The Ramsey Show - App - Practical Advice on Term Life Insurance and Child Riders (Hour 1)

Episode Date: September 21, 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. This is your show, America. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Nicole starts off this hour in Los Angeles.

Hi, Nicole. How are you? Good, and how are you? Just the same. How can I help? So I have a question for you. Back for really quick. It's about my aunt. She's my parent.

I lived with her since I was 12. She adopted me, the whole thing, because she's like my mom. I want to figure out how can I talk to her about her spending and saving for the rest of her life. And the reason why I say that is because she's 59 and she has a very aggressive lung disease. And she lived a year longer than what the doctor told her, but it's not like she's dying tomorrow. She's still going to work. She's still traveling for work.

But I went to her house the other night and I just saw a bunch more credit card bills and statements, and her medical bills are piling up, and she's just not thinking about her future and leaving work and what's going to happen after she passes. I'm going to be the one, which I have no problem with or anything, one of two people in my family that's going to take care of all that stuff for her, and I just don't want to resent her, and I don't want her to feel pressure or stress whenever she stops working or anything like that. Okay.

And how old are you? I'm 26. Okay. And why are you going to be left with the responsibility of this? My grandparents already lost a child, so it's already hard for them to comprehend it and then my other uncle and aunts um are not are not mature enough to handle it so it's just pretty much a sibling and my aunt that would probably take care of her and anything she

needs and what would happen after okay so. So I assume she's broke. Yeah, she is. She filed for bankruptcy in like 2010, 2011, so it took her a long time to recover it, but she rents a very expensive apartment. She leases a car that's this crazy, crazy amount. She makes good money, but she just doesn't know how to handle it properly. What does she make? I know she takes home about after taxes like $8,000 a month, at least that from what I know last time we talked about it. And so the prognosis of her illness is

she's expected to pass. The doctors are saying she's going to live how long? Not She's expected to pass. The doctors are saying she's going to live how long? Not very long. I mean, she hasn't told me. What's not very long? Two months or two years? Probably, right now, probably two years at least. At least two years. Okay.

Yeah, because she's lived a year longer than what they thought. Okay. All right. Because she's lived a year longer than what they thought. Okay. And so basically what this says is that she's just spending like there's no tomorrow because for her there's no tomorrow. I think so, yeah. Yeah, okay. So I don't think you're probably going to stop her from doing this. No, probably not.

I just know she just has a lot going on she got out of a toxic relationship where she was fronting a lot of their bills and she's she's just spending and she's buying more things she's redoing her apartment because of it it's just out it's getting really out of control okay well i i don't know how you talk to her about it. Number one, you need to know that you're not going to be liable for any of the debt. Oh, that was one of my questions. Yeah, it could be very simple that you just make copies of her death certificate and mail them to people that she owes money to and say you're not going to get paid.

Okay. And does she own a home? She doesn't own anything. She doesn't own a car? She leases her car. Okay. All right. And so the extent of you fooling with this is you're not going to get anything out of it.

There's not going to be any inheritance for anyone because there's no money no okay so you're you know if you if you want to fool with it and you don't even have to you're not obligated to you could just make copies of the death certificate and mail them to all her different credit card companies and her car company and tell them come get the car and there's no money and she died deeply in debt and you can just put a form letter with it and if you want to fool with it i'm not sure i'd even fool with it uh they don't have your number no and um i i think it's their problem that they're loaning this person money uh which they shouldn't be uh obviously she's not credit worthy you have former bankruptcy and and is misbehaving at length and

they should be able to see that but they continue to loan her money so um uh you know the only reason that you would manage through the process is if there's a big pile of money and you need to pay the bills out of the big pile of money and see if there's any left but i don't think that's the case here i don't think there's any money here no there's not there's not a 401k with five hundred thousand dollars in it or something right no i don't i very doubt i highly doubt it okay well i you know what you could do is you could just sit down and go you know um you raised me and i appreciate that you took me in when no one else would. And so it hurts me to watch you suffer with this medical situation. It hurts me to watch you spending everything and being completely out of control with your money.

