The Ramsey Show - App - Practical Advice on Getting Mortgage Life Insurance (Hour 3)

Episode Date: January 9, 2019

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🎵 Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. 888-825-5225. Well, it's the new year. One of the things you do at the new year is you set goals. You know what goals are when you are doing them with money?

Your monthly goals with money are where you tell your money what to do for the month when a goal is you tell yourself what to do right i have to do these things in order to accomplish this i'm going to exercise to lose weight i'm going to take an extra job to pay off debt and if i'm working with my money my goals are called a budget on a monthly basis. You take the driver's seat. You take control. People who win with money take control. And that's what the EveryDollar app is all about. It's about giving every dollar an assignment.

You plan the dive. You dive the plan. That's what we say when we're doing scuba, right? So you're right, you plan the money, you money the plan. Not really, but it didn't work at all. Let's just not go back there again. It worked in my head, but it didn't work when it came out. Hey, you got to have a plan.

You got to lay out the plan, and then you actually have to live the plan. That's the point. And there's over 5 million, almost 6 million people now using the EveryDollar app. It is one of the most popular apps in America today for money, and it is the best budgeting app, and it's completely free. So make 2019 the year you get control. Go to EveryDollar.com, download that app. It's free.

You've got to do this, people. You have to tell your money what to do. Jacob is in Austin, Texas, starting off this hour. Hey, Jacob, welcome to the Dave Ramsey Show. Hello, Mr. Ramsey. It's a privilege to speak to you. I hope you're doing well today. You too, sir.

How can we help? I want to start off with my question, and then I want to give you a little bit of background about myself. Is that okay? Sure. Okay. My question is, I have an opportunity to sort of owner finance my father's home from him. Owner finance your what?

Wait a minute. Your phone broke up. Owner finance what? Owner finance my father's home from him. It's about a $500 value property, and we've agreed on a $200,000 price tag. And my other option is to scrap that idea and then rent and save some money to put a down payment on about a $150,000 to $200,000 starter home. And I make about $75,000 a year right now,

and currently in step two of your baby steps. And I'm working on paying off about $14,500 in debt, $6,000 of that being credit cards and about $8,500 from a personal loan. So your dad owns a home that's $500,000 in value, and he's willing to sell it to you for $200,000? Yes, sir, that's correct. Okay. Is it the home he lives in, or he's just wealthy, or what?

He lives in the home, but he's getting to the age where he's pretty kind of, kind of retiring and his health isn't the greatest. So, uh, we're looking at moving him into sort of an assisted living situation and that would free up some income for him, uh, since he is on a fixed income now.

Uh, but I also should add that I'm getting married here in June, first part of June. And, uh, my fiance is completely debt-free, and she's going to be making roughly $40,000 to $60,000 a year, depending on the job that she gets put into. So I was just looking for a little bit of guidance in what you thought about my situation.

What's she think about your dad's house? She's kind of on the fence. She definitely likes the fact that it comes with about 20 acres of land, a shop, a couple of nice ponds, and it's about a 3,000-square-foot home. It does have a little bit of a foundation issue, which is going to ballpark cost about $20,000 to fix, but that's not anything pressing. That's really the only hiccup in the place. It's pretty much turnkey other than that, and the home is about 10 years old now, but it's a very nice home.

Has your dad suddenly hit a wall with his health, or is this a gradual decision? It's kind of been a gradual thing, but he's sort of getting to the point where his memory is kind of getting away. He doesn't have any sort of disease, but he's getting a little bit of dementia going on. He's had a couple of strokes here in the past five years or so, and we're just looking to get him into a place where he's better taken care of and can enjoy life a little bit better instead of having to worry about paying his own bills. Okay. I would want you to be debt-free before you buy a home from anyone.

Yes, sir. And so we're going to have to work on that, and you're going to have to knock that out. So it's probably going to be about six months before you can do this transaction. Is that okay? Yeah. six months before you can do this transaction. Is that okay? Yeah, I was honestly planning on, if I do owner finance that deal for my dad, just sort of renting, for lack of a better term, from him while my fiance and I pay off the debt. And I'm planning on having all that paid off by the end of this year, 2019, and hopefully this time next year to be either moving to buy my father's home or start saving to put a down payment on.

