The Ramsey Show - App - Should My Emergency Fund Be Over $1K? (Hour 1)

Episode Date: October 22, 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. Joining me today is my co-host on the air, number one best-selling author and Ramsey personality, Chris Hogan.

We're here to answer your questions about your life and your money. Open phones at 888-825-5225. That's 888-825-5225. Dylan is in Sarasota, Florida. Hi, Dylan. How are you? Hey, gentlemen. Thank you so much for taking my call. I appreciate it. Sure, man. What's up in your world? So, a little dilemma. I am currently trying to pay off a truck.

It was back in February. Stupid decision. We financed it. We still owe about $18,000 on it. My decision, I'm thinking we should sell the truck and get Will Beter to drive around in. My wife wants to keep the truck and keep trying to pay it off, but she's not really on board with the baby steps to pay it off. She just wants to kind of pay it off as we can. I keep trying to save money to throw at it. She's not really okay with just throwing money at it. She wants it to pay off in you know, in the time that we wanted, which was a few years. And I disagree. Um, I don't know how to get her on board with me cause it's kind of killing me. How old are you guys? Uh, I'm 26. She's 27. How long you been married?

Uh, we got married last year in november oh okay all right cool so uh dylan who's the spender in this family um it was me uh and then it stopped being me and she started spending a little more than i was and now it's kind of the roles switch a little bit. So she was the spender, or the saver, I was the spender, and then we kind of switched roles. Gotcha. Here's the thing that I'm missing in hearing you describe stuff. I want you to talk to your wife about why.

Why are you wanting to pay off the truck? Like, what's the thing that's motivating you? And it really is more of a matter of you sharing from the heart. Like, right now you're trying to get tactical, and she doesn't understand the heart behind it all. And so are you motivated to be able to prepare your foundation or you want to get prepared to have a baby and grow your family lately? Like, I think you need to talk more heart to heart and less tactical right now. And I think you know it. Well, I know her reasoning for wanting to keep it is because we do plan on starting a family soon,

and she says it's a safe, reliable vehicle, and I understand her side of that, but I also think until that family's kind of started, that would be, you know, where to go. Well, she doesn't think so. I know. I did that stupid two years ago. It turns out babies are small,

and I was the dummy that thought we needed an SUV that fit eight people. And there was only three of us at the time. So you, again, reliable vehicle, yes. Payment, no. And I think connecting with her and talking from the heart and helping her plug in and understanding this process of the baby steps, it's the roadmap, baby. It's the plan that leads you to being able to do more than you ever thought you could for yourself and your family. And so it sounds like you guys need to get aligned and get over into Ramsey Plus. Yeah, let's get you guys signed up for that.

I'll give you a year in it. And just start watching some of the Financial Peace University lessons together. I think you do need to quit talking about what to do and start talking about why. And just go, the reason I'm excited about this idea of being out of debt is I think we could build some serious wealth and that would allow us to blank, blank, blank, right? What does wealth allow you to be outrageously generous, allows us to make sure we can provide for a family and pay for our kids college. And, um, you know, we'll be able to travel, we'll be able to do this, and certainly we'll be able to have a reliable, safe vehicle for children. You may or may not need to sell the truck,

but I'm not really concerned about the truck right now because the truck is a minor issue compared to you guys not being on the same page. It doesn't matter if you do everything right, if you're dragging her along or vice versa. You know, it's just like trying to drag a boat anchor behind something. We don't see any couples become financially successful unless they work together. I mean, none. It just doesn't work. And so getting on the same page is a big deal then you can decide

whether to sell the truck or not but yeah it's a big deal get behind that so hang on kelly will pick up we'll get you set up in ramsey plus and that'll be our wedding gift to you you're newly weds and you're learning how to handle money together and that's a that's you know sometimes the first year is the best year sometimes the first year is a really rough year. It's all a process. I mean, you're learning how to speak a new language, right? Instead of speaking me, you're speaking we. And you're starting to work together. So it's going to take a lot of time, a lot of patience.

And it's a process. And as men, we tend to think one conversation is enough. This is an ongoing dialogue where you're sharing your heart and talking about the process. Yeah. I told you once 20 years ago what you're talking about. All right. Rebecca's in Nashville. Hi, Rebecca.

