The Ramsey Show - App - She Gamified Her Way Out of a House Payment! (Hour 2)

Episode Date: August 13, 2020

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. My co-host today here on the air, Rachel Cruz, number one best-selling author, Ramsey personality, my daughter, YouTube star. YouTube. Yeah, there we go. And there you go.

Because she's the nice version of the family, and people like her on YouTube because she's not nasty. No, I don't know if that's it. I'm bold sometimes. I didn't say you weren't bold. I just said you were nice. I mean, we have a different approach of how we take the we we give the advice sometimes people love you though that's why they're listening right now that's great you make good radio well it's compelling yeah it's true you're compelled to listen all right we're going to talk to you guys about your life and your money.

We're here to do that, and we obviously have a good time doing it. We hope you are. 888-825-5225. The advice is free. Some say it's worth what you pay for it. Adam's in Philadelphia. Hey, Adam, what's up? I'm doing well.

How about you, Dave? Better than I deserve. How can we help? So I think my wife and I just recently bought a house that might be too much for us. Uh-oh. That's a bad time to discover it's too much after you've already bought it. Yeah, well, actually, we bought it two months later, discovered you. So not the greatest timing. We should have done it beforehand. That happens a lot, though, Adam. It's okay. So what's the math? What's happening? So, I mean, it's not, well, you might tell me it's different actually. So based on our monthly

income, what I understand is we want our mortgage payment to be about roughly 25% on a 15-year. We're about 30.5% on a 30-year fixed mortgage, and we still have debt. So I'm not sure if, like, I may be jumping too fast to conclusions that we need a downside or if maybe I should follow my gut and we should downsize. Yeah. There's two levels to making it, two levels of panic, or there's two levels of something, of emotion that caused you to move on this. Level one is panic, which you can't exist today, and you can exist today, okay? Then there's another level that says out there four or five years,

are you still not prospering because of this thing but you've been able to exist okay you're not in the first one you're not in the panic but you've got you do have a little bit too much and you've accurately identified that you signed up for more than we would tell you to sign up for um so what is your household income and what do you do for a living so before taxes were about $120 based on bonuses, and my wife and I are both teachers. Okay. So you're probably not going to see a skyrocket in your income.

We're not going to project it's going to double in four years, right? No. We're both charter school teachers as well, so she's performance-based, but I'm pretty much the inflation rate. So, no, we really won't see much of a decline. Yeah. Okay. All right.

And how much debt do you have other than the home? $24,000. Okay. All right. Not too bad. Yeah, I feel like, you know, for you, Adam, you kind of are on that cusp. And what's hard, again, it's like, okay know, for you, Adam, you kind of are on that, on that cusp and, and what's, what's hard again, it's like, okay, look out five years.

Yeah. You're, you guys are both teachers, like you said. So it's not like you're going to, you make commission and you're going to be able to like just blow your income out of the water kind of thing. So, so you have to take that into account and then do the math and figure out, okay, how quickly or how much we're willing to sacrifice to get out of this $24,000 of debt. How long will it take us to get an emergency fund? Kind of go ahead and map out the next couple of years mathematically of what your money is going to look like.

And then see where you guys are and be like, okay, if we had a 25% take-home pay mortgage, how much would that be? Would we, that extra money, is it worth it at that point to sell and buy another house and go through that whole process? So it's kind of one of those, I mean, if it was 50% of your take-home pay, it's like a no-brainer for me. You got to go now. Yeah, that 30%, I mean, it's right there at that, you know, kind of that edge. So I think it's something you and your wife need to talk about and say, okay, is it worth it of what we're going to save if we did get a lower mortgage in a different house? Or are we going to be in this and we're just going to save if we did get a lower mortgage in a different house, or are we going to be in this and we're just going to have to sacrifice other parts of our lives to get out of this debt

faster. Agreed. Let me give you a strategy that goes exactly with what she's saying. Let's try this, okay? Let's say we're going to tutor extra after school and create some side income. We're going to get on a beans and rice, rice and beans budget and clear up the $24,000, which is stuff you already knew we were going to say, right? And as soon as that's cleared up or while that's cleared up, let's run the math out and say, if we were to pay this mortgage that we currently have at the current interest rate at a 15-year rate rather than a 30, that creates a payment of X. What does our income need to become so that that X is 25% of it?

