The Ramsey Show - App - The First Step to Getting Out of Debt (Hour 1)

Episode Date: August 21, 2018

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Live from the headquarters of Ramsey Solutions, 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. You jump in, we'll talk about your life, your money, this is your place. It's common sense for your dollars and cents. God's and Grandma's ways of handling things. Open phones at 888-825-5225. That's 888-825-5225.

Well, big announcement on SiriusXM. For those of you that are SiriusXM listeners to The Dave Ramsey Show, we've got an important update. The Ramsey Network has changed channels. We are live on Sirius XM channel 121 weekdays from 2 to 5 Eastern. The Ken Coleman Show kicks it all off at 2 p.m. where Ken answers your questions about how to get the most out of your work and your career live, followed by the Dave Ramsey Show.

And you can catch the rebroadcast also weekday mornings at 6 a.m. Eastern, Channel 111. And the Chris Hogan Show is moved to Channel 111 as well. And Wednesdays at 8, 10 a.m. and 8, 10 p.m. Eastern. So you can catch all of our shows in the mornings and in the evenings on 111 and live on 121. So lots of ones. 121, 111, you'll find the Dave Ramsey Show on SiriusXM, the Chris Hogan Show, and the Ken Coleman Show floating around there. And we want to make sure you know that.

There's lots of people questioning me on Twitter. Dave, did you go off of XM? No, we moved. And we're live, completely live. And we got the Ken Coleman Show live that way, which was a good move for us. And then, again, we're in drive time in the mornings on 111 and drive time in the afternoons on 111. So you can find us wherever you want to find us. Zachary is with us to start off this hour in Winston-Salem, North Carolina.

Hi, Zachary. How are you? Wonderful, Dave. How are you? Better than I deserve. What's up? Well, I'm going to try and keep this clear and with clarity. But pretty much I'm 26 and I work for a camper company, like Teardrop Campers,

and I've been there for around six or seven months. It's a, excuse me, it's, the company's owned by friends who are actually the pastor's wife's brother, just to give you a short, you know, history of it, but anyways, they were feeling called to go somewhere else doing some other things, and they pretty much approached me to become owner of it, not necessarily buying it, because they want to over a period of time. It's not all been like this has just been very recent, so I'm kind of nervous even talking about it. But they've approached me, and over time I would consume ownership, and they would eventually want to.

They would want to have royalties on any camper that would be sold pretty much from then on out after I, you know, whatever their initial amount they want to, in a sense, get out of the company, but they don't want to actually let me go and get it long or anything like that. And I really don't know how to approach it. And for some reason, you know, I just felt that Dave Ramsey was the best person to ask about it. You said you've been there six or seven months? Yes, sir. I've known him for the last three and a half years because I've been going to the ministry.

Have you ever run a business before? Well, when I was 22, I tried to. I kind of took off and burned and crashed because I went out. How expensive are these campers? What do they sell for? Between $4,500 up to $1,500. $4,500 up to $1,500. Okay.

$1,500. And do you stock them in inventory? The way it is, that's another thing. They've been in business for six years. The past year, they actually moved to a very big facility so they can actually build them better. We do made the order right now. We do have a showroom, but that's the goal as far as what they initially wanted to do

was make it to where they were pre-made and we do eventually occasionally make pre-mades and we sell them but as far as actually i have a you know a stock full no we we just um okay so you're not you're not you're not running a what we would call the car business a floor plan a bunch of debt on this business no everything's paid off except off except for the CNC machine pretty much as far as I know. Except for the what? At this point, the CNC machine, we CNC cut out our walls there on site. Okay. All right.

And how much is owed on that? I don't. I don't know the details on it, but I know that the CNC machine used or new is $20,000, $30,000. Yeah. All right. But I don't know if that's what they owe. Number one, there are two numbers you want to look at immediately as soon as you can. One is the top line, the gross revenues of the business in a year.

And the second one is the net profit. Now, in a business this size, many times people count net profit as if they made zero. Okay? And that's not the way you look at net profit in a business of any kind, small business or otherwise. You would say, I assume one of these people that is the current owner works there, right? Yes. And is the manager, right? Yes, sir. Okay. So, let's pretend I was going to buy this camper outfit, and I live in Nashville. So I would have to have a manager that does what that person does, right? Yep.

