The Ramsey Show - App - Should We Stay in Storm Mode or Pay Off Debt? (Hour 1)

Episode Date: January 6, 2022

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Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where debt is dumb, cash is king, and the paid off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. It's a free call, and some say the advice is worth exactly what you pay for it. We're glad you're with us, America. 888-825-5225. Esmeralda starts off this hour in Jacksonville, Florida. Hi, Esmeralda. How are you? Hey, good, Dave. How are you?

Better than I deserve. What's up? Hi. I'm in a brand new relationship. We are in the getting to know you phase, but I'm already very fond of this man, and I care very much about him and his young girls. I've told him I'm following the baby steps, but he's heard good things. He's not familiar. And he's currently playing the 0% credit card game. Now I have thoughts out, like I could just go, but I have been restraining myself. Okay. And I'm just asking for your guidance on how do I coach or guide him

in a gentle way to not step on the toes of this brand new relationship but also start to try to teach him about what's helped me and i'm on baby step four yeah uh you don't talk to him about his stuff you talk to him about your stuff let's tell your story just tell your story a lot and it is um it's your story and you know my story was that i did this and this and this and it didn't work and i used to screw around with credit cards this and this and it didn't work and i used to screw around with credit cards all the time and they didn't end up being a blessing to me and i decided that what i wanted was the peaceful easy feeling to quote the eagles right of uh being debt free right i i you know i just i and so i've been working to get out of debt and you know i told you

a little bit about that and and i got to tell you it's something that's kind of central to what I'm doing right now, and I'm really excited about it, and so it means a lot to me, and I'm getting out of debt, and the feeling is amazing. The empowerment that I've got is amazing, and just tell your story. If that isn't your story, then change it and make it your story. But, I mean, I was just trying to superimpose my verbiage over you in that situation. You follow me? Yes, sir, and that is my story and i want it's like i want that for him too but you're right okay i'll focus on me

he'll he'll come around he'll come around and you know there's other things in the relationship that you're going to get have serious discussions about as the relationship goes through its various phases i mean you're going to have a lot of discussions if you're smart about parenting and about what being in those little girls life means if you're going to be there what role you're going to play you know you're going to want to find out um that that uh if um if one of them tattles on you if you're in trouble, meaning that they hold too high a seat in the household in the event you're there, you're going to want to get that positioning straightened out at some point.

Agreed? And I've got one of my own. Oh, well, there you go. And how are we going to do the Brady Bunch? You know, you do the mix here, right? You know, that's a complicated process. And so those discussions are very serious and very heartfelt and mean a lot to both of you. And so does the discussion around money,

and so does the discussion around religion, and so does the discussion around in-laws that are crazy and what are we going to do with them. And, you know, because everybody's got one. And, you know, what's the discussion? So it's kids, money, in-laws, and religion are the four big things that break marriages up. And if you can have good, solid, in-depth discussions prior to marriage about all four and be on the same page about all four you have a very high statistical probability of winning with with your marriage the money's just one of them you know so that's good you know you say you're just

as this as but no more would you get involved in a deep parenting discussion than you would a deep money discussion at the early stages of a relationship. But somewhere up in there, when things are getting serious, you definitely will, right? Yes, yes. At some point, you are going to have to throw out there, you know, you're a little further down the road probably, but this means so much to me that it's like a deal breaker if we can't be on the same page about money and it would be because i can't i can't go back there you go i don't want him to struggle either because i care too much you know no it's not yeah i don't want to attach myself to a sinking ship that too you know you've done that before and i want to do that again and um even if it's a really pretty attractive sinking ship fair enough fair enough thanks dave have fun kiddo we appreciate you calling in erica is with

us in sacramento hey erica welcome to the ramsey show. Hi, Dave. So I have a what would Dave do question. We decided to finally start the baby steps and we have $31,000 saved up right now that we were planning on putting it towards our $32,000 in credit card debt. But we found out that my husband is going to be switching over vehicles for work. Two years ago, we bought a truck for $42,000 that his company has been making the payment every month and paying for gas and mileage. But in four months, they are going to give him a new truck and they're going to be responsible for paying his gas, mileage, insurance, wear and tear. Wonderful. Yeah, we owe $20,000 on that truck.

