The Ramsey Show - App - Stop Hiding From Your Debt - Attack It! (Hour 3)

Episode Date: December 24, 2019

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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. I'm Dave Ramsey, your host. Thanks for joining us. The phone number here is 888-825-5225. That's 888-825-5225. That's 888-825-5225. Jordan starts off this hour in Augusta, Georgia.

Merry Christmas, Jordan. Merry Christmas to you. So my question is, I'm 19, and I got a really good job right now, and I was wondering, as of right now I'm reigning, and I was wondering should I start looking i'm ringing and i was wondering um should i start looking to buy a house you know save up because i was doing a math in about a year and a year and a half i would have 20 down for a house wow i just save up and buy that right good for you well done so what are you making um well depending with uh with overtime which i

start getting overtime in january i would take home about $40,000 this year, and then I do have my girlfriend who lives with me, and she takes home $1,600 a month. So she makes about $20,000 a year. Okay, and you said you're 19. Yes, sir. What do you do for a living? I actually work for Bridgestone.

Okay. I'm working a plant good for you okay cool good well you're doing well and you have zero debt yes yes sir your debt and you have your emergency fund uh that i would have completed by march okay about march i would have the three six months yeah at that point i would start saving for a house if you want to, no question about it. You're getting in there pretty young, but that's not a bad thing. Yeah, that's why I was just curious. I didn't know if it was too early or not.

No, there's no such thing. I mean, there's nothing that says you can't buy a house. You do not buy a house with someone you're not married to. Of course. Under any circumstances. So your girlfriend's income does not enter into this equation. Okay, gotcha. I do plan on proposing to her in April, though.

Okay. When you walk down the aisle, then we can talk about buying a house together. Gotcha. You know what I would do if that's the case? I would wait until, you know, if you're proposing to her in April, when are you thinking about getting married? Do you have any idea? Probably until she graduates from school.

Which is? That would be about two years or a year and a half. Okay. And what's the point in waiting? I thought that would be the smart way so she would actually have her own, you know, actually have a job out in college and actual, you know, more steady income and everything than being part-time. I didn't know.

Okay. But you're acting like you're married already. Yes. I mean, we live together and everything. I know. So what's the point? I see exactly what you're saying. Okay.

Yeah. There's no difference. Well, there is a difference, but there's no tactical structural difference except that you go in to start your life i mean are her parents paying for her school yes if you were married would they continue to uh well i'm pretty sure yes okay all right and then yeah i just get married and you know new year's eve i don't care i mean you know it's up to you guys whatever because you're already acting like and you're already you know and you're talking about combining incomes and everything else. I would not combine money, and I would not combine ownership until you are actually married,

okay? Okay. And I probably wouldn't buy a house until you are. Okay. And then that way you can buy the house together as a married couple and use her income towards the savings of that, all that kind of stuff. And, of course, if she has any debt she's bringing into this marriage, we'd want to clean that up before you buy. But you've got plenty of time to do all of these things and get them in the right order.

Thanks for the call. Open phones at 888-825-5225. Rachel is in Louisville, Kentucky. Hi, Rachel. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you so much for taking my call. I appreciate the work that you do.

Thank you. How can I help? Yes, sir. I am a single mother of two children. Both of them are in their teenage years. They are bigger than me. I make a little over $30,000 a year. Debt is about 10 to 15. Most of that is student loans. I'm new to this whole trying to get the credit together and all of that. And I wanted to try to get a new car. I have a Toyota Sienna, which is about 15,

20 years old. It has almost 300,000 miles on it. There are definitely some things that are going wrong with the car. And yeah, and some safety issues when I took it in to the guy to just look at it because I don't have the money to get it fixed. But I don't know, I just, I'm kind of behind in everything and just kind of trying to see what's the best avenue for me to possibly get a car at a good interest rate rather than. You can't afford to get the car fixed. You can't afford a car payment. Well, yeah, that's true. Yeah, it is.

So we want to keep you away from car debt. I hate that you're driving a piece of crap, and it's scary right now. I get you. You have a couple kids and a junkie car, and you've been living hand-to-mouth for a while. You've been scratching and clawing just trying to make it. I hear you. I thought I could make this out. Yeah, I want good things to you.