So whatever their net profit is, I'm going to reduce it by that manager's fee. Would I have to pay a manager to manage this thing? $50,000, $40,000, $60,000? I don't know. I don't have any idea. Okay? But he's the general manager or she's the general manager. And so if they make $120,000 a year, that's not how you value the business

because the business is not – you don't want to just buy a job. Yeah. You want to buy a business. And the business is after, you don't want to just buy a job. Yeah. You want to buy a business. And the business is after you get paid for doing the job. So if they make $120,000 a year and it costs $50,000 to hire a manager, then their real profit is $70,000. You follow how I'm doing that?

Mm-hmm. Okay. Then about four times that number, maybe a little bit more, maybe up to five times that number is what that business is worth. And so if that number is, if the net profit after managers are paid for an absentee owner to buy it, like me, okay, if it's $50,000, I don't want to pay much more than $200,000 for this thing. Okay. And the royalties going on after they get their $200,000 is fine for a little while, but forever is not fine. Gotcha. It needs to be a day that that stops or an amount.

After a certain amount, it stops. Okay. One of the two. But there needs to be an end game, because otherwise you're getting married, and you only want to get married to one woman. That, yeah. And you don't... I understand that. It's a long life when you've got royalties like that.

Forever and ever and ever. Amen. There's very, very few businesses that do that, like none. The only time that comes up is with books or records record deals that's it and so um yeah that's a couple of guidelines and hold on i'll send you a copy of the book entree leadership which is the whole brand of how we teach people to run businesses and small businesses how we run ours how we've grown ours from a card table in my living room to where it is today.

And Kelly will pick up and we'll send you a copy of that. And check out the podcast for Entree Leadership. Ken Coleman hosts those. And check out all the online affairs and everything there. Ideas, content, things that'll help you a lot running this business. Good luck with it, Zachary. Sounds like an exciting endeavor. Okay, I need you to listen to this, because one normal routine that everyone does can cause total chaos in your life. Folks, I'm talking about the simple act of using Wi-Fi. When you're on Wi-Fi anywhere in public or at home, you're at risk of hackers easily seeing every site you visit and search you're doing online. It doesn't matter if you're doing it on your cell phone or your laptop.

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That's hotspotshield.com slash Dave. You can be secure in seconds. Download Hotspot Shield today. Nicole is with us in Waldorf, Maryland. Hi, Nicole. How are you? Hi, Dave. How are you? Better than I deserve. What's up? Great. I'm so glad you received my call. Well, I'm calling because I'm a single parent.

I am divorced now for several years. I was just calling because I have a lot of debt and I really don't know where to start with this debt because a lot of the debt is priority. I did list it. If you want those numbers, I can give them to you. Well, my total debt is $191,000, including my house. How much of that's your house? $119,000. Okay. $7,000 of it is credit card. $11,000 is taxes.

I owe taxes for the last tax year. Why? Because I needed my money during the year since I'm a single parent. I have a senior in college, and I have a parent plus loan. And then I have a senior. So you didn't pay your taxes? I paid some of my taxes. I didn't pay enough.

Enough didn't go in. Are you self-employed? No. Okay. All right. What other debts have you got? $22,000 is for a TSP loan. Mm-hmm.

$32,000 is a parent plus loan. And then the $119,000 for my mortgage. But I did refinance my mortgage to a 15-year, and I make my payments. How much is your car payment? I don't have a car payment. But my car right now is on its last leg. I bought it brand new in 2009. What do you make a year?

I make $98,000. Wow, wonderful. What do you do for a living? I work for the federal government. I'm a printer. Okay, great. And you have one child and he's in college. I have one daughter that's in college.

She's a senior. Then I have another daughter. She's a junior in high school, but she goes to a Christian school, and I have to pay tuition for her every month. Okay. So that's another debt, but that's very important to me, the Christian education. Okay. And she's a junior in high school?

