The Ramsey Show - App - The Deeper You Sacrifice, the Faster You Get Out of Debt (Hour 1)

Episode Date: December 23, 2019

Home Selling, Debt, Budgeting, Retirement Tools to get you started:  Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

🎵 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. Open phones at 888-825-5225. That's 888-825-5225. Elizabeth is with us in Albuquerque, New Mexico. Hi, Elizabeth. Welcome to the Dave Ramsey Show.

Hi, Dave. Thank you. Sure. What's up? So I have a question. Our home has been on the market for five months. We have purchased a new home. Uh-oh.

And we are trying to sell our home. We've done everything possible as far as making sure that the price is right. That home is in an HOA, so to make sure that people understand how the HOA works, which it is also on a land lease, which when we purchased the home, we weren't able to buy the land but then had recently within the last few years been able to purchase the land, which we did not because we knew we would be moving. But our thing is, is our home has been on the market. It's beautifully updated.

It's not overpriced. It's priced well within the same price range as that other homes in our neighborhood are going for. But other homes have been on the market and off the market in less than the time that our house has been on the market. Were they on the land lease? Yes, they were on the land lease as well. Okay, so that's not the distinguishing factor then, right? No, and our home is on the outside of the neighborhood.

So the neighborhood is raised up a little higher than the street is. So on the street side, the wall is eight feet, which we recently just raised it. So now it's 10 feet high. And now on our side, it's six feet high. So we did raise it because I think that was probably a deterrent. But I do know that we're going into, you know, it's six feet high. So we did raise it because I think that was probably a deterrent. But I do know that we're going into, you know, it's December now, and I know that the market can have the tendency to slow down. And so that's what I was concerned about.

Okay. So I haven't heard your theory yet on why it hadn't sold. We think that possibly it is because it's on the outside of the neighborhood and that it backs up to a major street, so that was the wall that we had built up. Yeah, so traffic noise. Yes, traffic noise. And so what we did is raise the wall because we had talked to... The other houses that sold were not against that wall. Correct.

Okay. That's a possibility. So that devalues the house. Okay. That's a deterrent. And so that causes your value to go down compared to those other comparable sales. Okay. So you're probably priced high.

As far as that goes, even though we're in the same price range as the other houses, we should probably lower the cost of our house. The other houses don't have a traffic noise in the backyard. Okay. And so that's, you know, you have to do something. Okay, if I'm looking at two houses and everything's equal, the price is equal, the features are equal, one has traffic noise in the backyard, one doesn't, I'm taking at two houses and everything's equal, the price is equal, the features are equal, one has traffic noise in the backyard, one doesn't, I'm taking the one that doesn't. Right.

Unless you give me a reason to take the one with the traffic noise, and that reason would be price. So, yeah, it's not going to bring as much. Okay. Okay. So that's your advice on what we should do as far as lowering the price to be comparable. Has your realtor not told you that? I mean, she just said it would take time. And then, you know, other realtors have come in and said, you know, you should build up the wall.

So we built up the wall because it's kind of one of those things out of sight, out of mind. So if you can't see it, then it won't be such a big deal. You can't hear traffic noise if you're inside the house. It's only when you're outside in the backyard, and it's mainly at certain times of day when the traffic is a little bit heavier. Our house is a little more updated than other houses that have sold, but I think definitely that is the biggest deterrent. Well, if all things are equal except traffic noise, they're not going to pick yours. So all things can't be equal. That's what we're saying. You've got updating to your advantage in some cases, maybe over a certain house on the street,

but other houses on the street may or may not have been updated. But someone, even if they're not in your particular neighborhood, if they're two neighborhoods down and they've got a similar per square foot cost and similar attributes to the home, it's still going to be comparing, you know, apples to apples, plus or minus stuff like traffic noise. And so, you know, you're probably going to pay someone vis-a-vis a price cut to move in there is what it amounts to. It's what it sounds like to me. I don't know.

But just listening to you talk it through, that's what I think I'm hearing. And if you haven't talked to one of our endorsed local providers as a real estate agent, you probably should. They're one of the top-selling agents in the area, and they will tell you the truth on this and help you set the price appropriately so that it can actually get sold. Because I think you're going to get stuck here, and you've got two house payments now, and you're going to end up being a dadgum motivated seller soon if you don't watch what you're doing.