Welcome to the Dave Ramsey Show. Hi, Dave. How are you? Better than I deserve. How can you help? Well, my husband and I, we were wondering if you could give us some financial advice. We are both debt-free, and we have around $50,000 saved up right now, and we were wondering if you could tell us

what would be the best strategy to use that. We're currently renting. We want to buy a house, potentially start a business. We're not sure what kind of business yet, and invest. We were wondering what would be the best way to use that. Well, since you don't have a business idea and you don't have a business plan, I think the next order of business is for you to buy the home. Let's get in that and get settled and make sure we're continuing to save. You've done a great job saving. And so, yeah, I think you need to hold back on emergency fund of three to six months of expenses.

But you don't want to hold money or pour money into something as far as the business side of the equation where you don't have a very airtight, well-thought-out, detailed plan because that money will just leave. You're just throwing money up against the wall to see if it'll stick. That's just a bad idea. And so later on, when you've fully developed your business plan and you've thought exactly what to do, then I think you can scratch the money together while you're living in a home to do that. Yeah, I agree, Dave.

That emergency fund, again, going back to what we've walked through with this COVID pandemic, there's never been more validation for an emergency fund than right now. If you're out there and you don't have three to six months tucked away to be able to be a cushion between you and life, I don't know what you've been watching. Like, you know, you've got to see this and understand and have that never again moment. I'll never forget you You said that during that pandemic. Never again am I going to allow myself to be in this position to make a decision between food on the table and lights on. And that was something that really resonated where you got to go. Yeah, you have to draw that line in the sand.

Yeah, I'm done. I'm not going to happen anymore. When you finally say I've had it. That's right. I've had it. That's when people change their lives. Rebecca, Kelly, if you would send her a copy of Day's Entree Leadership. If you're thinking about a business, I went to grad school, and there were village idiots there,

talking about OPM, other people's money, and leveraging. You need to know how to do it the right way, and Entree Leadership will help you. Oh, there you go. When you get ready to do the business. That's right. Good. Good question, Rebecca. Thanks for joining us.

Chris Hogan, Ramsey Personality, my co-host today, here on the Dave Ramsey Show. I get asked all the time about what people need to do to improve their family's money situation. Two of the most overlooked things are term life insurance and disability insurance. Both plans make sure that you have income to pay bills and take care of yourself and your family if something were to happen. For term life, you need to carry 10 to 12 times your income, and I recommend 15 or 20-year plans for most families. Stay away from cash value or return of premium plans. They're just a rip-off. Disability insurance is just as critical.

How are you going to pay your bills if you're unable to work? Disability is the leading cause of bankruptcies and foreclosures. That's why I send you to Zander Insurance. They've been helping my listeners find the right plans at the lowest cost for almost 20 years. Call 800-356-1780 or visit zander.com and compare online that's 800-356-1780 or zander.com winning at anything is not an accident it's an intentional act as a matter of fact it's a series of intentional acts if you get to the end of the month and you have a month left at the end of your money you didn't do that on purpose if there's too much month left at the end of the money i don't make enough no you didn't even look at your month.

No one plans to be broke. No one sets out. It just happens because they don't have a plan. And you've got to pull together, start doing a detailed thing, and that's called a budget. And the best way to do that is with the best budgeting tool out there, EveryDollar. The best class in America by far on getting your act together with your money is Financial Peace University. Then once you're tracking towards

your goals and you're doing your budget where you monthly know where everything's going, we're doing intentional acts to win, and you're learning the content of what you need to do with investing and what you need to do with insurance and what you need to do with getting out of debt, then you need to see and measure your progress, because if you don't measure progress, you don't get a psychological reward. You need to see some progress. No one digs a ditch because it's fun. You dig a ditch because you want to see the progress towards an end goal of some kind.

We want to see water come through there. And so the Baby Steps Tracker, the EveryDollar app, Financial Peace University are all part of what's called Ramsey Plus. And a Ramsey Plus membership, there is a free trial available right now. If you're ready to say never again, if the pandemic was your wake-up call

and you say, that's it, I'm never going to be in this situation again like Chris was talking about a while ago, text the word BEGIN to 33789. Text BEGIN to 33789. Our question of the day comes from Blinds.com, the number one online retailer of custom window coverings. You get free samples, free shipping, and with the new promos they run every month,

you'll save even more. The magic word, the promo code is RAMSEY. All right, today's question comes from Rebecca in Illinois. She says, my husband is 62, myself is 52. We're waltzing merrily along into Baby Step 7. He hopes to retire in the next year or two. And a financial pro recently asked if we plan to continue to contribute to my IRA once he retires. At that point, our income will come primarily from his pre-tax 401k.