And let's say that within three to five years, somewhere in that range, if you don't get your income to that level, then you probably are having a house that's slowing down your progress. Because the problem with having a high house payment is not that you can't pay it, in your case, because you can pay it. The problem is it weighs down everything else. So when you get ready to buy the next car, you didn't have any wiggle room in your budget to save up to pay for the car.

When you get ready to go to Christmas or go on vacation, you're having a budget really, really, really tight because all your money is being sucked up by a house payment. And in your case, it's not all of it. It's just too much of it. And I think you can make it. You're just going to have to make very careful choices. And I think your income is going to reach that 25, reach the point that you're paying a 15-year on this mortgage, and it's 25% of your income.

I think you'll probably reach that in three to five years. And so you'll be fine. It's not ideal. It's not what we would have signed you up for. of your income, I think you'll probably reach that in three to five years, and so you'll be fine. It's not ideal. It's not what we would have signed you up for, but it's not bad enough to force the sale of the house artificially right now. Okay. Yeah, that's encouraging.

But, yes, we'll get to work right now. We'll make sure we're doing exercise stuff for super. Yeah, absolutely. And then, Adam, I will add the other side of the coin too, that we do talk to people and that they decide on their own, even with all that math, they're like, you know what, it's not worth it. We're gonna just sell, get a smaller house and just, you know, have extra money to go crazy on the debt and lifestyle and all of that. We just have more wiggle room and it's worth it for them to do it. So again, it's not like an either or answer. And so it's kind of, it is up to what you guys, what you guys want to do, because we've heard both sides of the story. Rachel, I'll give you an example of that. That's not it's not Adam's situation. But when you were a tiny child, a couple that was in our church and they had three kids that were older than you all and we considered them good parents. So we were kind of looking as parents of babies.

We're kind of looking at this couple like I kind of like to have parts of their parenting. I like what they're doing um they right before we met them they had moved down in house like 30 down i mean way down like a substantial change in neighborhood and house and everything because they felt very very very strongly in their house and I'm not impugning this on everyone, that the lady wanted to be at home full time with her kids. And the only way she could be a full time at home mom with the kids was not in the house they had. So they said, we're making a choice here. She can either be home or we can have this house. Oh, yeah.

And they said, we want her home. And can either be home or we can have this house. Oh, yeah. And they said, we want her home. And they moved them home. And they did end up raising great kids, for that matter. This is the Dave Ramsey Show. One of the questions I get all the time is, which life insurance company should I use for my term life policy? A valid question since there are hundreds of companies out there with rates all over the place and riders and add-ons that are simply a waste of money. You need to get this

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rachel cruz is my daughter of course and uh you know this is this is part of her story right here. Nearly every great success has a never again moment where you run into something and you say, never again am I going to be here. That happened to me the year Rachel was born in 1988. I filed bankruptcy that year and I said, never again is my family going to be in this position. Never again is American Express going to call my house unless it's a wrong number never again are they going to take the water meter out of our house to make sure that we didn't turn the water back on illegally never again are we going to feel that level of stress around money in our home. And once you have that never again moment, it changes things.

Some of you are having that moment because of the economic upheaval caused by COVID. You've lost your job. You've been furloughed. You've been pushed around. You've been pulled around. Or you've been afraid that you're going to be. And you're saying, I don't have any money, and I'm deeply in debt. And never again am I going to be, and you're saying, I don't have any money, and I'm deeply in debt,

and never again am I going to be in this place. My grandfather had a never again moment in the Great Depression, so that when I'm pulling nails out of boards with him in 1972 at 12 years old, I got ready to throw the nail away, and he said, oh, no, no, no, no, we don't throw that away. We put that in a coffee can. We straighten out we're going to keep it because his life was changed because he said never again if you're in a never again position right now and you're ready well a lot of our stuff is available to you ramsey plus has got a free trial running right now which gets you into financial peace university a lot of our life-changing books and tools are 73% off, and that includes our kids' pack, the Adventure Pack for Kids, which includes a box of teaching aids, our bedtime stories to read to children,

and one of them is about you. I know. I got my own kids' book in there. Yep. Well, you're the subject anyway. Yeah, that's true. Remember? Yeah, I do. I don't remember the's book in there. Yep. Well, you're the subject anyway. Yeah, that's true. Remember? My name.