It just hurts me. And I just wish you had a better life. I wish you had a better situation. Is there anything I can do? And is there anything you want me to do when you pass if you don't want me to do anything i won't but uh i think you might be surprised that she turns around looks at you and says don't worry about it while i'm alive and don't worry about it when i'm dead and you know what if she says that i wouldn't worry about it okay i mean there's not anything you can do here i did this does not sound like a person

that's open to change and the reason is is i think that her spending is tied to her having given up hope on her medical condition and so she's literally just living every moment because that's the only moment she's got and i don't think you're going to change this one i've been in these situations several times as a coach or a counselor over the years and and i've never one time talked to someone with these symptoms out of it because they're just like why you know why does it matter and hopelessness is a one of the most destructive situations or things that somebody can get into. And when they face that with a terminal illness, it really changes everything for them. It's really, really sad.

Very, very difficult to deal with. I'm sorry you're facing it. But you can sit down and talk to her and just say, you know, this is awkward. And how can I serve you while you're alive and and honor the fact that you raised me how can i serve you and honor you when you're dead due to the fact you raised me what do you want me to do how can i help because i'm sad watching your medical condition deteriorate and i'm really sad watching your financial condition deteriorate you know and i'm just sad and i just wish i could do something to help you and see

what she says she might ask for help but i i'll be surprised if the baby steps is the right time to buy life insurance? My answer is typically now. Life insurance is not part of the baby steps because it's needed when your family has debt and not enough savings to provide for their financial needs. That's when they're at the highest risk. And no matter where you are in your baby steps, it's a necessity, not a choice. This includes working husbands and wives, as well as stay-at-home parents. It's pretty expensive to replace those stay-at-home parent responsibilities. I only recommend term life insurance since it's the most affordable way to get the right amount of coverage and not break your budget. Go to Zander.com or call 800-356-4282.

These are the guys I personally use. Term life insurance is inexpensive and your family needs this no matter where you are in your baby steps. That's Zander.com, or call 800-356-4282, Zander.com. Thanks for joining us, America. Jesse is with us in Kansas City. Hi, Jesse. How are you? Oh, good, Dave. Thanks for taking my call, man.

It's a pleasure. Ple pleasure to speak with you. You too, sir. How can I help? Well, two years ago, purchased a new home, and I'm hoping not to get the cart in front of the horse here. I'd always dabbled in your plan by listening on the radio, but was never too good at burying it, you know,

my feet in deep. Um, when we moved out of our old house, uh, had foundation issues. So $15,000 before we could sell it. Um, plus a lot of that down payment.

So anyway, it got us out, out here. Um, but it was on a 30 year, uh, fixed. That's what we did.

Um, I, I am tempted a lot with all the, and I'm current with the market being hot, if you will, as far as my education is. Will that valuation help, number one, on, you know, helping with the equity portion, you know, in the 80-20 value and also in that is it the 15 years going to put me

You're talking about refinancing? Yes, sir. I'm sorry. That's okay. Yes, sir. So if you were to refinance if you can get 80% loan to value and you don't have that now that would get rid of PMI.

That's a big plus. Well, and I don't know if I did bad or good on that. I took a quarter point and had them put that on that, which took the PMI point out of it, but it put me at 4.5%. But, you know. But can you refinance at below 80% now? And that's where I'm thinking that I could get valuation looking at the houses around because about two months after we bought, all the houses around us jumped $20,000, $30,000. Okay. So what do you think your house is worth today?

I'm thinking it's going to be $250,000-ish. And what do you owe on it today? I owe on $204,000. The number I need is about $256,000, I think. Okay. But I think in the question, the main question here that I'm struggling with is in being in the baby steps where, you know, I'm in baby step two right now. And I can probably jump and be at three, you know, here in a month or two. What's your household income? About 110. Okay. and be at three, you know, here in a month or two. What's your household income?

About $110,000. Okay. Well, you probably can't roll closing costs in and make it. So you're going to have to come up with a closing cost out of pocket to be able to make it. Because, you know, you're saying the thing is barely going to appraise to get you at an 80% loan-to-value. And if you can get an 80% loan-to-value and pay your closing costs out of pocket and tap the brakes on, you know, you're going to be debt-free in two months?