What if you rented his house for what the payments would have been? That's what essentially we're going to plan to do. Yeah, go ahead and do that. There's no downside to that because he can always sell it later if something happens or you can sell it or whatever. But here's what I would tell you to do. I want you to be debt-free before you become the owner. And I don't think we'll do owner financing.

I think we'll let you and your fiancé's income will be together at that point. You'll be making enough to get a mortgage on a 15-year fixed rate. Let's just buy the house from him and let him with your own mortgage. I don't want you paying payments to relatives. The borrower is slave to the lender, and I wouldn't do that deal. It's a kind offer because of the deep discount that he's giving you, and he can still give you that discount. There's not a problem with that.

And then you can help him invest the $200,000, and it will make him probably more than you were going to pay him monthly anyway if he was going to give you a competitive interest rate. You'd probably help him make more money on the money than you were going to pay him on the money, unless you were going to pay him some 10% or something, which you should never do. That wouldn't make sense. But if he was going to give you a mortgage rate that was like today's mortgage rates, 3% or 4%, he can beat that, investing that same amount of money and make more money.

So that's what I would tell you to do. The second thing is, or the last part of the equation is, I would not do this deal unless he and you are very clear that two years from now, if you and your new wife decide you don't want this house anymore, that you can sell it. And he would have no say in the matter of what you're saying. He'd have no say in the matter, and his feelings wouldn't be heard, and he wouldn't hate you for the rest of his life or something. If that's the case, then we don't want to do these deals.

We don't want to do these deals where we're handcuffed to them. But this thing's got $300,000 in equity in it. It sounds like a nice place. It's a deal you need to do. But let's get out of debt, and let's use mortgage money to do it, not his borrowed money. And let's be free to sell it should we decide to later without somebody being upset with us. So that's how I would do it if I were in your shoes. And that helps him, and it helps you.

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Hey, Mike, welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call. Sure. What's up? Hey, I just got a question for you. I'm 60 years old. My wife's 58.

I retired. I have a retirement of $45,000 a year. We have about $50,000 in the savings account. My wife is going to retire December of this year. She has a 403B. Six months ago, my wife's employer, basically this is their money that they contributed, was managing her money. But anyway, they had to give it to her, to the employees, and they had to do something with their money. So we didn't know what to do with her money. But anyway, they had to give it to her, to the employees, and they had to do something with their money.

So we didn't know what to do with the money. I mean, we didn't want to cash it out and get penalized, so we took it to a financial advisor. And yesterday I was listening to your program, and you said something about not having the money in the stock market for short-term investments. And that's where a lot of it is, and I was wondering if maybe you can guide me on that a little bit. Why would you consider it a short-term investment?

Well, she's going to retire in a year, and, you know, I don't know. We're not planning on using the money, but we just want to make sure that we have it in the right place. It was part of her retirement plan, and we just want to make sure that we have it in the right place. I would have just put it, it was part of her retirement plan, and they just issued it to her, right? Yes. And so it's still in the retirement plan in mutual funds. Well, it's in a few different things.

We have it with Edward Jones, and they have it spread out in a couple different areas. And part of it is in the stock market. And yesterday I thought I heard you say that you shouldn't have it in there if you were close to retirement. No, I didn't say close to retirement. I said if you're going to use it in five years or less, and you're not going to use this. You're going to roll this to an IRA when she retires, and it's going to be invested long term.

So you're fine to be in good mutual funds. As a matter of fact, that's where all of this retirement should be. Is it an IRA? In good mutual funds inside of her account. And so Edward Jones has managed – I'm sorry, I do not understand. They gave her a bonus, and you took it to Edward Jones? No, it was part of her retirement. But I guess – and I think it had something to do with her employer is a non-profit organization.