So in four months, we're going to be responsible for that. You have been responsible for it all along. Yeah. They just gave you the money for your responsibility. Exactly. So the way I see it, I have three options. We have three options. Um, I can, we can save us $5,000 a month for the next four months, pay the truck off, or we can sell the truck and make about $3,000 because I have a small little beater car that I drive for $3,000, but it needs about $2,000 worth of work. What would you do? Would you sell the truck, pay off the truck?

I'd sell both of them and buy you an $8,000 car. Okay. And he's got a truck they're giving him. Yes. Yeah, that's what I'd do. Yeah, for sure. And you've got almost enough money between your car and his truck to do that you'd only put two thousand out of thirty one towards it three and three three out of yours three above on his truck right

yes and two out of your savings and we got an eight thousand dollar car for you that's a dadgum serious move up for you because you're Because you're driving crap, you know. And we get rid of his $20,000 truck, and he drives the company truck, right? Yes. I love it. All right. Sounds good. Does that work for you?

It does. Yeah, we still have a $90,000 HELOC and a $90,000 mortgage. Yeah, well, you're going to track that HELOC now with the $29,000 that's left over out of the $31,000, right? Yes, definitely. And now you just roll up your sleeves and get after it, do that budget thing, that gazelle intense thing that, you know, we're not going to see the inside of a restaurant unless we're working their thing because we're getting out of debt we're doing this that's how you decide this is the ramsey show I heard a statistic recently that absolutely blew my mind. In the U.S. alone, over 3,000 people die every day without life insurance. Now, I don't want to sound

unsympathetic, but this drives me crazy. What are people thinking? I don't understand how taking care of your family is not a top priority. Most of you probably just spent a bundle on Christmas on things you really didn't even need, and now you're making New Year's resolutions that are focused on yourself. But if you want to use the New Year as a reason to do something right, like protecting your family, then take care of it right now before it's too late. Term life insurance is something every family needs, and that's why I talk about it every day. It's not complicated, it's not expensive, and Zander Insurance is the only place I recommend. Go to zander.com or call them at 800-356-4282.

Please learn from other people's mistakes and get this taken care of. That's Zander.com or 800-356-4282. Thank you for joining us, America. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money. This is The Ramsey Show, where common sense shows up for your life, your work, your money, your relationships. David is in Houston, Texas. Hi, David.

Welcome to the Ramsey Show. Thank you very much, David. I appreciate you taking my call. Sure. What's up? I'll be brief. Here's my question. My wife and I have really worked hard over the past two years working on paying off our mortgage.

Good. We've got $60,000 left on our mortgage. Wow, you're almost there. All right. I'm now 59 1⁄2, and I've got 1.9 by 401K. Should I take the money out and be done with this and pay it off or keep plugging along on my mortgage? Look at you.

Congratulations, millionaire. Thank you. How much millionaire. Thank you. How much of this did you inherit? Zero. Hang on a minute. My grandmother left me a $50 savings bond, so that probably helped me out. You know, what probably helped you out was her character in your DNA.

I like it. That's awesome. So, oh, man. What's your household income, sir? $260,000. Cool. What's the house worth? About $500,000.

Okay. Well, there's certainly nothing wrong with cashing enough out today mathematically to pay off your house instantaneously. So you're debt-free. Okay. What did you say the house was worth 500 okay all right cool all right so you're worth over two million dollars net worth we know that so you could do that and it wouldn't wouldn't even blink however you make enough money to knock 60 000 out real fast and allow that money to lay in there and continue to grow tax-deferred or tax-free. So I'd be tempted to not let the government get their hands on the money if it was me, just because you can do it within a year, right?

