The Ramsey Show - App - Practical Advice on Paying Off a Second Mortgage (Hour 3)

Episode Date: September 17, 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. W as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. We ask that you jump in and be part of the program today.

This is all about you. Chris starts off this hour, Harrisburg, Pennsylvania. Hi, Chris. Welcome to the Dave Ramsey Show. Hi, thank you so much, Dave. Really appreciate the opportunity. Thank you. How can I help? Well, I was calling in about a question. We're in baby step three. But before I do that, I think I had another idea in mind because I'd like to say hello and congratulations to Brittany. I also had breast cancer when I was 30 years old, and that was 26 years ago. So I'd like to tell her she's got a lot of life ahead of her. Very cool.

Very nice. Yeah. Appreciate that. Okay. Your question about Baby Step 3? Yeah. I've been on Baby Step 3. We got out of Baby Step 2 the end of last year of 2017. And Murphy keeps messing with us.

And the latest thing was that my husband had a medical emergency last month. He was off work for three weeks and he does have insurance, but we've, after everything's sorted out, our portion of what we have to pay, I got a final bill is far good and we've got 2300 in a health savings account good what i'm wondering what's the best strategy what would you do i would use the 2300 towards the medical bill and then i pay the rest of the medical bill out of your emergency fund and go ahead and just rip the Band-Aid and... Why would you keep the debt?

Not keep the debt, but I know for this kind of a bill, they would let us have payments. So? And... Why would you keep the debt? Because Murphy keeps messing with us. Is something else going on? Just things. Not right now.

Okay. Then just pay the bill. But, like, just a couple months ago, it was my husband's truck. And before that, you know, it was something else. Slow down at his work where he didn't get as many hours. You know, things like that. So my impulse was to just rip the Band-Aid. But I also hear you say you cash flow something.

So what's the difference between... Cash flow something means you pay cash for it it doesn't mean you take payments on it okay cash flow means you pay for it as you go and in this case you're going to pay for it as you go they're going to send you a bill and you're going to write them a check and you don't have anything following you and then you you know you're you're back on baby step three you're rebuilding your your emergency fund yeah and uh the bad news is you've had some emergencies the great news is you've had an emergency fund well that's what i did yeah my husband was very discouraged and i said hey we don't have to go into debt for this that's exactly right we've got the money to pay for it. That's what it's for. It's there to keep us moving in the right direction.

So, yeah. I mean, I hate it that it happened, but, and here's the good news, too. It won't persist. What ends up happening is that you kind of get over the hump here, and if something continually goes bad at his work, then you're probably going to change jobs and get something more stable. If you're sane, you know, I'm not going to just keep letting them cut my hours. And I don't, you know, I have an unpredictable income all the time.

I've got to do something different then. Right. And so, you know, if it persists, if it doesn't persist, then it was a bump in the road and you had three different bumps in the road in one year. So it was an unusual year. It's not unusual to have something come up occasionally. That's why we have the emergency fund. But it sounds like you've kind of had yours all clustered together right here for a little bit.

That's okay. That's okay. You'll work through it. The good news is it's not going to keep going like this. You're going to get the other side of your baby step three, and then you're going to start your baby step four and start putting 15% of your income away into retirement. Kelly is with us. Kelly's in Brownsville, Texas.

Hi, Kelly. How are you? Hi, I'm good. Thank you, Dave, for letting me come on the show. Sure. And ask my question. So I was wondering, I know I've taken your financial paper off my husband and I, and you have suggested a certain percent to invest to 401k until you're debt-free.

No. Is the employer matching? No, I'm so confused. I did not suggest that you put a percentage of your income away until you're debt-free. No, no, not, well, I think you said until your employer matches. I think you said like 3% or 5%. You flunked the class. You have to go back.

Yes, I do have to go back. Okay, here's the deal. Let's stop. Let's stop. Stop. Did you really go to Financial Peace University? I did. I mean, it's been a year.

Okay. Okay. So the baby steps were not ingrained into your brain. And that is the clear path to building wealth the fastest. Now, baby step one, we'll review, okay, because it's been a year for you. Baby step one, save $1,000. Don't do anything. Don't save any money.

Don't pay any extra on debt until you've got that $1,000 saved. Does that sound familiar to you? Right, yes. Let me have that one down. Good. And then baby step two is to be completely debt-free, everything but your house, using the debt snowball. List your debts, smallest to largest, pay minimum payments on everything but the little one. Attack the little one with a vengeance.

