The Ramsey Show - App - Pay the Price to Change Your Family Tree (Hour 2)

Episode Date: December 28, 2018

The show about you

🎵 Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. You jump in. We'll talk about your life and your money. It is a free call at 888-825-5225. Terry is with us in Columbus, Ohio.

Hi, Terry. How are you? I am well. Thanks for taking my call. Sure. What's up? Well, I recently inherited some money, which I actually haven't claimed yet. I just don't know what to do with it.

It may sound kind of strange, but I'm just afraid. I don't want to do the wrong thing with it and lose it. So I don't know where to begin. Okay. No, that's not strange at all. As a matter of fact, it's kind of wise. It's like, how much money? It looks like $380,000,000 wow how old are you i'm 53 just turned 53 okay are you broke or do you have money um pretty much

broke except for this so except for what for this inheritance oh except for this inheritance. Oh, except for this inheritance. Okay. What's your household income? Well, so far this year it's about $26,000. Okay. Well, it's kind of like someone tossed you the keys to a race car and you've never driven. Right. And that would be a little scary because it could get away from you, right? So you're wise to be, I don't want you to be terrified, but you're wise to be careful and aware that you don't know what you're doing, and that's smart. So what's the answer to this?

Well, just like learning to ride a bike, how do we do it? We actually do it. You can't talk about it. You can't have someone else do it for you. You have to learn to ride the bike. And the good news is you can learn to ride a bike and not die. And so you can learn to handle money and not lose it all. Okay.

But you might fall over and scratch your knee. But you won't die. You won't die. You'll get up and ride the bike again, right? You follow me? And so you need to give yourself permission to make a few mistakes. And so don't be so terrified that you have paralysis of the analysis. But on the other hand, you do want to move slowly.

Here's a couple of rules for you, if you'll remember these, okay? I use this rule personally, and I am the money guy. My personal rule on money is the KISS principle. Keep it simple, stupid. That's what i tell myself okay and what that means is do not invest money in anything that you don't understand ever never invest money in something you don't understand now right now you don't have a lot of understanding of different kinds of investments is that a fair statement yes it is but you do know about opening a savings account at the bank don't have a lot of understanding of different kinds of investments. Is that a fair statement?

Yes, it is. But you do know about opening a savings account at the bank, don't you? I do. Okay. So we can put it in there. Well, there was a disbursement given back in June, which I went to my bank, which I just had a checking account at that point. And I did put it in a money market savings account. Okay.

And she asked, you know, is there going to be more? I said yes. I didn't know how much at that time, so I didn't give her any figures. She said, well, when you're ready, you know, come back to us, and we'll help you with investments. And I said, well, I'd like to pay off all my debt first, my mortgage being one of those things. And she said, no, no, mortgage is good debt. We'll help you refinance to our bank, but you want to keep that i don't know much but i know that's not right well and you know that you have a banker that's trying to get you to borrow money so asking a banker if you should pay off debt's

like asking a dog if it's hungry right so you know you didn't get investment advice there i wasn't telling you to go over there for investment advice i just said that's a place you can park some money for now until you understand i wouldn't go there for investment advice. I wouldn't go there for financial advice. They're freaking bankers. Okay? No, thank you. There's nobody in there I need their opinion about anything.

But you can go in there and have a savings account, and that's safe. So that doesn't violate principle number one. Principle number one is KISS. Keep it simple, stupid. Don't put money in something you don't understand. Now, what that means is later you're going to start learning about investments, but you don't put money in them until you get comfortable. Not perfectly comfortable, but intellectually comfortable.

You understand what a mutual fund is, and you can tell somebody the basics of what a mutual fund is. You're not a mutual fund expert. You're not running a multimillion-dollar fund. You don't have a master's degree in finance. I don't want you to do any of that, but you can understand what a mutual fund is. There's not that much to it, okay? Okay.