I don't want someone, while you're treading water, to throw you a boat anchor. Thank you. And that's kind of what a car payment would look like in your world right now. It would sink you. You're just hanging on. So let's avoid that. Let's work on a couple things. One is I want you to go to our nine-week class, Financial Peace University.

I'm going to pay for it. Okay. And I want you to, and I'm going to give you the one-year membership to financial peace on top of that to hook you up with every dollar, okay? And you're going to be okay, kiddo. We're going to walk with you, all right? And we want you to learn how to handle money here, and you've been starving to death a long time. The second thing we've got to do is we have to get your income up on a temporary basis and permanently. How old are you?

I'm 34. I'm renting a home and I'm kind of thinking about moving out of the home and possibly moving in with my mom and dad who already has my sister and her two kids. There are five there. I don't want to do that unless it's a short term plan where I have a plan to get back out okay okay and the plan is we're going to get your debt paid off and save up the money for a better car and then we're going to get back out okay and that means while you're there uh they can help you watch and knock a noggin on those teenagers and uh thump them on the head because teenagers need that periodically it's just part of life

and um then then while they're doing that uh you're going to work like extra jobs and stuff and let's get this stuff cleared up as fast as we can because here's the situation twenty thousand dollars changes your life yeah right yes sir because you'd be debt free with a five thousand dollar, and you're driving a $100 car right now. Yeah. Okay. It changes your life. $20,000. And what that is is $1,000 a month for 20 months or $1,500 a month for a year.

Okay. Extra income plus making the income that you got scream. What do you do for a living? I'm a receptionist at the moment that you got scream. What do you do for a living? I'm a receptionist at the moment. Okay, good. And then when you start thinking about long-term, you're 34. What's the 48-year-old you doing that makes $100,000 a year?

My nonprofit organization helping young men become the kings that God has destined for them to become. That's a great mission. Usually doesn't pay $100,000 a year. Could, but it was a massive nonprofit. But let's start living that dream, okay? Let's start taking the steps towards making all of that happen. You hold on, and we're going to make you the queen that God destined you to be. We're going to get you in financial peace and help you do this.

You can call me back if you need some help. Kelly's going to pick up and get you signed up, kiddo. Support a small business this holiday season that does business right. I'm talking about Grip6 belts. It's the only belt you can get online with no holes, no flap, and no bulk. And the buckles come in really cool designs and are interchangeable. I personally own a number of these belts. Plus, these guys have a great story.

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We're glad you're here. Our question of the day comes from Blinds.com. Find out for yourself why Blinds.com is the number one online retailer of custom window coverings. You get free samples, free shipping, and with the two new promos they run every month, you get to save even more. Use the promo code RamseyBlinds.com. You'll love these guys. I do. Daniel is with us in Indiana. My wife

and I are 30 years old. We have no dad outside of our mortgage. I put 16% towards a 401k. My wife contributes $2,400 towards her Roth IRA. $15,000 saved. When do you reach a point of having too much money tied up in retirement options? Is there such a thing?

We want to make sure we are enjoying life now while also remaining diligent when saving for retirement. Well done, Daniel. You're doing great. You're doing great. Okay, the rule of thumb at the stage you're at, you're debt-free. You should have an emergency fund of three to six months of expenses. We call that baby step three. Once you've done that, then you start saving 15% of your household income.

And I don't have your household income, so I can't do the math. You said you're saving 16% and your wife's saving 2,400. I don't know what that is. So you need to take your whole household income before taxes, your gross, and say gross we make 100,000. So gross we need to save 15,000. I'm putting away X, and 15,000 minus X equals Y, and that means my wife needs to put away Y.