Any money you have anywhere in savings, anywhere except cashing out retirement, goes on that step. Anywhere you get money from goes on that step. And you stop all saving and all investing and completely focus on getting out of debt and that focus is what gives you the emotional and the spiritual and the mathematical momentum to get out of debt and when you've blown through baby step two you still are not investing you are not saving you go to baby step three which is you start you don't pay any extra on your on your mortgage at this point you don't do anything until you build your emergency fund from the one thousand dollars up to the fully funded three to six months of expenses and once you've

got that done then and only then regardless of employer match do you restart got that done, then and only then, regardless of employer match, do you restart. Now, that shouldn't take but about two years, which is not going to keep you from losing your future fortune due to missing your match. So it is a temporary stop of all investing and all saving while you're in Baby Step 2. Now you can go back and take the final exam for Financial Peace University and graduate. Because that's how it works. If you get the Total Money Makeover book out, it covers exactly the same material in exactly the same way. And reminds you not only what to do, but why to do it. 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. Thank you for joining us. Suzette is in Tampa, Florida. Hey, Suzette, welcome to the Dave Ramsey Show.

Thank you. How are you? Better than I deserve. What's up? Well, in February, my husband and I read your book, and between March and June, we had Baby Step 1 done, and we completed Baby Step 2 by paying off our $5,000 credit card. Yay!

And, yeah, so we've been cash-flowing some urgent items that we knew we had coming up, so we will be done saving up for all of those urgent things by the middle of next month. And we kind of were wondering where we should go from there. We know we have Baby Step 3. However, 12 years ago, we were dumb and young, and we bought this house that we're in while still owning a previous house. So we used an 80-20 mortgage, which I know was an awful idea. So we have the equity line, which is that 20% of the mortgage. And we were wondering if we should treat the equity line as part of the consumer debt and pay it off like we were doing Baby Step 2, treat it like it's Baby Step 3B as if it was the 20% of a down payment for a house,

or just put it towards Baby Step 6 and just work on it alongside four, five, and six. Gotcha. What we teach in Financial Peace University and in the Total Money Makeover is it's either baby step two or six. And the way we decide is the size of the loan relative to your income. What is the loan balance on the second mortgage? $33,219. What's your household income? $33,219. What's your household income? $50,580.

It's baby step six. Okay. Okay. And here's the way we determine that. Is it more than half your annual income? And it is. And so it sits in baby step six. Now, what you may want to look at,

or what you do want to look at, is the terms on that second mortgage are pretty crummy usually. The interest rate, the time, and whether they've got a call or a balloon on it or whatever. What is the interest rate on it? 8.68. Yeah, that's what I mean. And your first mortgage, what is your loan amount on your first mortgage? $147,000. Okay, and what is your loan amount on your first mortgage? $147,000.

Okay. And what's your interest rate on it? 3%. Okay. It's probably about a break-even, but you can run some numbers out to be sure. But basically, because of the high interest rate of the second, even though your first mortgage would increase in interest rate, it might be wise to think about refinancing and putting them together.

Okay. And getting a new first mortgage on a 15-year. The problem is current interest rates are more like 4.5, not 3, okay? And so by the time we bump 150 to 4.5, it may offset what you would have saved dropping eight down to four and a half on 33 you see what i'm talking about so let's you're you're at a flat three yeah let me just do it i can do it right here all right so that's 4500 a year and um uh eight you said on 33 is 2600 a year all right let me just play put it all in the calculator here all right so you're paying 7100 a year in interest today and if we took 183 and we said 0.45 that would be 5900 so you actually would save money

you're currently paying 7100 between your first and your second we add them together okay and go back and check those numbers because i did it live on the radio in front of 15 million people and i could have messed up so um but um but i think i was right so i took your interest rate times your first mortgage balance i think i got 4,500 i took your interest rate times your second mortgage balance i think i got 2,600 for a total of 7,100 a year you follow me yes that's what you're paying now were you to refinance the total of 183 times 0.045, a 4.5% interest rate, you would only pay out $5,900, and so you would save $1,200 a year. Right, okay.

