The Ramsey Show - App - The Best Calls of the Year So Far (Part 2) (Hour 1)

Episode Date: September 15, 2023

МУЗЫКАЛЬНАЯ ЗАСТАВКА МУЗЫКАЛЬНАЯ ЗАСТАВКА Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Rachel Cruz, Ramsey personality, number one best-selling author, and my daughter is my co-host today. As we answer your questions about 888-825-5225, about your life and your money, 888-825-5225. Kevin's in Indianapolis. Whoops, that's wrong. Let me try it again. Kevin's in Indianapolis to start off this hour. Hi, Kevin. How are you?

Hey, Dave. I'm doing well. How are you? Hey, Dave. I'm doing well. How are you doing? Better than I deserve. What's up? Well, I've got a question. My wife and I have been talking for about a week or two now. We are trying to get some stuff underway to start saving up for a mortgage on our house.

Backstory is we're about one- smart, three quarters dumb. We were one quarter smart off by living off of a $30,000 a year income for on her income. So I could pay my way through master's school, three quarter dumb. We needed a reliable car. So I fell into that trap and I bought a car years ago. Um, where we're at now is we owe about 21,800 left on the car. In one savings area, we have about $19,000, and in another savings area, we have about $5,000. We are torn between being highly aggressive with that $19,000

and being mildly aggressive because we do have a one-year-old, and we're both kind of like, you know, do we go for the full $19,000 or do you go a little less? Wondering what your advice would be on that. Did you graduate? Yeah, yeah. Graduated, got a double-year income. Right now I bring in a 125 gross.

125? Gross, yes. Okay, and she's still working, and she makes 30? Yeah. So we have $150,000 household income, a $21,000 car debt, and $24,000 in your accounts. Yes. And what are they each saved in? What's the $19,000 in?

It's over in Capital One. It's just over there sitting in a high-performance CD or high-performance savings. Okay. And then the other five is where? It's just in our mutual bank account. Okay. Gotcha. Gotcha.

The five is our kind of our three months. We're just starting to look at your guys' stuff a little bit. And when we're looking at our numbers, the five is kind of our about five-month savings. We have a thousand emergency, but the five is there. The 5,000 is about four or five months. Yeah. So what happened, Kevin, was when I was your age, I went broke and lost everything. Rachel was a baby and we couldn't pay the light bill.

And so from that experience, I started studying what is the fastest right way to build wealth because I had built wealth the wrong way. And that's why I lost everything. Too much debt. pretty quickly discovered that the people who build wealth, not the middle class and not the people who wander around in a fog with an opinion, but the people who had actually become millionaires, the vast majority of them realized that their most powerful wealth-building tool was their income. None of them get rich on a high-yield savings account. A high-yield savings account cannot not, by definition, cannot mathematically, by definition, make you rich.

Because you're making 3% or 4%. And inflation is 9%. Okay? Right now. So you're going backward. All right? Period. So the bottom line is this.

The ones that built wealth were the ones that got out of debt and avoided debt. That put us on the journey of at Ramsey 30 years ago of showing people how to get out of debt so that they can build wealth more reliably, so that they can change their family tree, so that they can be outrageously generous. Okay? So that's the premise on which we answer all of these questions. We want to take you down that path, and never in the history of man has someone keeping a $21,000 car loan around like it's a pet been a method of building wealth. Think about it.

Yeah, we were really aggressive with it to get to the start. So it was $60,000 total. I paid $40,000 in two years. And now we're looking at it as when we sat down and did the numbers. Let's just say out loud that that purchase was stupid. Well, yeah. It was way out of your budget. You said that was the 25% not smart.

I'm agreeing with you. I've done dumber. I've done dumber. I've done dumber. But so, you know, all of that's going to lead us to a pretty simple answer. Yeah, which, Kevin, is to pay it off today. And then you're going to have $3,000 left as a buffer for your emergency fund and baby step three, which is your three to six months of expenses. But you make $150,000 a year.