Yeah, I do. Yes. I don't remember the name of my book. You don't? It was from a few segments ago. But I remember this book. Oh, you remember this book. It's called?

Careless at the Carnival. Careless at the Carnival. Because it really happened. It did really happen. Yes. We talked about it in Smart Money, Smart Kids, I think, too, didn't we? Yeah. Yeah.

Yeah. Yeah. As every parent knows, your kids are obviously also different. So, was the the still am the spender kid love spending money still to this day i love spending money uh and i yeah spent it too quickly at at a theme park and you guys said once your money's once it's gone you spend it all on the games you're done no more and i spent it like two minutes playing some three games and i was like can i have more money shoot the water in the clown's mouth and blow up the balloon yeah the carny ride the carny stuff it rips you off those games are all designed to lose

rachel you're gonna lose and you're gonna be out of money and you're gonna be whining the rest of the day because we're not gonna give you any more money and i gotta tell you she wanted the rest of the day but she learned a lesson she learned her lesson. She learned her lesson. I had perseverance. Really tried to get some more money out of y'all. Persistent salesman. But so is a kid's book. Yeah, the kid's books are there to teach kids those same kinds of things. Okay, don't be impulsive and out of control with your spending.

And you joke about being a spender. It is your nature, but you're very mature and very controlled. Oh, yeah, yeah, yeah. I've learned, yes you have developed a a discipline and a skill that's not nerdy you're out of control but it gives you an adult view on spending versus a child's view on spending oh for sure yes well that's the one thing about the budget you know that i always talk about that it was so hard for me like the budget was one part of personal finance. It was so tough, just because I'm not great at details. I felt like the whole time budgeting was just like,

oh, constrictive. It means you can't have any fun. You can't do anything. And I was like, oh my gosh, I don't want to do a budget. And then actually doing it and living on one later after Winston and I got married and realizing, wow, a budget really gives me that permission to spend. It allows me to spend money while I'm in control. There's still guardrails, there's still boundaries, but I can spend money now without second guessing, without worrying, without stress. Like all of it really is this tool in my life

that I'm able to do what I love, aka spend money. But I am doing it, yeah, with a boundary in place. But it's so much more enjoyable. Like even Amelia, she started kindergarten. She had her half day today, her full day is Monday. it yeah with a boundary in place but it just it's so much it's so much more enjoyable like even amelia she started kindergarten she had her half day today her full day it's monday so technically i still say she's not started pretty i still i still have four more days pretty emotional technically hasn't started but we did some back to school shopping stuff for clothes and i put it in our every dollar budget like back to school shopping within a dollar amount so i was able to

go and like we were able to pick out some stuff and get it. And I wasn't freaked out. I wasn't like, oh, is this too much? Is this okay? Like it was all right there. All questions are answered when you budget and when you spend in control. So yeah, that is me. I went from careless at the carnival to an every dollar budget user.

Yeah. And I love it. I'm not gonna lie. If you, you every dollar budgeters, if you know it, the transactions come in and you get to drag and drop them. Oh, it's my favorite. I love it. I'm not going to lie. You every dollar budgeters, if you know it, the transactions come in and you get to drag and drop them. Oh, it's my favorite. I love it. I do. I love it. Turned her into a nerd. Chelsea's in Utah. Hey,

Chelsea, what's up? So I do have a question. So I'm in Baby Step 2, but I just had this like aha moment where I know what I want to do with my life. And I found that I want to start a business organizing homes. But in order to do it legally, I'm going to have to put some money into it,

which is it's not going to be any more than $5,000. Whoa, it does not take $5,000 to start a home organizing business. Well, I have to get, like, licenses and, like, certain classes and whatever. You don't have to take a class on organizing. You are already an organized person. Look up organizing on YouTube and watch it for five hours. You will have become the most educated organizer on the planet. And then just hand out some cards and go to people's houses and take their money for that.

You don't even need to get licensed. It's not illegal to operate a single-person service-oriented business where you go to someone's home out of your home on a small scale in any municipality. You have built this up to be way bigger than it is. Just go do some work and make some money. Okay. How much are you going to charge? I was thinking probably like $100 to $200 per room.