Mark is with us. Mark's in Phoenix. Hi, Mark. Welcome to the Dave Ramsey Show. Hey, how are you, Dave? Better than I deserve. What's up? So I got a question. I'm starting to pay off my debt that I have.

I'm going to finish paying off my truck in the next six months. Good. And my question is, with that to be paid off so aggressively fast, I'm going to stop my TSP that I have right now going. I put the max in there every pay period, so it's going to give me a substantial bump. My question is, I have a house in Virginia that I rent out, and what I'm wanting to do is pay that off instead of sell it. Why? And I'd like to keep that eventually as rental income. Why? You live in Phoenix. You live in Phoenix.

Correct. Yeah. I mean, having rental property in Virginia is a nightmare. Well, I have family out there that takes care of it, and we eventually plan on moving back there. When? In the next four years. Okay. Well, that's fine if you want to do that i mean you get it paid off and keep it i just as a long-term game plan you ended up with this house because

you moved out of it not because you bought it while you lived in phoenix right it's you know you're a landlord by default not by strategy it wasn't your strategy to do this and it's not a good strategy long term if you can do it quick, because 36 months, 48 months, and get back up there, that'll be okay. But I wouldn't be owning a house 5, 10 years that's in a different city as a rental. I think that's a bad idea.

But you are wise to stop your TSP temporarily. We tell folks to temporarily stop your all investing, all saving, including retirement, including even if it has a match, temporarily do that until you get your personal debts paid off. You clear those personal debts. Then you finish your emergency fund.

It's three to six months of expenses. Then you move into putting 15% of your income into retirement. So that's the point. You restart your TSP is after you get your emergency fund in place and you're debt-free, except your houses. So, hey, man, thanks for the call. Appreciate you being part of the show today. This is The Dave Ramsey Show. How often can you get the best of both worlds? Not very often, right?

Well, with the Rate Secured program at Churchill Mortgage, it's possible. You can secure a low rate now to nail down your budget and if rates drop while you're shopping for a home, they'll give you the lower rate. That's right. They take on the risk of fluctuating interest rates, not you. Who does that? Well, you should fall in love with the numbers before you fall in love with the house. This program lets you do just that. So if you're buying a home this year, you'd be crazy not to call Churchill and get your rate secured now. Call Churchill Mortgage today and have the best of both worlds. Go to ChurchillMortgage.com or call 888-LOAN-200. That's ChurchillMortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org.

Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. We'll see you next time. Thanks for joining us, America. We're glad you're here. Open phones at 888-825-5225. This is the Dave Ramsey Show. Tina is in Milwaukee, Wisconsin. Hi, Tina. Welcome to the Dave Ramsey Show. Good afternoon, Dave. Thanks for taking my call. Sure. What's up? So, my husband and I are kind of at a disagreement right now. We currently save 15% of our income towards retirement, but we have about $30,000 in debt on auto loans. And he wants to get those paid off,

but in order to do that, we have to stop contributing for the next two years to our retirement accounts. What's your household income? $115,000 a year. So why does it take two years to pay off $30,000? It's only $15,000 a year. Well, I mean, we have all of our bills between the mortgage taxes. You have other debt? We do not. Okay. Let me try this again. Do the math with me here, okay?

$115,000 minus 30. You should be able to do that in one year. Okay. You see how I'm doing that? I mean, I'm not looking at the details of your budget, but what I'm challenging is your standard of living. Sure. Your level of commitment to sacrifice deep enough to get this done.

I don't think it takes two years to pay off $30,000. As a matter of fact, I know it doesn't. Millions of people have paid it off faster. So you're just beginning to fool with this idea. You guys are just starting some of these discussions, and somewhere along the line I entered the picture, and I'm starting to become a... We did your financial peace course 10 years ago. Oh, okay. You flunked. Okay.

I suppose if you want to say that. Well, you did. There's no way you graduate from that class and have $30,000 in car debt. You flunked. But over the past 10 years, we paid off $70,000 worth of other debt between school loans and credit cards. Meanwhile, you borrowed $30,000 on two cars. Correct. Yeah, you flunked.

