The Ramsey Show - App - Practical Advice on When to Refinance Your Mortgage (Hour 1)

Episode Date: October 29, 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. You jump in, we'll talk about your life and your money. It's a free call at 888-825-5225. That's 888-825-5225. You jump in, we'll talk about your life and your money. Tommy is with us in Boise, Idaho.

Hi, Tommy, how are you? I'm doing well, Dave. Thank you for taking my call. Sure, man. What's up in your world? Well, my wife and I sat down and realized that we're on a bad road for our future and decided to really take control of our finances and our lives and just calling to see if I can get some advice from you. We recently found some stuff online and had a friend suggest that we watch some of your guys' videos and found you online there from there and saw, you know, your steps. And so right now we are

currently saving for Baby Step 1 and we have a total debt of loans and consumer credit card debt of $17,900. My question is, including in that $17,000, I went ahead and rolled in our second mortgage that we purchased on the home we just moved into, and that totals $2,175. So in my mind, from what I've learned, and obviously not working, that's why I'm calling, is should I roll in that second mortgage? The reason why I think that is because that's going to lower our bills once I pay that off. Your second mortgage is $2,000? Yes, sir. So my wife and I just recently got into our second house.

Yeah, okay. So if you have a $2,000 second mortgage, yes, it's part of your debt snowball and baby step two okay good i was just curious i wasn't sure if that would be the best way to continue to attack this to create a better future for us and for our two daughters yeah if it's if it's under half your annual income on a second mortgage we always suggest you put it in your debt snowball. And, man, that's an unbelievably small one. So thank you. Congratulations.

Well done, man. I mean, just knock it out. And I'm glad you're attacking this. It's going to work for you. Debbie is with us in Anchorage, Alaska. Hi, Debbie. Welcome to the Dave Ramsey Show. Hi.

I had a question about whether it would be wise i don't maybe that's not a good word but to refinance our house to pay off credit cards um not unless it's to avoid a bankruptcy how much credit card debt have you got? $34,000. Okay. And what's your household income? $140,000. Yeah. No, I would not. Because, see, when you refinance your house and you put the credit card debt onto the house,

there's two or three problems with that. One is the debt didn't go away. You just moved it. Right. You just moved it. That's all you did. Okay. The second thing is the credit card debt is not the problem.

It's the symptom of you living without a budget and overspending. Would you agree with that? Yes, we do have a budget, but yes. Well, it's not working. No. Okay. You're not sticking to it. Because nobody sits down and goes, hey, the smartest thing on the planet is let's very intentionally set out to go $30,000 in credit card debt.

Nobody does that. So I know you didn't do that. Right. Most of it's from one of our kids. He has Down syndrome, had leukemia. And so we, during that time is when all of that went on there. Yeah. So you had all kinds of expenses that you weren't prepared to cover.

Correct. Okay. Okay. And how's he doing now? He's doing really well. He's in remission, and we're four years out, so that's, we are very optimistic. Yeah. Good, good. Well, that's a tough thing to fight through, and congratulations.

Well, if you're going to have credit card debt and you're going to make a mess of your finances, that's a really good reason to do it, okay? Taking care of your baby, that's higher on the list than being a spoiled princess and buying crap you can't afford, right? Right, right. Well, then we had two other kids that blew out their knees, and we had to pay for those. So it turns out kids break, and so we need some kids break funds called the emergency fund.

And we live on less than we make, and you haven't been doing that. And so when life happened, you didn't have any umbrellas when it rained. That's what it amounts to okay so now we know we need an emergency fund and yeah we need to cut up these credit cards and clean them up the good news is you can pay off thirty four thousand dollars with what you make in one year okay but you're going to be on beans and rice rice and beans and no vacations and you're not going to see the inside of a restaurant unless you're working there but it's time to get serious and get this mess cleaned up.

Whether the mess is there for a valid reason or not, which it is a valid reason, obviously we're going to care for our babies, right? But the invalid part of the reason was you weren't ready when life happened, and we all know life's going to happen. So now it's time to get this cleaned up and get your emergency fund in place. So pay a price to win. Let's get rid of it. And it doesn't go away by moving it onto a mortgage.