You should be able to put several thousand dollars a month in that account. And so we're not going to be at $3,000, but for 30 seconds. The end of the next month, you should be at $6,000 or $8,000. The end of the next month, you should be at $10,000 or $12,000. So we're not walking around with a one-year-old with absolutely no money as a way of life it's just a momentary thing here by christmas you ought to have a big old pile of money man and that's that's where we're at where we're both when we talk about it we both see the like you're saying dave with the get aggressive and then four months you have this and we're

both looking at the one-year-old who does have some medical appointments coming up going should we be just slightly safer and spanning out over a matter you're not going to have a medical appointment unless the child has medical issues today you're not going to have a one-year-old medical appointment that is going to take more than three thousand dollars okay unless he has some kind of unless he's struggling with something but i mean if he's going in for standard checkups, it's a couple hundred bucks, dude, and you make $150,000 a year. I think you can handle it.

So be aggressive with it, highly aggressive. The reason would be that that's the fastest right way for you to build wealth. Get that emergency fund in place, a fully funded emergency fund of three to six months of expenses. And then with no payments at all, now we save for that house like crazy. And you can do it, man.

I mean, you just lean in on a budget. Yeah, and I think, Kevin, too, one of the mindset shifts that is important for you guys, just to say out loud with you and your wife is like, okay, where we are today, we don't like it. We don't like having, we had a $60,000 car loan. Now we've, you know, we've, we've taken it down to 21,000. We have some money here. We have some money there. Obviously something is stirring in you guys that you're not content with where you are financially. You know, there's something in you that's like, man, there could could be a better way which is why you picked up your phone and called the show right I

mean like there's something in you the bear cage bear named Dave bear named Dave uh but but so so my challenge to you Kevin would be like to be do something different try this way what we're saying and again it's not going to put you back financially at all you guys have a great income you're going to be okay and there's going to be natural fear natural hesitation to do something that feels a little different but what you guys have been doing if you keep doing the same thing you're not going to be happy with your results so you have to do something different doing something different is uncomfortable but push in even if it's even if you're scared and uncomfortable because you're going to be okay.

You're going to be fine. If you pay attention and play through. Good stuff. This is The Ramsey Show. George Campbell, Ramsey personality is my co-host today and stepping into the guest seat, Alex hormozy i'm gonna mess

it up hormozy a first generation iranian american entrepreneur i just spent the morning with him we did his podcast i was a guest he's an investor a philanthropist known for his expertise in customer acquisition and monetization it's a huge deal on youtube has done some amazingly large business deals, including scaled and exited seven companies for an excessive $46 million. So been a joy hanging out with this young guy. He's getting things done. 1.3 million YouTube subscribers. Welcome.

Good to have you, brother. I'm honored to be here. Well, we're honored to have you with us. Thanks for hanging out. Yeah, this is big. I've been following you on YouTube for a long time. And then we had Graham Stephan on. I was on his show and he was like, he got to hang out with Alex.

So you're on now. And what's interesting is that you mentioned in one of your YouTube videos that Dave gave Graham Stephan some of the wisest advice you'd ever heard around investing. And I want you to share that. So Graham had his big pie chart of his investments on the table. And he said, Dave, what am I doing wrong here? What should I be doing? And Dave, rather than just giving him like, oh, you need to be 16% here and 13% here.

He said, well, if this pie chart were your knowledge and expertise, how would you divide it up? He's like, well, I'd probably say I'm 85% real estate, maybe like 15% like my knowledge of stocks. And that more or less mirrored what Graham's actual investment portfolio looked like. And the big takeaway that I had when I was seeing that was it wasn't one particular methodology. It wasn't like, oh, you got to get into stocks.

You got to get into crypto. You got to get into, no, obviously, I'm baiting, right? But it was more so do what you know. And when my wife and I exited our company and we had taken sizable distributions prior to that, I hadn't really come up with an investment strategy. Because the investment strategy was in the beginning, don't be poor. It's a good start.