Well, the gold is July. Yeah. So, I mean, for the difference in the taxes that you would pay by pulling the money out of the 401k there's no penalty because you're 59 and a half but the taxes i just go ahead and use my income to do it i'm already paying taxes on it and let's be done by july just for that reason but there's no wrong answer here it's just that's an Yeah, that's what my wife wants to do, but I kind of wanted to be done with it, start 2022 with fresh, with zero debt. I said, I'll call Dave and see what he thinks.

I'm going to go with your wife because the taxes on the $60,000 are going to be $20,000 in your world, and you don't need the money out of the 401K. You're not going to be touching it anyway you have mandatory withdrawals if it's traditional that begin at 70 and a half but until then you could let that money grow and instead of giving that twenty thousand dollars to the government now wait 10 20 years to give it to the government so i i'm with you emotionally i'd like to be done right now i'm because a rip the Band-Aid off guy.

But mathematically, it costs you extra $20,000 this year to do it this year, unless you do it out of your income, and you can be done by July anyway. If it meant six years instead of six months, I'd do it in a heartbeat. But it's six months. It's all in the same tax year even. So, yeah, sorry. I'm going with your wife on this one. But let me just tell

you again neither one of these boxes are in the stupid column you can check either one of them and they're both in the smart column you guys have been amazing you're heroes you've you're everyday baby steps millionaires you've done the stuff we talk about well done i'm proud of you all right denise is in indian. Hi, Denise. How are you? I am well. I have a quick question as well. I have an annuity that I cannot access. I can't roll it into an IRA.

It was given to me through a divorce. I have the option of beginning to draw monthly payments as early as age 60. My question is, should I treat this as I would with Social Security and begin the draw as soon as it is available and reinvest it into mutual funds, or should I wait and let it continue to grow? It'll grow faster if you pull it and invest it. It'll grow faster if you pull it and invest it. So are you sure you can't take a lump sum on this and roll it? I actually worked with a SmartVestor pro, and he said, no, we can't do that.

Okay. Because I would think you could move this to a variable annuity. It's a fixed annuity, right? But is it because of the divorce settlement documentation, or is it just the type of product it is? I think it's the type of product. Okay. Well, there's a thing called a variable annuity that's mutual funds inside of an annuity, and you can move from annuity to annuity pretty easily unless you've got severe.

How long have you had this other annuity? About five years. Yeah. You might have a seven years' worth of surrender charges in it. That may be what he's looking at or she's looking at this saying, don't take those surrender charges. Circle back with that SmartVestor Pro again and ask them about moving it to a variable annuity and why that doesn't work.

They may be right, but I want to understand why if I'm you. So my first choice would be moving to a variable annuity and get the whole thing in mutual funds inside of a variable annuity. My second choice would be to take it as quickly as you can, like you said, like Social Security early, and just start moving it monthly, systematically, over to good mutual funds that way. So good question.

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Always use the promo code Ramsey. Josh is in Georgia. My brother is getting married next year. He asked me to be in the wedding party as a groomsman. Very nice. He's having a destination wedding five hours away. And going would cause me to sacrifice $10,000 in lost wages, $3,000 for a hotel, driving expenses, food, et cetera, for me and my family.

I want to go and show my support, but I don't think it's feasible to lose that much money for a wedding while I'm still in debt with a mortgage and a car payment. Should I be part of the wedding or tell him i can't afford it uh josh you're exaggerating you're gonna go for a wedding and you're gonna lose ten thousand dollars in lost wages i'm calling bs three thousand dollars for a hotel where the flip is this i'm calling bs so maybe you just fly in just in time for the wedding and stay one night and you fly right back out and you were there for your brother's wedding but you couldn't do all of the week-long party that's probably what i'm doing yeah you're exaggerating because you don't like that he's

doing this and forcing it on you i think you can do this very very inexpensively and it's your brother and you probably should We'll see you next time. Thank you for joining us, America. This is The Ramsey Show. We talk about your life, your work, your money, your relationships. We're glad you're here. 888-825-5225. Morgan is in Atlanta, Georgia. Hi, Morgan.