So it might make sense to refinance. It's not a huge difference, but it might make sense to consider refinancing, depending on what the refinance cost would be, and if you have enough equity to pull that off and so forth. But the answer to your first question is it's in Baby Step 3, or 6, I'm sorry, even if you leave it there and just pay it. That's fine. But any time I chunk a big second mortgage into Baby Step 6, I always stop and look at the refinance numbers,

because usually the second mortgage sucks so bad it makes sense to refinance them both together. And this one's right there. I think it may make sense. So even though, again, we're jumping a point and a half up on your first mortgage, which really gives me great heartburn, but something to consider. So check with Churchill Mortgage and see what they tell you and see if they can give you an actual quote detailed, and then it will start to tell you if that makes sense or not. But it is not a Baby Step 2 item. Scott is with us in Atlanta, Georgia.

Hey, Scott, welcome to the Dave Ramsey Show. Dave, it is an absolute honor to speak with you. Thank you for everything you do. Well, thank you, sir. How can we help? So my wife and I are on baby step two. We've eradicated nearly $30,000 in credit card debt. And we are now working on student loans, which are kind of a big mountain to climb. The question is regarding hers. She owes about $74,000 on hers, and her income-driven repayment plan right now has her paying $219 a month.

If she pays that $219 a month for the next 10 years, then they will forgive what's nearly $50,000 worth of that debt. Maybe. And I'm, well, let's assume that the program remains intact. Oh, it's currently intact, but you're aware of all the discrepancies around it, right? I am aware, but we're hoping for the best. Yeah, I don't think, well, anyway. All right, so what's your household income? Just about $200,000.

There's no way I'm staying in debt 10 years. No way. And hope the government follows through on a program they're already not following through on half the time? No. Pay that debt off, man. Be done with it. Get it out of your life fast. As fast as you possibly can.

There's no possible way I'm going to wallow around in the mud for 10 years when you make $200,000. Fair enough. That's what I thought you might say. I'm fairly predictable. Get them. Get them, man. You can do it. Thanks for the call.

Open phones at 888-825-5225. Let me just tell you, unless you've been in the student loan forgiveness program eight years and you only have two years left to go, 100% of the time I'm going to tell you not to do it. Even if you have a little small income and it doesn't seem like you're ever going to get out. I don't want, listen, don't sign up for welfare

because welfare always dumbs you down. It doesn't seem like you're ever going to get out. I don't want, listen, don't sign up for welfare. Because welfare always dumbs you down. It always dumbs you down. And that's what this is. It always causes you to think slow, to think low, or not think at all. Yeah. Stay away from it. And I got to tell you, Department of Education is screwing with this stuff,

and it is not pretty. I mean, what if you waited all that time to get out of debt, and then you got screwed? Man, I'd be so mad. And you just can't count on those people because they can't do math up there. Have you noticed? Neither side of the aisle. They're just awful. They just spin. We used to say, when I was a kid, it used to be a saying,

spin like a drunken sailor. You ever heard that saying? But I decided I was not going to insult drunks or sailors anymore. I just say spin like you're in Congress. Oh! There you go. Yeah, it's a lot more accurate. And that way we can still salute the military properly.

Oh, this is the Dave Ramsey Show. Thank you. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major health care costs. Christian Health Care Ministries is the original health cost-sharing ministry, a Better Business Bureau-accredited organization CHM members share to pay each other's medical bills. It's not insurance. It's Christians financially and

spiritually supporting each other. It's what financially and spiritually supporting each other. It's what Christian Healthcare Ministries has done for over 35 years. And our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org And the lobby of Ramsey Solutions, Mark and Becky, are with us. Hey, guys, how are you?

How are you? Welcome, welcome. Where do you guys live? Festus, Missouri. Okay, which is near. St. Louis. Okay, very cool. And you brought the kiddos with you.

What's their names and ages? Jake just turned 12, and Katie's almost 10. All right, fun, fun. And all the way down here to Nashville to do a debt-free scream. Absolutely. How much have you paid off? $68,000 and we also cash flowed $25,000 for a van, some medical and home repairs. Wow, okay, cool. And how long did this take? 25 months. All right. And your range of income during that time? For those two years, we averaged $165,000.

$165,000? Yes. Okay. What do you all do for a living? In sales engineering for a cable company in St. Louis, Spectrum Enterprise. Okay. And I homeschool our children. Fun, fun.

Well done, you guys. So what kind of debt was this sixty eight thousand dollars it was our house you paid off your house yes i'm looking at weird people you have a paid for house no debt in the world no debt i love it how fun well done well done so what inspired you to do this 25 months ago so um i read your book, The Total Money Makeover, years ago. And so we paid off consumer debt and all that. And we had gone to Financial Peace University. But really, when we started leading it a few years ago, that's when we were like, okay, let's just get rid of the house, too.