So I'm going to cut up the credit cards. I'm going to list them smallest to largest. I'm going to get on a budget that works, a really tight budget where I live way less than I make. And I start putting $2,000 to $3,000 a month on these credit cards and list them smallest to largest, pay minimum payments on everything but the little one, and attack the little one and push your way right through it. I'm sorry for how you got here.

The thing to do is still learn the lesson, and that is how do I never get back here again, ever. And because something's always going to come up. It always comes up in all our lives that costs money. And sometimes it's irresponsible spending, but sometimes it's just life. And that's what you've been facing. So we're going to get you out of debt and have a big emergency fund. Because if you had $30,000 in the bank and no debt when this happened,

you wouldn't have ever called me because you wouldn't have ever gotten out a credit card. Good job. You're heading there. You can do this. If you need some more help as you go along, ever called me because you wouldn't have ever gotten out a credit card. Good job. You're heading there. You can do this. If you need some more help as you go along, you call me. We'll help you any way we can. Open phones at 888-825-5225. Mitch is on Twitter following me at Dave Ramsey.

Dave, can you give some tips for those of us in a marriage that has two free spirits? Well, most of the time, opposites attract. And a nerd and a free spirit will get married the nerd is the more administrative one the free spirit is the one that's a little bit more fun and they also tend to uh not be majoring in all the details about getting out of debt and doing budgets and that kind of stuff but if you got two free spirits you don't have one that naturally goes there is what we're saying nerd Nerds like the control of a budget. Free spirits don't.

So if you have two free spirits, then what we have to do is just look at each other and go, yeah, we're free spirits. We enjoy life and we enjoy having a good time and we enjoy doing those things. But grown-ups, whether they're free spirits or nerds, live on less than they make. Adults devise a plan and follow it. Children do what feels good. And so it's okay to be a free spirit. We just need to be a mature free spirit. And that sets some boundaries for yourself for the good of your future.

And it's called a spending plan, a budget, where the two of you work together and you stick to it. It's not your nature to go there, but as a mature person, you can say, hey, I need some boundaries. I need some guidelines, because now I'm a grown-up. 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, America. We're glad you are here. Open phones at 888-825-5225. Brooks is with us in Pensacola, Florida. Hi, Brooks. Welcome to the Dave Ramsey Show. Hi, Dave. How are you?

Better than I deserve. How can I help? Sir, thanks for taking my call. My wife and I were moving out to San Diego, getting stationed out there. We have a paid-for house here in Pensacola, and I know you normally say not to buy a house if you're in the military, but I've made good money the last two times I've done it, and I am uncomfortable with having my whole net worth in the stock market, basically, because we'd be looking at this house about $350K. We have $315K in retirement already, but I would have to take out $225K in non-retirement investments

in order to be able to afford a house out there in San Diego. So I don't want everything in the stock market. I also don't want everything in one house, especially if I'm only going to live there a short time, and I wanted to know your advice. I don't have a problem with you not wanting everything in the stock market. I would not long-distance landlord in order to accomplish my goals, though. So you're talking about keeping the home that's paid for in Pensacola when you moved to San Diego.

Is that what you're telling me? No, sir. We have it on the market. I am going to cash out of this now. I'm going to buy a house there in San Diego. What will it sell for? About $350,000. Oh, sir. We have it on the market. I am going to cash out of this now. I'm misunderstood. What will it sell for? About $350,000. Oh, okay. And you're not going to be able to buy anything in San Diego for $350,000? Well, not unless I cash out my non-retirement investments. You know, add $225,000, and now I can afford something out there.

How much do you have in non-retirement? Is that all you've got? $225,000 non-retirement? Is that all you've got? $225K non-retirement. So you're talking about buying a half million dollar house then? Yes, sir. What's your household income? About $180K. Okay. The reason we tell folks to not buy in the military in most cases is because you're not in the home long enough for it to appreciate enough to sell it and make a profit and also sometimes some military markets have an oversupply

of homes on the market they're hard to resell so you get stuck in it and you lose money on it in some markets. Now, Pensacola would not be one of those markets usually, and certainly San Diego would not be one of those markets. You're going to see incredible appreciation and incredible market activity in both of those markets. You should. So you should be able to get out of this and make a profit on the one you bought there, and that's what it sounds like you're doing,

and you should be able to do the same in San Diego. And I do agree, real estate prices are up substantially. I'm not sure that you have to use all of that. I would probably, if I were in your shoes, what would I do? If I woke up in your shoes, I would either A, rent, or B, I would pay cash for whatever I bought in San Diego. And that would mean one of two things, neither one of which is going to be comfortable. One is I'm not going to spend as much as you're talking about spending.