So somehow all the employees got what they had contributed, the employer contributed. My wife's been there for 40 years, and so they basically had to take their money and do something with it. So I'm assuming you guys rolled that to an IRA probably then at Edward Jones. That's what it sounds like happened already. Well, no. I mean, because part of it is an IRA. I mean, some of it, I'm looking at the thing now, and it looks like part of it is a mutual fund, some of it is in stocks,

and some of it is in exchange trade closed funds. Okay. Here's the thing. All of those are investments. An IRA is how an investment is treated. Okay. If you can have a mutual fund inside an IRA or not inside an IRA, you can have an exchange-traded fund inside an IRA or not inside an IRA.

And so if they gave her this inside of a retirement account, if the Edward Jones guy was doing his job, he didn't take it out of that. He rolled it inside of, from inside one retirement account to inside of another retirement account. That way you didn't have taxes on it. So it would be... No, we

haven't had taxes on it. So it will probably be in an IRA with them. So what you need to do, sit down with your Edward Jones No, we haven't had taxes on it. You always want an investment person where you know what's going on. And right now you don't. But if you're in a good IRA and good growth stock mutual funds, just because you're coming up to retirement doesn't mean you're going to cash all that out. No, you're in the perfect place. You would not move that, assuming it's a mutual fund that's a good one and assuming it's inside of an IRA. And I think that's what we're figuring out here. All right, Tommy is with us in Dallas. Hey, Tommy, welcome to the Dave Ramsey Show.

Hey, Dave, thank you for having me. Sure, what's up? I have a life insurance question for you. I was hoping to quickly run down my situation and have you tell me how I'm looking, if I'm on the right track. How much do you make a year? I personally make $80,000, then my wife makes $50,000 to make up $130,000. Okay. How many kids do you have?

Two. What ages? My son is four. My daughter is two. Okay. Do you have a net worth over $2 million? No, sir. Okay. Then you need about 10 times on you on 20-year level term, 12 times on you, and the same on your wife. So your wife needs $500 to $600, and you need $800 to $1 million on you in 20-year level term. Here's our unique situation. My wife is essentially uninsurable at the moment with a couple of medical issues.

We have a little bit of insurance at her employer, about $20,000 worth. So on my end, I didn't know if I needed to go above the 10 to 12 times my salary in that case. It doesn't help. Well, I guess it could in case both of you were in an accident together. Right. That might offset some of that. That's not a bad thought. I wouldn't go too crazy on that. What is the nature of her health issue? I don't know how temporary it is, but some high blood pressure issues, and then she's been diagnosed with depression.

And we've gone through Xander. We've gone through a few other organizations, including work, and we had a hard time getting anything. Agreed. Do you have a mortgage? Yeah. Yes, sir. Okay.

We owe about $207 on that. Yeah, I might buy mortgage life insurance on her. It's expensive. It's about five times what normal term is, but it would at least pay off the mortgage, and most of those are guaranteed issue, regardless if they don't do a medical, and that's why they're five times more. But you can pick up a couple hundred thousand that way, carry a little extra on you, and then let's just get out of debt and build our wealth as fast as we can, and hopefully

we can get past her medical issues. She can get some distance between her and both of those things that make her insurable five years down the road or something but you're right i think i i think you found correct information from my knowledge of it she's probably not insurable today with the double with the double hit of the two things you mentioned so um yeah i would pick up i'd probably pick up a mortgage life on her to pay off your mortgage if something happened to her, and then I would add a little on to yours, and so we're going to put you at $1 million to $1.2 million. It's not that expensive.

How old are you? I actually turned 30 yesterday. Okay, and you've priced it out, I assume, since you've been doing all this, right? So, yeah, and based on your advice, I think I'm a little bit high. I actually just signed a 20-year term policy for 1.5. That's okay. And then I also signed a 30-year 250K policy, a 30-year 250K. Why'd you do that?

As an addition? I'm a little high. Yeah, I probably wouldn't have done that 30. You're probably over-insuring yourself here. What'd you pay for that 1.5 at 30? Yeah, I can always drop it. Yeah, what'd you pay for that one and a half at 30? Yeah, I can always drop it. Yeah, what'd you pay for that one and a half at 30? I'm paying right around 60, I think 65 a month.