Does it make sense to take money from his retirement account and contribute it to mine? How long should we fund our Roth? Well, I'd say this. First and foremost, you've got a pronoun problem, right? You keep saying his and my. You need to say our. And the main thing is this, you're going to have to deal with taxes on the pre-tax 401k. You're going to pay taxes on the

money as it comes out at 59 and a half. But inflation is a real thing. You're talking about two to 3% of the costs going up each and every year. So it's imperative to grow your money. So investing is not something you're going to stop. You're going to continue. Yeah, I agree. And I do think it's a good idea to move from his pre-tax and enough to fully fund two Roth IRAs for you guys each year in good mutual funds. You're going to pay the taxes on it and you have an earned income. So you're able to do that. You're able to do a spousal ira and a regular ira for you and your husband and um since you'll be working at 52 and um as long as you have an earned income you can do that and that's a good place to i would rather have the money in roth for the next 25 years than in traditional for the next 25 years because it's growing tax-free and effectively that's all we're

doing here is moving it dave every time you say Roth, I get the goosebumps. Listen to me, people. Roth is after tax. That means tax-free growth. The government's not touching it anymore. So it's a beautiful thing. If you have a Roth 401k option at your job, you need to go sit down with a smart investor pro and start talking about looking at it. It is a beautiful opportunity. Yeah, I think it's important to remember that because you take a 25 year old invest to 65 yeah 100 bucks a month in mutual funds if it averaged 12 which everybody gets mad at me for saying that but mine do so um but you know 12 100 a month you've got a million two at retirement now if that isn't a traditional it's taxable and so that's a three hundred thousand dollar tax bill that's right you're looking more eight

when you pull it out you may pull it out gradually but over that period of time that's right as you pull it out you're gonna be taxed on it or it's a million two and it is zero taxes that's right so it's a million two that's right and and it's a million, too. That's right. And so, you know, when you say Roth in a very simple little minor $100 a month investment, it's a $300,000 word. Just in that one. Just in that example. And we all know what we spend $100 on. I mean, some of y'all go to those fancy coffee shops, and it's, you know, I mean, think about it.

In pizza or whatever. But $ bucks just there gets you to it. So imagine where you're going to be. If you're following the recipe, we're talking about the baby steps and you go to 15%. You're changing your family tree. That's the deal. It's an interesting question though. It was a good one. Sarah in Idaho. Hi Sarah. Welcome to the Dave Ramsey show. Hi. I have a question about retirement that you guys are talking about and investments. So my husband and I are on track to finish Baby Step to the end of this year,

and we've been looking forward to investment. I had a question if it's a better deal to be able to just invest a lump sum, like the beginning of each year instead of monthly, I was able to come up with like $5,500 for each of us beginning of the year. Well, you've either got it invested all year or you've got it invested 11 months, 10 months, 8 months, 9 months, 5 months. So assuming the investment is good, on average, it's going to be better to lump sum it mathematically. Now, sometimes people suggest you do gradually dollar cost averaging, so you get some expensive shares, some cheaper shares, and all that throughout the year. That does not come out to be more money, but what it does do is it does indicate that steady,

constant investing is really the answer, not just flash-in-the-pan investing. And the second thing is that you don't have any emotional problems, meaning if you turn on the news, which I've just about quit doing because it's just stupid. But anyway, if you turn on the news and they're screaming that the stock market has crashed, and four days before you put all your money in, and then you go, oh, the market's down. They never come on and go, hey, everybody, the market was really up today. They never do that, right?

But they're going to scream and yell and flop in the floor, foam at the mouth, all this stuff when it goes down. If you can't emotionally handle the roller coaster ride four days later, then don't lump summit. That's right. And Sarah, hear me out. I love that you're asking an investing question. It tickles my heart. But you're on baby step two.