Welcome to the show. Hi. Thank you. My husband and I both work in a volatile industry. We were introduced to your principles about 18 months ago and immediately went into storm mode. Since then, we've saved $50,000 and I started a second career. Unfortunately, we found ourselves feeling Dave-ish, wavering in and out of emergency mode as we found success with my second career, using that to pay off some debt, refinance our house,

cash flow emergencies, and do some home improvements. We still have $65,000 in debt, though, and I'm wondering, you know, can we continue on this path using my second career to finish paying off the debt and preserve our 50K we've saved, or is it time to just decide, you know, you're either in storm mode or you're not? How do you do home repairs when you're in a storm, home renovations when you're in storm mode? It's illogical. My second income, my second career. I know, but you're in storm mode.

You're too scared to pay it on the debt, but you're not too scared to fix your kitchen up? I think I'm more scared to not have money. I still have two careers. You fixed up your kitchen! No, I didn't. Well, what was the home renovation? Well, the home improvement, it was a retaining wall. Okay, so why couldn't that wait if you're in storm mode that's why i'm calling now my point is is that you're picking and choosing when you decide you

want to be afraid or not i don't want to be afraid when i'm talking about my income from the new career i don't want to be afraid when i'm talking about doing something i want to do which is a retaining wall but when i want to pay off debt now i I want to be afraid. I guess I'm afraid I'm going to use that savings, and then I'm going to lose my job. You used it for a retaining wall. That's my second job, and it's... Ah! It's all your income. It's all your income.

It's all one pile. There's no bifurcation here. Okay. You're not getting it. You are really inconsistent in this. And so you got to decide what you is. You got to decide. Are you going to keep running this plan or are you going to say, all right, this storm mode thing is not real or it is real.

If it is real, it means you don't need to do anything with any money except pile it up that's that storm mode okay we think we're going to lose our jobs our careers are volatile and we're going to be on the street homeless and we just need to stop and know it no retaining walls no vacations no eating out we're afraid we're going to lose our income so we're not willing to work a plan until we can get stabilized we are pushing pause on any progress of any kind anywhere in our life and piling up cash getting ready for a nuclear winter. That's storm mode. If you're not that scared, then you need to cash all this stinking money out and quit screwing around and get out of debt. Okay.

And I think that's the one you need to do. How do we know when we're in a volatile industry? How do you feel good about exiting storm mode? Well, there's, okay, there's two kinds of fear here. How long have you been doing this volatile industry? My entire career. For how many years? 15. And how many years? 15.

And how many times have you been without income? Zero. Okay, so the volatile industry thing is a mythology. I hope so. No, honey, it's 15 years, and you've made money every year. You're just afraid of the fact it goes up and down, but the actual facts are disputing your feelings. Okay.

Aren't they? What am I missing? I don't know. I just am not confident in my career. I i mean this is the least confident i've ever been what do you do i'm an airline pilot okay all right uh well today they could use your help they can but they also could determine that because I've chosen medical freedom. Yeah, I understand. I understand.

You could be put on the street. You could be put on the street. Okay. So until the storm passes, you don't need to do anything else, or until you get your income up in another area, which means the storm has passed, you don't need to do anything else. And so I don't disagree with your conclusions or your stance or anything else it's not the point uh but for 15 years the airline pilots have not been

volatile i mean it's the the income is irregular based on how much you work or don't work but the chances of you being completely out of work for the last 15 years, it's higher at this moment than it has ever been based on your choices. But, I mean, airline pilot, so, okay. The other thing is that you are an airline pilot. Now, what that means is that you prepare for your job every day against only and are mostly against worst-case scenarios right everything you do is to avoid a crash it is in your it's in your nature thank god because that's what you're good at right i mean i don't really want you flying unless you do that okay so

i'm not it's not a criticism but the very the very essence of your job is to constantly prepare for worst case scenarios it's safety safety exactly exactly but that that translates then in your it gets into your nervous system and that translates over to your checkbook and you go okay i'm gonna run my finances the way i fly the airplane i'm gonna only prepare for worst-case scenarios, and I'm going to pretend like we're about to crash at any moment, and I've really got to have thought through every checklist. I've got to thought every backup switch I've got to throw, every scenario, right? Because that's what you guys do.