Yes, you did. I suppose000 on two cars. Correct. Yeah, you flunked. Yes, you did. I suppose if you want to say that. Well, we were pretty clear, never borrow again. I mean, that's the only way to get out of debt, stop borrowing. So the formula is this. It's an emotional formula because it's a behavior-based situation. The angrier you are at the situation or the more motivated you are at the situation, whether it's anger or fear, the deeper you will sacrifice.

The deeper you sacrifice, the faster you get out of debt. The faster you get out of debt, the faster you don't have any payments and you now have that money to build wealth the shortest distance between where you are and wealthy is debt free because it clears up all the money you're spending on this other stuff that's what you learned or should have learned in the class so i agree and that that's so what i'm saying is if i'm in your shoes I'm not going to just kind of wander out of debt. I'm going to get a little more fired up. I'm going to do it in one year.

And, yes, of course you know we teach you to temporarily stop investing while you pay off debts. Correct. That's what we teach. Yes, that is correct. Okay. And so who's not wanting to do that? It was you. Me.

I'm the free spirit of the group. Okay. Well, it's not a free do that? It was you. Me. I'm the free spirit of the group. Okay. Well, it's not a free spirit thing, really, on that. It's a free spirit just means I'm not as nerdy and I'm not as detail-oriented and that kind of stuff. It doesn't mean that you're... Well, because I see it as if we're already contributing 15% to our retirement funds, and we have a net worth of $360,000. We're 35 years old.

What's a little car debt is how I look at it. Yeah, what's a little backache? Not a big deal. It's just, what's a cigarette every now and then? It doesn't kill you completely. It just makes you sick. I mean, you can do whatever you want to do, but that's the same logic pattern you're following. The critical thinking is bad. I mean can you can tolerate a lot of stuff

but the question is just what's going to get you to where you want to go faster to live like no one else so later you can live and give like no one else is what i would do i don't even say to sell the cars i just said let's just roll up our sleeves and let's get serious about this and clean this mess up. And then let's get back into saving 15% of our income. Because see, if you had followed what you were supposed to have learned, you wouldn't have a $350,000 net worth now. You'd probably have a million dollar net worth. It's probably cost you that much in the decade while you've been screwing around with this stuff. So that's the problem is the data points all tell us the shortest way to wealth the

wealthy people avoid consumer debt of any kind and that gives them the control of their most powerful wealth building tool which is their income and you just gotta decide if you're gonna do that or not we can be friends and you're not do my stuff i got lots of friends that don't do my stuff but if you want to do you call me on the. But if you want to do, you call me on the radio. So if you want to do our stuff, that's what we teach. And the reason we teach it is it's the shortest distance between where you are and wealth. And we want you to be wealthy so you can change your family tree and so you can be outrageously generous. Everyday millionaires.

Ann is in Sonoma, California. Hey, Ann, how are you? Hi, Dave. It's so great to talk to you today. You too. Merry Christmas. How can I help? Thank you.

So I just recently came into a pretty significant inheritance, but it's split into three very interesting ways, and I'm curious to see what you think I should do with it. Okay. What is it? So my dad just passed away. I'm curious to see what you think I should do with it. Okay. What is it? So my dad just passed away. I'm sorry. Thank you.

How old was he? So in his checking account, I will inherit about $10,000, which completes my emergency fund. Okay. And I have zero debt and I'm already saving 15%. He has about $90,000 in a traditional IRA, and I'm able to either roll that into my own IRA and minimum distribution over the course of my lifetime, or I can make a lump sum,

but I'm worried that that puts me in a really high tax bracket, and I'll have to pay a pretty significant amount of money to the IRS in order to do that. Right. And then the second piece of the inheritance is a house that's fully paid for in Arizona. I'm in California, but it's a really good family friend who was one of his best friends that lived there, and he's 80 years old. He'd like to live there until he dies. He's a great caretaker, so I was planning on just keeping that as a rental because it's pretty zero maintenance, actually, on my part.