And you got that from Zander? I actually got it through my auto and home insurance. I got a little bit of a discount grouping them together. Oh, okay, cool. All right, and it's a 20-year level term? Yes, sir. Okay, good deal. Yeah, I think you got too much.

That extra 30-year policy, you're overdoing it. Because her situation, as you said, may or may not be temporary in terms of her insurability, but for sure you guys are going to be getting in better financial condition over time, and the more money you have and the less debt you have and the older the children you are, the less insurance you need. In other words, today, you probably have the highest need for life insurance that you're ever going to have in your life, and it's going to diminish, decrease every year as the children grow older, as you get further out of debt, and as you build more wealth. Then your need for life insurance goes down gradually.

We don't chop it in a gradual thing, but we don't set the insurance. It kind of runs rough. It runs out there 20 years and just goes away. But your need actually is decreasing daily as you build wealth, get out of debt, and the children age. So, hey, you're thinking about it. You're being intentional. Very good decisions. This is the Dave Ramsey Show. One question I get asked all the time is, do I need life insurance?

Listen, the whole point of life insurance is to replace your income for someone who counts on you. So if you have a spouse or you have kids, yes, you need term life insurance. It's the only way to protect them until you're out of debt and have built up your wealth. You're only digging a deeper hole if you waste money on cash value plans since it robs you of the ability to make real progress. And that's why I send you to Zander Insurance, and I have for 20 years. That's where I get all my insurance, and they only offer the plans I recommend. It is not expensive. It's not complicated. And Zander will be there as your guide every step of the way. Visit Zander.com or call 800-356-4282. You need to get this taken care of.

I can give you the advice and I can tell you where to go. But it's really up to you to take that important step to get your family protected. That's Zander.com or 800-356-4282. In the lobby of Ramsey Solutions, Andre is with us. Hey, Andre, how are you? Really nervous, but very excited to be here. Well, we're glad to have you. You'll be okay. We've never lost a patient.

Where do you live? Just outside of Philadelphia. Oh, cool. Well, I was just up there in Lancaster last weekend, speaking at a church there at LCBC. Very cool. Well, welcome to Tennessee. Good to have you. Thank you.

And all the way down here to do a debt-free scream. Yes. Love it. I'm ready to do it. How much have you paid off? I paid off $60,000 in, well, $57,000 in 18 months. 18 months. Way to go.

And your range of income during that time? I started off at $30,000 and went up to $105,000 this past year. Wow. Must have changed jobs. No. Well, I picked up some extra jobs. I was doing Lyft, Instacart, delivering packages to Amazon. I have a tutoring business.

That's my main job. And I started tutoring for some other companies on the side. But the vast majority of it was just my business did really well this year. Good. So I'm very grateful for that. Very good. Good year. Congratulations.

What kind of debt was the $60,000? It was $35,000 of credit card debt. I had a $15,000 student loan, $10,000 car loan, and some dumb loans here and there, like dentist. I never thought when I was a little kid that I would end up going into debt to go to the dentist. Yeah, really. There's not things you think about when you're a little kid.

Definitely not. I love it. How old are you? I'm 27 years old. Way to go. So 18 months ago, something happened. What happened that put you on this journey? Well, it was New Year's Eve of 2016, and the relationship I was in kind

of imploded. So I went back home to my mom's, and I was laying there on the mattress, kind of looking up at the ceiling, realizing that I wasn't worth nothing. I was worth less than nothing, financially speaking. And that was a scary thought to have. I have a negative net nothing. I was worth less than nothing, financially speaking. And that was a scary thought to have. I have a negative net worth. I have a negative net worth, exactly. And that's how I thought about it through my whole debt-free journey. But to be honest with you, it wasn't just the debt that got me.

It was the fact that I was alone. And, you know, not just because of the relationship, but I realized that the way I treated my family, the way I treated my friends, the way I treated other people, it was about take, take, take, take, take. I wasn't a giver. And so that was really the beginning of just starting to turn everything around. Wow. Yeah.