And when you do, then you could pick out a good mutual fund, and I'll give you somebody that can train you and teach you. What you want in these situations, that woman was trying to sell you something and you could feel it, couldn't you? Yes. And so you don't want someone with the heart of a salesman. What you want is someone with the heart of a teacher around money. And about 85% of the people around investments and the stuff like that, these people at the

bank, they're all salespeople. About 15% are teachers. So you want someone with the heart of a teacher. So go to SmartVestor at DaveRamsey.com. Enter your info. It'll drop down a list of the SmartVestor pros. These are professional investment advisors. They're not bankers.

But they are not going to slick and sell you stuff. They're going to teach you. Go in there, and the first thing you tell them when you meet with them is, I'm not doing anything today. I'm here. I got this much money, but I'm here to learn. I got $400,000, but I'm here to learn. You have to teach me.

And if you leave there dumber than when you came in, then you don't have the right person because they didn't teach you because you're capable of learning. Right? Yes, I am. Okay. So rule number one is don't put stuff unless you understand it. Rule number two is look for people with the heart of a teacher, not the heart of a salesman.

Whether it's a mortgage broker, whether it's an investment broker, whether it's a real estate broker, whether it's an insurance broker helping you get insurance, whatever you're buying around the issue of money, you need someone with the heart of a teacher, and you don't put money in it until you understand it. There is no shame in going slow. There is shame in going slow. Okay. There is shame in doing nothing.

Don't do nothing, but go slow. Okay. So I should go ahead and accept it and then put it in a money market savings account? That's fine. All of it? That's fine. And in one bank, or should I? You probably should have two. You probably should have two.

You're single, I take it. Yes. Yeah. You got 250,000 coverage, and you can pop it into two different banks and no more than 250 in one bank and just have two different money market accounts. No big deal. Accept it. Schedule an appointment with a SmartVestor Pro. Sit down and start to learn.

If it takes you six months of meetings to get comfortable,'s okay that's okay okay you know you have a half a million dollars here give or take you know that you need to learn about and take your time take your time take your time and if you understand it then when somebody comes on the news at night and goes oh the stock market wow you know how they do that, right? Yes. Yeah, if you ever hear that and you know what you're doing, then you don't freak out. Do you own a home? Well, I'm paying the mortgage.

Yeah, okay. How much is the mortgage on it? Right now, it's $35,000. Oh, good. So you can pay that off. That's all I have left. Yeah, it would be a no-brainer to pay that off. I'd go ahead and pay that off today. And you're debt-free.

But see, you didn't freak out when you bought a house because you're comfortable with houses. You grew up in a house. There's houses on your street. Houses are all around you. You know about houses just because you got walking around since. And so when you bought a house, you weren't freaked out. You were kind of excited. Investments can be the same way.

Take your time and learn. Thanks for calling. It's time to take another look at your budget. That means scouring every expense and making sure you're not leaving any money on the table. One of the biggest expenses is your mortgage payment. I recommend a quick Churchill checkup. In just five minutes, our friends at Churchill Mortgage can tell you if you could save some cash each month. They've helped thousands upon thousands of my listeners keep more cash in their pockets through a smarter mortgage.

I want you to call Churchill for your checkup and see if you can lower your monthly payment or better yet, see how you can pay off your house early. Think about it. What could you do with your money if you didn't have a mortgage? Call Churchill at 888-LOAN-200, 888-LOAN-200 or visit churchillemortgage.com for your Churchill checkup. That's 888-LOAN-200 or churchillmortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Welcome to the Dave Ramsey Show.

Kevin is in Indianapolis. How are you, Kevin? I'm great, sir. It's a pleasure to talk to you. You too, man. What's up? Well, my wife It's a pleasure to talk to you. You too, man. What's up? Well, my wife and I are in baby step number two. We've paid off about $6,000 in debt so far.

We have about $31,000 remaining. But my wife's job might be changing in the next six months, so we've hit the pause button on paying off the debt and have been building up the emergency fund, and I just want to make sure that that's the right step to take or if at some point I should start paying off debt instead of building up that emergency fund more. The more sure you are she's going to lose her job,

the more you should push pause. Okay. So if you're if you're pretty sure that this is a going down i mean like this is this is 85 percent getting that she's going to continue to have a job say that again goodness probably 85 chance she's still going to have a job after six months. It's just kind of not 100% sure she is. There's some changes in the field that she's working in that maybe she will, maybe she won't, but it's probably most likely that she will. On 85%, 90% probability, I'm not stopping your debt snowball.