It's a good one. I like that one. But then after that, it was just like I had everything in indexes and I wanted to take a more active role. And the only thing I felt like I knew good enough was business. And so I'd gone all the way to the edge thing I felt like I knew good enough was business. And so I'd gone all the way to the edge on two, three, four big real estate transactions. And right before I needed to send the money, I pulled back. So I was like, I don't know this stuff. And so once I basically gave myself permission, or I felt like you'd give me some sort of verbal permission to just do what I know, Acquisition.com kind of started and became our family office for everything

that we do investing, which is exclusively businesses that we feel like we can add value to. Yeah. And it's a space you know you're comfortable in. You should never put money in something that you don't understand and don't know. And because some guy in a good suit said to, and the only thing he may own is a good suit. that's probably not where we're taking the advice so really that that's really really really important okay so you started with nothing over 50 million dollar net worth in excess of that on this one transaction so i know i know you're probably north of 100 million at that point um and uh the iranian american so your parent your first're first generation American? Yeah, first generation.

Okay, so your parents came from Iran, both? Just my dad. Just your dad, okay. I've got a really good friend that both of his parents came here. And also unbelievably successful, and financially. And sometimes I think, I was talking to my friend brown buffini who's irish and he has a book out called the immigrant edge and so the mentality that comes off that george's parents are he's second first generation middle eastern middle eastern as well

so uh uh there's an immigrant edge that goes with that what is the you think the number one mindset as you work with investors and companies that keeps people broke? They subscribe to what everyone else around them who is poor tells them about how to get rich. So they take poor people's advice on how to make money. And so as a result of that, they keep doing the wrong stuff or they don't do anything at all. And a lot of them sit into this area of, you know, the paralysis analysis. They're like, I need to find the perfect thing, and meanwhile, 10 years later, they're still trying to wait to find the perfect thing, and they haven't started anything. Yeah. How do you become a writer?

Right. How do you become an investor? Invest. I used to, because I talk a lot about sales stuff, because I think it's a really good entry thing for anybody who wants to, you know, take control of their own income and cost no money to get into. And all you have is skill is that, you know, you can read a hundred books on sales, but the first thousand cold calls you do, you'll learn more than all the books that you read up to that point. Experience is a mighty teacher. Oh, a hundred percent. And, uh, it's interesting with the skill proficiency, but, uh, people will put off, you know, it takes 20, 20 takes 20 hours of concentrated work to become proficient at most skills. Playing the guitar, playing the piano, learning to do a cold call, 20 hours of actual dedicated work.

But people will wait a decade to do those first 20 hours because they're afraid. Fear's holding them back because they don't want to fail a lot of the times. Yeah, they don't want the judgment that they think is coming along from people who aren't actually paying attention to them to begin with. Multimillionaire, young age entrepreneur, Alex Hermosa, our guest this segment, you can catch him on YouTube. Be sure and look that up. That's H-O-R-M-O-Z-I if you don't know. And you can check him out at his website at acquisition.com. So what do you feel like? I mean, you had a couple of really big hits along the way. The actual liquidity event was a big hit, but the building up was gradual.

And, I mean, it wasn't like you hit the lottery in 20 minutes, had this kind of network. So you built a company, sold it, and that was a lot of it. What do you think all of that has taught you about building wealth out there in america today a is it possible and b what do you think that you're the sense of hope or the sense of principles around it what did you what's your takeaway so a 100 possible b i think um i define sadness as ignorance as in you don't know what options you have. And so like whenever you feel hopeless, it's because you don't know what to do. And so when I felt sad in my life,

I think to myself like, this is because I don't know what to do, which means that this is a problem I can solve because all I have to do is figure out what I need to do. And then that even gives me my first action step, which is like, oh, I just don't know. Great. And so for me, solving that has been a perpetual education process. And nowadays there's so much free information that exists on the internet. Like you can learn how to flip houses. You can learn how to sell. You can learn how to code. You can learn how to edit videos. Like there are all these skills that pay entry level roles, 50, 60, 70, 100, $200,000 a year that you can learn in eight weeks. And so for the people who are willing to just put in the eight weeks and then apply for the jobs,

you can get way ahead. Well, there's a lot of young people out there and I get the messages. They're 17, they're 18, they call into the show, they're going, hey, I want to invest. I want to build wealth. I don't want to wait till I'm 60. I don't want to work a job I hate and do the 401k thing. They want to make money really quickly. And a lot of times they want to do it the wrong way. What is the advice you constantly give those folks? Yeah. So I say like, you can invest in the S&P 500. I was like, but I prefer people invest in the SME 500, which is you're always going to get higher returns on investing in your own education, your own skillset compared to any stock market. And so like a really real example of this is a buddy of mine has a daughter. She's 17. I think she just turned 18. And she's, she was working at a bowling alley, minimum wage job,