Well, I can be. Yeah, what's your household income? Well, it's 110. And how much money do you have in the savings? I'm sorry. I broke be. Yeah, what's your household income? Well, it's $110,000. And how much money do you have in the savings? I'm sorry, I broke up. How much money do you have in the savings? I've got about $11,000 in the bank right now between my checking and my savings. Okay.

But I could pay off my van that I have. And then, see, we have a travel trailer, and now I'm like, I'm ready to just sell it because it makes me sick, you know, looking at the interest going on. And what do you owe on it? Oh, it's about $11,500 is what it is. Okay, so you have $11,500 on that, and you owe $11,000 on your car. No, I'm sorry. I owe about $65,000, I think, on my van. And that's it?

Yeah, that's it. Okay, so what would I do if I woke up in your shoes? I would pay off my car, I would sell my travel trailer, and I would save for a month and a half, and I would refinance. And during that time, you've got to get an appraisal that gets you to 80%. If your appraisal doesn't get to 80%, then wait until after the first year and try it again. Your appraisal is going to cost you $400. Okay.

But talk to the appraiser. Talk to a good realtor in the area. You've got to have – what I'd do is if you've got a realtor friend that can pull some MLS statistics for you, pull some actual comps in the area, he's probably going to find the same thing the appraiser is going to find, and they can help you with whether or not you're really going to hit that 80%. You may have to wait two or three months to get there. But here's the thing.

If you can go from four and a quarter to three and a quarter and do a 15-year, which you could do if everything else is in line here, then that's going to save you $2,000 a year in interest. And the big thing is pay out-of-pocket on that closing cost. You're probably going to have to come out-of-pocket to get your loan-to-value ratio to hit. Understood. Because if you throw $5,000 closing costs on top of your 204, now we've got to make $266, not $256. All right.

And so I don't think you're going to make that. I think you're probably stretching on your valuation anyway is what it sounds like. Yeah,000. All right. And so I don't think you're going to make that. I think you're probably stretching on your valuation anyway is what it sounds like. Yeah, maybe. So sell the travel trailer and pay off the car today. Absolutely. And then you're debt-free. Now let's start building up that closing cost fund and get some good information from a good friend that's a real estate agent

that will pull some comps for you. And then that sets you up not to sell the house, but to be able to not spend the $400 if the comps are coming in at $240. Just wait a little bit. If the comps come in at $260, then rock on. Order your appraisal. Get in touch with Churchill Mortgage, and let's get the refinance going. And that will work for you then. So really good question.

You're thinking, and you're right, you're dabbling in it because you're sitting there on enough money to be debt-free. You're not working the baby steps as a purist. So now it's time to decide. Are you or aren't you? Are you really going to do this after you call me on the radio? Or is this still just a freaking conversation, dude? So this is your time. I don't care.

I'll be your friend either way. But it's real clear to me what your path is. And I think you can get there very fast if you'll lean in and do the right smart stuff. So good question. Thanks for calling us. Open phones at 888-825-5225. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee,

which means even if you mismeasure or you pick the wrong color, they're going to remake your blinds for free. With Blinds.com, you get free samples, free shipping, and the new promos every month. Yeah, you save even more money if you use that promo code. Ramsey, that's the promo code for blinds.com. Kayla's in Wisconsin. My boyfriend suggests that the 10% allotted for giving

is also used for gift giving, such as Christmas and birthdays. He also believes that if he spends any time doing charitable work, that he can pay himself out of that money for his time. We're talking about getting married, and I'm wondering if this is a big red flag. Well, if you are an evangelical Christian, it's a big red flag because your boyfriend doesn't believe the Bible. He thinks he's God, and he gets to decide whatever he wants to do, which if you think you're God and you get to decide whatever you want to do, that's you think you're God and you get to decide whatever you want to do, that's okay.

You can do that. You can decide whatever you want to do. But if you're talking about giving a tithe of 10% according to what Scripture says, then that would go to your local church in actual money. You can't wink 10 times, and that counts. I can wink. I can just make this up. I can tip my hat three times. I can spin in a circle 10 times times and that counts. I can wink. I can just make this up. I can tip my hat three times.