What's it worth? It's worth probably about $240, $250. And what's the rent? The rent is $1,300. That's low. Okay. You need to find out what the rent is worth. I don't mind the gentleman staying there, but not at 50% of what it should be.

If you want to give him a deal, that's fine, but not at 50%. And my guess is that this property is probably worth $2,000 to $2,500 a month. Okay. I'm guessing, but you need to check with a realtor and find out in the area somebody that manages property. Probably do a little bit of online research and find out as well. You say it's in Phoenix proper? It's in Sun Lakes. It's a retirement community.

Okay. I can't live there until I'm 55, which I don't spend on everything. No, it might not be worth that then because you have a limited type of renter that you can put in there. They have to be 55 or above. They had a realtor do a market analysis, and she put it between 230 and 260. Ask her what it should rent for and do a market analysis on that. Okay. It might not be full market rent because you are limited to 55 and above,

and so it might have to go cheaper than that. But a typical $250,000 house, a good rule of thumb is just I'm guessing, but it's not always true, but I just start with this, and then I do actual research, 1% per month. So $240,000 is $2,400 a month. Okay. That's why I'm challenging it. I may be wrong, but I want you to research it.

Okay. Moving on, what's your income? It's about $'m challenging it. Okay. I may be wrong, but I want you to research it. Okay. Moving on. What's your income? It's about $140 a year. Okay. How old are you? I'm 39. How old was your dad?

Yeah, 73. I'm sorry. Well, I'm with you. I think you keep the house and rent it to the gentleman. Let's just try to get the rent adjusted to something that's a good deal for him, but that is a little more accurate, I'm guessing. And I would roll the IRA into an inherited IRA and some good mutual funds. Get with a smart investor pro to help you do that if you don't have a broker. The inherited IRA that you described is the right way to do it with a minimum distribution.

You don't need the money, and let it grow tax deferred. And that's a good plan. Hey, thanks for the call. In a season of giving, what better gift can you give someone in the coming year than a new job? Business leaders, if you're looking to add to your team in 2020, get started now with LinkedIn Jobs. At Ramsey Solutions, we post on LinkedIn Jobs because we know the right person will have an impact on our company for years to come. And LinkedIn Jobs matches the right person with the right job. It's no wonder a hire is made every eight seconds on LinkedIn, and over 600 million members visit LinkedIn to make connections, learn and grow as professionals, and discover

new job opportunities. So find the right person for your team and give the gift of a rewarding new career. Get started today and get $50 off your first job post. Visit linkedin.com slash Ramsey. That's linkedin.com slash Ramsey. Terms and conditions apply. We'll be right back. Cody is in Phoenix. Hey, Cody, welcome to the Dave Ramsey Show. Hey, Dave, how are you?

Better than I deserve. What's up in your world? Okay, I got a quick question for you. Me and my wife are in baby step two. We're chunking away at our debt. We're very open with our family about it. My sister sees the progress we're making, and she has a question for me, and I'm not sure how to answer it for her, so I'm calling you.

Okay. She's going into her senior year in college. She is an athlete. This year her coach gave her a full-ride scholarship plus an extra $5,000. She has taken student loans out before this time, and she's asking me if she should pay the $5,000 towards her student loans or what she should do with that money. Wow. What's she studying? She is wanting to be a teacher. Okay, great, great great and so she's heading into her senior year correct when in the fall uh yeah so she's still in her junior year right now okay

perfect good good um no i would uh the first goal for her is to graduate with no more debt okay to ensure that that happens, I'm going to set the $5,000 in an account to never be touched for anything except to ensure that we don't borrow anymore. Seems simple enough. No more borrowing. Then when you graduate,

let's say everything works out perfect. You graduate, you never touch that money. There's $5,000 sitting there at graduation. You go get your teaching job. Everything's rocking. You get your apartment set up or whatever you're doing. You start your life. You've got $5,000 to start your life with.

And if it survives that, then we throw it at the debt. Okay. But that's after graduation. Okay. Make sense? Yes, sir. Thanks for the call. Knox that's after graduation. Okay. Make sense? Yes, sir. Thanks for the call. Knoxville's next.