you know, popcorn. Right. And she said, or he told her, he's like, you know, you can triple your income. If you just get a certification and become a phlebotomist, it takes two days. It's 500 bucks. And by taking $500, she could invest in the S&P 500. And at 18 years old, maybe there'd be a ton of compounding. But if she invests $500 in getting the certification, and then two days later, she triples her income, probably a better investment in buying the certification than forever having a three times higher baseline for what she can make. And I think that's just like a micro example of how much skills can give you more cashflow to invest in everything else. And so my, my belief is always keep reinvesting in skills because that raises your lifeline, your, your lifetime baseline

of earning potential. That's so good. And valuable, valuable education, uh, is always cost minuscule amounts, not all education, but I said valuable, usable, utilitarian value. She can immediately go and do something with that. It's not like I collect degrees for a living. No, this is like, but studying something that is usable 100% of the time is the best investment you can make. My father came here with a thousand dollars and he didn't speak English, but he had a medical degree. And so he's always been big on education for me. And if you look at it as an actual investment, I mean, he fled during the revolution in Iran. He said, they took everything we had, but they couldn't take my education. And so it's something that can never

be taken from you. You can't lose it in a divorce. You can't be taxed on it, on your education itself. It appreciates with time. And then the more educated you become, the more valuable each prior skill adds on top. It compounds. That's good. Like if you know how to do math, then you can then learn accounting. When you learn accounting, then you can learn investing or business or whatever. And like each one compounds unto itself. You got to follow this guy. Check him out on YouTube. Alex Hermoza, H-O-R-M-O-Z-I,

for those of you that aren't familiar with how big a deal he already is. And check him out at acquisition.com. Check him out at at Hormoza on all his social media. And his podcast is called The Game with Alex Hormoza. Alex, an honor to meet you today. Hang out. Got a new friend. And it's been an honor to appear on your podcast. Thanks for hanging a new friend, and I've been honored to appear on your podcast. Thanks for hanging out with us for a few minutes here. The honor's all mine. Cool. Jade Walsh, all Ramsey personality, is my co-host today.

Open phones at 888-825-5225. If you are a new listener or viewer, and we know there are a bunch of you based on all of our analytics and numbers, and a huge number of you have joined us in just the last few months, thank you for that. You may be a little bit out of the loop on all this lingo, the baby steps and debt snowballs and all those kinds of things we talk about around here all the time. We'll try to keep you up to date, but if you want to really dive into it and start to learn where you are and where you need to go next, it's a free service. Just go to ramseysolutions.com, click on Get Started, and we'll help you figure out your next

best step from where you are right now. ramseysolutions.com. It's completely free. Click Get Started. Sandy is with us in Nashville. Hi, Sandy. Welcome to the Ramsey Show. Hi, Dave. Thanks for taking my call. I've been agonizing over something for a few weeks, walking around my house saying, what would Dave say? What would Dave say? So today I decided to call and see what you would say about this. My husband wants to buy an Airbnb in Florida as an investment. We have no emergency fund. We have excellent credit. All we do have is the equity in our house, which we do have a mortgage on.

I'm terrified about this idea. It would require a home equity line of credit and possibly another investment mortgage loan on top of that. You already know what Dave would say. Yes, I do, I believe. And do you want to know what Jade would say? Yes, yes, yes. Well, I might not be able to say it on the air but but it ends in the word no yeah capital you know you're broke people broke people don't need to buy investment properties

broke people really don't need to buy high risk investment properties broke people really don't need to buy high risk investment properties in another state with all 100% borrowed money. Oh, and leveraged on your own home. Right. This goes sideways. It's got nowhere to go but bad. Okay. So let me tell you, he's been watching. He's been spending too much time on the Internet.

Yeah. Yeah. So here's what the Internet, here's what the idiots on Tic Tac will tell you, okay? That running an Airbnb is 100% profit. You're going to make so much money. You're going to be just bathing in money. There's going to be cash everywhere. It fails to mention the renters that tear up your house.

