestion on that?

Well, you've got to do something. But I agree. I'm going to do almost anything to keep from doing that. I tell people not to cash out retirement unless it's to avoid bankruptcy or foreclosure. Now, here's my question, though. Okay? How are you going to make up this $500 shortfall? What are you going to do?

Well, he's got an old car that is sitting in our garage that he likes, you know, kind of like a project car. It's a GTO 71, I believe. So he's looking to sell that. What's it worth? I think he's going to sell it for about $18,000. And that will correct your $500 shortfall? It will, but that won't happen until February. He already has somebody who wants to buy it for him.

In February? In February. Okay, so how are you covering your $500 shortfall? That's the thing. You're're gonna get behind on your bills no we definitely will not do that we we own our own business as well so you know there's little bits of money that come in here and there unexpectedly you know that you really don't plan for but then again so what do you owe on that's creating the 500 shortfall do you need to sell one of your stupid cars so my car is completely paid off i have an old car an 05 um he has a newer car um but what's his car payment his car payment i believe might be around four or something or five something,000 something. Voila.

Yeah. Long before I cash out retirement, I'm selling his car. Okay, but he needs a car to get to work. Well, get a $2,000 car. Get a $2,000 car. But you don't need a $25,000 car to get to work. You're broke. Yeah.

You can't meet your bills. The other option that he was thinking was to sell one of the properties because that one does have equity in it so we owe a house we own a house that um we have rented out right now but that one so how much debt do you guys have not counting your homes goodness um so we owe about um 128 in student128,000 in student loans, $90,000 in credit card debt. What else, what else? $20,000 on a car. Yeah, $20,000 on a car. That's kind of, yeah.

Okay. And what will the property bring? The property would bring us probably around $40,000. And what's your household income? About $125,000. Okay. Yeah, I'd sell his car, and I'd sell the property, too. Okay, but don't touch the IRAs.

No. Right? No, and sell the collectible, too. Yes. All of them. Yes. And that, you know, let's see, that's $40 and $20 and another $20. So that's $80, and you're about $170 in debt.

So that gets you about halfway there. Okay, that's without our properties, right? Well, you're going to have to start selling everything in sight until you get this debt cleaned up, whatever it takes. I mean, you've got not counting your properties. I don't know how many other properties we've got. I ain't got time to get into all of that before the break here. But, yeah, his car's gone, the collectible's gone, and the $40,000 property's gone for sure yesterday,

and probably more if you've got it to clean this mess up. This is the Dave Ramsey Show. Thank you. Our scripture of the day, Proverbs 16, 3. Commit your work to the Lord and your plans will be established. Chris Everett said, find something that you're really interested in doing in your life. Pursue it. Set goals, and commit yourself to excellence. Do the best you can. Absolutely. Hey, guys, if you feel out of control when it comes to your money,

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Check it out at EveryDollar.com. David is with us in New York City. Hi, David. How are you? How are you, David? Merry Christmas. Merry Christmas. Hi, David. How are you? How are you, David? Merry Christmas. Merry Christmas to you, sir. How can I help?

Here's my question. I'm a recent convert. I make a good salary, even though I'm in New York City. My accountant wants me to put money into my Roth, so I don't have to pay taxes on it. But yet, I'm down to my last $6,000 that I owe for baby step number two. Once I do that, I just have my fleece payment left on the car, and then I'd be debt-free. Your thoughts on this? Do I save the money on the taxes knowing that I will pay it out?

I make about $130,000 a year. A Roth IRA does not save you on taxes. Well, not a Roth, a regular IRA. I apologize. Traditional IRA. I didn't mean to say Roth. Traditional IRA, yes, sir. Your accountant is giving you tax advice. They're not giving you financial advice.

There's a difference. Okay. Okay. What he's suggesting, or she's suggesting, we'll save you on taxes, obviously. That's true. Would you borrow money on a credit card in order to invest in a Roth IRA to save on taxes? Well, no. That would be stupid, you know?

And so effectively, by not paying this off, it's as if you borrowed the money. And the funny thing is, I'm only listening to you for six months now. I just want to let you know I've knocked out $22,000 in the last six months. And you're on your way. I've been holding on to this last five because I just kind of was scared to go with that last thousand for the baby step number one i said let me have a little extra and i kind of knew what you were going to say but i had to hear you say it just so i know yeah knock it out man you got it knock it out uh be done with it jared is in des moines iowa. Merry Christmas, Jared. How can I help?

Yeah, Merry Christmas, Dave. Hey, I'm kind of new to the show, and I really enjoy it. Thank you. My question for you today is, I own a few rental properties, trying to get some residual income. I actually own my own business as well, but I want something to kind of sit back and retire on when the time comes. My question for you is these three properties I own outright at the moment. I paid cash for them. I don't have any other debt except the house I'm living in at the moment. But we're getting ready to sell that and then move to another debt-free property. So with that being said, my question is with interest rates now,

is it smarter to go out and borrow against those three houses and get three more investment properties going, or is it better just to save the cash? You know, it might take a little longer. What motivated you originally to do this debt-free? I just don't like payments. Why? I guess I don't. The business that I own takes up a lot of my time and a lot of my responsibility, so it's kind of hard outside of that to find time.