I can spin in a circle 10 times and that counts. But that's all just made up crap. That has nothing to do with what the scripture says. So, you know, I think this might lead you to some more discussions about where you guys are on your faith walk. And being in agreement on your faith walk is one of the big four to get married. Statistically, if you're in agreement on your faith, you're in agreement on your money, you're in agreement on kids, and you're in agreement on in-laws and how they're to be treated,

the crazy people in your family, then statistically, if you're on those four big four, you have a very high probability of your marriage making it. You drop out in one of those four, ooh, you've got a problem. And faith is a big one to drop out. Not being in agreement on faith, very difficult to stick together. Very difficult, because you view the world differently. And he definitely views it differently than a traditional evangelical Christian view of Scripture.

It's okay if you're not that, but if you're talking about a tithe, then you should view Scripture and what God has to say about this. 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 Healthcare Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major healthcare costs. Christian Healthcare 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 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. In the lobby of Ramsey Solutions, Chris and Brittany are with us.

Hey, guys, how are you? Hey, Dave, how are you? Better than I deserve. Welcome. Where are you guys from? We're from Terre Haute, Indiana. It's about 45 minutes to an hour southwest of Indianapolis. Absolutely.

Welcome. Good to have you guys. Thanks for having us. Good to be here. Fun. So you're here all the way to Nashville to do your debt-free screen. Yes. Welcome. Good to have you guys. Thanks for having us. Good to be here. Fun. So you're here all the way to Nashville to do your debt-free screen. Yes, sir. Very cool.

How much have you paid off? Just over $75,500. Love it. And how long did that take? Right at 13 months. Good. And your range of income during that time? We started at right around $85,000 and topped out at about $150,000.

Whoa! You doubled your income in a year? Well, yeah. How? I worked two full-time jobs with overtime at both jobs. Wow! Yep. Glad that's over.

Yes. Absolutely. Oh, my goodness. What do you do for a living? I am a paramedic. And I'm a patient care technician at one of the local hospitals. Gotcha, cool. So what was the second full-time job?

Well, both were as paramedics. I was working as a flight paramedic for an air medical service and then just on an ambulance for a ground service. Okay, all right. And which one did you keep? What's your main gig? I'm on the ground. Okay.

Yeah. That works. How much debt? What kind of debt, rather, was the $75,000? Two vehicle loans, student loans, multiple credit cards, and some medical debt. So we were normal. Yeah, you were. Just regular folk.

How much did you owe on the cars? When we started, hers was about $10,000, and I was right at $14,000. Okay. All right. So that was the bulk of everything. Yeah. Gotcha. All right.

And so did you keep both the cars and work your way all the way through? Yes. Yeah, we paid them off. With this income, I guess you did. Wow. Amazing. So what happened 13 months ago? What put you guys, something lit you on fire, man?

Well, the 13 months includes the first six months of last year where we were just making our normal payments. It really started in the summer when we really kicked into high gear. And actually, it started as me working extra to save up money to go back to school last fall. And then what had happened was I had actually saved up enough money to pay off one of my credit cards, a little bit over $3,000. And I decided to do that instead of keeping it to the side for school, which got me thinking about the Total Money Makeover book, which my mother had given me back in 2009 as a gift. And it basically served as a paperweight, really, during that time span. Coaster on the coffee table. Yeah, exactly. That's right.

So I opened up the book because it got me thinking about that and um found the youtube channel um really kicked into high gear really didn't actually say anything to her while i was doing all that just you know i read the book i you know watched the videos and decided we were going to do it and then i came to her and he said hey this is what our budget's going to be. We're doing this Dave Ramsey thing. I hope you're on board. And I was like, what? What?

And he said, you're only going to be allowed to pay cash for everything and you're going to have a super strict budget. And I was like, whoa, absolutely not. I know, I like to spend money and I like to go shopping. And then he kind of talked me through it and we read the book together kind of and we watched your shows and I was like, I want to do that.

I really want to do that. I want to pay off all of our debt. So he kind of got me on board pretty quick, actually. Yeah, so he had to actually backtrack a little bit because his initial approach sucked. Yeah, because he did that typical, Dave says, the one thing that he says that you say not to say. I love it. Well, congratulations, you guys. Thank you. I mean, you knocked not to say. I love it. Well, congratulations, you guys. Thank you.