It fails to mention the times that it sits empty. It fails to mention the high management fees. It fails to mention all of the costs of your maid service it fails to mention uh the fact that uh the local municipality decides that airbnbs are no longer legal when they pass a law prohibiting airbnb in your neighborhood which is happening in some areas and hoas are preventing them left and right because they don't want a hotel in their neighborhood, which is essentially what an Airbnb is. And if everything works perfect the way the Tic Tac guys say, you're going to be so rich it's unbelievable.

But guess what? You and I live in the real world. It doesn't work that way. Running an Airbnb is a complete pain in the bohonkas. Okay. That's exactly what every fill in me is screaming yeah are you going to be able to convince him of that she's not going to sign the deed i'm praying i'm praying just no i refuse to sign the heloc the house has your name on it in tennessee well. He can't get a HELOC without your signature. Right. No. Okay. Well,

thank you all so much. We'll discuss the marriage aspects of this, but no. All right. Don't do it. Here's the thing. Who can find a virtuous wife for her worth is far above rubies. The heart of her husband safely trusts her, and he will have no lack of gain. Sandy, you have what's called common sense. You can perceive risk a mile away. Your husband has spent so much time on Tic Tac that he has no idea what real risk is

and how much work and hassle and problems this is. You can make money running an Airbnb, but, you know, you can also make money running an airbnb but you know you can also make money running a hotel but it's called a full-time job somebody has to manage the hotel somebody has to manage the maintenance people somebody has to manage the maid service somebody has to this is not just found money that you walk out on the sidewalk and pick up a bale of money because you signed up for airbnb because some moron on Tic Tac said it was a great idea. It's passive. It's passive income, Dave.

It's passive income. There's no passive about it. You talk about active, it's about as active a piece of real estate as you can get. Again, there is situations where you can make bank on this if you're willing to go through the hassle and the hard work and put up with it, but it's not as much as people say it is and it's certainly not as much as your gross rent projection is by freaking airbnb because all they'll tell you is you keep it full all the time here's what we can get for it well nobody keeps it full all the time number one number two nobody puts everybody in there and 100% of them pay. Never happens.

Nobody puts everybody in there and they don't tear it up past beyond the level of their deposit. Never happens. So, dadgum, man. I got a three degrees of separation guy that has an expensive property that he put and a bunch of uh characters went in there and one of them killed the other one in his house oh my god oh so i was not expecting that yeah there you go that that's my that's my love of airbnb it just went away right then But that doesn't happen very often.

But I mean, these characters, and this was not a cheap, this was not a house in the wrong end of town or whatever it is. Sheesh. No, this was people partying. They party too hard. Oh, my gosh. Yeah, out of control. So, yeah, it's, you know, does that, is that going to happen?

No, that's not going to happen. Right. All right. But the point is you're running a high turnover night to night, week to week rental. If this is not, you put a tenant in there and they stay in there a year and you have an actual relationship with the tenant. So, okay. So here I am playing devil's advocate as i sometimes

do there are listeners who want to get into that space and they they don't we don't want them to listen to tic tac as you call it what do you say pay cash for the person pay cash for it after your home's paid for baby step seven and understand that you are embracing two things that no one talks about when you do Airbnb. High hassle factor, high risk. Yeah. And so you have to apply those to the numbers. It's the same thing when somebody goes to one of these nothing down real estate crap and they go, I can rent the house for $1,000 and my payment's only 500.

I'm going to cash flow 500. Well, let me tell you how that works in the end, okay? If that's the case, you're going to break even. With vacancy, with nonpayment, with suing to evict them, with fixing the repairs beyond the deposits, with fixing the repairs that just happened to a house, the heat and air goes out, the roof leaks, paying the insurance paying

the taxes messing with it you got a 500 cash flow no you don't you're breaking even this is what people don't grasp i have a 500 cash flow what that means is you don't know what the flip you're doing you have no knowledge of how real estate really works. My homes and properties of all kinds are 100% paid for. And I swear, I wonder if some of them are going to cash flow then. You know, I mean, it's unbelievable. And you do know Airbnb and wouldn't even get into it. No, no, no. Winston Cruz runs all that stuff.