I mean, you're really good at it, thank God. That's why we have very few airline crashes. So, you know, you guys your your profession is amazing but but the the essence of your profession doesn't help your nervous system adjust to your finances your finances are a lot safer than you shouldn't run your finances like you fly an airplane this one trying to say okay that makes sense it does so you guys have a lot of money you've done very well you're going to be okay how much notice do you think you'll get you're not going to get put on the street in 24 hours you're probably going to get you're probably going to get

six months or 90 days anyway notice on uh on vaxxing right uh yeah it's like two to three months yeah okay if that actually happens let's worry about it then okay in the mean in the meantime because let me just say this way okay let's pretend that that you had no money because you put it all on the debt when you get off the phone here this is a great conversation by the way thank you for calling terrifying i love it i love it well i mean i'm messing with you because but it's it's really a good conversation so let's pretend you got you had put all the money today on the debt and you had no cash except a thousand dollars because you're working the baby steps pure okay how much debt have you got? About $65,000. Oh, my God.

You're almost debt-free when we write this check, then. Okay. But let's pretend you're not debt, that you got $15,000 in debt, because we wrote $50,000 towards it today, and you got the call tomorrow, right after you wrote those checks and the money was already out the door, that you got 60 days if you didn't do anything at all for 60 days except pile up cash you'd have a really big pile of cash in 60 days wouldn't you we could come up with something yeah yeah i'm talking about you do nothing no retaining walls no going out to eat no nothing and you use all three sources of income and you just do nothing and you pile up cash because it's an emergency, you'll be okay.

You're in good shape. I'd write a check today and I'd be moving towards debt freedom. I think you're going to be debt free, and I think that's going to change your whole vision on your second career and on how you react to this first career's demands. Thank you for joining us, America. This is The Ramsey Show. We're so glad you're with us. Open phones at 888-825-5225. In America, for the last 24 months, lots of people have lived in such a jacked-up, anxiety-ridden, semi-rage state of mind

that to come back down off of all of those hormones and proteins and be calm again is kind of a weird thing. Might be a good New Year's resolution, by the way. Turn off the television, the news channels anyway. Unplug or largely unplug from social media. And back away from the manure. If you're pouring that much manure into your brain, your brain is going to turn into manure. I knew I had a problem when I actually violated one of my lifelong rules. One of my rules is don't ever read the comments after any article.

If you want to know why some species eat their young you can tell by reading the comments after the articles these are some of the dumbest human beings on the planet and some of the meanest to any article on anything and i knew it was time for me to just back away from the screen because you get in jacked up mode because here's the thing dr delaney talks about this all the time facts are your friends and when your brain is jacked up like that on fear and rage you've been doing all the covid fear porn over and over death you're going to die you're going to die you're going to die you're going to die and your brain gets jacked up to the point that your critical thinking skills just

disappear none of us do good critical long-term thinking when we were really angry or really afraid, your brain doesn't work that way. If you're standing near the street and a car at 60 miles an hour swerves towards you, your brain is designed to scream at you, get out of the way, not to analyze the possible impact of a 2019 escalate on my hip. You don't have time to do all of these discussions in your head. Just move. Your brain is primitive and is designed to throw you out of the way of danger, not to have a critical thinking discussion about it,

or what I should have said in that argument. Get out of the way. And so your brain shuts down its ability to do critical thinking when you're freaked out. And when you're in trauma like that, Deloney teaches us, and it's been a really good lesson, I've enjoyed learning it myself, that when we're in trauma like that, we have to force ourselves into higher thinking. We have to say, facts are my friends. What are the facts?