Okay. 50-50, I would stop your debt snowball. But I would monitor it, and as you get closer and closer, you may want to stop and build up cash if you start seeing more uncertainty instead of less uncertainty. Okay. I think you'll get some indicators as you go along, won't you? Yes, I think so. Yeah, I'm probably going to get back on my debt snowball.

I think there's change coming, but it doesn't sound like there's a high probability of her losing the job, more like a high probability of her keeping the job. So if it's 85%, 90%, I'm staying on the job, then let's keep the debt snowball rolling. Now, if you get more and more scared for a good reason, not just because you're a scaredy person, but as you get closer, you're getting indicators from the employer that, hey, we probably are not going to continue this, then, yeah, I'd stop and pile up cash aggressively at that point.

But at this stage, no, I would not. Plus, you're working, so it's not like we're going to starve leanne is with us in columbia south carolina hi leanne how are you fine how are you sir better than i deserve what's up um my husband is trying to reach his retirement iq as quickly as possible and one of the things he's looking at is an opportunity, hopefully, to take a pay cut but maybe get equity in a software company that he would work for. And I was just wondering what you thought about that kind of plan. Okay.

I would never do anything with the retirement IQ as the only reason. Wealth or money as the only reason, especially with your career, because you're pouring your whole life into this, and you ought to be able to make money doing something, and you'll be able to hit your goals. But instead of trying to hit this home run, how old is he? He is 41. Okay. trying to hit this home run how old is he he is 41 okay all right we have no debt uh paid for a

house and about um 130 and uh mutual funds good um good well you're in great shape so he can do whatever he wants to do it's just a matter of what what you know what helps us get where we want to go and is he going to enjoy working at the other places the kind of people he wants to be around the type of work he wants to do and is it taking him long term where he wants to be and the money's great so how much of a pay cut would we take in order to take the equity deal well that's what he's negotiating right now it's a small company and they want some work done but he doesn't know if they'd be willing to pay his salary. And so he thought, well, in exchange for a lower pay, he could maybe bargain that for equity.

Oh, well, why don't we get both equity and good pay? Um, just because he thinks they might not be able to, they might be making a ton of money over there. Small doesn't mean broke. Well, it's definitely not broke, but the guy is older. I don't know if he's – he might be trying to – he wants to update all the software before – in a very short time. And so hopefully that does give them some leverage.

But I guess I'm asking more for me than for him because... So what does he make now? Right now, gross is $122. Okay. Well, here's what I would do. I'd get $122 plus equity. Okay. I don't know.

I mean, this set of assumptions where you assume a negative before you even start negotiating is crazy. Yeah, the guy wants the software done. Your husband has the target. He goes, yeah, I'll take an unstable situation with a small company versus my really good job if I get equity on top of what I'm already making. Okay. You think the guy's offering equity, or your husband just might hope he does? Well, he and a friend of his found this opportunity, and the guy has no investors.

There's no one on the board, and he is in his 70s. And so that's why they're saying, well, maybe there's an opportunity there to get in. And it is a good company. He has some big clients and that just, you know, make something of it in the future. Equity might be good, but an option to buy it might be better. Okay. Where he ends up with it. Because what you're telling me is you've got an older gentleman who needs a transition plan. Well, that's what they're in.

They have just started talks, but I just get nervous whenever he's talking about the money side. And eventually he would like to start his own software company and i guess he's also looking at that as here's some experience here's a guy who did that and i can learn also from him maybe you buy this one yeah that's true instead of starting one because this one's sitting there this guy's got to do something with it. So I think you guys just continue the talks. But here's the thing. If the guy can pay what he's already making and he gets option to buy or equity or both above that, it becomes a no-brainer then, doesn't it? Okay.