So what happened the next day? What happened after that? How did you end up doing all of this? Well, I discovered you pretty quickly thereafter on a YouTube search. And don't ask me how I ended up YouTube searching and land on Dave Ramsey. You were trying to get out of debt. Yeah, something, right? Something, yeah.

That rabbit hole was deep. But I found that, and then I decided that I wanted to go to PA school and become a physician assistant because that year, the year before, I made $30,000 doing the tutoring thing. I was looking at this debt of $60,000. I was looking at the tutoring thing of $30,000. I was like, this is not the kind of future I want for myself. I don't think this is sustainable. I worked the program, got really intense, and I was about 12 months into the program, I was about to, I got accepted to PA school, I was about to start that May, and I did the math, and I had paid off about half of the debt that I had, but I wasn't going to do it fast enough in order to start PA school debt-free.

So I decided to give you a call and I got through and I asked you, hey Dave, can I borrow money for school? And you said, absolutely, do it. No, I did not. Just kidding. You did not say that. You said, no, you idiot. Don't go to school. You've like gone halfway through. Are you really going to undo all of the work that you did? And so I deferred that acceptance, and I was going to start this past May, but when I got out of debt in July, I really started realizing that I made that decision from a place of fear,

and that was not the path that I wanted to go down. So being free, I decided not to do it at all. You made a different decision once you were debt-free on what you were going to do with your future. Absolutely. That's powerful. That's interesting. Very cool. Well, congratulations.

Thank you so much. Who was your biggest cheerleader? My mom, definitely. Okay. My mom, she kind of, you know, put fun on me, which, you, which is all good and fun. But no, she was there for me. And even though they're not here anymore, my grandparents, they lived to be 95, but they did so well with money that they had enough left to leave an inheritance to their kids and to us as well.

So yeah, I know they'd be proud. Yeah. So, you know, that memory says, okay, this is who we are as a people. We're not doing this anymore. Absolutely. Yeah. This is grown-up land. Way to go.

Well done, man. Thank you. Very well done. What's your advice to people who want to get out of debt? What's the secret? Just do it and realize that there is no easy way out. You're going to pay for it one way. You're either going to pay for it by sacrificing

and radically taking control of your life and making a change and changing your future, or you're going to pay for it when you're 65, 75 years old, still working minimum wage or still scraping by and not having anything to show for it. So there is no shortcut. You're going to have to pay for it one way or another.

So pay for it up front. Yeah. Live like nobody else. So later you can live like no one else and give like no one else. Absolutely. Yeah. So what do you think that this 18-month journey has changed in you the most? Oh, my God.

This story just sounds very transformational to me. Yeah. I'm sorry. That's okay. It's been a really big transformation. And I try now to always come to relationships and ask, what can I give? What can I give to my family? What can I give to my friends?

My relationship with my students has even changed. And that in and of itself, I know you've said this before, it's not a coincidence that when you decided to get out of debt, your income doubled or tripled. Because the way I showed up, I took responsibility. I started getting my life in order. And now I, instead of asking, okay, what's the quickest way I can make a buck? I asked myself, what is the best, what is the best way I can serve this parent? What is the best way I can serve this student? How can I connect with them? How can I motivate them? How can I encourage them to be better themselves? And you know,

one thing I always do with my students is I'm, I'm an SAT tutor. So, so, um, and I have to do my plug critical point prep. Uh, if you're in the Philadelphia area, uh, we love, we love working with students, but, uh, one thing I always do is we'll do exponential. When we talk about exponential functions, I'll say, look, I got into $60,000 of debt. If I had put this money into a gross, into a mutual fund at 12% growth interest rate, how much money would I have had by 65? And we'll calculate that, and they'll say, oh, my God, you have $10 million. And so that kind of shows them, oh, look, you could do this as well. Well done. Well done.

Well, I'm proud of you. I know your parents are. I know your mom is. Good job, man. Very well done. Thank you. Well, I'm proud of you. I know your parents are. I know your mom is. Good job, man. Very well done. Thank you. Very well done, Andre. All right.