And so that's how we do it. And the first thing you do is take advantage of matches. The second thing you do is take advantage of Roths. And the third thing you do is traditional 401ks. And so in that order, matches are first because that's your best rate of return. And then Roths are your next best rate of return. And then you move on to

traditional and you spread your money across four types of mutual funds growth growth and income aggressive growth and international berkeley is with us in san diego hey berkeley how are you hi good mr ramsey how are you better than i What's up? So my question is kind of a question in a statement. I'm not sure if I'm in baby step one or two. Okay. So I have the cash flow and emergency fund, but I can't touch it because it's in a local credit union on the East Coast, and I literally have no access to it other than going into the bank with my id and

saying hey i am who i am um they do not have the credit union has no online access they do but i've been locked out of my account for a couple of years now why and i just recently because i moved around and then either I forgot my logins or for whatever reason, I just cannot access my account. So call them, yeah. Yeah, so I've called them several times and they say, we can't do it over the phone, which is fine. I understand security reasons. So they mail me, mail, mail, this form I fill out, so I mail it back. And then I call them again just to verify that they

got it. You know, how do I get access to my account, and I still can't get access to my account for a bank jargon that I honestly don't understand. So should I start over an emergency fund on an account I can't access until I can get the funds or get... How much money is in the credit union again? Last I checked, it was about $3,300, sir. $7,200? $3,300. That was a couple years ago. Okay. And how old are you? I'm 29. Do you have family in the area where the credit union is?

No, sir. It was when I got stationed out at my first duty station. Okay. And so it's a small local credit union in what town? Pensacola, Florida. Oh, okay. All right. Hmm. I think it's highly unusual that you cannot get into this account. And there's not any bank jargon that's that complicated. So I think you should try again until you get dialed in. Say, please, just get a hold of the manager and say, I don't understand.

I need some help. And please walk me through exactly what I need to do so that I don't mess this up because I need to get this money out of here. And you need to get them to just give you a little bit of personal attention, talk to the branch manager at the credit union or the credit union manager. If it's a small local, it's probably got one branch. And most of the time, it's very unusual for credit unions to be anything except helpful. It's one of the reasons I endorse credit unions, particularly small credit union like this.

They're very customer-oriented and just go, listen, I served when I was there. I'm a little bit confused by all of this. I'm a little bit intimidated by all this. Please, would you help me and walk me through it? And then you take detailed notes of exactly what you need to do and spend $7 in FedEx or UPS overnight, the document right back to them. Matter of fact, they could probably email you the document. You can fill it out, and you can probably e-file it back with them

if there's a document that needs to be signed to reactivate and get your password reset so that you can cash this account out. But you need to follow through on this. You need to learn how to do the business parts of this. And it sounds like it's just intimidating to you. And so you keep bailing on it. And I want you to play through. I think it'll be really, really good for you to learn to interface with somebody like this, because this is not a big, bad bank here. This is not a Wells Fargo that doesn't care or a Bank of America that doesn't care. They'll help you.

I promise you they will. Hey, thanks for the call. Brad is with us in Naples, Florida. Hey, Brad, welcome to the Dave Ramsey Show. Thank you so much for taking my call, Dave. I appreciate it. Sure. How can I help?

So I just learned from my wife that we are going to be expecting a child. Yay! I know. Very excited. I'm 31. She's 30. Both employed. About $80,000 a year gross. We're facing about $95,000 and change in debt.

Majority is student loans. We're about $13,000 left on a car that we're just really focused on paying off. So it's not a situation where we're going to sell it. We're just going to be crazy about paying it off, which we have making double payments and everything. So the child and then the situation with my wife, she's going to continue to go to school. She's going to end up having a master's degree and being either physician's assistant or nurse anesthetist. So, you know, the salary will go up. My salary inevitably will go up. I work about two side jobs, so I'm pretty much busy every day making extra money. But our gross is 80, not counting those extra side jobs. So a bunch of money in the bank. My question is, what do I prioritize? What's that?

How much money in the bank? I've got about 40. And you have 90 in debt. That's correct. And 13 on a car. Right. Okay. All right.