Where'd you get that number? Out of my butt. Well, probably ought to do some more research than that. Oh, Lord have mercy. I'm losing it. I'll take over. Yeah, please pick up. I was going to say, home organizing, it is like a fad right now.

There's a lot of Instagram accounts. There's a lot of people doing it. A lot of people doing it. So you will be able to do it well and then and and then ask around from different competition around to see what they literally are go online and start doing some research for organ home organizers in your area and try to find out what they're charging and so what you do is you study study competition in your area and people that are doing it in similar sized cities across America. You can do all of that with some simple Google searches.

And then you'll figure out that it's $10 a room and not $100 a room. Or you'll figure out that they don't charge by the room. They charge by the house or by the hour or something else. So you look at different pricing models and different ways to pull this together. And you lay that out and you pull. Oh, y'all, if I could just close my eyes, I could keep talking. It's got to be a full moon or something. So, yeah, it's called in business when you're looking for you looking for successful people and you copy their ideas, we call it best practices.

And so if we're launching a marketing campaign or a pricing structure or a business model around here, we try to find someone who's been successful in that space before, and we emulate or model or copy them after that. hey thanks for the call this is the dave ramsey show you Thank you. In the lobby of Ramsey Solutions on the debt-free stage, Alex is with us. Hey, Alex, how are you? Hey, Dave. Hey, Rachel. How are you? Welcome. Where do you live? I'm from Hartford, Connecticut. Cool. Welcome to Nashville. Yeah, thank you. And all the way here to do your debt-free screen. Uh-huh. How much have you paid off? About $193,900. Good night, girl. Wow. How long did this take? 19 months. Okay, this is a story. And what's your range of income? I started

about $100,000, worked its way up to about 160 and then you know covid shifted that a little bit since then okay cool what do you do for a living i'm a software engineer for data analytics with a health care company and you are kicking butt yeah well done very well done so uh 194 in what 19 months student loans loans? No. What was it? It was my house. You paid off your house! Oh yeah. Alex is weird! This is a weird girl! I am. Way to go!

How old are you? I'm 27. Oh my gosh. You are awesome! All because of you. You did it. I didn't pay any of it. What's this house worth? It's probably about $270, $280 now. Good Lord.

That is amazing. I really hustled. You've got to be on air. It feels great. That's incredible. It feels great. What made you, Alex, want to do this? Because at 27, a lot of people just kind of settle in with the mortgage and just say,

you know, we'll have 15, 30 years. It's part of my life, yeah. Why did you decide to kill it? Well, I, well, my story started before then, probably about 10 years ago. I graduated college. I didn't know anything about money, but happened to listen to podcasts, got books from family and was able to pay off about 30,000 in student loans pretty quick. And I love learning, so I kept listening to the podcast. I kept reading your books. And it just was more and more ingrained in me over all that time.

So I bought my house about two years ago. And I thought, well, I'll probably do it quicker than 15 years, but I wasn't going to go super gazelle. Then it became a game. If I throw this bonus at my house, if I get an extra roommate to live with me and I bring that in, if I get an extra side hustle, I think at one point I had up to six side hustles. Wow. I was doing a lot. I liked staying busy. What kind of side hustles? What was the most lucrative side hustle? Probably having roommates for sure. Anywhere between two and four at a time.

But I had a couple of catering jobs. I turned all of my passions into hobbies. So I love fitness. I became a personal trainer and a bunch of other little side miscellaneous things. But it became a game. The more I could throw, I saw my spreadsheet nerd through all this extra money, how many months it would take off of my mortgage, being able to pay off the house. And eventually, you know, down to 10 years, down to eight, down to five. And then it was 19 months. And I said, you know what? I got to do it.

So I did it. Knock it out. Yeah. Amazing. And your family's with you. They are. So what have they been saying about this? Wow.

Not much they can say, but yeah, they're very impressed and they helped me along the way. Parents became debt free last year, so that was helpful along my journey. Yeah. Friends from Connecticut following the plan just became debt free. So we're kind of doing that together. Yeah. Everyone's very happy human whirlwind everything you touch not gets knocked over well done something like that well done

well done wow so what was the hardest part are you yeah because you're what 27 27 so man so okay as a 27 year old i mean you're working like crazy yeah making sacrifices obviously not doing like anything crazy extravagant with your bonuses that you're getting none of that. So like, how does that work? Because some 20 year olds are watching or listening and they're thinking, oh man, I don't know. Is it worth it? She didn't have a very good life.