You guys are about to wrap that up. You are not going to, at the beginning of the year, invest. At the beginning of the year, you guys are going to start your fully funded emergency fund of three to six months of expenses. Then you'll shift to investing. And so that's the mindset around it. And, again, I love that people get excited. And, matter of fact, Kelly, if you'll get her information, I'll send her my book, Retire Inspired, because it's good to have that information.

But don't mess with the recipe. Follow the steps. Hogan is giving every caller something. He's going to be popular. He's going to have really good ratings. I'm like Santa. I'm trying to outrate you, Ramsey. It's been a long 15 years.

I can't catch you. You won't sit still. Just sit still, Dave. You're giving away all my stuff, man. It's one way to catch me. Make me go broke. Oh, I love it open phones at 888-825-5225 now you can give anybody anything you want you know that i know that oh it's just funny it's

like every call man he's on he's on binge today three kelly's just got the shipping department downstairs working for her already man it's something. James will tase me at the break. It's okay. I'll pull it in. He's feisty. Somebody or whatever. Emma is on Instagram. Can my emergency fund be more than $1,000? I'm not real comfortable with just that amount. I live in California where expenses are really high.

Well, looking at this, Emma, what I would tell you is if your income has not changed throughout all this COVID situation, young lady, that means if you're on baby step one, it means you've got debt. And if your income hasn't changed, I want you to keep stepping, sweetie. That $1,000 is there for you to break your appetite with debt. And you have something in case life happens. But I want all extra money going toward the debt. However, if your income has been reduced, you've been furloughed, then what you're going to do is go into conserve mode.

So, yes, you want to pile up more money. You stop doing the baby steps. That's right. And pile up money. But as soon as your income stabilizes, you'll release that money to go back to the baby steps as normal. And just to be very clear, we do not suggest a $1,000 emergency fund. That's a starter, a dinner emergency fund, a real emergency fund at Baby Step 3, 3 to 6 months of expenses. This is the Dave Ramsey Solutions on the debt-free stage, Derek and Kayla are with us.

Hey, guys, how are you? Good, how are you? Better than I deserve. Welcome, welcome. Good to have you. So, how much debt have you two paid off? $55,000 in 19 months. Good for you. Well done. And your range of income during that time? About $90,000 to $110,000. Good. What do you guys do for a living? I'm an elementary school teacher. I teach fifth grade,

and I also was doing a side hustle of coaching acro and tumbling. Oh, wow. And then I was working a restaurant as well as real estate. And then I took a little time off to join my family's brokerage as a financial employee benefits advisor. Oh, great. Very cool. Where do you guys live? Temecula, California. Oh, yeah. Fine. Well, welcome to Nashville. Good to have you. Thank you. And all the way over here to do a debt-free scream. So what kind of debt was the $55,000? Well, it was taxes. Apparently, real estate, those checks you owe money to the IRS. So back taxes, as well as her student loans for her master's and a couple

cars. Well, my car and then my BMW that took a crap had a little bit of extra when I traded in. Of course. Wrapped in. Of course. So you just had a buffet of crazy. We did. We did.

So what made you all decide, hey, we're going to get serious and we're changing this thing? Well, we started off when he first proposed. We knew that we wanted to first pay off what I had for my undergrad and for my car as well. But we went from there and then we became the yes people with the big wedding. And then a great honeymoon. And then we just started having fun. First year, you said it can either be great or terrible. It was great for us. We went out a lot and we had a lot of fun. Yeah. Our entertainment is where we spend most of our money. And one weekend, my sister was home from college. So we went out on Friday and then on Saturday and then brunch on Sunday. And we realized we spent $900 in one

weekend. And we figured, okay, we've had a good first year. Something has to change. Okay. So what happened then? So after that, I was driving to work. I had heard of you, Dave Ramsey, before and the envelope system. So on my way to work for the next week, I listened to your podcast and really focused on the envelope system. And we tried to be Dave-ish. And I even printed out some Monopoly money that we could use for the envelopes while still using a credit card

and quickly realized that that's not how it works. So those first few months were a little bit of a struggle. We learned how to communicate. We had to combine our bank accounts. That was the hardest part. Yeah, so once we did that, for Christmas, we ended up getting FPU. And from then, it's just been on to the next. And now we have a couple of friends who are following you as well. All right. Very cool. Very cool.