Instead of spending $500, maybe $400 and leave $100 in non-retirement. Or I'm just going to get comfortable, in order to have a house like that with having no non-retirement investing until I resell this house. Now, if you resell this house, let's say you bought it for $575 or $550. You use up all your cash, non-retirement cash and money from this other home. And it goes up to $700 when you sell it. You're probably, next move, moving to a cheaper market. There's not many more expensive markets for you to move to in the military than San Diego. That's about the top.

I mean, Hawaii maybe, okay? But there's a couple of other. I mean, there's one or two. But most of the markets would be, well, most markets in general, not just naval markets, but markets in general would be cheaper than San Diego. I think we can all agree to that. So if you make some money and you're there three years and you sell out, you're going to put money back in non-retirement investing and buy a less expensive home, maybe a larger home,

but a less expensive home the next buy and the next station. Does that make sense? Yes, sir, it does. home but a less expensive home the next buy in the next station does that make sense yes sir it does so it's not really a permanent decision even if you use all your non-retirement cash although i'm with you i don't think i'd want to use it all i'd probably try to buy something in the 400s instead of in the 500s leaving me with some cash in non-retirement investing uh but the point at your point you're making is, from my portfolio standpoint, I don't like it all being in one house, and I don't like it all,

and I don't like so much of it being, I don't like using up all my non-retirement investing from a portfolio standpoint. My answer to that is, you're not for that long. You're not going to be there 10 years. And if you are, that mix is going to change during that 10 years. But if you're not, then you're going to reset your mix when you buy a different type of real estate, different expense of real estate in the next location that you're stationed.

Hey, thank you for serving your country. Sounds like you're doing a good analysis on it. I'm just kind of joining you in the discussion. Jason is with us in Tucson, Arizona. Hi, Jason. How are you? Good. How are you? Good. How are you doing?

Better than I deserve. What's up? I own my own business, and I'm trying to figure out how not to be climbing under horses when I'm 60 years old. What retirement should I go for? Okay. Well, you need to be... How do I start a retirement, I guess? All right.

Well, the first thing we teach folks to do is to get out of debt and have an emergency fund before you start retirement. And the reason is because if you don't have any payments, you have more money freed up to put into retirement. And then we want you to put 15% of your income into retirement. Jason, what do you make a year? It bounces around a lot. I average probably right about $1,000 a week.

Okay. So somewhere around $50,000 a year. Okay. Yes, sir. And how old are you? I'm 34. Okay, good. Do you have any debt?

No, sir. Good for you. Are you single? No, sir. Okay, good. Do you have any debt? No, sir. Good for you. Are you single? No, sir. Okay. Does your wife work outside the home? Yes, sir. She's a nurse.

What does she make? Right about $70,000. Okay. All right. So you've got about $120,000 household income and no debt. Yes, sir. And you're 34 years old. Well done.

Well, we want to have an emergency fund of three to six months of expenses that's grandma's rainy day fund and then we would tell you to put 15 of your household income into retirement and that's going to be about 18 000 a year in your case going into retirement and now you're asking how to fund that. If she, as a nurse, has a 403B or 401K available at her hospital or doctor's office, you would put some money there, especially if there's a match, and then you both need to do a Roth IRA. You can do $5,500 each. That's $11,000 of the $18,000 that we need to be putting in right there,

and put that in good growth stock mutual funds and jason to help you set that up and teach you how it works because you need to learn how it works you don't do it because i said do it or someone else said do it you do it because you understand it and you don't buy something you don't understand when it comes to investing. But I recommend good growth stock mutual funds for your long-term investing in your 401ks, in your Roth IRAs. And if you want some help with that, go to DaveRamsey.com and click SmartVestor because you're getting ready to be a smart investor. You're going to learn how to be a smart investor. So SmartVestor at DaveRamsey.com. Put in your information.