Well, I was still a little bit in poor college student mode, maybe a step above that. But I was able to save a lot and i didn't really need to spend money i knew what my needs were versus wants and um just prioritized i wanted to get my house paid off it seemed like a great goal so that was my priority i stuck to it have you always been like goal driven like since you're a little kid even probably yeah yeah so my family's entertainment for you is knocking stuff over yeah Yeah. I mean, knocking goals over. Set a goal. That's entertaining.

Knock it over. More entertaining than going out to a club or going on a trip. Entertaining for you is knocking something down. Yeah. Knocking it out. Oh, yeah. Raising something up. I'm going to hit that, and then you hit it.

Yeah. You're built that way. That's incredible. Yeah. Yeah. Very exciting. And you applied it to this subject matter. Yep. Wow. Yeah. Very exciting. And you applied it to this subject matter. Yeah. Yeah.

Wow. Exactly. And obviously to your career as well, because you were making an outstanding income for a 27-year-old. Mm-hmm. So just touchdown, girl. Yeah. Way to go.

Score. So great, Alex. So what was the hardest part as, you know, I think of the 20-year-olds watching right now, and they're thinking, that is impossible. I don't even know how. Like, how did she do that? Like, what would you say is like, oh, yeah, this was the tough part of it. But obviously, you still did it.

Because it's not all unicorns and Skittles. I mean. Well, maybe it is unicorns and Skittles. So I'm a very disciplined person. And so it really wasn't that difficult for me. I knew what my goals were, and I stuck to it. You know, some days days last summer, I probably worked 16 to 18 hours at three or four jobs a day. You were tired. I was tired. I would come home and

I'd have roommates all over, which they were all great people. But you know, sometimes you just need to relax and rewind. But I knew what my goal was. So as tough as that might have been, I was able to get through it. Amazing. Absolutely incredible, Alex. Absolutely incredible. I'm blown away. The bumper sticker on her refrigerator door says no whining. I mean, she knocks it out.

You're incredible. You're absolutely incredible. Very, very, very well done. Okay, so we have somebody out there that has a mortgage or has a large student loan debt that's in your age group. And we've all read news reports that say some people think in any age group, but always in your 20s, you're more susceptible to it, that I'm stuck and I can't get ahead. So what do you tell them from your life experience? You literally paid off $194,000 in 19 months. So what do you tell them the key to getting out of debt is? Because it can be done.

You're standing here as proof. Yeah. One of my favorite sayings that started when I was big in fitness, came into my financial life, is sacrifice today for a better tomorrow. So you'll make your life better with the things that you do today. You say multiple different versions of that same quote throughout your show. Live like no one else so later you can live and give like no one else. Yeah, and it feels great when you're there.

So just pursue. So basically it's a short-term sacrifice, and you can do almost anything for 19 months. Yeah. You really can, if it's only 19 months. If you did that for 19 years, we would call you a workaholic, and you'd be out of balance psychologically and everything else. But for 19 months, it's paying a price to win the Super Bowl.

And now I have so much freedom because of that. You can do anything you want to do the rest of your life. You're going to be a multi, multi, multimillionaire before you're even 40. That's cool. The math is unbelievable yeah i mean you take 150 grand a year coming in and you have zero payments in the world no house payment even and you start investing just a decent share of that while you have an incredible life of consumption and generosity but just investing a decent share of that it it turns into serious money.

So how did it feel the moment you paid that last mortgage payment? It was great. I was in the office, and it was two days before Connecticut shut down for COVID. Whoa. And so I was able to do a little I'm-net-free scream with my family because no one was in the office. I was alone. But it was great.

It was great. It felt amazing. Well, and then COVID hits and you got no payments. Exactly. I didn't have to worry. I wasn't really worried about jobs in particular then. It was pretty stable, but I still had that in my pocket. Yeah. You don't have to worry about it. You're so impressive. What a hero. Thank you. Well done. You're inspiring to our viewers, our listeners, everything else. Absolutely. Absolutely incredible. All done. You're inspiring to our viewers, our listeners, everything else. Absolutely. Absolutely incredible. All right.