I mean, you knocked it out fast. Well, we lucked out because I was working full-time on the helicopter, and I stayed part-time on the ambulance. And in August, they changed the pay rate for the ambulance service, and if I were to go back full-time there, it would be an $8 raise on the hour. Yeah. So, and because of how most medics work schedules, we work 24 hour shifts.

So I was able to do, you know, basically four days a week at two jobs was full time at both jobs. And then I would, you know, pick up extra shifts after that. So I went back on full time there in August and stayed full time both places until May, actually. And we paid everything off in February.

Way to go, man. Way to go, you guys. How does it feel now that you don't have any debt? Amazing. It's wonderful. It's indescribable. Was it worth all that work? Yes, absolutely.

I'd do it over again 30 times if I had to. So what are you going to buy to celebrate? Well, we've been cash-flowing a major remodel of our house since then. And that's kind of why I stayed on extra, you know, full time both places there for a while to save up cash to do that. But I'll tell you, a real kick in the butt came when we, the last debt to pay off was my truck. You know, following the debt snowball. We paid that off on a Friday. Monday, we went and filed our taxes.

Well, it turns out when you make a whole lot more money and you don't change your deductions, you owe a lot more. So we actually owe just under $5,000 in taxes. Oh, gosh. Three days after we paid off our last debt. Right when you thought you were debt-free. Right. But luckily, because of the steps we had taken and all the debt we had paid off, we paid

that off in less than two weeks. Wow. Then we were really done. Yeah, yeah. This sucks, but oh, well, we're going to do it. That's right. Very good. Good for you guys.

Well done, well done. Thank you. Very proud of you. You're incredible. Very cool. Appreciate it. So we got a copy of Chris Hogan's book for you. Number one bestseller.

Excellent. Retire Inspired. We want that to be your next chapter in your story. Be millionaires. Awesome. Thank you. Outrageously generous along the way. Very cool stuff.

Good for you. All right. It's Chris and Brittany from Terre Haute, Indiana. $75,000 paid off in 13 months, making $85,000 to $150,000. Count it down. Let's hear a debt-free scream. Three, two, one. hear a debt-free scream three two one way to go you guys way to go way to go way to go

love it very well done very well done all right scott is with us in richmond virginia hey scott how are you Very well done. All right, Scott is with us in Richmond, Virginia. Hey, Scott, how are you? Dave, how are you doing? Better than I deserve, sir. How can I help? Well, unlike a lot of your listeners, I've also paid a stupid tax in the last 10 years, and I need advice. Okay.

Yeah, 10 years ago, I took out a whole life $50,000 policy on my daughter. And the policy came due, and I started doing it. Like I said, I did a little math and found out that I can actually get a term policy, a 20-year term for about $100,000 for about $100 a year. Now, I spoke to the young lady at Xander about this, and she stated that because my daughter is under 18 that i cannot do a term policy um and i could actually put her on as a i think a child rider onto my personal policy and i called my insurance company and they do not offer child riders i hope i have that term right and just uh asking advice on what would you do and how would i how can i get out of this whole life policy how would you have coverage for my daughter?

How old is your daughter? She is 14. Okay. And do you have your emergency fund in place? Oh, absolutely, yes, sir. We're totally debt-free. And so you're buying life insurance for her. Why?

Just basically for the unspeakable. I mean, she's in an accident just to cover expenses for just the unspeakable. Yeah, and I mean, she's an accident just to cover expenses for, you know, just, you know, be unspeakable. Yeah, and that's what your emergency fund's for. I wouldn't buy a child. If you're in good financial shape and you're not, you know, you're not broke, you have your emergency fund in place, I wouldn't recommend a child rider. I didn't carry them on my kids once I got my wealth back and started. Because all you're doing is, you know, you're not having to replace an income that she creates for the family.

All you would have to do in this horrible tragedy would be to pay for the funeral. And you can do that. Okay, okay. So I would just self-insure through that, in other words, by having the cash in the bank, and I'd just save the money. So it's pretty simple in that case. You just cancel it. Okay, that's simple enough.