$60,000 paid off in 18 months, making $30,000 to $105,000. That's what's called a transformation. Count it down. Let's hear a debt-free scream. Debt-free scream sequence initiating in three, two, one. I'm debt-free! I love it. I love it.

Romans 12.2 is what I sign the Total Money Makeover books with. It says, be not conformed to this world, but be transformed by the renewing of your mind. Transformation is what occurs if you're going to get your financial act together because financial act together is all about behaviors and habits and character it's all about a transformation this is the dave ramsey show This is The Dave Ramsey Show. Our scripture today, James 1, 4, Let perseverance finish its work, so that you may be mature and complete, not lacking anything.

Bruce Lee said, I fear not the man who has practiced 10,000 kicks once. I fear the man who has practiced one kick 10,000 times. There you go. Blinds.com gives us our question of the day they have a 100 satisfaction guarantee that means even if you mismeasure or you pick the wrong color when you're ordering your window blinds from blinds.com they'll replace it in other words it's a you screwed up guarantee yeah i screw up sometimes and so it's nice to have a used screw-up guarantee. You get free samples, free shipping, and new promos they run every month.

You save even more. I love this company. They're such good people, and their products are excellent. Their prices are excellent. Blinds.com. I always use the word Ramsey to get the best deal. Doris is in New York. How do I stop backsliding and spending my emergency fund on things that are not emergencies,

and most of all, my debt snowball? I'm so gazelle intense that it's challenging to see that $1,000 sitting there and not use it on baby step two to pay off ankle biters faster. How do I hold off on the excitement and refrain from touching my emergency fund? Well, here's the thing. It's just an act of will. Your emotions don't control you. You control your emotions. You're a grown-up.

And so you just get to decide. You've got to look at it and go, listen, wisdom says we need a little bit of money. A thousand dollars is not much money. And a thousand dollars is not going to cause you to build wealth or get out of debt, but it is going to cause you to fall off the wagon and mess up your system if you have a $400 expenditure pop up and you don't have it in the budget. If your alternator goes out on your car and it's $500 and you don't have the money, and now you go put that on a credit card, you're going to lose more emotional momentum than you'll gain by cheating and borrowing the $1,000, borrowing your own $1,000

and throwing it at the dead snowball. And as far as spending it on things that are not emergencies, that's the opposite of gazelle intents. That just means you're just spending money. Now, if you're having things come up in your budget, sometimes people aren't budgeting well. And so things that shouldn't be emergencies become emergencies. You're leaving things out of your budget that are going to happen.

And you have to put those things in your budget. I mean, don't be shocked that the kids are going back to school in August or that Christmas is in December. They don't be shocked that the kids are going back to school in August or that Christmas is in December. They don't move it. It's not an emergency. It's a predictable event. Tires don't suddenly wear out on your car. So these are things that are predictable.

You just watch these things and get ready for them. You budget for them, and they should not be emergencies. Emergencies are unexpected events and there's some things that you're you know as you get better at budgeting your wisdom is going to lead you to expect and you're going to get that covered well folks it doesn't matter what year it is or what's going on in the world something that's always in the top five new year's resolutions is just what she's asking about, spending less, saving more. If you've got any financial goals this year, we've updated our website at DaveRamsey.com to help you choose that specific goal and get a plan for tackling it. So if you go to DaveRamsey.com, you could click on, say, starting a budget.

We'll show you how to do it. Buying or starting a budget. We'll show you how to do it. Buying or selling a house. We'll show you how to do it. Starting to invest. Show you how to do it. Growing your savings. We'll show you how to do it. Whatever it is.

Whatever your financial goal is, we've got a great long list of them. When you click on that, it's going to lay out a customized plan based on where you are, what your goal is. And you can make your goals happen if you've got the right tools and the discipline. And if you don't know where to start, well, we do. Go to DaveRamsey.com and click on what your goal is, and we'll help you lay that out. Ray is with us in Atlanta, Georgia. Hi, Ray. Welcome to the Dave Ramsey Show.