Very well done. Derek, I see your face. What's the biggest thing you've had to sacrifice throughout this time frame? Well, I guess I would say we got great at no. And it got really exciting. That's how our friends got into it is essentially if you tell them no enough, they're going to wonder what the heck's going on. And, you know, we're saving money. We're feeling great.

We're excited. Gazelle intense, right? And so getting after it became more and more easy. In the beginning, it was just the communication and figuring out why we're doing this. What is our why? That's great. And that was the biggest part too, is not only did we become debt-free, but we've become stronger together as a couple. It just feels like it's us against the world, just one goal at a time. So since then, we've bought my new-to-me 2017 car, Cash, for my mom car, and we're about halfway done with

baby step three. All right. Very good. And we have a three-month-old. Yeah. There you go. In the middle of all this. All right. Very fun. So what do you tell people the key is then? Communication. Definitely. Yeah. We weren't able to talk through and set the budget and stick to the budget and have our monthly budget meetings. I'm the nerd and he's the free spirit.

So sitting down and really connecting. At first, it took him a few times to get it to get going. But once we were on a roll, it does get easier. I know it's hard, but sticking through all of it, it just feels like a weight's lifted off of our shoulders. Definitely. And it's exciting. I mean, it's always what's next? Now what do we do?

And we're excited for everything that we have planned in the future. Yeah. Yeah. Wow. Very well done, you guys. Very proud of you. Thank you. Got a copy of Chris's book for you, Everyday Millionaires.

There's no question that's the next step in your process, without a doubt. So are we going to leave the three-month-old out of this shot? I think so. We don't want to scare him. Okay. You scare him to death, yeah, when you scream. All right. It's kind of borderline on that one.

Yeah. All right. It's kind of borderline on that one. All right. Derek and Kayla, San Diego, $55,000 paid off in 19 months, making 90 to 110. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free. Yeah. Well done, you guys.

Very, very, very well done. I love it. I like the phrase, Dave. They got great at no. Before that, we were yes people. That's right. And friends will catch on, and they will ask you, what are you doing? Well, why aren't you doing this?

And then it cracks the door, baby. All you got to do is kick it down like Wyatt Earp and walk through it and explain to them what you're doing and why I'm telling you it can open up people's eyes good stuff Dave is in San Jose hi Dave welcome to the Dave Ramsey show whoops I picked up the wrong one I'm gonna be there's Dave hey Dave how are you hello there you are what's up man hear me loud and clear so I'm 21 and I just graduated from college, and I started working. Good. And I have no student loans, no debt, and I have about $100,000 in my savings, where $30,000 is my emergency fund, and the rest are diversified investments.

Where did you get all this? I worked during college. I ate rice and beans, beans and rice, never went out, worked super hard. So I saved up a lot. And so my question to you is that I've always wanted to buy a house soon in the next two, three years. But houses here are around $1 to $1.5 million for a townhome. And so the down payment is like $200,000 to $300,000. And so my question is, should I continue to live right to beans, beans and rice and save up for this down payment? Or

is it okay for me now financially to splurge a little bit and maybe buy myself a car that I've always wanted? Well, to start with, you're way ahead of the game. And, you know, San Jose is one of the most expensive real estate markets in America. And so you're not in a cheap area, dude. I mean, you're in a very, very expensive area. You've got plenty of time. You're only 21. And so if I were in your shoes, I would buy a car.

What are you thinking about buying? I'm trying to buy a Tesla. Mm-hmm. And what's that? Those are around. Go ahead, I'm sorry. Yeah, so those are around like $30,000 to $50,000. Okay. And that's out of your cash.

Some of your investments will go to that. Yeah, full cash. Yeah. And what do you make? I make $160,000 a year. Okay. What do you do? I make $160,000 a year. Okay. What do you do? Software developer.

Okay. Take it. No shock. Yeah. Okay. And in San Jose in 21. Okay. Wow.

Okay. So, yeah, buy the Tesla, and it fits in this, and then you go back to saving. Here's the thing. You're on what we call baby steps four through seven and that's where you 15 of your income going into retirement and uh you can stop that for a little while if you want to and save for a house we call that baby step 3b um and if you want to do that that's fine but there is no requirement of beans and rice rice and beans when you're at this stage yeah you you go from intensity intense intensity gaz intensity, to intentionality.