It'll drop down a list of the smartvestor pros in your area. Those are men and women that are in the mutual fund business that will sit down with you in person and teach you and your wife and teach you how to do the investments, how to get them set up. You can have it automatically drafted out of your checking account, going into that mutual fund every month. And if you do that for 30 years, you're going to be a multimillionaire. Multimillionaire. If you fully fund two Roth IRAs from age 34 to age 65, you will be a multimillionaire. That's a pretty cool idea. So that's exactly how it works, dude.

If you want to learn more about retirement investing, Chris Hogan, one of our Ramsey personalities, has a number one bestselling book called Retire Inspired. I'm going to send you a copy of it. You and your wife go through that as well. But click SmartVestor at DaveRamsey.com, and they'll help you walk through this and learn about it. Just learn. It's like anything else.

If you just learn it a little bit at a time, you can learn it. It's not rocket science. Thanks for calling in. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money. It is a free call. Why in the world would you trust some random guy in a cube when getting your mortgage? Do you really think he cares about your long-term money goals?

Well, he doesn't. Those companies care about getting you into whatever home loan program they're pushing that week. When it comes to ordering a cheeseburger, the meal deal works fine. But let's get real, people. We're talking about the largest investment you'll probably ever make, so don't be naive and trust an order taker who pressures you into a prepackaged loan. My friends at Churchill Mortgage have been helping my listeners for over 25 years. Call Churchill Mortgage and get custom solutions from an expert within 10 minutes.

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Equal housing lender 761 Old Hickory Boulevard. Redwood, Tennessee 37027. Live in the lobby of Ramsey Solutions, Jaron and Shannon are with us. Hey, guys, how are you? Hey, Dave. Welcome, welcome. Where do you guys live? Knoxville.

Knoxville. Well, I'll be heading over there in a few hours. Well, actually, Friday, I guess. It's more than a few hours, but I'm going to come over and watch a little football, I guess. So what part of Knoxville do you all live in? uh we live in west knoxville okay very cool i was born just over there merrill yep so welcome guys so you're here to do your debt-free scream we are love it how much have you paid off 180 000 whoa look at you that's awesome how long did that take six and a half years six and a half years And your range of income during that time?

Starting out at around $75,000 and ending around $160,000. Good for you. You guys are killing it. What do you all do for a living? I'm a licensed clinical social worker. I'm a construction project manager for an interstate retailer. Ah, okay. Very good.

Well, you guys are killing it. Way to go, man. Thank you. So what kind of debt was this $180,000? Well, $8,000 was my car, and $172,000 was our wonderful student loans from a private Christian university. So we were expensive spouses to each other. Wow. Yeah. Okay.

So you dropped some coin then. Yes. All right. to each other wow okay so this is you dropped some coin then yes all right and um then six and a half years that's a long time to pay off the student loans i was thinking maybe it was the house when you told me six and a half years so there has to be a good story tell me your story um i got a really funny story actually um when we went through financial peace at our church at the time, one of the things that you had mentioned in your video was take cash with you. We were newlyweds when we first went through, and you said take cash when you go to a furniture store or to buy a car and flash the cash and talk to them that way. So we were at a furniture store, and I'm a very non-confrontational kind of guy, kind of a free spirit. And she had told me, hey, let's do this. Let's put this to practice. So we took cash in and I'm talking to the sales

guy about a bed that we were trying to buy for our apartment at the time. And I'm flashing the cash and saying, Hey, I'm going to walk if we can't make this deal happen right now. And he's like, I'm sorry, that that's just the price. And so I just went out in the car and sat down because I couldn't swallow my pride and buy it but then my wife ended up buying the bed. It's 50% off. But that's just to show that there was a lot of negotiation from the beginning.

We were really, when we were dating and engaged at the time, we were sitting down with our finances and we were actually writing out the numbers and it was just this pit feeling in our stomachs of, we're just indebted to these loan companies, and we're going to be in our 50s before we pay them off. And so once we started the class, we nailed down a budget, did the envelope system. We were really persistent and faithful with the envelope system and just really got serious about it.