Easy enough, man. Thanks for the call. I appreciate you joining us. On the same subject, Tom says on Facebook, how much term life insurance do I need and for how long? We recommend 15 or 20 years and about 10 to 12 times your income on you. And as he said, he talked to Zander Insurance.

Go to zanderInsurance.com. You can do a quick, easy quote there. It takes about 13 seconds. And here's the deal. So if you make $100,000 a year on you, you personally make, let's say you make $80,000 a year, okay, then you have an $800 to $1 million policy on you. You'll be surprised at how inexpensive that is if you're in good health and certainly depending on your age.

It doesn't cost that much. And then if you died, somebody could take that $800,000, invest it, and it would generate about what you used to make after taxes, for sure, and the investment return. And so we're replacing you with an investment upon your death that's funded with term life insurance until you're out of debt and have enough wealth that you don't need insurance later on. And that's what I did, what I do, how I recommend you do insurance. Thank you for joining us, America. We're glad you are here. This is The Dave Ramsey Show. 888-825-5225.

Ogden, Utah is next. Tim is with us. Hey, Tim, how are you? Tim, I didn't push the button. Hello. There we go. Now I got it. Didn't push it hard enough.

How are you? I'm good. How are you? Better than I deserve. What's up? So I'm wondering if I ought to stop contributing to my HSA and potentially a Roth IRA to start piling up money for a down payment on a house. Okay.

You can. You certainly can. A lot of people do. We call that baby step 3B around here because you're debt-free, everything but the house, and you have your emergency fund of three to six months of expenses. And before you restart retirement, in your case stopping it uh sometimes people tap the brakes on starting retirement and that would include hsa then uh in order to save up for a down payment you want to do that pretty quickly because we don't want to stay out of

retirement very long but uh but if you did it for a year a lot of people do it for a year maybe two years and if you can get your down payment built up that fast then restart everything in most cases that's going to be just fine how old are you i'm 30 okay cool what's your household income well i make 70 uh right now my wife's working only till about december she makes about 25 right now but we've got a baby on the way in february so she'll stop working then yay okay so how quick can you save your down payment if you temporarily stop this stuff? Well, so I currently contribute to Roth 401k through my employer, and then I max out a Roth IRA,

and I put a little over $5,000 in an HSA. So I could, I mean, if I totally stopped, I could put nearly $15,000 aside, and we've already got about $8 8 grand in a separate house fund now. Okay, and so would one year do it? We were thinking a year to 18 months probably. Yeah, I think you're fine doing that. I mean, you'll be 32 years old.

You're going to start again. You've already got some money in retirement, and then you're going to be healthy on your retirement contributions after that. You're going to retire a multimmillionaire doing that awesome so yeah i think i would do that if you don't own a home and you got a new baby she's wanting a house i get all that that makes sense now obviously we tell you never to take out more than a 15-year mortgage and that we um and you never take out a payment that's more than a fourth of your take-home pay. Vincent is with us in New York City.

Hi, Vincent. How are you? Hi, Dave. How are you? Better than I deserve. What's up in your world? So I'm a New York City police officer. I'm 28 years old, and I plan on staying another 18 more years.

I have a deferred comp question for you. So I have a 457, and everyone at work tells me to do the pre-tax option. I know that you always say to do the Roth, but even though I live on Long Island, I still have to pay New York City income tax. So between New York State and New York City, I'm paying an additional 10% on top of my 28% tax bracket. If I were to touch the 457, let's say I move to Florida or Texas after I retire, which option do you think would turn out better, the Roth or the pre-tax? The Roth will, because most of what will be in your account is growth.

It is not what you have put in and paid taxes on. Right. Like at your age, 90-something percent of what is in your account, if you look up and a million dollars is in there, it wasn't because you put a million dollars in there. It's because you put less than $100,000 in there, and it grew to a million over 30 years or 20 years that we're talking about here. And so Roth always works out better, assuming you're putting

the same amount in. And if you're going to reduce the amount that you put in because it's Roth, then you'll come out about even. But if you put in the same amount, you're effectively putting more into retirement by doing that effectively because you're picking up those taxes that you're talking about. And that's what I'd recommend doing. Put 15% of your income into retirement. Roth is always your best option when you've got a long-term, a long time horizon like that, because the entire account will be tax-free when you get there. Michael's in Denver, Colorado.