What's really happening? What do you see with your eyes? Do you see people falling down dead all around you? What are you really seeing with your eyes? What is the actual facts? Not what someone says is science. Not what someone says is their political stance on something. What are the actual facts?

Now, when those occur, then you will act on those. But until then, you need to get about your business of having a life. You need to move on and you need to put stupid people and stupid processes and stupid conclusions that were emotion-based in your rearview mirror nothing wrong with emotions until they start running your life and we've got a whole generation or two that was raised thinking their feelings are valid. Your feelings aren't valid. They're feelings. It's valid to have feelings, but it is not valid to make decisions based on your feelings. That's what children do. Children do what feels good.

Adults use higher thinking skills, devise a plan and follow it. And we follow it based on the facts that we see in front of us. What is the real world? What actually has happened, not what someone says might happen, not what someone thinks is going to happen, not what you worry about at 2 o'clock in the morning as your brain dreams up all of these bizarre freaking scenarios about your life. And don't we all do that? We do.

Facts are your friends when you're facing this stuff. We started telling you that with the COVID shutdown and the quarantine almost two years ago. We started telling you that with the covid shutdown and the quarantine almost two years ago we started telling you that you know i had just gotten back from a trip to australia when covid hit and we went into quarantine sharon and i spent a month in australia our first trip over there we loved australia was fabulous and if you recall the beginning of 2020 there were massive fires in australia if you were to watch the news in america you would have thought the entire continent of australia was on fire we were there a month and had you know had did you know went to one area

where the fires had been and the uh the vegetation was already starting to grow back in those areas. A beautiful green valley, but the fires were real and they were devastating. And I'm not saying they weren't horrible. They were, but they did not cover the entire continent of Australia. And we actually had several people. Of course, this is pre-COVID, right? The early, early, early days of COVID. There were a few people in the uh airports with masks in those days but very few and we had lots of people in australia tell us say hey would you please tell americans that the entire continent

did not burn down because apparently americans based on what they saw on Fox and CNN, decided that Australia was a black-charred mess not to go, and tourism was way down because of the perception of the fires, not the reality. The reality was a very small percentage of the continent was actually affected. Now, the percentage that was affected was a big problem, and it was devastating. I'm not saying that wasn't so. But the difference is, what are the facts versus what you saw on the news?

Because what you read in the newspaper, if anybody does still do that, what you read on some website and what is the truth is very seldom the same thing. What you see in a news report is so jacked up. We got two, three inches of snow today in Nashville, and you would think, according to the news, that it is 17 feet deep out here. The facts are that people in the south can't drive in the snow so you probably should stay home but it's not knee deep it's barely over the soles of your shoes and if you have a four-wheel drive and go slow you're going to be just fine

and consequently i've been at work all day so i'm not and i'm not shaming you if you're not at work today in n. That's okay. It's fine. I understand. I got a bunch of our folks on our team didn't come in, and I'm not mad at them or anything like that. If they can't drive in the snow, they shouldn't do it. But if you were to watch the news, is my point,

according to these weather forecasters sound like a beagle chasing a rabbit. Hey, hey, hey, hey, hey. You would think. I have read articles written about dave ramsey that i don't even understand what how did you where did you get that it has nothing to do with anything that is me nothing to do that didn't happen it just didn't occur somebody just made it up and you know it's amazing to me okay so the point is folks don't make your financial plan like our last caller in that last segment based on your fears fears aren't facts analyze the fearful situation and figure out how much of it is actually factual use your adult higher thinking skills is the is the snow really 17 feet deep

is it really this is the Ramsey Show. 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. It's a quick hit of advice about life and money in under 10 minutes. Check out the Ramsey Call of the Day podcast wherever you listen to podcasts.