Christina is calling. Hi, Christina. How are you? Hey, Dave. How are you doing? Better than I deserve. What's up? Well, I'm hoping that you can help.

My husband and I, we're new parents, and we had our daughter early, and so now we are loaded with debt. Okay. So we're hoping that you can, we're very, very unorganized with everything just because, sorry, this part's a little emotional, but we had to go on leave, and we had no savings at the time, and I wasn't being paid for any of the leave, so naturally things were just adding up and not being paid, and I wasn't getting paid. So that created a huge monster. Our car recently, we had to give it back because we could no longer afford it.

And so now we're going to have that debt added. So your husband quit work too? No, no, no. He was working and was taking care of our home and, like, our bigger bills. But I, you know, the bills that normally i would help you know like with the one car payment you know our bank loan and some of the credit cards those kind of piled up and you know you can't cut the income in half and then still try to survive on the two incomes you know spending so so the car got repoed it did oh lord know. So now we're stuck with that.

And so I'm happy it's gone because we don't need any more cars. We're so overdead. We're so motivated and so determined. And we were prior to having her. We paid off $15,000 in debt before her, which came a little early. So we ran out of time, and then it just got worse in the meantime. So in three months, you got behind on credit cards and got a car repo during her coming three months early. Yes. Okay, and how's she doing?

She's doing good. She's much, much better now. So she's just happy and strong and doing all the things. So we're super grateful for that. Good, good. All right. Well, so you're behind on credit cards. You've got a car repo, and you're behind on a bank loan.

Yep, and we've got now, because of her NICU bill, because she was born early, it was like $80,000 after insurance. It created a $5,000 bill. Wait a minute. Wait, wait, minute wait wait wait stop stop stop after insurance paid everything but 80 000 but all but five thousand oh okay so you have a five thousand dollar medical bill yeah okay that's better okay yeah and then and then a little bit of physical therapy medical bills for her. When do you go back to work? I went back after four months. Yeah, I did go back after four months of having her,

but we threw daycare into the mix when we were already drowning. So without even thinking. So what is your household income now? We're at right now about $68,000, $67,500, something like that. Okay. All right. Well, let's walk through what we're going to do. Okay.

The first thing is you're going to go back to getting organized again because that's your only hope. That's how you were winning before, and that means getting on a budget and making the $68,000 behave. As you probably remember, once you start getting organized, you'll feel like you've got a raise. And that'll get you there. So, you know, you're going to start to make traction again. Now, then the first goal is to take care of your household and keep the current bills current.

So food, shelter, clothing, transportation, utilities, that kind of of stuff and the bills that he already was had current we're going to keep all those current you've got enough to do that easily yes because you were doing that on half the income okay so then what are we going to do from there the next goal is we make a list of these other things and we prioritize when we're going to get current on which ones okay so do we get current on the bank loan before the credit cards probably do we get current uh do we get current get something going on the medical bill before the credit cards yeah probably then we get current on the credit cards and then once we're current on everything and we've got monthly payments going out now ignore the uh the uh car repo for now okay it's going to take them months

to get around to bothering you so for right now we're going to ignore it and then once you're current a little bit at a time you get current on each one once you get current on each one. Once you get current on everything, then you start your debt snowball again. Okay. And you'll clean up the credit cards. You'll clean up the medical. Then you'll clean up the bank loan. And at some point, the car repo is going to call you and say, well, the car sold for less than you owed on it, and you owe us the difference, the deficit amount.

They will take roughly 25 cents on the dollar for that. So whatever they call you with, about a fourth of that is what you can settle it for. But you'll have to save up and pay cash to do that settlement. Okay. But today, we don't have to worry about that. We're going to just not worry about it. It'll be six months before they even call you, probably. Okay. Yeah, because that's where we know we do get quarterly bonuses and we do know that we're you know we could be in a good position to be debt free which is our number one goal

um because you know since having her we would like to you know upgrade the home but we want to pay cash so yeah you need to get some stuff cleaned up right now before we start upgrading the house and do another stuff but yeah we've got it we gotta get some stuff cleaned up right now before we start upgrading the house and doing other stuff. But, yeah, we've got to get some of these. We're going to skip Christmas, so that way we can buy, you know, FPU. We're almost there to be able to get it, so we're hoping that that will help. And then we didn't know if, you know, we got our income tax. You're not skipping Christmas to buy FPU.