And your husband's getting to live his dream, which is he wants to own a company someday, either this one or use this one to learn how and build one himself someday, right? Now we're doing this for more than just money. Yeah. But the only motivation at the start of the conversation was, I want to make a pile of money to hit my R.I.Q. Well, he wanted to hit the retirement I.Q. so then he could start his own company. Yeah. I didn't say that. Well, he wanted to hit the retirement IQ so then he could start his own company. Yeah.

I didn't say that. So, yeah, it would fit in line with his eventual goals of, hey, I don't have to worry about money so I can start my own thing. But I'm with you. In order to accomplish that goal quickly, I don't want to go into the land of stupid, which was your – that was your fear, that he was going to take some huge risk or something here but uh and i don't like his attitude that he has to take a pay cut in order to get these other things i want him to get a full pay and get these other things i would like that too yeah and you're not going to get it going in the way he's thinking right now you need to jack it up and make it happen so uh that you know uh i think you got potential here there's a lot of good things in this story that make a lot of sense so good call and it sounds like he's got you to

he's got that entrepreneurial go-getter uh you know he's the racehorse fully into the bit and uh you're the ones got to hold the reins and that's why god sent you to each other he needs your he needs you to hold back a little bit and be wise. And you need him to pull you forward. And so that's a good balance between the two of you. I think you guys got a good team there. You're doing well. Hey, thank you for the call.

Open phones at 888-825-5225. You jump in. We'll talk about your life, your money. We appreciate you being with us. This is the show where we teach you how to live on less than you make. Live on a written plan. Have money saved for emergencies and purchases and changing your family tree. People get wealthy listening to this show and doing what I tell them to do.

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We are all at risk, and it doesn't make sense to wait. Numbers don't lie. That's Zander.com or 800-356-4282. Thank you for joining us, America. We are glad you are with us. Eric and Melissa are with us in New Haven, Connecticut. Hey, guys, how are you? Hey, Dave, we're doing great. How are you?

Better than I deserve. I see on my screen you're debt-free. Congratulations're doing great. How are you? Better than I deserve. I see on my screen you're debt-free. Congratulations. Thank you. Thank you so much. We're very excited to be calling in. How much have you guys paid off? $83,798. Cool. And how long did that take? 21 and a half months. Good for you. And your range of income during that time? We started around $138,000 and by the end we got up to about $160,000. Wow. What do y'all do for a living? I'm a school teacher and I'm a physical therapist. Very cool. Good. What kind of debt was the $84,000? It was a little bit of sort of everything, not too much.

But we had student loans for about $51,000. Car loans were about $8,000. And then actually a bunch on credit card and personal loans for about $25,000. Wow. What happened 21 months ago? Well, I listen to you a lot, and it's really the classic case of when the student is ready, the teacher will appear. I've heard you say that a lot. And we weren't looking for anything.

In fact, I was just in the backyard mowing my lawn. I'm a bit of a podcast junkie and was scrolling through the list and saw your face in the feed and said, hey, I think I know a little bit about money, but let's see what this guy has to say. And so I started listening to you and listened to you for about the first 45 minutes and wasn't really sure what to think. And then all of a sudden I actually heard that first debt-free scream and stopped mowing the lawn, ran inside, told Melissa, you know, you have to listen to this.

This is, like, unbelievable. And, you know, she just to it and uh kind of just went from there wow so the debt-free scream made you get off the lawnmower it sure did yeah he came running in he was very excited very cool it really was it was you know we weren't looking for anything we were just kind of bebopping along, like you say, and we were honestly just resolved to this is just going to be the way it is. We had no hopes for better. We just kind of thought that this was sort of normal for us. Wow.

Well, I'm so proud of you guys. Very, very well done. Congratulations. What made you, what do you think when you heard that, that free scream, what do you think flipped in, what kind of a switch flipped in your brain that's an interesting thing that you went from kind of like apathetic to all of a sudden running into the house um i just you know i i wish i could remember exactly who the caller was but i think it was just the reality that somebody else did it.