Yes. Okay. And how much of your older daughter are you paying for the college? Well, I have a $32,000 current yeah i know i got that but i mean are you paying more is this kid the kid in college is what what you're in college she's a senior okay so are you done with that um i'll be done this year with more loans or is this it no this is it okay well the first step to getting out of debt is quit borrowing. More.

You can't borrow more. You can't get out of a hole while digging out the bottom. I understand. Okay. I've been listening to you about two weeks now. Okay. And I was able to get together the money for my baby step one, the $1,000. Gotcha.

And I'm just trying to figure out what to do with the rest. The second step is to get yourself on a budget. Jump on EveryDollar.com and get your budget going. You make good money. Your house payment is not that high. You don't have a car payment. So you're in pretty good shape there. And then you start looking at that budget and saying, okay, I'm not going to see the inside of a restaurant unless i'm working there as an

extra job we're not going on vacation i don't have any money you see the thing about hitting goals it's not what you're willing to do to hit your goals that causes you to hit them it's what you're willing to give up to hit your goals and and right now what happens is is that you see something you want to do and you just go do it and then you look up and go well darn there's another eleven thousand dollars in debt on taxes oh there's a thirty two thousand dollar debt in college and oh now what are we going to do when this scene this kid in high school gets ready to go off college we're we going to go another $40,000 in debt? No.

Yes, I haven't been able to save for my youngest daughter's college. So what do I do now? Because she's a junior. Well, she's going to have to go to a college that's cheap, number one. Number two, she's going to be working while she's in college. Number three, you may have an extra job during this time while you're paying off a bunch of these other debts. You sure as crap can't not pay your taxes anymore. That was suicidal.

I agree, and I did change my dependence to zero, so they're taking the max out of my paycheck. Well, I want to have the proper amount taken out and then get the $11,000 paid as fast as you can. And then I want you to cut up your credit cards, and we've got to have a plan for this kid to go to college. I love that she's in a Christian education, and I love that that means something to you, and I think you can probably work that out. I don't know how expensive it is, but if you have to choose between her going to that school her senior year or her going to college, which would you choose? You might have to choose. her going to that school her senior year or her going to college which would you choose you might have to choose her going to college yeah you might have to choose

it'd be very painful for her to move her senior year of high school emotionally absolutely that would be a horrible thing i hope that doesn't have to happen how expensive is this christian school it's um ten thousand four hundred dollars a year so that's like eight hundred and sixty eight dollars a month yeah that's not that's not killing you that's not it's about ten percent of your income so that's not gonna you know if you told me thirty thousand we'd have to talk about this you know but ten thousand is i think you can probably make this so number one when you start doing a budget you're going to feel like you got a raise every month you make every dollar behave you are now happening to your money instead of your money

happening to you you can do this nicole okay i've been talking to you for five minutes you're not a dumb person you're a smart person you can do this but you you've kind of just kind of wandered along and this stuff has all happened to you and now you're going to happen to it and it's going to be like a growl it's going to be like a growl you got a sweet little voice and i want to hear a growl in your voice like i'm getting out of that okay i want to believe me when i got my divorce it was like I was just hit with a lot of debt all at once. How long ago was that, though? It was some years ago. See, that's not the problem today.

The problem today, the stuff you're facing today, you did it. It wasn't the divorce. It wasn't the divorce. I took ownership. Yeah, you took out the $32,000 Parent PLUS loan. You didn't pay the taxes, and you ran those credit cards up. Yes, I did. Yeah, and that's okay. I've done dumber, kiddo. I've taxes, and you ran those credit cards up. Yes, I did. Yeah, and that's okay.

I've done dumber, kiddo. I've done a lot of stupid stuff in my life. You're not dumb as some I talk to. You're pretty smart. I think you can do this, but you're going to have to really cut your lifestyle to nothing, and it has to be a thing you focus on to the exclusion of almost anything else. Really, I got two goals. I got three goals in this call that I want to try to do, all three of them.

And if that means I work two extra jobs, I'm going to do it if I'm in your shoes. Number one goal is I want to start working on getting out of debt. Number two goal is I want to keep this kid in that school if I can. And number three goal is we want her to go to college and pay cash for it. But she's going to a cheap school, not an expensive one, unless somebody else is paying for it, because her mother is a broke single mom that's $190,000 in debt. Absolutely.