So we just kept going. So you were chunking along on Baby Steps 4, 5, and six, but six got serious when you started leading. Right. Okay. Because you could see it. Right. And, I mean, 68,000, you could see that. I can do that.

Let's do it. We'll make 165. We're going to do this. Exactly. And let's just reach over and knock that thing in the face. Well done! I love it! How old are you two?

I just turned 42 on Friday. Wow. I'm 46. Have you ever been debt-free since you got married? Nope. Never. House and everything. Do you know anybody else that's 42 and your friends that are debt-free?

House and everything? No. No, you're weird. You are so weird. I'll take it. I love weird people. Normal's broke. It sucks.

It does. That won't be normal. Look at you. Oh, well sucks. It does. That won't be normal. Look at you. Oh, well done. How does it feel? It just feels like a weight's lifted off. We don't owe anybody anything. Yeah.

And it's just wonderful. Yeah. And walk through the backyard without any shoes on. The grass feels different. Yes, it does. I mean, really. You just add up. At 42 years old, if you just invest a house payment, you'll be multimillionaires.

If you just invest a house payment, much less all the other stuff that you can do, and still send these two kids to school. Oh, my goodness. Well done. Yeah, that was my motivation. I'm one of those guys, when she read that book, I was like, oh, man, it's going to take away my fun. And I just look at these two kids and all that God has for them. We just want them to have whatever direction God leads them professionally. We want them to have that education and be debt-free to do it so that they can serve him and he gets all the glory.

It frees you up to do what you're supposed to do yes sir uh and and frees your kids up to do what they're supposed to do instead of being slave right not slave anymore and uh it change it gives you so many options it changes everything absolutely fabulous very very cool so what do you tell people now that you're coordinating a class and you paid off your house and everything? What's the secret to getting out of debt and being 100% debt-free house and everything? Definitely the budget is the first thing. If you don't write down where the money is going to go, it's just going to go.

Right. And living below your means and stop trying to keep what the Jones is. Just be content with what you have because someone's always going to have something that you don't have. So learning to be content. And we have the imputed righteousness of Christ by grace as a gift. And so what more do we need? If you lean on that, that helps with the contentment issue for sure. Well done, you guys.

Very, very, very well done. What was the hardest part of this for y'all? For me, it was just the stuff. I had to stop being a little baby. I work so hard. I deserve stuff. I just had to get over that and just realize I need to live this life for my family, for Christ. And that was the big thing for me.

She was just, she was the, she's the nerd, and she really encouraged me and kept me going, and she never wavered. She was the rock through it all. She did it, she was fantastic, so. Put her on a plan, she executes, huh? That's right, she's on it. Game on, she executes. That's right. She's on it. Game on. I love it.

I think for me it was keeping the long-term goals the focus instead of the short-term wants. Because if you're living in the now, it's hard to say no to the future. Or if you're living in the now, you won't stay focused on the future right that's exactly right that's exactly right you know it's uh live like no one else so later you can live and give like no one else well done well i'm proud of you guys congratulations what's the house worth probably about 130 i love it way to go very cool and it's yours yes sir it's yours i love it oh man well we got a copy of chris hogan's book for you retire inspired and that's the next chapter in your story to continue on your journey become millionaires and outrageously generous as you go along i think god is going to give you some powerful things to do with money and you're going to be uh powerful in doing those

because you're you're trained and you're ready to go. I'm proud of you. Very, very well done. Good stuff. Mark and Becky, Jake and Katie, St. Louis area, $68,000 paid off in 25 months, making $165,000. Count it down. Let's hear a debt-free scream.

Three, two, one. We're debt-free scream. Three, two, one. We're debt-free! Love it! Love it, love it, love it! Well done, you guys. Well done. Man, oh man, that's how it's supposed to be. Wow, no house payment.

No house payment. Eric is in Phoenix. Hi, Eric. Welcome to the Dave Ramsey Show. Well, hello. Speaking of no house payment, I have a question for you. Okay. Debt-free except for my house.

I have about $25,000 in cash, and I have just under $24,000 left on my home. I'd like your permission to become a weird person and possibly be the first half a millionaire on your half hour program. Love it. Okay. Do you have any money other than $25,000? Yeah, I have $260,000

in my 401k. You don't have an emergency fund other than your $25,000? Yeah, well, that includes what I have in my emergency fund. No, it's not an emergency to pay off your house. I would not pay off your house and only have $1,000. Let's leave an emergency fund in place. What is three to six months of expenses for you? Probably $7,000.