The caller, I remember, was a single girl, and she was able to just do it. And just for the first time ever, there was like, wow, this is sort of somebody else has done this before. And nobody else that I knew had ever done something like that. Yeah. And I think just being tired, you know know tired of looking at our tax returns at the end of the year and seeing how much money we make and not getting forward anywhere and not being able to do any better than that in fact almost taking a step backwards every year kind of like it gave you hope didn't it it sure did yeah absolutely yeah wow. Well, you guys did it! I'm so proud of you!

Awesomeness! So, what do you tell people the key is? You paid off $84,000 in 21 months. That rocks! So, how do you do that? Tell people that are on their lawnmower right now. So, get off your lawnmower and go get another job. Yeah, we kind of came

up with three quick keys. You know, the number one is, is the why. For me, once I started diving into your process and learning, the why had to really be there. And for us, the why was, for me personally, the why was my kids, you know, I got two young boys, seven and five, and just really seeing them and, you know, knowing that we're kind of in this rut and we can't really do anything about it. Pay a price to change your family tree. That's the line right there. Yeah.

Took the words out of my mouth. That was it. And that's the line that I've been just repeating to myself over and over again. I just want to, you know, see a change. The other piece, too. Sorry, change. The other piece too, sorry, Dave, the other piece too that we were seeing was having the why, but also having the emotional reaction. I know for me, I was angry at the debt. Like I was mad and I was tired of it. And we were

just, you know, after we kind of looked at our big picture and realized that we had a really good income, but we really weren't doing much with it. It was just kind of flying away. I love it. I was angry at how much we were working and how much we were doing, but just thinking further into debt. Like, we just couldn't get our heads above water. You know, make $138,000. We make too much money to be this broke. Right, right, and it was

mystifying to us, and I was mad. I was really, really mad, and so that really kind of got things started, and I think that was the key for us to just, like, dig in deep and, you know, get to work. So tactically, in terms of what you actually did, what were the things you did that moved the needle? I think, well, first of all, getting together and getting on the same page. You know, Melissa was the one who handled the finances. I was an absentee financial partner. You know, I was actually probably more of the problem in the beginning. I would just kind of spend the money and not really pay attention to it at all. And that was a big challenge. We really had to come together as a team and be united because she honestly didn't trust me. You know, I came in

with this plan and she wasn't on board right away. It was a good month of sitting on the couch, turning off the TV, talking, talking, outlining our why together, you know, having that dream date that Chris Hogan talks about all the time. And really me trying to prove to her that this is really it. This is the thing that I'm buying into because taking that money out, we had about, I think, $5,000 or $6,000 in savings that we dumped right away onto the debt initially. And that was a big, tough commitment for her to be able to trust me um you know and but luckily uh luckily it worked out yeah we did it and then obviously the budget you know the

budget the budget the budget that's kind of our daily daily measure you know that's the rhythm of the 21 months there you go yep way to go guys. I'm so proud of y'all. Did you have more cheerleaders or detractors? I would say that we had really good support. There was really no one that looked at us like we were crazy. I think they were kind of surprised, like, wow, okay, you're doing that? And, all right, good luck, you know. And I think really the biggest cheerleaders in all of this was just us to each

other. I mean, that was so important that we were both holding each other up when we got a little week. And, you know, when I wanted to go on vacation and summertime was coming and I was thinking about going to a beach and renting a beach house. And Eric's like, you know what? Not this summer. Like, we're not there yet. And just hang in there. And, you know, we needed to be each other's cheerleaders. That's the breakthrough right there. Yeah, the beach house breakthrough. That's it right there. Very cool.

Well, congratulations, you guys. We've got a copy of Chris Hogan's retire-inspired book for you, and I want that to be the next chapter in your story, to be millionaires. You're well on your way to doing that that and be outrageously generous along the way. Absolutely. Can I just share one last story real quick here? So for the listeners, just for some inspiration and maybe some motivation, we started about five years ago.