Hey, Dave. Thanks for taking my call. Sure. What's up? Me and my wife, we. Hi, Ray. Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my call. Sure. What's up? Me and my wife, we're newlyweds. My wife works full-time. I stay at home because of my own disability. Since we got married, we've been working on baby steps

to pay off our mortgage. We have two cars. One car just got hit by a deer, and it's in the body shop. The other car has serious transmission issues, and we're going to Gazelle to pay off $72,000 off our mortgage. So the question is, should we buy the second car, or do we do our best to survive with the one car until we pay off our mortgage? What's your household income?

$90,000. Okay. And the car that you're talking about replacing is the one that got hit by the deer? It totaled it? No, no, no, no, no. Oh, the transmission one. The transmission one.

The car that got hit by the deer is my car. Okay. And is it still running okay, or did it mess it up bad? Yeah, yeah. The car that got hit by a deer is running okay. It's not going to be ready until next week, so my wife is using the car that had issues with the transmission. However, it's just holding on. It's barely holding on.

So I let her use my car. So what's the car with the transmission that's bad worth? Oh, maybe $1,500 1500 max if that okay you're making 90 000 and you have no payments but your house payment and you're aggressively paying off your house with gazelle intensity that's what you told me right correct how much is in your emergency fund about 1500 1500 in the emergency fund yes yeah okay i'm gonna put you on About $1,500. $1,500? In the emergency fund, yes. Yeah, okay. I'm going to put you on hold because puppy's blowing everybody's ears up here.

But you can still hear me, so here's the deal. You're doing this wrong. You need an emergency fund of three to six months of expenses before you move forward in your baby steps. And so you need to stop paying extra on your house until you build an emergency fund of three to six months of expenses. Meantime, it sounds to me like you have an emergency and you need to buy a $2,000 or $3,000 car. And so that's probably going to be your first thing,

is you sell the broken car and quickly put a little cash with it and buy her a $3,000 or $4,000 car for cash. And then you've got the deer-damaged car that you've got. You're fine with that, apparently, for now. It's coming back out of the shop. It's going to be okay. So we've got two cars that are runnable at that point. Then we build the emergency fund from $1,500 up to three to six months of expenses.

Then we start putting 15% of our income towards retirement. Then we start paying extra on the house. But you've started paying extra on the house so much that you don't have an emergency fund, and you've let these cars run down to nothing, and you've left yourself walking. And so you've stretched it out there too far. I want you to do all of these things, but you need to do them in a way where reality will work. And reality is that both of you need a $4,000 car is not abrasive or abusive. You're not spending money like a crazy person or something at that point. You're still fine.

So you're right on track. You're going to be fine. But yeah, you need to stop putting extra on the mortgage, buy a $3,000, $4,000 car for cash with the sale of the transmission car. Um, then take your 1500 and raise it up to three to six months of expenses. Then start putting 15% of your income away for retirement and above, pay off the house. Here's the interesting thing. I'm suggesting putting, what, $13,000, $14,000 a year into retirement out of your 90. You're going to be driving a paid-for car, and you're going to have an emergency fund.

You're going to be walking in a lot more peace than you're walking in right now because you guys are living right on the edge. You've got no money. You've got no debt, but you've got no money. And so it's put you on the edge, and there's an edge in your household. There's a tension in the air that I want removed. The interesting thing is mathematically this is going to mean you pay off the house one year later, maybe 18 months later than you would have anyway. It's not going to change your life negatively.

It's not going to mean you're in debt on the house forever. It's not blowing up the goal of paying off the house at a very young age. You're still going to get to all of that. And it's really only going to delay it about a year to a year and a half. You are in fine shape. You're going to be okay. Hold on. I'm going to send you a copy of the book, The Total Money Makeover,

to show you how to do all this stuff. That puts this hour of the Dave Ramsey Show in the books. We'll 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, associate producer and phone screener for The Dave Ramsey Show. If you would like to do your debt-free screen live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you

to come to Nashville and tell Dave your story.