And I think the big part for us for as far as deciding to really try to work on Baby Step 2 is we paid my car off relatively quickly. And then he had gotten his first pretty big bonus from work. And so we were like, OK, we haven't really gotten to travel before kids. Let's take a really great trip to europe with this money we deserve it and we were sitting at dinner one time we were like ah we're we just did our budget you know a few months ago and so that was the first step we used that bonus money instead of a trip to europe which who knows if we'll be able to take that ever and that's okay but we uh why wouldn't... Well, why wouldn't you? You make $160,000. You don't have any debt.

Why can't you go to Europe? We put a huge debt in our first... Well, now we have two kids. Yeah, it just makes sense. They allow kids in Europe. At least in some countries. Yeah. So, yeah, that was the big turning point for us when we put that big lump sum money in

our first student loan payment. And it was an awful feeling. It hurt hurt but a good feeling at the same time how much of the six years did you make closer to 75 and how much closer to 160 pretty much the whole six years i'd probably say the last year was the last year the incomes doubled then right yes okay and so that's a relatively new figure correct then and so really you, basically you paid off about $30,000 a year for six years while making about $75,000. Right. Yeah, so you really have been doing this. Yes, sir.

Okay, and then last year it kicked in about the time you saw the light at the end of the tunnel, the income comes up. Right. Yeah. What was the hardest part of this for you all? Because six and a half years? Go ahead. this for you all because six and a half years go ahead um i think for me the hardest part was starting it and just seeing the light at the end of the tunnel because when you see that 172 000 on a piece of paper for you know two undergraduate degrees and a master's degree it's just like is

this worth it and um so i think when we paid off our first student loan, that was just such a victory feeling for us. So it was really hard at the beginning to go from letting our money kind of flow out wherever to really nailing down a budget and doing the envelope system. So that was hard for me to... Yeah, I think for me it's just the sacrifice. You know, in the world we live in just the spirit of comparison and just seeing everyone around you spending money and buying new nice

things and um just constantly you know telling ourselves that will be later and you know when we went through the class and i know it's kind of what you always say but it really has been embedded in me is just you know live like no one else so that you can live like no one else and i really clung to that because there was times where we wanted to give up or it would have been easy to just, you know, go buy what we wanted. But to be here now, to be able to talk to you and all these people and just say that we did it, it's just an amazing feeling. So you're free now.

Yes, sir. Does it feel like you like lost 300 pounds? It really does. That's a lot of debt. That's pretty incredible. I know it's a long time and a lot of sacrifice. Was it worth it? Yes, sir.

Yes, it was. Will you ever go back in debt? No. No, we've never had credit cards. We want to cash flow. We're on baby step four. Well, at the beginning, step to baby step four, but we're wanting to save up to cash flow for a minivan. All right.

Good for you. Never thought I. All right. Good for you. Never thought I'd say that. Good for you. There you go. Big dreams. Just like that. Well, your dreams change as you go along. That's right.

That's good. Good for you guys. Thank you. Well, congratulations. Did you have more cheerleaders or more detractors as you went along? I think we had a lot of cheerleaders. Yeah, we were really supported by our family and our friends especially once we started getting the ball rolling and paying off debt it was kind of just

people were in disbelief that we were able to pay off so much and um and at the same time too one of the big things for us with our journey was um being smart with our money especially all the extra income that was coming in and things like that. But we also wanted to still, um, obey the Lord and use our money for him. And so, um, a lot of, you know, for the first few years, a lot of our money was going out, not towards our debt and we felt okay with that. And so that's just part of our journey for people to not be afraid to still be generous while you're on baby step two, even if it's a huge lump sum, because the Lord has blessed us in so many ways. When we, I mean, we've kept both of our cars. My car is like 11 years old and so we don't want another car payment. We were at the point to

where we literally, it was, we were outgrowing our car with the car seats. He couldn't even put a seat back all the way. So he was like sitting up, but we were like, we're not getting a bigger car. And so part of our story is my parents, they blessed us and gave us their paid off SUV. Oh, wow. Yeah. So, you know, that's just one of the main, you know, blessings that, you know, the Lord's given back to us. They didn't give it to you. They gave it to the grandkids.

That's right. Yeah. But yeah, it's just been incredible to be able to experience. We've got a copy of Chris Hogan's book, Retire Inspired, number one bestseller. And that'll help you in the next chapter of your story become millionaires. Make $160,000 a year. I think Europe's not a big deal. Minivans aren't a big deal.