It means for, you know, much other responsibilities there, but. That ain't got anything to do with payments. That's probably the best answer I got. That ain't got anything to do with payments. Okay, so. Let me answer anything to do with payments. Okay. Let me answer it for you, okay? Okay. I think I know, listening to you. But if I'm wrong, you tell me, okay?

Yes, sir. I think you paid cash and didn't borrow on them because you don't like risk. Absolutely. Yeah. Me, too. Me, too. I don't like risk. And I don't like people telling me what to do. Yes, sir. I'm a hillbilly. I don't like risk. And I don't like people telling me what to do. Yes, sir.

I'm a hillbilly. I don't like being bossed around by other people. And you know what? When you've got a bank, you've got people bossing you around. The borrower is slave to the lender when you have a mortgage. And I just, there's no way. I made a lot of money in real estate in my early 20s, and I went broke in my middle 20s in real estate because I borrowed up to my eyeballs because I did not have my risk meter was broken. I did not measure risk well or at all for that matter.

I thought as long as you could make a spread that risk didn't matter, and so the returns were infinite. Just roll up that leverage, baby. And now I've gone completely the other way. I don't borrow money for anything ever, and it sure has caused me to be able to build wealth in good times and in bad times. See, I don't know if North Korea is going to burp or not, but if they burp, if they have a little hiccup over there, all of a sudden

stuff might change you know you know like twin towers i don't know if you're old enough to remember those things getting bombed by those cowards right oh yeah flying airplanes into it you know i mean you know i'm not predicting bad times but you can't do your stuff based only on good times you have to have a plan that sort that prospers you in good times and in bad times but you can't do your stuff based only on good times you have to have a plan that sort that prospers you in good times and in bad times and debt-free does and so i love the fact that you're debt-free i think you were wise to be debt-free okay and i think somebody out there got into your brain a little bit and acted like you weren't sophisticated and they're probably somebody that doesn't have a net worth as big as you. You're probably kicking their butt.

Don't take financial advice from broke people. You're doing fine. Pay cash, grow your portfolio more slowly but steadily, and you don't have to take penalty steps backwards for being stupid. David is in Fresno, California. Hi, David. Merry Christmas. How can I help?

Merry Christmas, Dave. And I'd like to just take a moment and say thank you to you and the whole team at Ramsey Solutions for everything you do for us folks. Well, thank you. We're honored to serve. How can we help today? Dave, the question I have for you today is my wife and I, we have a 1999 Toyota Tacoma. It's got about 300,000 miles on it.

And, well, in our budget, we've kind of built up an extra $2,000 just in case the engine or the transmission goes out. And we still have some student loans. Myself in particular, I have about $36,000 left in student loans. And I'm just unsure if we should use that $2,000, you know, for the truck or if it should be applied to the student loans. Well, we teach folks to follow what we call the baby steps. Baby step one is $1,000 saved. Anything above that we apply on debts. That's not retirement accounts.

And so, you know, I'd have $1,000 set aside to do repairs. I mean, that's a good truck it's probably gotten toyota tacoma go they'll go forever man already has gone forever 300,000 miles yeah but it'll probably go forever we've actually got a couple of them daniel my son drives one so is my son-in-law winston and uh they're both good good vehicles really are they're not that they ain't got that many miles on them yet, but they're both good vehicles. And so, you know, I think that thing will run a while, and it's probably going to need to. If it doesn't, then you may have to trade and get you another little hooptie truck of some kind to get you by until you get out.

But I don't reserve more than $1,000 while I'm getting out of debt. It's what we teach. It's what we've done for 25 years, and it works. It's not much money. $1,000 is not much cushion, but it's not designed to be much cushion because the goal is to have complete and total focus on the debt. I mean, just be wearing it out. Just be wearing it out.

Every morning you get up, you're thinking about one thing, and that's get that stuff cleared up. Get that debt out of here. Because as soon as I get it out of here, now I don't have any payments. I mean, if you don't have any payments but a house payment, you can breathe again, people. And then you can build up your emergency fund to three to six months of expense. It's pretty easy, and that's maybe step three.

The average family doing the stuff we teach, by the way, folks, is getting out of debt everything but their house in about two years. That's the average. That means some do it faster and some do it slower. And then they're building up their emergency fund, three to six months of expenses in about six months. So about a 30-month plan, about two and a half years on average to get through those first three baby steps.

But then it starts. The wealth building starts. That puts us out of the Dave Ramsey Show and the books. We'll be back with you before you know it. In the meantime, remember, there is ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, it's Kelly Daniel, associate producer and phone screener for The Dave Ramsey Show. Did you know that in 2017, Dave Ramsey Show listeners paid off $50 million of debt?

That's pretty impressive. And it could be you this year. Keep listening for more inspiration.