And so you're fairly new to our whole process then. That's 100% correct. I always had the opposite philosophy of just always have as much cash as you have. I just had that anxiety about, like, only having 1,000. But I'm new to the program, and we're ready to dive in, absolutely. Okay. Well, when we find out someone has a pregnancy or a looming emergency, like they come in and say,

we're going to lay you off in four months, or we're laying everybody off in four months, or something like that. When you have a looming emergency, we stop temporarily what we call the baby steps and pile up cash until the event passes, in this case, until the baby comes. Okay? Sure. Because a big pile of cash is really nice to have in case something happened now we're not anticipating anything bad happening here but if if there's a

hiccup i don't want you having a thousand dollars i'd like for you to have fifty thousand right right and that gives you a lot of peace with a new baby coming and this is your first apparently right it is absolutely so it's super super exciting slash terrifying. Yes, all at the same time. So a big pile of cash is a good idea there. Alright? And then don't start your baby steps. Baby step one is $1,000. You have that accurate. Baby step two is paying off all of your debts with great intensity, smallest to largest. But I wouldn't be doing that right now. I'd just be doing that right now.

I'd just be piling up cash. Okay, for how much longer do we wait after the child? When mommy and baby come home and everybody's healthy, then that event is behind us. Then I'm cleaning out my account, and I'm going to be moving towards debt-free down to $1,000. I'm going to get intense then. I might go ahead and pay off the car right now. You've got a bunch of money. But, you know, the idea being it's a good idea to have a pile of cash when a baby's coming. Are high health care costs getting you down?

Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major health care costs. Christian Health Care Ministries is the original health cost sharing ministry, a Better Business Bureau accredited organization CHM members share to pay each other's medical bills. It's not insurance. It's Christians financially and spiritually

supporting each other. It's what Christian Health Care Ministries has done for over 35 years, and our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Solutions, April is with us. Hi, April. How are you? I'm doing well, Dave. How are you?

Better than I deserve. Where do you live? Just outside of, is with us. Hi, April. How are you? I'm doing well, Dave. How are you? Better than I deserve. Where do you live? Just outside of State College, Pennsylvania. Oh, cool. Welcome to Nashville. Thank you. And here to do a debt-free scream. Yes.

How much have you paid off? $380,000. Whoa! My goodness. How long did this take? 22 months. Okay. And your range of income is?

It was about $415,000 a year. Okay. My goodness gracious. What in the world do you do? I'm an emergency room physician. Okay. So you're an MD? Yes.

Okay. And you're working your brains out. Yes. And $380,000 had to be med school debt. About $260,000 of it was in student loans, and about 120 was on a mortgage. You paid off your house and everything? Yeah. Wow. How old are you?

31. How long have you been out of med school? About three years. Okay. So you come out of med school, and kind of a year or so goes by, but then right after that, you decide to attack this stuff with a vengeance. Tell me the story. My goodness.

Yeah, well, I finished, it was actually residency three years ago, and when I came out, I started going to a church that was doing Financial Peace University, and some of my friends were taking it and talking about it and saying great things. And so I decided to download your audio book, Total Money Makeover, and started listening to it. And I think the turning point for me was when I got to the point about the debt snowball and listing your debt. Because up until that point, I had been just doing everything to try to avoid thinking about it. It was stressful. I didn't even want to deal with it. And I logged on and

I saw that in the past three years, I had been paying about $13,000 a year, and about $15,000 a year was accruing in interest every year. So I really wasn't even making a dent in the student loans, and so I knew something needed to change, and I needed to get serious, especially being in my late 20s at the time and single. I didn't want to have this burden looming over my head for the next decade or two, and certainly if I got married or had a family in the future, I didn't want to bring that burden into that. Well, you paid off a ridiculous amount of debt with a ridiculously wonderful income. So you, wow.

Okay, so you finished residency, and really about a year went by before you started this, right? Yeah, roughly a year. Okay, did you come straight out and go into ER? Yeah. Yeah, my first job was in emergency medicine. So you were making bucks already, but then when you sat down and did the math on this, you went, oh, I can do this.

Yeah, I just realized that something absolutely needed to change because I couldn't live like that anymore. Wow. Look at you. I mean, you just dove in. Now, do you take a lot of extra time at ER in order to get the income at this, or is that what an ER physician makes? So I actually went to my boss and asked if I could work all night shift in the ER, and

I did that for the entire 22 months because it paid significantly more to work nights. Yeah. It's dead gum near double, isn't it? It's about 20% more an hour. Only 20% more. Okay. All right. But wow.