And she doesn't need to run up a bunch of student loans herself either. No. Can I ask you one more question, Dave? Yes, ma'am. All of my money, I'm in a TSP, but all of it is going, I have it in the G fund. Am I doing the wrong thing by having all of it going to the G fund? Yeah, I would have it all in the C. All in the C, okay.

80% in the C, 10% in the I, 10% in the S. But I wouldn't have anything going in there right now until you clean this mess up. I would stop all investing temporarily because you've got a TSP loan. You've got a $22,000 loan. I'm investing 5%. I'm investing 5% only because the other 10% is more towards the loan. Yeah, stop. Don't put anything in there.

Just pay the loans. All you're going to do, stop. And I'm going to show you how to do all this. I'm going to put you through our class, our program called Financial Peace University. It's a one-year membership. I'm going to pay for it and sign you up for free. The only thing I ask is you go to all nine lessons at a local church and then you stay in the thing. You stay online. You stay in the every dollar budget. And when you get out of debt, you call me and tell me you're doing it. And if you need some help, you call me and I'll help you.

You can do this, Nicole. You can do this. This is the Dave Ramsey Show. Did you know, statistically, when it comes to life insurance and protecting your family, that women are more likely to be uninsured or underinsured than men? This doesn't make any sense. Women make up half the workforce, contribute mightily to family incomes, and in many cases are the breadwinners and take care of their families 24 hours a day. This is one of the most overlooked areas when it comes to financial planning.

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Hey, guys, how are you? Doing great, Dave. How are you? I am better than I deserve. Congratulations. Welcome, welcome, welcome. Where do you guys live? We live in Nashville, Tennessee.

Oh, we're neighbors. Absolutely. Right around the corner. Very cool. We live in Antioch. Oh, do you really? Yeah. All nashville tennessee oh we're neighbors absolutely right around the corner very cool lived in antioch oh do you really yeah all right that's fun well welcome good to have you guys and so you drove all the way across town to do your debt-free screen that's right that's right how much have you guys paid off uh we started out at uh let's see what we pay off two hundred and forty thousand dollars it was yes sir and it took us about four and a half years okay Okay, cool. Good for you.

And your range of income during that time? Well, we started out at $90,000, and then we went all the way up to $165,000. Mm-hmm. And we also did side gigs, whether it was Uber, Airbnb, or going on game shows and consulting for like an additional $20-something thousand. Oh, my gosh. Yeah. Wow.

What do you guys do for a living? I'm a marketing consultant. I used to be a marketing director, but last month, because I'm debt-free, I quit my job. There you go. Just like that. I love it. And what do you do, Nick? And I actually run a barbecue restaurant in downtown Nashville, and I brought you four

bottles of sauce as well from my restaurant. Oh, my mouth just watered. There you go. I see it. What's the name of the restaurant? Jack's Barbecue. Oh, yeah. Yes, sir. Big barbecue oh yeah yes sir big time yes very cool good for you man that's good stuff how long you've been doing that uh i've been doing rest well jack's for five years but i've been doing restaurant managing for over 20 years okay all right yeah you're in the middle of a hot

restaurant scene around here for sure yes sir no pun. No pun intended. Yeah. Excellent, man. Very cool. So tell me about this. What kind of debt was the $240,000? It was a car lease. Oh, man. A car lease, some credit card, and a house. Oh, you paid off your house? Yes. Of course.

I'm looking at weird people. The weirdest. How old are you two? I'm 32. Uh-huh. And I am 41. Wow. And you have a paid-for house.

Yes, sir. You're totally weird. What's this house worth? Probably about $310,000. $310,000? Yeah. $310,000? Okay.

What part of Antioch? Right outside, right before Smyrna, like on that old Hickory Boulevard exit. Gotcha. Right off of 24. Right close to Laverne. The old Starwood area. There you go. Okay.