We've got a copy of Chris Hogan's book for you, Everyday Millionaires, because there's no question that's the next chapter in your story. Yep. So very, very well done. Alex from Bloomfield, Connecticut, 27 years old, $194,000 paid off in 19 months. That's her house and everything. She is 100% debt-free. She's officially weird. Count it down.

Let's hear a debt-free scream. Three, two, one. I'm debt-free! Yeah! Woo-hoo! Wow! Absolutely incredible. Amazing.

So impressive. Wow. This is the Dave Ramsey Show. Thank you. Rachel Cruz, Ramsey personality, number one bestselling author, is my co-host today here on the air. Kylie is in Kansas City. Hey, Kylie, how are you? Hi, Dave. Hello, Rachel. My husband just popped in and said we should probably know the answer to this.

Like, we're coordinators, but I think we've just had a little bit of hesitancy and want a little bit more confidence, I guess. We've been doing the baby steps for about four years, and we started with $134,000 in student loan and non-mortgage debt and we found this house. We live about three hours away from family and we found this house that's pretty perfect for us for $80,000 and we just closed on it last week so we have like a bridge loan for that and we have our house in Kansas City under contract and it's looking like we'll have about $132,000 in proceeds from selling our house. So we're just trying to decide, like, do we pay cash for this house in our hometown? It needs about $30,000 to $40,000 in renovations to be livable. We need to pay off our student loans.

We have about $16,500 left in that. We need about $4,000 for Baby Step 3. And so we just want to make sure we're, like, stewarding this money well and making a good choice with this halt on student loan payments and things like that. We've had some people kind of say it's dumb to just throw all your money at student loans right now. We don't owe anything.

You should just hang on to that. Some people are stupid. Some people are stupid. You're a Financial Peace University coordinator. You know the answer to that. So I guess you can feel confidence. Some people are stupid. You're a Financial Peace University coordinator. You know the answer to this. I guess we're just nervous. So what would you do? What would you tell somebody in your class? What is the Ramsey answer to your question? So work the steps. So pay off our student loans, square away baby step three. And then I guess that's the issue that we're having with paying off the house and the renovations is just if things come up that it ends up being more expensive than we thought. Like we've done

our due diligence and what needs to work on the house, but there's always surprises that I don't want to back ourselves into a corner and then not have the cash on hand to get it livable. What is your household income? $120,000. Okay and what does it take to get confidence in the bids on the rehab because you're not confident in your rehab bids? I think about 40. No I said what does it take for you to get confident that your rehab bids are accurate? I guess just knowing once we start. No, no, no, no, no, no, no, no, no. You are not confident that the rehab bid is accurate because you've told me four times that once we get started, we think we're going to uncover something. Something's going to come up.

It shouldn't come up. A rehab is a project. A project is estimatable. Get more bids. Get more contractors to look at it. Do more in-depth. Figure out ways to get fixed pricing on some of these things so that you know you've got a complete job for X price.

And let's get more confidence in the rehab bids before you start the rehab okay okay because it listen if you were a hundred percent sure or 98 sure which you feel like you're about 60 sure to me that it was going to cost you thirty thousand dollars to fix this house up you could run this out and answer the question by running the baby steps. But the place you're stumbling is every time in the conversation you get to the rehab portion, you say, well, that part I'm not sure about, and that's what's scaring me. Yeah. Am I wrong? Did I miss something?

No, I just think there's so many unknowns once you start tearing a house apart. Because it's an older home, and you're worried that, yeah, they pull up the floor, and it's all rotted underneath, and you've got to do the foundation again. So, yeah, I mean, you've been in real estate your whole life, Dave, so speak on that a little bit. So pull up a piece of the floor and look at it. Right. So when we closed on it, we found out there was like beautiful hardwood floors underneath the carpet so that was like a big win but like the foundation needs work and this is this will be our fourth house so we're a little confident in flipping it like we're not

newbies we're not getting in over our heads i don't think too much but like we've never had to do foundation work and what if like i don know, sometimes I feel with contractors it just, like, adds up and then adds up and adds up, and it's in a new town where we haven't worked with people. Like, what if we just end up with a bad contractor? You've got to manage the project better than you're outlining for me. Okay. I ran rehabs for years. I built houses.