We brought our dog to the vet and we found out that for the rest of her life, the dog's life, that we were going to need $250 worth of medication for her. And we were driving home terrified that night. You know, making this much money, $250 a month, was not a reality for us. And we actually ended up going home and calling up the mortgage company. We refinanced our mortgage to open up some money to be able to pay that debt bill every month. And if we fast forward to last month, we're out of debt. We have our emergency fund already. I'm driving into work, and my engine blows.

Oh, my gosh. Eric, I don't want to cut you off, but I'm short on time. I want you to get your screen in. You guys count it down. Let's hear your dad free scream. Okay, you guys ready? Colin and Ryan, we're doing our scream. Three, two, one. That's how you do it! Way to go, guys! This is The Dave Ramsey Show. We're glad you are joining us, America. This is the Dave Ramsey Show. We're glad you are with us.

Stephanie is on the line in Charlotte, North Carolina. Hi, Stephanie. How are you? I'm doing great, Dave. How are you? Better than I deserve. What's up? I have a question about an extra life insurance policy that I have.

My husband and I both have term life insurance policies, but I also have another policy that I inherited from my parents. And I think it's a universal life policy. And I wanted to find out if I should cash it out or save it. And the reason why I ask is because the original amount on it was $25,000, but the death benefit is now $30,546.25. That's because enough money has been... So it's not money that just goes away. Right. Well, the one of the two is going away, okay?

If they pay you $30,000, then you didn't get a death benefit. All you got was your savings. Follow me? Well, the policy was originally for $25,000. No, the policy has the cash value. The savings portion, the only way that happened is one of two things. There's one of two possibilities, okay? One possibility is, and this is the most likely one,

is that this is a very very old policy and the cash value is no has now grown to be bigger than the face amount okay okay it was it was done 32 years ago that's what i'm guessing yeah so and i only paid ten dollars a month on it yeah but apparently it has grown over 30 years, which it should have, to be $30,000. And so when you die, all they're doing is giving you your savings. Okay. They're not giving you insurance. If you cash out $32,000 and put it in a fruit jar and you die, there's $32,000 in a fruit jar. Gotcha.

You follow me? I mean, you get to keep your savings when you die. That's how life works. The only difference here is that you're getting no insurance because your savings has grown to be bigger than the insurance policy. If you go back and actually run the investment returns out on this policy versus what has been put into the policy, it will make you ill as to how poorly it has returned. And, you know, you're going to find that you've had a 30-year investment at 4% or something, or 3%, or whatever it is. So what would I do? Make sure I have the proper amount of life insurance in place. Once you have the proper amount of life insurance in place once you have

the proper amount of life insurance in place i would and you're not sick you're not you know you're not you're you're able to get the right amount of insurance you're able to do all of that you've got it all in place then i would always 100 of the time cash out and close up cash value insurance policies. 100% of the time. You come out better financially. It's a math thing. It's just a math thing. You just do not end up with more money the other way.

And so you got $32,000 in savings? Put it in different savings where it makes more money. Put it in a better investment. Dustin is with us in Austin, Texas. Hi, Dustin. How are you? I'm doing awesome, Dave. How are you?

Better than I deserve. What's up? I have just a quick question for you. Me and my wife got married a couple months back, and I went out and bought her a car. And right now we owe probably around $12,000 all in debt with the car and a credit card um we're currently renting an apartment for about thirteen hundred dollars a month

and i was wondering if we should use some money that we saved up for a down payment on a house if we should use that money and just pay off the car before we get into the house and then save up start saving up money again for another down payment yes i we what i found over 30 years of doing this dustin and you guys just got married you got you know you everything's going great you want to go get you a house it's easy to get house favor everybody's telling you get a house get a house get a house i understand that and it feels like you know markets hot the interest rates are low and times areo, times are good, you know. And everybody gets, they just, people get out of control. I'm just the guy that goes slow because I've got too many scars from when I didn't go slow.