Wow. Good for you guys. Look at you. Yes, sir. Ding, ding. A paid-for. Did you you yes sir ding ding a paid for did you ever think you'd have a paid for house in your life it wasn't even a priority until five years ago right what happened four and a half years ago that lit your hair on fire i mean you guys have been after it um losing a job oh right i mean scares crap out of you know you always think that paycheck's

going to come in and you know seven years ago, and this kind of started the initial conversation of it, but like seven years ago, I lost a job that I thought I was going to have forever. And, man, I just never want to have that feeling ever again. Amen. And that's when we kind of decided once we got everything in order that we were never going to be like that ever again because I was never going to let anybody else dictate the way I felt. There you go. Yes, sir.

I love that. Okay. So you lost the job, and then you got the new jobs. Got the new jobs. And everything's going. And then what did you do? So we moved to Nashville about five years ago, and that's when we bought a house, and we had all this debt.

And I kid you not, the month we moved in, our hot water heater broke. Of course. And it was like $1,200. Of course. And that's when we were like, we cannot live like this. We make really great money and I'm not going to be one of those people that makes good money and is in debt. So we actually were having fights about it because I kept wanting to go on vacation and job, you know, use my Amazon Prime membership.

And we were fighting about where our money was going. It was like we were in a car with a full tank of gas and we had no idea where we were driving to. We were just driving. We had money in the bank account, but we didn't have a common goal. So our preacher, Barry, at church, recommended that we read your book. So we read a chapter every night

and then we would sit down and discuss it together. And from that... How brutal was that? It actually, I feel like it kind of saved our marriage. It really put us on the same page, on the same path. And so as we were doing that, both of us, we were like, let's do this. Let's just pay off the house and not completely give up our lifestyle. You know, we listen to your show a lot. We hear about people on rice and beans and taking their

budgets down to nothing. Giving is so important to us. And we wanted to continue giving to people and having people into our home and being hospitable and being active in our church. And so from that, we decided to do extra things like Airbnb our house on weekends. Oh, okay. So you offset that with extra work. With extra work. Okay.

That's what we did. In one year, we had five W-2s between us. I mean, we were out there just working. Hustle and grind. That's what you got to do. Yeah, absolutely. Yes, sir. Very cool.

Very cool. How does it feel got to do. Yeah, absolutely. Yes, sir. Very cool. Very cool. How does it feel? You don't have any debt. I'm going to tell you. Really, let me say, it is amazing. Don't get me wrong. But when you've been working so hard for something, it's like you know what's going to happen. And you didn't want me to tell the story, but I think you'll like this.

So I'm going to tell it anyway. You're in trouble. So what's going to happen. And, you know, you didn't want me to tell the story, but I think you'll like this. So I'm going to tell it anyways. You're in trouble. So here's how it, yeah, well, you know. So here's what happened. So we decided we had a lump sum that we were going to do and write a check, okay? And so we had a check for like $80,000 to pay our house off. And the bank lost it in the transaction to get it to the bank. So that totally killed it.

It was like, I mean, we cried for two days because it took like over 24 hours to find the money. It's a buzzkill. When they did, yeah. And so, like, it just sucked all the wind out of the sails, man. And so, you know, we're now recovering from that. But we're enjoying it. I mean, it's great. I mean, you know, we don't have to, we just don't have to worry as much, you know.

It might be another month before it settles in after that bank thing. Right, absolutely. It's great. I mean, you know, we don't have to, we just don't have to worry as much, you know. And like I said, I never would have thought that. It might be another month before it settles in after that bank thing. Right, absolutely. But could you imagine? Because I'm sitting there thinking like, man. Oh, God, I'm ready to kill somebody. That's a lot of money. Are you kidding?

Yeah, where I come from, it is. Absolutely. Oh, my gosh. So, yeah. That's incredible. Wow. So, what do you tell people the key to getting out of debt is? You know, my key to getting out of debt is to stay humble.

Even when you're making a good income, you've just got to hustle. We stayed literally in roach motels while we were Airbnb-ing our house. And when you make a combined income of close to $170,000 and you're sleeping, I mean, at this roach motel. Literally, there were three roaches in one of our hotels. I kid you not. I stayed there. I know the place.