So you really sacrificed to get this done. Did people think you were losing your mind? I mean, your family's like, well, you're a doctor. You ought to be enjoying your life. I mean. Yeah. The one thing I heard a lot of was in regards to buying a new car because I was still driving my used car from medical school at that point

despite being out for a couple years. Yeah, you did it right. And so my friends and family would tell me, you know, you're crazy. You can afford a new car. You can afford a car payment. And I would tell them, no, I really just want to save

and I'll buy my next car with cash and it'll probably be a used car. And they thought I was nuts. Yeah. Well, you can drive anything you want to drive now. I mean, you make $415,000. You don't have any payments. Look at you.

This is an amazing story. Very well done. Thank you. Very well done. Well, you did exactly what I try to get docs to do. Most docs come out and go, I finally worked all this time. I've gone to school my whole freaking life. I deserve a new house, a new car.

I deserve a trip. And they spend money like water. You've seen them do it. Oh, yeah, definitely. And it's crazy. And instead, all you did was you just kept living like a broke college student. Yeah. And I think that was really the key to getting out of debt was just to keep living like a resident while I was in those first few years out because that was really the easiest time to do it. And so I think that was probably the most important step that I took. Yeah. Because now, I mean, you make $300, $400, $500, whatever you make, you're going to be unbelievably wealthy.

So you said you're how old, 30? 31. 31. Wow. With this fabulous income. Congratulations. Thank you. I'm so proud of you.

So who was your biggest cheerleader? I know you had to have detractors. That was easy. Yeah. But who was the biggest cheerleader? I would say my parents. My mom had followed you for years. And also people in my church family as well because they talked a lot about you and were encouraging me to look into you because they knew I had a lot of student loans.

Yeah. Yeah. you and were encouraging me to look into you because they knew I had a lot of student loans. Yeah, yeah. So, I mean, you went from being completely crushed by student loan debt to completely owning it. Yeah, I felt like I was suffocating under the debt. I remember being so scared when I was sitting there and actually looking at the balances and I didn't know if it was even going to be possible to get out, but I didn't really have another plan and so I figured I'm just going to be possible to get out. But I didn't really have another plan. And so I figured I'm just going to go with Dave Ramsey and stick with it and just commit to it and see what happens.

And 22 months later, I made my final payment. Yeah. You paid off almost $200,000 a year for two years. I mean, that's the rate you were on, which is pretty incredible. But you're making $415,000 minus taxes, which takes a big chunk of it. So you weren't splurging on anything. No. You weren't starving to death, but you weren't splurging.

And just completely leaned in. So as you're going along, you're hitting this thing. I mean, you're hitting it almost $20,000 a month. Yeah. $15,000 to $20,000 a month on a given month. At what point when you started doing that did you go, wait a minute, this is actually going to work? How far in were you before the switch kind of flipped for you? Well, I paid off all the smallest loans first.

I had a total of 20 different student loans. And so I was able to attack the smallest ones first. And then once I saw how easy it was to do that, then I started to have some more hope that I would be able to pay off the largest ones. I think my largest individual loan was right around $50,000. And prior to that, I had just looked at it and I was like, there's no way. I'm not going to be able to do this. So you were chunking some of these like one or two a month. Yeah.

Knocking them off. The little baby ones when you first started. Yeah. And that had to give you a lot of emotional boost. Definitely. That snowball really kicked in for you then. It did what it was supposed to do. It let you know that this is going to work. Wow, wow, wow, wow, wow, wow. All right, so what is the big takeaway?

When someone says, oh, I'm a doc. It's hundreds of thousands. I can't get out of debt. You say, yes, you can. Here's what you do. You do this. I think the most important thing is just to stop running from it, stop trying to hide from it like I was trying to do.

I just felt crushed and I was so afraid that I would never get out of debt. And once I faced it and once I took personal responsibility for it and realized that I'm the one who signed the papers for the loans, I needed to get myself out, then I just made a plan and stuck with it and made the commitment to change. Are your parents good with money? They are. Their income is much less than what mine is.