Okay. If you want to take it down to an emergency fund of three to six months of expenses, I'd be fine. But I wouldn't go below that and then just chunk on it with your income and finish it off, you know, in the next few months after that. But, no, I want you to be debt-free as bad as anybody on the planet. But, you know, I'm going to stick with the plan that we've used that's helped so many people, and that's maybe step three is three to six months of expenses, and then four, five, and six, six being pay off the house, is beyond that. We don't go back into that and go back to $1,000 in order to pay off the house.

I want it to be paid off, believe me, but I don't want you to do that. Well, guys, you hear me talk about the seven baby steps all the time, our proven plan to handle money the right way. Our number one best-selling book of all times around here is The Total Money Makeover. Almost 6 million copies sold. We're celebrating the 15th year anniversary of The Total Money Makeover. Offering exclusive deals in the online store at DaveRamsey.com. The Total Money Makeover plus a free smart money event live stream, all just $11.99. And you can also get the Total Money Makeover audio book plus the brand new book,

Everyday Millionaires, How Ordinary People Build Extraordinary Wealth. You can pre-purchase it, all of that, for $30. That book comes out January 7th. All of this is at DaveRamsey.com. Or call Customer Care at 888-22-PIECE, 888-227-3223. We'll be right back. Our scripture of the day, Isaiah 40, 29, He gives strength to the weary and increases the power of the weak. Zig Ziglar says, try to look at your weaknesses and convert it into your strength. That is success. Christy Wright is our Ramsey personality,

the founder of the business boutique movement, equipping women to make money doing what they love. And if you ladies have your own business or you ever thought about starting one, she's created a free workshop just for you. The Three Essentials for Business Success workshop is available right now, and it's free. It'll give you the time, money, and flexibility to focus on what matters the most. She'll teach you how to identify the problem your business solves,

how to find your perfect target market, and how to connect with your audience with great marketing. Start making money doing what you love. Sign up for Christy Wright's free workshop at businessboutique.com. Businessboutique.com. Businessboutique.com. Kansas City is calling. Kim is on the line. Hi, Kim.

How are you? I'm doing great, Dave. How are you? Better than I deserve. What's up? I feel like I'm on the pay off your house early theme hour this hour. I think you are. How can I help?

I got a question about that as well i i just want to hear you say it i think i know the answer can i take two years off paying um quite just a little bit less toward retirement bringing it down from 15 to 6 so that we can knock the house out in two years rather than three years. Okay. You can do whatever you want. You're an adult and you're in charge of your life. It's not what we recommend.

So help me understand that. One year isn't... If it changed at ten years, I would do it. But it changes at one year. It's just not worth it. And here's what the funny thing is. When this story's over, it's not even going to have been a whole year. You think? Yeah, you've got a bee in your bonnet.

You want the house paid off. You're right, and that's because of you. And I've got a feeling that you're going to do it to the point that it's going to be even less than a year's difference. It might be only eight months' difference. It might be, I don't know, it's not going to be a bunch difference point that it's going to be even less than a year's difference. It might be only eight months difference. It might be, I don't know, it's not going to be a bunch difference because the math is not that big a deal. The point is stopping the investing does not change the equation that much. Yeah.

It's a year. All right. I just needed to hear you say it because I'm so ready to be done with this mortgage. I love it. And you know what's going to happen? You will be done with it because you're focused on it. What we focus on, we win at, you know? So you're going to get there. You're going to get there. You can do whatever you want. Neither one of these things is in the dumb column, but I'm just convinced that if you'll keep doing,

once you got to baby step four, I want all of that wonderful magic of compound interest, the miracle compound interest working for you and i don't want to stop it again it's already been stopped once so i stopped twice stopped the first time when you were broke stopped the second time while we got you out of debt and baby step two now you finally got it going i don't want to stop it again well i want to thank you for walking into my house and mentioning that it was on fire because we were very comfortable with the mortgage until we met you. Ah, well, cool. Let me know when you get paid off. I want to hear your story.

And remind me of this because I want to know if I was right later. If it takes 14 months, I was way wrong, right? All right, I'll tell you. All right, cool. Thanks for the call. Open phones at 888-825-5225. Chris is in Baltimore. Welcome to the Dave Ramsey Show, Chris.