You can do it. You've got no payments. Proud of you guys. Very well done. Thank you. All right, it's Jaron and shannon knoxville 180 000 paid off in six and a half years making 75 to 160 count it down let's hear a debt-free scream three two one Way to go, you guys. Love it.

Congratulations. Very proud of you. Very, very well done. Stacy follows me on Twitter, at Dave Ramsey. When would you suggest that someone refinance a mortgage from a 30 to a 15 year? I wouldn't. The only reason I would refinance a mortgage is to get a lower interest rate. If you have a 30 at three and a quarter, you wouldn't refinance that. You just pay it like

a 15 and it'll pay off in 15. You don't have to go to the refinance expense to do that. You refinance if you're going to save on your interest rate. And while you're at it, make it a 15-year. This is The Dave Ramsey Show. Thank you for joining us, America. We're glad you are here. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee, which with Blinds.com, it means it's different stuff. What it means is if you screw up, like you measure your blinds wrong so they're too short to hang or they're too long to fit in the slot, or maybe you pick the wrong color,

they'll make your blinds over for free. That's pretty stinking cool because sometimes I screw up. Do you ever screw up? Sometimes I screw up. Blinds.com, free samples, free shipping, shamples. That's free shipping and samples at the same time. Free shipping and free samples. And, yeah, use the promo code Ramsey and you get a better deal blinds.com today's questions from nicole in pennsylvania i've been with my company

for 15 years with six of those being in mid-level management six months ago i took a new higher level role that i didn't feel i was right for but i took it anyway sure enough i'm not a fit at all i hate coming to work in addition the culture here has changed, and I'm ready to leave. I've had a few interviews, but they all question why I want to step down in position and see it as a red flag. How do I get around this? I guess you just tell the truth. I mean, it depends on who you're interviewing with as to what they want to hear on something like that. But I think you just say, you know, I don't do well at this, this, and this.

And so I'm better for that, that, and that. And when I come over here to your organization i want to be bring i want to be on my a game i want to be bringing you 100 competency and when i'm outside of my competency it it doesn't indicate a lack of ambition it indicates a lack of self-awareness on my part and i'm self-aware enough to know that i'm not good at that and um so that's why i want to step down i'm not good at this and um if that's the truth anyway just tell the truth it's amazing when you do that how it just kind of releases you eric's with us in afghanistan i don't get a lot of calls from afghanistan eric how are you pretty good sir how you doing? Better than I deserve. Are you military?

Former military. I'm a contractor now, sir. Okay. Well, thank you for your service. How can I help today? Yes, sir. I have a rental property in addition to my primary home that I also rent out. But I was just notified by my property manager that the house came up on the market, or the house that came, well, my tenants moved out.

There was an inquiry of someone that actually wanted to buy the house, and my question was whether I should just sell the house or continue renting it out. Where is the house? It's in El Paso, Texas. Where's your home? It's in southern Arizona. Okay. So when you finish contracting in Afghanistan and you live in southern Arizona, if you did not own a rental property in El Paso,

Texas, would you go buy one? Would I go buy another property if I didn't have it? Let's pretend you lived in southern Arizona and you did not have any rental property and you got ready to buy rental property. I suspect you'd buy it in southern Arizona, not El Paso. Absolutely. Yeah, because you probably have this house left over from being stationed there, right? Yeah, well, I bought the house right after I got done being stationed in Fort Bliss. I bought a home there. Because it was a good deal.

We got the zero down VA loan, so I took advantage of it, which is stupid in hindsight. I'd sell it. The reason I would sell it is because you wouldn't buy it again. For the same reasons you wouldn't buy it again, you wouldn't keep it. By the way, you can apply that decision making tool to almost anything if you've got a boat sitting in the yard that you never use and you look over there and go you know i'd never buy another boat then sell that one because you don't use it you know for the same reasons you wouldn't buy another one you sell that one and that's true of investments that's true of rental properties it's true of a lot of