Hey, Michael, welcome to the Dave Ramsey Show. Hey, Dave, how are you doing? Better than I deserve. What's up? Well, I'm currently living with my in-laws. Joy. We have two kids, and we've been there for two years now, and we make about approximately $50,000, $55,000 a year.

We've got $18,000 in debt. How much progress have you made in two years? Huh? How much progress have you made in two years? Well, I started reading the Total money makeover probably after a year. What had happened was we were trying to move into a place, big mistake, obviously. And so we thought, oh, we'll move in with our in-laws, you know, while we're, for our offer to be accepted. And then, uh, a year went by and I, I decided, you know, something's got to change. And so I read your book. Um, I think in the year

that since we started doing the, you know, your plan, I think we've paid off probably 5,000 approximately, uh, maybe a little bit more, actually. I think we started paid off probably $5,000 approximately, maybe a little bit more actually. I think we started out with $25,000, so maybe $7,000 that we paid off. So what's your question? Well, my question is, you know, the rental prices here have moved up considerably. And so I'm just wondering if it would be wise for us to start looking for, you know, a cheaper place to live just so we can save our relationship and get back out on our own, or should we... I don't understand. What do you mean when you say cheaper place to live?

A cheaper rental? Well, yeah, yeah. Would I move out of my in-laws after two years and go rent something? Dadgum right. Yeah, yeah. Yeah, I would. Absolutely, I would. And is that going to cause you to take a little bit longer to get out of debt because you have a new expense now?

Sure it will, but you also have your dignity. You have your relationship intact. And I guess you guys are probably going to have to kick it in gear and you know pick up some extra jobs and move the needle here because so far your your application of the ideas and total money makeover is lame five thousand bucks in a year out of fifty thousand is pretty lame yeah nobody around there is intense yeah yeah extra jobs sell everything in sight beans beans and rice, rice and beans. Don't see the inside of a restaurant unless you're working there,

and don't even talk to me about a vacation. Rent something cheap, cheap, cheap. Get out, save your relationship, square your shoulders, get her done, man. Get her done. Kick your income up about $25,000 by working like crazy man's schedule for one year, and you are out of debt, and then you're building your emergency fund and saving your down payment, and another year you're buying your house. So two years, you're into a house.

That's where you are. But it's going to be two years of hell. The good news is it's not forever. It's just for a short period of time, and you have to get it done, man. You've got to put this thing in gear. You've got to raise your passion level about this subject about nine thousand percent but yeah if i'm in your shoes i'm getting out of there for sure and it sounds like they want you out so um can't say as i blame them i love my kids but they ain't living with me it's just that's i mean unless it's just an emergency for a short period of time, we'll provide a safety net.

But we ain't got any hammocks around our place. Hey, thanks for the call. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money. Dave, would you ever suggest someone modify baby step one to be a bit larger if they already own a home? No, because it's for a very short period of time when we started this stuff shannon we told people just get out of

debt don't save money completely do the debt completely do the debt completely do the debt there was no baby step one it started with the debt snowball complete gazelle intensity focus go crazy that was so impractical because every time an alternator would go out, a tire would blow, a kid would get sick, and you had a $200 item, a $300 or $400 item come up, then you're sweating debt all the time. And so we acquiesced and backed off and said, okay, baby step one. This is when we developed the baby steps. After we were already teaching Financial Peace University for a couple years, we said, well, baby step one is $1,000.

At least you can catch the little stuff during the year and a half, two years while you get out of debt. But you're not doing this for very long. And you usually don't have big emergencies during short periods of time like that. And that's why it works. So I'm not suggesting you walk around with a $1,000 emergency fund for 10 years. It's a different idea, see? It's a short period of time. That's why it works. So I'm not suggesting you walk around with a $1,000 emergency fund for 10 years. It's a different idea, see? It's a short period of time. That's why it works.

You don't need to modify anything. You need to get your butt in gear and do it. This is the Dave Ramsey Show. Hey, it's Blake, Chief Production Officer for the show. And here's a little tip for 2018. Go download our revamped Dave Ramsey Show app from the App Store. We're always listening to your feedback and adding new features to make it even better. Check it out.