Most people's. Yeah. Yeah, I definitely learned how to live on a budget debt from my parents. And also, they had been in quite a bit of credit card debt in the past, and they always told me, you know, don't be stupid with credit cards. You know, make smart purchases. And so I think I learned a lot of those principles from them. Yeah, there was a sense of character that came from them that caused you to be able

to do this. That's what I was thinking. Yeah. Very good. Very good. Well, I'm proud of you. I know they are. Well done.

Very well done. What a great, great story. Well, we've got a copy of Chris Hogan's book for you, Retire Inspired. That's the next chapter in your story. And we want you to go on and be a millionaire. You'll be that in about 20 minutes. And outrageously generous as we go along. Well done.

Very, very well done. Woo-hoo! Touchdown. April from State College, Pennsylvania. $380,000 paid off in 22 months, making $415,000 ER doc cleaning up med school debt. Way to go. Count it down.

Let's hear a debt-free scream. Three, two, one. I'm debt-free. Yeah. Wow. Wow. Wow. Wow! Wow! Yeah, you don't get those numbers very often.

That's pretty incredible. You don't get those numbers on either side of the equation. Most of you. I mean, what if you were making $41,000 a year and you had $38,000 in debt? That'd be the same ratio. Yeah, two years, baby. You can do it. This is the Dave Ramsey Show. Thank you. Our scripture of the day, Jeremiah 29 11

For I know the plans I have for you declares the Lord plans to prosper you and not to harm you. Plans to give you hope and a future. Zig Ziglar said, lack of direction, not lack of time, is the problem. We all have 24-hour days. Andrea is with us in Los Angeles. Hi, Andrea. How are you? Hi, Dave. How are you? Hi, Dave. How are you?

Thanks for all your help. Thank you. How can I help today? Yes, I'm going to try and get to the point. We make about $100,000. You need to speak directly into your phone. I can't understand you. Okay, is that better?

Yes, ma'am. Thank you. Yes, my husband and I make about $310,000 a year. $110,000 or $310,000? I'm sorry, $110,000 a year. Okay. And we have in debt, including the home, about $330,000 a year. How much of that is home?

The home is $300,000. $300,000? So you have $300,000. $300,000? So you have $30,000 in regular debt? Yes. Okay. And this year, we're considering whether we should sell or relocate because the taxes are going to increase quite a large amount. I do want to finish my school for registered nurse. Of course, our goal is to have children

so we were considering you know should we stand up should we relocate we wanted some advice. Okay so you would relocate in order to get in an area that is cheaper and lower on taxes. What would that do to your careers? We would have careers either way. It doesn't matter where we live. So you can make $110,000 if you live in an area other than Los Angeles? Yes. What do you do for a living? Currently I'm an LPN, and he's farming at a shop, a mechanic shop. Okay, so where would you move?

Well, we just visited his family in Washington State and we really fell in love with it. So we might be considering moving there. Yeah, what would be wrong with that? Well, the only thing is the house that we have now, I think it's a little bit of an emotional because his family had purchased it many years ago, and it was like $820,000. The house you live in now?

Mm-hmm, $820,000. Okay. So his family purchased it. How did he end up with it? Basically, they purchased it. They used it as a rental for so many years. And then once we were married, we were due to get married. Basically, he has one house for him and his sister has one for her.

Okay, so you own the house, though? It's in your name and your husband's name? That's the other thing is it's in his name and his sister's name so now that we're married you know to change it to his name it's going to really increase the taxes i'm so confused why is his sister's name still on the house unfortunately it just hasn't been done and his parents did that many years ago. Okay. Yeah, that should have been done. Because now you've got a capital gains problem. Well, you need to see a tax professional about how to retitle the house

and how long you have to stay in the house. You may have to stay another year after retitling the house in order for it to qualify as your personal residence if it qualifies as his personal residence he shouldn't have any taxes on it and i'm not sure if you can make the case that this has been his personal residence from the start or not uh you need to see a tax person on that but i don't see any reason to stay there just because they bought it for him you can take the 800,000 and do something else with it like you know buy a dadgum huge place in Washington I mean wow and be out of debt and whatever so yeah yeah I you know you got a half million dollars not 800,000 you got a half million dollars equity

you got 300 owed on it but um I didn't hear any reason to stay in Los Angeles except some kind of weirdness around the fact that he was given this house a long time ago. And you all haven't done the proper work to retitle it and take care of business the way you should have. But you're going to have to get all that done anyway. And then you decide if you want to. Where do you want to live? That's what it comes down to. Hunter is with us in Columbus, Ohio. Hi, Hunter.