We built buildings, commercial buildings here. And, you know, when we dig a hole next door over here, which we did the other day to put a building on, and the building's up now. We don't know in Tennessee whether we're going to hit rock or hit a sinkhole. It's an unknown. And so we can blow up a budget on a $50 million project because you can have a million dollar swing, and it can all go into a hole in the ground, right? And so what do we do to offset that? Well, before we set the budget, we do some core drills over there, and we find out what the flip the soil is, and then we go, okay,

we've got some bad stuff over here in this corner, so we're probably going to add an extra $200,000 on that. And it's just another zero in your numbers, but it's the same process. You manage the risk of the project by continuing to unfold and gather information on the project and tie things down. You can't just run around with your hair on fire going, I don't know, I don't know, I don't know, I don't know. That's too much stress. You can handle it as long as you know what it is, and you can manage through it, and you can decide, okay, we're going to have to not do this portion of the renovation until we have the money out of $120,000 income. So if I'm in your shoes, I'm going to do that. I'm going to get a lot more detailed in my due diligence, get actual contractor bids, multiple contractor bids on things I'm really unsure about.

You're unsure about the foundation. Let's get three or four bids talk it through you're going to start to see some trends in the way those guys are talking about that and you're going to go okay i i feel very confident now after talking to four different people that will be able to do it for x and it's not a hundred percent but your confidence level goes up versus one guy goes i don't know with these foundations once you start you don't know what you're gonna get well you just got fired okay i'm gonna get me another one right and so and you just got to manage the risk on your project that's what you're doing and so um and really before you pay off the bridge loan you get all those numbers together

but you do certainly finish getting out of debt you finish your emergency fund and then you're sitting on enough to we think pay off the house and do the rehab in the balance in the remainder but you've got them you got to get your details honed down tight tight tight tight pretend like i hired you to do this rehab and you had to report to me for the accuracy of your estimate and you were working for someone else in other words and then that forces you to not be sloppy with managing the risks on these details Rachel's husband Winston runs all of our real estate this is what he does all day long isn't it oh yeah absolutely well and that's that's what I was going to say though too it's your family home it's in a new city again those unknowns are

there and when you don't have choices you don't have options you feel stuck in something that's when That's when the stress happens. But just like, I mean, just like you said, though, I'm like, get a couple of bids, get options. When you have options that gives you power to say, okay, this is what we're in. This is, this is the reality of what's going on versus it just being all up in your head. And you have one guy that tells you one thing and that's it. So. Okay. So Kylie, at this point, you're debt free, you have your emergency fund and you have $110,000 sitting in the bank and you have an $80,000 bridge loan. Okay. That's roughly where you're going to end up. And so you got about $30,000. We think for the, we have $30,000 for the renovation if we pay off the bridge loan, which was 80 grand. All right. And so now you've got to manage the project to get the house livable within $30,000 and then stage anything above $30,000 in phases to come out of your income,

which, by the way, you have no payments, and you make $120,000 a year. And so you can stage into that. I do not think this $80,000 house is going to eat much more than $30,000. If it eats $40,000, the other $10,000 is in two phases, a $4,000 and a $6,000 phase that you cash flow out of your income. And you'll be able to do that easily because you have no payments. So that's how you're going to work it. But the stress will go away. Jim Collins talks about this in leadership and in business all the time.

And Dr. Deloney talks about this too that the a challenge does not cause anxiety and stress the unknown causes anxiety and stress and so that's what you're looking at right now that's what i keep coming back to in your situation the unknown is what's driving you nuts and making you go crazy and not follow the steps that you know to follow so all i'm trying to do is get this into a known situation. We're going to, if you can get this house livable, and I'll bet you dollars to donuts you can, within $30,000 of rehab, then you're going to have a paid-for house, and you're probably going to have some other work you want to do that you're going to cash flow.

And you're going to do that in phases. That's what the numbers sound like to me. Great job, Kylie. Thanks for being a coordinator, by the way. This is the Dave Ramsey Show. That's what the numbers sound like to me. Great job, Kylie. Thanks for being a coordinator, by the way. This is The Dave Ramsey Show. Hey, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. This episode is over, but if you heard about an event, product, or service and didn't have a chance to write it down, don't worry.

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