Hey, how you doing, sir? Better than I deserve. How can I help? Hey, so probably a softball question, but something I never thought about. So I've been seeing some articles online about legislation that's going into effect. I believe it's this week that's going to make freezing your credit free. And then that just got me thinking, like, as far as from an identity theft perspective, is freezing your credit a good idea? I never use credit.

I just didn't know. And by the way, I do have standard ID theft insurance as well. It's a great question, and it is a good reminder. Yeah, the legislation changed. September 21st, freezing or unfreezing your credit becomes free. The three major credit bureau reporting agencies have been charging a fee up to that point, and legislation allowed them to do that the first few years. But as of the 21st of September 2018, it'll be

free to freeze or unfreeze. So here's the advantage or the disadvantage, okay? If someone gets your Social Security number and they fill out a credit card application fraudulently with Bank of America, stupid bill, okay? And Bank of America only checks on those applications. They only pull credit reports on about 2 out of 10. They just automatically approve about eight out of ten. So your dog can get one eight out of ten times.

Okay? You see what I'm saying? So if they don't check the credit, then they're going to issue a card in your name that was, you know, to an identity thief, right? Right. So it doesn't help you at all in that case. The two times that they do actually check the credit and find it frozen, they would deny the thief the card.

Okay. Because they find your account frozen. So it's a partial block against some types of fraud, the type of fraud where the lender is actually responsible and actually attempts to check the borrower's credit, which seems so freaking common sense that they ought to do it all the time, but they don't. They just issue these things carte blanche, so to speak,

and just, you know, willy-nilly, here we go. And if they actually check your credit, though, having it frozen will keep them from issuing a fraudulent type of credit, whether it's a credit card or anything else. So mine has been frozen since the very first day they allowed you to do it. My kids and my wives have been frozen since the very first day they allowed you to do it. And I had to unfreeze it one time for something because somebody was checking to see if I was breathing or something. And then I froze it back an hour later, you know. And so I paid the fee both times because back then there was a fee.

As of this week, as you said, there's no longer a fee. So, and you can do it all online. I mean, you can jump on their website, freeze it and unfreeze it. And so if you need to have, let's say you're applying for a job and they want to pull your credit and it's frozen. First thing I'd tell them is it's completely empty, there's nothing on it, and it's frozen. If they insist, then you can unfreeze it for a day or two and let them pull it and then freeze it back, right?

That kind of a thing. But it does help with the type of identity theft where the lender is actually responsible enough to pull a copy of the credit before issuing the debt. So it does help with some identity theft. It is a bit of a block, but again, it's assuming the competency of a lender, which is laughable these days. Canada's on the line. LaToya is with us.

Hey, LaToya, what's up? Hey, how you doing? Thanks for taking my call. Sure, how can I help? I'm a single mom. I have a four-year-old daughter. I just managed to save up $1,000. I make about $43,000 a year.

But I have a lot of debt. I have about maybe just under $60,000. I did pay off about $10,000 of that. And I do have one that did go into collection. It's a Visa credit card that I've kind of, didn't forget about, but I've kind of sporadically been paying the minimum. I just wanted to know how should I go about

taking care of that. So I just recently to know how should I go about taking care of that. So I just recently went into collections, like a third-party collection agency has contacted me. And, I mean, in the future, I'm planning to buy a house in the future. You're not going to buy a house until you get this debt cleaned up. Right. So I'm not worried about you buying a house right now. What I do want you to do is get the debt cleaned up as fast as you can, and I want you working the debt snowball. Here's what I would do. How much is the balance on the visa that went into collections? It's about $3,700. $1,000 or $100? $3,700, yes. Oh, so not

much. Not much out of your $60. What's the $60? It's an old student loan, an old line of credit that I've had, two Visa cards, actually one Visa card. Does old mean you're not paying on them? I mean old in terms of like I've had them around for a long time. But are you paying on them? I've been paying the minimum. Are you paying on them now? Yes, I am. Okay, good.

All right. Well, put your budget together and send this company some money. $10, $20. Even if it's not what they want, they won't send it back, and it messes up their computer because you're actually paying on it. There's activity on the account, and that'll keep them at bay while you work your way through this, probably. That puts us out of the day. 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, guys, this is James Childs, producer of the Dave Ramsey Show. I'm excited to announce that we're now carried on 600 radio stations across the country. To find one near you, head to DaveRamsey.com slash show.