How are you? I'm great, Dave. How are you? Better than I deserve. How can I help? Well, my husband and I have a slightly different pay schedule than most. He is the majority income earner in our household, and he has paid 26% of his total income in a year in the form of a bonus every December.

Okay. And so I kind of wanted your insight on how to budget for this. Do you guys live on the rest of the money during the year? If you include the property taxes and homeowners insurance, auto insurance, the bigger bills that come annually, biannually, then no. There is not enough throughout the rest of the year. So you typically pay those out of the bonus and everything else you live on the base? Yes.

Okay, I got you. And while also paying off our debt, you know, what's left over throughout the rest of the year, it can be a little tight to make those payments on the credit cards that we owe. Right. Well, they shouldn't have you. We're going to use the bonus to pay them off, so they're going to go away. Yeah, I would set aside the money to take care of those annual expenses that you've always done out of the bonus, and then I would use it to work your debt snowball, which it

sounds like you're on baby step two, cleaning up debt. Did I get that right? Yes, yes. We have a savings in the emergency savings already, and we're just... How much is in your emergency savings? $5,000. And how much is this bonus? $19,000.

Okay. And how much debt do you have, not counting your home? We have about $15,000 in credit cards, a student loan of about $9,000, and then $28,000 in an auto payment. Okay. And your household income is what? $89,000. $89,000?

Yeah. Yeah, you've got a really expensive car. We do. That was not a good purchase. No. No, a truck he had to have. Yeah. Hmm. Okay, if I woke up in your shoes, what would I do? I would chop up all the credit cards tonight, I would put the truck up for sale, and I would pay off the credit cards and the student loans with the bonus and with some of the money that's in savings.

Okay. You could pay off everything but the truck with your savings and be down to $1,000 and you got no payments now. Right. That's what I would do. Otherwise, the second thing you could do would be to pay off your credit cards and your student loan and then roll up your sleeves and really really live on beans and rice rice and beans and pay off this truck but it's going to take you probably over a year to pay it off

yeah and it was a dumb purchase to start with it's too much truck yeah it was and you know you take that hit when you drive it off the lot. So you couldn't get out quite what we paid. Yeah, so there's some more money you've got to come up with, too, on top of this. So I'm wrong. You're not going to be completely debt-free. You're going to probably actually use some of this bonus money to get out of this truck and get you a little paid-for car. That's probably what's going to happen, and that's going to slow down what I was just talking about. But we can pay off a bunch of the credit cards and the student loans

and move down your debt snowball, which I think you're in a position to do that. But I think the truck needs to go, and I think you need to take your savings down to $1,000, put the $19,000 back with the other money, and let's clean up as much of this mess as we can doing that, whether it's paying off how far you are upside down in the truck and then getting you a little $2,000, $3 thousand dollar car to get around while you clean up this debt because your problem is you got so much in debt payments you can't breathe you could make it easy on his base if you didn't have all these payments and it's just stolen your life is what it amounts to and then what we do we added to the trouble by

buying the truck so it was impulse it was an impulse i had to have a truck you know that's what she said as she rolls her eyes without talking about her husband i mean oh my gosh you guys it's exactly what we're just talking about and we all do this stuff i've done it and you've done it too but the more of it we do the more trouble we have that puts That puts this hour of the Dave Ramsey Show in the books. Thanks to James Childs, our producer, Kelly Daniels, our associate producer and phone screener. I am Dave Ramsey, your host, and we'll be back before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.

This is James Childs, producer of The Dave Ramsey Show. Did you know you can now listen to The Dave Ramsey Show on Pandora and Spotify? For all the ways to watch and listen, check out our show page at DaveRamsey.com slash show.