Rachel's husband, he would shoot me if I proposed Airbnb. It would make his life miserable. But why is that? Well, the hassle factor versus the risk risk it's not worth the risk the juice ain't worth the squeeze there you go that's what i want people to get like just pay cash for a normal rental right yeah that's what i would why even but if you want to do it you probably could make more money net net you would make more money if you can get it rolling if you have a reasonable property you'll make more money doing an airbnb than you would make more money. If you can get it rolling. If you have a reasonable property, you'll make more money doing an Airbnb

than you would renting it out. But not just some guy off the streets who thinks they're just going to... Net-net, you would do that. But even if you don't know what you're doing, you don't know how to be a landlord, net-net, you'd make more money. But what you need to perceive is the extra hassle level. It is real.

You're dealing with a lot of human beings. This is The Ramsey Show. Dr. John Deloney, Ramsey personality, is my co-host today. Travis is with us in Grand Rapids, Michigan. Hi, Travis. Welcome to The Ramsey Show. Hi, Mr. Ramsey, Dr. John Deloney. It's a pleasure to speak to you both today.

You too. What's up? So my question is how to get out of debt with my current salary as a truck driver projected to make $80,000 this year. Okay. How much is your debt? Total debt is $67,000. $40,000 is student loan debt. And then I have $11,000 balance on a car, and the rest is credit cards.

Okay. You're single? I've been trying to make a – I'm dating, currently living with my partner, and so that's kind of tricky because when I moved in with her, I was over the road, and now I'm a local driver, so I pay her to help her with the mortgage, but we're not married yet. Plenty on engagement soon. So.

Okay. So you are paying part of your roommate's payment as rent. Essentially. Yes. Yeah. And your rent is how much? Uh, 500 a month. Okay. All right.

So you make $80,000 a year and you have a $500 a month rental. Okay. All right. So you make $80,000 a year and you have a $500 a month rental. Okay. Yep. So what's wrong with getting on a tight, tight, tight, tight, tight, tight, tight, tight budget and beginning to pay these debts down? You should have all kinds of margin in this budget. Yeah. And I've been trying to see that for myself like i have in my notes all my bills and credit cards um how much each monthly payment the sum of them is for the minimum balance um i've been following uh listening to you guys over the last couple months for the baby steps yeah but i just can't seem to get ahead of you don't you haven't done a budget so what is your take-home pay um about 1200 a week

okay you get paid once a week correct okay you sit down and you look at june how many times are you going to get a paycheck let's pretend it's four okay that would give you four thousand eight $4,800 to work with, minus $500 for rent, minus food, minus some car gas, minus the minimum payments on all of these bills, and everything else goes towards the stupid credit card until it's gone, and you cut up the credit card. I've cut two of them up since I've started listening to you. I feel like you drove right past all the room that should be in this budget. $4,800 minus $500 minus food.

That's a buttload of money left over. Yeah. It's about $3,600 or $3,700. Yeah. How much is the balance on the credit card? I have three of them left. One's $2150, $600, and $700. Okay.

You should pay the $600 and $700 off this month and probably the $2150. Yep. So you're done with credit cards in two months. One month. Oh, one month. Let's do it. Okay. But you're not going out to eat.

And you're not going on vacation. And you're not going drinking with your buddies. You got no life. You're getting ready to clean up your dadgum mess because you want to get married. Yes. And it's time to clean up your mess. So what I'm teaching you is what's called a zero-based budget. Your income each month, unique to that month, minus every dollar gets an assignment. Every dollar has a mission.

Every dollar has a name beside it before the month begins. Before June gets here next week, you need to have figured out what your income for June is and assign every one of those dollars first to necessities food shelter clothing transportation and utilities so rent car payment car gas food okay that's it and then everything else dude we're going at this at these credit cards like they're the freaking enemy because they are. Yeah. If you had $4,800 minus $500 and you had $2,600 makes you debt-free,

or I'm sorry, $3,200 makes you debt-free, you're debt-free of your credit cards in one month. You really should be. Right. That's how you do it. Absolutely. That's how you do it right there. And jump online and pick up the, or hang on, we'll give you the EveryDollar app,