I just want you now to be intentional, just be paying attention, which I don't think you're going to do anything but that. No, and you need to relax and start to have some fun, dude, or you're going to snap and go buy like nine things or whatever. Have some fun, but you need to be prepared. Are you ready to stroke a check for $50,000? I mean, you've got to be aware of this and really acknowledge that bank account's going to be a whole lot lighter.

Make a decision. Be clear. Yeah. Well, it fits everything we're talking about to go that route. Yep. And you've got plenty of time to save up then and do things for your house after that. So, good stuff. Well done.

This is the Dave Ramsey Personality, number one bestselling author, is my co-host today here on the air. Open phones at 888-825-5225. Chris is with us in Kansas City. Hey, Chris, welcome to the Dave Ramsey Show. Hi, Dave and Chris. Thank you very much for taking my call. Happy to talk with you guys. You too.

What's up? So kind of an M in 3B baby step. I did a day of ish for a while and got pretty serious and paid off all the debts and saving for a house, but kind of find where we're in the process of where the need for a new car is becoming more of a need as opposed to a want. And so curious if I should use what I've been saving up to go towards a new car, stay in a house that we're at, and pay that off, or use the down payment for a new house and try to limp through with a vehicle. How much you got saved up, buddy?

I'm sorry, say that again? How much do you have saved up currently? $67,000. And that's outside of your emergency fund? That would be including, so probably outside would be about $47,000. Okay, okay. And how much car are you talking about buying? Oh, $18,000, including tax.

We were talking like maybe a small SUV, maybe even less than that. Okay. And what's your household income? We're probably going to be right about $110,000 this year. Okay. All right. And so the obvious statement is, if you you buy the car it delays the house purchase a little bit right correct yeah and um so it's just a choice of you know if you feel like the

other car is going to lay down on you then you know we're gonna have to do something right right right it's not quite at that point, but I got a feeling Murphy's coming. Who drives it, Chris? You or your wife? I do. Okay. Well, that's better. Yeah, the new car would be for the wife.

I would essentially just switch cars at that point once we got the new one. Okay. It's up to you. There's no wrong answer here. The car you're buying is not out of line with your income. You have the cash to buy it, so it's fine to do that. The obvious tradeoff is you're delaying purchasing the home a little bit to do that, and so you're just making a call here on that.

Are we going to put Mama in a better situation or not? Right, and Dave, when people go to buy cars, I'm going to talk about this because I think people don't think about it. If you're planning to spend $18, that means you're planning to buy a car that's around $15. Because you're going to have tax tags and title and things that you're going to have to pay for. And so, you know, just in that mindset, I want to help people kind of get a better range of view. So don't, you know, yeah, can you maybe get a deal on a car? But you need to be aware.

Tax tax and title is real. Yeah, it'll step up and bite you in the process. It really can. Sean's with us in Fort Wayne. Hey, Sean, welcome to the Dave Ramsey Show. Hi, how are you doing? Better than I deserve. What's up?

We're in baby steps three, four, five and six. Uh, we purchased our home about three years ago for 160,000 and paid it down to it's 142 now. So we're not down to the 80% where we can get rid of PMI, but the homes around us have gone up in value so much. I'm wondering if we can get rid of PMI by getting it reappraised or is there a way to get rid of PMI? Are you on a Fannie Mae loan? Conventional? Yeah.

Yeah. Call your mortgage company. Usually you pay for the appraisal. It has to be an appraiser on their list that they approve. But if you can prove the value is down, in most cases they have to drop the PMI. I mean, if you can prove the loan-to-value is down, meaning that the mortgage balance as a percentage of actual value is well below 80%. It sounds like it is. Yeah.

Yeah. There was a house that sold across the street from us, same builder, same floor plan, that sold for $205,000 a couple of weeks ago. Well, you've got to remember now what it'll sell for and what it will appraise for are two different things. Okay? And so, Sean, Dave just gave you a key point, and I don't want to gloss over it. I want people to actually pay attention to it. You need to use an approved appraiser. So you'd reach out to your mortgage company.