That's just not true. But I'll give you FPU for Christmas. You guys have been through hell and I'll help you get out. Let's get you on out. So you hold on. We'll get you signed up for the class and for the one-year membership as well. Get you into everything. But I'll be happy to help you with that. But let's

just get back in the saddle. You got knocked off the horse. That's what it amounts to. And systematically get current then once your current systematically work your debt snowball and then save up and be ready to settle with the deficit amount on the car repossession and let's work this through but get organized get intense get focused get detailed again and you'll start making progress again. You got your income back. You've gotten the other side of this event that has messed with you financially, and we'll get there.

You're going to be all right. You're going to make it. Hold on. I'll have Kelly pick up, and we'll get you signed up. This is the Dave Ramsey Show. you shall. Thank you. Thanks for joining us. Brandon is in Philadelphia. Hi, Brandon. Welcome to the Dave Ramsey Show. Hi there, Dave. How are you doing? Better than I deserve. What's up?

So I'm currently a college student. My parents have been a true blessing, and they've given me a 529, and that combined with me applying to be an RA means that I won't graduate with any debt, hopefully. I currently have about $15,000 invested across the four different types of mutual funds that you recommend, and I do have a small 401k for my job over the summer and a very small amount, only about $2,000 in a Roth, and I really would like to start expanding on that and take advantage of the compounding interest since I'm only 19 years old, and I was wondering how much I should put in that Roth IRA or if you had any other recommendations.

Well, you're a rock star. You're on fire, and you're thinking about stuff that very few 19-year-olds are thinking about, so you're going to be wealthy without a doubt. Thank you very much. I appreciate that. You're being very, very smart in how you're looking at all of this. I probably wouldn't. I want you to graduate from school debt-free more than I want you to have compound interest in the next two years.

And so when you graduate from school, you're going to have plenty of money, it sounds like, and you'll be able to invest aggressively, and you'll be able to move, and you'll be able to buy a house, and you'll be able to get your life started because you're going to have a pile of money. You are a better investment as far as compound interest and rate of return than a mutual fund is. And what I mean by that, I'm not just being complimentary, what I mean by that is what are you studying? I'm double majoring in business management and finance. Okay.

With those degrees and what you learn while getting those degrees, you are light years more valuable than you were when you came out of high school. And so what you spend on those degrees, the return on investment, is going to be much larger than a mutual fund. Do you see what I'm saying? Yeah, that makes sense. And so your income going up as a result of your knowledge base and your degrees. And so, and going with the fact that you're a go-getter as well.

So all of that to say, I'm 1,000% more concerned that you graduate and that you graduate 100% debt-free to the point that I'm okay if you miss out on a couple of years of compound interest just because that money's piled up there and accessible to you. If you want to do a Roth, that's okay. I mean, you could put $5,500 in a Roth. You'd still have $10,000 laying around. It's not the end of the world, and it sounds like you're still making money to add to this. But never invest down so low, leaving your cash balance so low, that there's any possible chance that you don't get through school. And so what I might do is I might just add up every dollar it takes to get through school,

subtract the 529 money from that, because that money is probably not going anywhere, and then only invest what's above those numbers. Like how much is in the 529? I'm not sure off the top of my head, but I know it's around $80,000 if I had to take an estimate. Okay. And then so let's add up what room, board, books, and tuition is going to be through the end. And let's say... It's going to be about $91,000 probably.

Okay. And you've got $15,000. Correct. Okay. So see, that gets us through. And so above the $15,000, we might want to start talking about doing some investing. So probably not going to invest right now. I would rather you have that insurance policy in case you stub your toe and can't work

or something happens between now and graduation. I don't want you to get to the end and have Roth IRAs and student loan debt. Yeah, that makes sense. That's what I'm saying. So all of that's my speech. So I'm going to be real conservative in that regard. So thanks. We appreciate it.

Good job, man. What a sharp 19-year-old. Open phones at 888-825-5225. I'm a 59-year-old, so I didn't get that figured out. Jessica is with us in Orlando. Hi, Jessica. How are you? Hi, I'm doing good.