and we'll get you tied into the advanced version of the EveryDollar app, which connects to your bank and helps you run your budget. It's the world's best budgeting app, and it'll help you, but it's giving every dollar a name. That's the point. When you get very detailed very nuanced and very careful with your planning each and every single month and you squeeze every one of these dollars until benjamin franklin is squealing then you are ready to go and that's what we're doing we're not we're not spending money on anything because we're trying to clean this mess up so realistically you've got 50 uh two fifty fifty five thousand dollars in debt you

make 80 000 but you got almost no expenses you probably could be 100 dead free in a year pretty close a year and for everybody listening i want don't don't blow by this because it's easy to look at him and be like man that guy you can't out earn your your unintentionality your lack of intentionality he's making eighty something thousand dollars a year and he can't figure out where it's going we're how to pay off a two thousand dollar credit card can't figure it out and and it's not because he's dumb it's because it's just chaos there's too many spinning place everywhere yep and that's what a budget a budget does. It's all spun up in your brain and in the ether and everything else. And so giving every dollar an assignment.

Every time you do this, people, those of you that haven't done it, you need to sit down and do it tonight. June's coming next week. And you sit down and do your dadgum budget, maybe for the first time in your life. Put your income for the month at the top of the page and then give every dollar an assignment. I will promise you two things will happen. Number one thing will happen is that you will feel like you got a raise because you will go where is all this freaking money going it's going to blow your mind how much you waste and the second thing that's going to happen is you're going to get a sense of peace instead of a sense of anxiety even though you've actually done nothing

with money yet now you've actually executed a plan that says if i take these 17 steps i'm going to be free and as soon as you see the steps in front of you and you realize they're doable your anxiety goes down your uh stress level goes down your peace level goes up and you kind of just slick your hair back and go, okay, let's get about the business of doing this. Let's go. Game on. And people lean into it, and it changes everything. Timothy is in Chicago.

Hi, Timothy. Welcome to the Ramsey Show. Thank you, sir. It's a pleasure to be on your show today. Honored to have you. What's up? My wife and I are wondering if we should use a portion of our emergency fund to pay our mortgage off how much is in your emergency fund currently we are at 46.5 okay and we owe 30 all intents and

purposes 34 okay and you don't have any other money to put into this equation, so you would drain your $46,500 by $34,000? Yes, sir. What's your household income? Base salaries, we're looking at $130,000. No, no, I didn't ask. Ask what your household income is. Oh, my goodness. Between mine and my wife's, we're looking at, like I said, $136,000.

Okay, okay. That's what I was asking. Good, good, good. All right, and so wife's, we're looking at, like I said, $136,000. Okay. Okay. That's what I was asking. Good. Good. Good. All right. And so here's the thing. Paying off a house is a really good thing, and we really tell everybody to do it.

It's not an emergency. So if you go below three to six months, if you go below three months of expenses in order to do this, you cut too deep, and it kind of feels like you are. Okay. What do you think? What's three months of expenses? Three months of expenses, we're looking at $18,000, $19,000. All right. Let's call it $20,000, which means you have $26,500 to throw at your $34,000. Okay. Did I get that right? Yes, sir. Okay. And then by Christmas, throw at your 34 okay did i get that right yes sir okay and then in the next by christmas you just cash flow the rest of it and knock it out okay uh now my wife will be getting bonuses throughout the next several months which will be paying down the mortgage further yeah given that

happening yeah we're looking at august okay done now the question go ahead i'm sorry then do it yeah done absolutely go that route that's what i would do yeah that's the whole idea so by christmas we're rebuilding the emergency fund maybe from three months up to six months which you don't need more than 40 what's by august i mean that's if he pays this thing off in august with some bonuses well then they got to rebuild it right up from 20 up to 40 oh by christmas no more than 40 in your emergency fund you don't than 40 in your emergency fund. You don't need 46 in your emergency fund. If 20 represents three months, 40 represents six months, six months is enough.

Then move on to your other steps. This is The Ramsey Show. Hey, it's Dr. John Deloney. If you love the show and want a deeper dive on your money journey, we have a weekly newsletter that gives you trending and helpful articles and tips on following the Ramsey way. Just go to RamseySolutions.com today to sign up for our newsletter. Again, that's RamseySolutions.com to sign up for our weekly newsletter.