And so by go slow, I mean I have found that people, the house is going to be a blessing to you, sir, if you don't have any payments when you move in the house. The house is going to be a blessing to you if you have an emergency fund when you move in the house. A house is going to be a blessing to you if you have an emergency fund when you move in the house. That way, when something breaks on the house, I didn't say if. I said when. Yeah. If something breaks on the house, you've got the money. It doesn't put you in a financial pinch.

But a house is not a blessing when you've got a bunch of debt and you don't have any money saved. It's a curse. And so, yes, I would tell you to be to be debt free which means we're going to pay this car off and um or sell it move down in car but i'm probably just going to pay it off and and then i'm going to build my emergency fund of three to six months of expenses then i'm going to save my down payment it might take you just a few months longer to do it that way might even take you a whole year longer but you're talking to a guy who's getting ready to celebrate my 35th wedding anniversary. One year, it's not spit.

One year is not a big deal. You're going to not know where some of these years go over the years. So do it right. Do it slow. Calm down. Don't take the pressure from your family and your friends that are telling you to go buy, go buy, go buy, go buy, go buy. Don't do that. Cody's with us in Branson.

Hi, Cody. How are you? Pretty good. How are you doing? Better than I deserve. What's up? Well, me and my wife are in the process of beginning to pay off debt. We've been married about seven years, bought a home right out of the gate,

and then accumulated some debt over the course of the last seven years. We have been offered a home basically free of charge. My in-laws own it. They're not using it. They said, you guys want to move into it, go for it, live there as long as you want. So what we're doing is we are renting out our current home and moving into this other home to kind of reappropriate some funds towards debt. My main question is, currently my wife has about $40,000 in student loans. And then we have an additional probably $35,000 to $40,000 in just other random loans, car payments, credit cards, things like that. What is your household income? Our household income is about $100,000 a year.

Cool. All right. My main question, though, is I know normally with, like, the babysit program, you start with the biggest and work your way to the smallest. No, it's the opposite. Opposite, okay, I'm sorry. With that, her student loans are adjustable rates. Would that change the way you would do anything? No.

Okay, but you would still start with the smallest and go up? Because they're not going to have time to adjust. You're going to be debt-free in two years. Okay. Because you're going to live on nothing. Beans and rice rice rice and beans if you're willing to move out of your house and rent your own house out you're willing to do almost anything and you need to go on beans and rice rice and beans don't see the inside of a restaurant unless you're working there no vacations we're on a tight tight tight tight tight scorched earth budget we're going to get this mess cleaned up fast

rip the band-aid off fast and that's 40 000 a year for two years out of 100 that leaves you 60 to live on minus taxes you can do that but it's tight well and honestly we just came from less than that for the two of us and we were still making all the bills we're making now. Okay, good. Then you can do it faster than that. So when we... See, 80 grand in debt, 40 a year for two years, you're done, right? Yep. And so it's not going to have time to adjust enough to matter. Right.

So list your debts smallest to largest. Pay minimum payments on everything but the little one because you're going to be living so tight and you're going to be sacrificing so deeply that you're going to need to psychologically and emotionally see the progress. And that's why paying off the little one works best. Okay. Because you bust it through and you start to believe.

You start to believe and you just start going, yeah, we got this. Yeah, we can do this. And because that little one's gone, that one's gone. And keep a big old chart on the refrigerator. Draw big red lines through it as you knock it out so you can walk through the kitchen and point at the enemy and go, you're the enemy. Sally Mae, I hate you, you ugly woman. You know, Bank of America, get out of my life. You just start talking to these people because they've been screwing you over.

They've been taking your life. And you let them do it. But you now have declared war on the enemy and you work too hard to spend your whole life being broke people you guys it's time america you work too hard to put up with this crap off these banks and be treated the way you're treated by these people think about the way they talk to you when they call you why in the world do we let them into our lives like this you deserve deserve better. Change it. You're on fire, Cody.

You got this, man. This is the Dave Ramsey Show. Hey, guys, it's Kelly Daniel, associate producer and phone screener for the Dave Ramsey Show. Hey, this hour of the show is over, but you can find our podcast on iTunes or Google Play. We're everywhere, for free, here to serve you.