They've got a list of the people that they trust, people that they go by. You can't, I would not just go get a random appraisal on your own because they may not accept it. Yeah, the 205 across the street is a good indicator as to where you are, but it's not the answer to the whole equation. So start with, say, if I had an appraisal that showed that the house was well below 75% loan to value, is there a situation where we drop the PMI? And if so, which appraiser do I need to use? Or give me the list of appraisers to choose from. And then you order the appraisal. You will pay for the appraisal. And it's usually $400 or $500 out of

pocket to cause this to happen. But it's worth every penny if you can get the PMI drop. So just step into it and do whatever you want to do. Yep, and the people listening out there, we keep saying PMI, that's private mortgage insurance. It protects the lender if you default. It does nothing for you but costs you money, $150 to $300 extra per month. So if you can drop it, get it out. Carlo is in Dallas. Hi, Carlo.

Welcome to the Dave Ramsey Show. Hello, Mr. Ramsey, Mr. Hologan. Thank you for having me on your show. Sure. What's up? I have a quick question. So my wife and I, we're about to celebrate our five-year anniversary. And we are worried about, like, whether do we do it, do we not do it. We are currently in our master's program, both of us. We are having our job, and we have some student loans from this program,

but other than that, we don't have really any other debt. So our main question is, like, do we do this trip, or do we hold off until we are done? Oh, so you want to go on a trip? Yeah. Okay. Well, if you're working our system, you're in baby step two, getting out of debt, no trips.

You can do whatever you want to do. You're an adult. You get to decide. But you don't go out to eat. Nope. You don't go on trips. Nope. And you don't do anything.

It's scorched earth. You get rid of the debt. You can go on a trip around the block. Celebrate with a cupcake. Yeah, you drive around, and then you come back home and go boy that was fun and we're gonna get back to business because in another year or two we're gonna have this stuff out of our lives and we're gonna get a raise we didn't have to go talk to anybody we're gonna get a raise and we're gonna be able to move forward and protect ourselves

carla you can go on anywhere you want to go when you get out of debt because you're not gonna be broke anymore you can do whatever you want to do, sir. You're a grown person. You get to make your choices. The reason we teach the things we teach is because they work this way. And this singular focus, intensity, intensity that does not even allow you to ask this question kind of intensity is what will get you out of debt. You can wander into debt. You can't wander out. You can't wander out. You can't just sort of, well, I think I can do this, do this, do this, do this. And then 10 years later, you're still fighting the exact same crap,

and Sally Mae's still set up with a pup tent in the back bedroom, and you aren't going to get her out of there because she's ornery. You are not going to get Sally Mae out of your life unless you are really angry and intense and focused. And that does not allow for these other things. Now, again, that's what has the highest probability of getting you out of debt, which then gives you the highest probability of building wealth.

And that's what this formula is about. And so it's live like no one else so that later you can live and give like no one else. No discipline seems pleasant at the time, the Bible says, but it yields a harvest of righteousness. Now, again, you do whatever you want to do, sir. But if you're asking what we teach and what we suggest and what we have done, the way you get out of debt is scorched earth. Vacation does not even come up in this discussion.

And, Carlo, you could use this as a great opportunity to fast-forward things, meaning talk about the places you all want to go on that trip in a couple years. Print out some pictures. Go look online. Use it as a motivating factor of what other job can we do? What other income can we bring in to go faster? Because really the thing standing between you and this trip is the debt and your emergency fund. So how fast are you willing to run? What are you willing to sacrifice? How

bad do y'all want to go on that trip? And I'm going to tell you, I've talked to couples and they've made some serious sacrifices to make some stuff happen quicker. You guys can do that too. Yeah. You know, do that too. Yeah. You know, Chris, I was getting ready. I was working on a real estate deal the other day, and I was all emotionally involved in it. I was pumped about it. That's rare for you.

Then the deal fell apart. Uh-oh. And you know, I had this weird experience. Because I didn't put that money on that, I felt richer. Because I didn't spend the money. You didn't put that money on that, I felt richer. Because I didn't spend the money. You didn't spend it. So when you don't spend the money on this vacation, you should feel richer. Hmm.

You kept your money. Yeah. Got options now. It was a weird experience. I had not really had because that's not the way my brain usually works, but it was very interesting. Puts us out of the Dave Ramsey show in the books. Have a friend or family member that needs a daily dose of Ramsey advice in their life? Let them know about the Ramsey Call of the Day podcast.

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