How are you? Better than I deserve. What's up? All right. Yes, so me and my husband are both debt-free, but we have not started saving for our retirement. Okay. And I'm 30. He's 32. Good. I did start a Roth IRA a couple of years ago, but there's only about $2,000 in there. So I haven't been contributing enough to it.

Currently, I do not work. I'm staying home with my one-year-old. I have a one-and-a-half-year-old, and now I am expecting another one coming next year. And my husband works full-time. Yeah, so my husband works works and he's the sole provider right now. And what I was wondering is when we did the math, we could contribute. He was able to receive a lot more clients in his job that he has. He was able to have, he was able to bump his income from 60,000000 after taxes to $104,000 after taxes.

Way to go. Yeah, now he's doing great and he's able to take care of us. And the plan is for me to go back to work within a couple of years. Okay. So we'll have that extra income, but should we put money towards two IRAs starting now, which it would be probably in there for a good 35 years or so, or maybe a little longer. Yeah, what we tell folks to do, Jessica, is this in your situation.

I want you to be debt-free, which you are, except your home, right? No, we have bought our home. And it's paid for? Yeah, it is paid for. We were able to pay cash for my husband's parents' home. Okay, so you're 100% debt-free, and you have $100,000 of your take-home pay. Wonderful. Wow.

Well, we tell folks to walk up the baby steps. Do you have an emergency fund of three to six months of expenses? Yes, we do. Good. Then it's time for you to be maxing out, not just merely doing an IRA. You've got your emergency fund in place. You don't have any bills. You've got money coming out your ears. So you need to be maxing out everything. Does he have a 401k available? He doesn't.

No, he's self-employed. Okay, then does he have employees? He does. Okay, then does he have employees? He does. Okay, how many? He just has one. And how long has the employee been with him? They're fairly new since he's gotten his new, he's needed the hand since he's gotten new. Okay, I want you guys to sit down with a SmartVestor Pro, and you can at a minimum max out two Roth IRAs. That's $5,500 each.

And then on top of that, he can either do a SEP or a simple IRA, which is a 401K for small business, in addition to the two Roth IRAs. But you need to be putting as much money as you possibly can, maxed out. I mean, you ought to be able to put 10 20 but 11 000 is the two roths that's a minimum in addition to that you can do a set up for a couple of more years before that other employee kicks in or he can do a simple ira which is a 401k for small business put another 18 000 away so that'd be putting 30 000 away 2500 bucks a month and man you start doing that you're're going to be multimillionaires.

You're going to be in really, really good shape. And he's making good money. He's doing really well. And you guys have done a fabulous job, 100% debt-free at your age. Well done. So just click SmartVestor at DaveRamsey.com, and it will drop down a list of the SmartVestor pros in your area when you fill out what you're doing, when you fill out your stuff, and then you pick a SmartVestor pro to sit down with or more and interview them.

And what you're looking for is someone with the heart of a teacher, someone that will teach you about the money and teach you about the investing. You do not want to invest with somebody that's slick. You don't want to invest with somebody because they're a good salesman, because they, oh, I like this guy. No, no, no, no. You invest with them because they're a teacher and because you understand what you're doing. You don't get somebody to babysit your money.

And that's how you pick your IRAs. Pick your mutual funds for your two Roth IRAs, and they'll help you get the small business retirement set up, whether you use the simple or use the SEP, one of the two. Either one will work. And they're absolutely fabulous. And it's going to keep you from paying so much in taxes, and it's going to allow you to really seriously build some wealth.

And it sounds to me like you guys need to get on a budget because you thought $60,000 was tight. And now he's able to, quote, take care of us making $100,000 take-home pay. And you don't have any debt. So something's wrong with your budget. It sounds like you need to be doing one to know where your money's going. You've done a really good job to get where you are, though. Well done. This is the Dave Ramsey Show.

This is James Child, producer of The Dave Ramsey Show. Once again, you made The Dave Ramsey Show one of the top five most downloaded podcasts last year. To get your daily dose of motivation and inspiration, subscribe today.