stuff if you wouldn't buy it again then don't keep it because by keeping it tomorrow you bought it again in a sense so i think you take the offer or get a really sweet offer up the offer or whatever but i'd dump it i'd definitely dump it natalie is in little rock arkansas hi natalie welcome to the dave ramsey show hi dave how are you better than I deserve what's up um kind of a unique situation here I'm really not sure what you're going to tell me to do but we've been working through your plan through the baby steps we're on baby step two um paying off debt so we only have the one thousand dollar emergency fund and the only thing that we have left to pay off is my car which i just discovered you recently and so six months ago when it was i really needed a new vehicle we did the dumb thing of buying a

brand new car so i owe a lot on my car about thirty five thousand dollars good lord yeah well um about less than a week ago i was involved in a pretty big car accident and that car is now totaled okay um luckily we actually bought the gap insurance to cover the difference between um awesome so you're out you're out awesome so we're debt free yay yay but we only have the one thousand dollar emergency fund and i need a new car like yesterday. Gotcha. And so what's your household income? About $150.

Okay. And you have one car, right? Yes. Okay. What is it? It's a 2008, I don't know, a GMC truck. Okay. It's my husband's truck.

Good, good, okay. It's paid for. All right, good. Wow. I'll tell you what I did when I was in the same situation one time. I rented a car for a month while I saved up the money to buy a car. I'll bet you could save $5,000 in a month. Yeah, probably so.

And then buy you a $5,000 car. And drive it for six months or four months while you save up a bunch more money and get you a 15 or a 20 000 car and pay cash for it okay so rent for one month buy a five thousand then okay then drive it for four or five months and buy you 15 or 20 000,000 all with cash. Okay. Because I don't borrow money anymore. Right. Well, we also, we considered the option or talked about it or super thrilled about it,

but we have a 401k. No, no. We're not borrowing money anymore. Okay. We don't borrow money. Well, okay. If you borrow money on a 401k, it's a debt. You borrow money.

Is that borrowing it? Yeah, it's borrowing. Cashing out. If you cash it out, that's even worse. If you cash it out, they're going to charge you a 10% penalty plus 35% on your taxes. That's borrowing money at 45% interest effectively to buy a car. No. Yeah, I didn't know that those were the fees. Yeah, it's horrible.

Okay. Horrible. Okay. Unless you've got something you can sell right fast. Anything you can sell right fast? No, not valuable enough to buy a car with. Then rent the cheapest thing you can rent. You're working, I assume.

No, I'm not. You're not? I stay home with my kids. Okay. I've got three kids, so. Okay. How long can you make it without a car? I can't make it a day without a car.

I really can't because my husband and his hours and where he works and me being home with three kids and having to do all of the to and from school stuff, I can't be without a car. I'm in a rental right now. Oh, good. Okay. What's your rental costing? Well, my insurance is covering it right now.

How long will it cover it? For probably about another week, maybe. Good, good. Just milk that all the way out, right? Okay. And then find you the least expensive rental you can get for one month. Okay. That'll get the job done. Please don't go rent something super nice. Yeah, no. the job done please don't go rent something super nice yeah well i mean yeah no i'm not in something it's not super nice and i'll probably just try to keep what i've got because it works okay if it's not if it's not super because the more you spend on the rental the less you can save to buy a better car right right but you just need a little five thousand dollar get around van a little minivan

just something that runs yeah for just a little. Because you make a ton of money. Yeah. And you've been broke for long enough. Are you through being broke? If you're through being broke, this is how to fix it. But if you go back and start doing normal people stuff, you're going to be broke again. You know what normal people do? Yeah.

They go buy another $35,000 car to prove that they were stupid the first time. That's what normal people do. Don't borrow money. You are not that desperate and you are not that needy and you are not that entitled. You're none of those things. If you are, you're going to be broke again. You're going to be normal people because normal people are broke, needy, and entitled. And you're not entitled.

You're broke people. So drive something until you can pay cash for it and then move up and pay cash for it. It's what I did when I was in your exact situation many years ago, and it worked out for me. This is The Dave Ramsey Show. Hey guys, it's Blake Thompson, Chief Production Officer for The Dave Ramsey Show. This hour's up, but you'll find more on our YouTube channel, where we have over 6 million YouTube views each month. You can find debt-free screens, millionaire hour clips, Dave rants, and so much more.

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