Yeah, I guess. It's just about putting your head down and honestly working together. That was the thing. We were on separate paths and just picking up any extra job you can. I will tell you, two years ago, it was our 10-year anniversary, and I've been begging Nick to go to Hawaii since we got married. I was like, I'm going to Maui. And he's like, nope, not until we pay off our house. That's right.

So I applied for a game show, and I got on, and I won some money. And I was like, we're taking that money, and we're going to Hawaii. So if it's not in your budget, figure out a way to make it in your budget. Go pick up an extra job. So what did you win? I won $7,500 on a $ thousand dollar pyramid. All right. Look at you. So, you know, there you go. But you know, communication is big and you're right. Staying humble. As a matter of fact, right now, even though we are debt free, I still start my car with an ink pen.

The one that we drove over here because the reverse wouldn't go down. So I had to stick it in there, you know, and prime it on down. Stick a pen in there. It has 230,000 miles on it. And, yeah, we still drive not really great cars, but we're going to be able to upgrade that soon because we have a paid-for house. You make $150,000 a year, you can buy a car. But it's hard to get out of that mindset of, like, sacrifice so much. You'll work your way up.

No, I get it. Absolutely. But that was the hardest part for us. I know you asked that, but the hardest part for us was not seeing her paycheck for five years. Like thinking, man, we've made all this money and we don't even see it.

And so it was out of sight, out of mind. We were just making a mortgage payment every week. It's over now. And it's over now. Wow. Yeah, yes, sir. Congratulations. Well, thank you so much. I really appreciate it. So proud of you guys. And it's over now. Wow. Yeah, yes, sir. Congratulations. Well, thank you so much.

I really appreciate it. So proud of you guys. And way to go, Pastor Barry. Yeah, absolutely. And I'm going to tell you, the first time I ever heard of you was in 1997, like right when you were kind of getting into your fourth, fifth year or whatever. And there was this old man. I used to wait tables at this restaurant.

This old man came in, gave me the Financial Peace book. Oh, yeah. And I wish, man, 20-year-old Nick, I wish I would have done. Because the thing that stuck with me, I don't remember that book, but I always remember Ben and Arthur. I will never forget that. And that always resonated with me. So thank you so much for that. Powerful.

Good stuff. Well, congratulations. We've got a copy of Chris Hogan's book for you, Retire Inspired. That's the next step for you guys to be millionaires. $240,000 paid off in four and a half years. Hustle and grind. Humility. Get her done.

Gene and Nick, count it down. Let's hear it. Debt-free scream. Three, two, one. We're debt-free! Freedom! Freedom! Freedom! Freedom! Freedom! Open phones this hour.

Dave, I was listening to your show. I was surprised that you said there are very few times where you felt prompted by the Holy Spirit to give. I do agree with your overall framework for giving. I either misstated that or you misunderstood it. I was talking about the tithe, I think, yesterday maybe. And I was talking to a guy about tithing. He was asking about that, and what I said was, in that context, was that to give over and above the tithe, to give offerings,

Scripture only indicates that that is done from surplus, extra money. And the only time I would give while I was getting out of debt above the tithe would be if the Holy Spirit prompted. And that would be a very unusual, very unusual situation. It's not just, oh, I want to give to dot, dot, dot. No, that's not the Holy Spirit. That's just you want to do something. But if God is telling you to give and you're sure it's him then do that now as far as overall giving holy spirit prompting um almost every day for me to give uh and it's different situations

sometimes it's just increase a tip um sometimes it's random stuff usually is um and it's usually not huge amounts in those cases um the larger the amount, the more I slow down because I want to use wisdom. And I want to make sure that that's really the Holy Spirit, that's really God. That's not just my impulse, you know, my natural generosity bone that has been developed over the years. And so, but no, I mean, the vast majority of my giving, I hope, is Holy Spirit-prompted overall. But my point in the other conversation was that when you're in debt, when you're trying to clean up your financial messes, to be crazy generous above that, above the tithe, it's not indicated in Scripture.

And so it would have to be, it supersedes common sense at that point, and so it would have to be God's voice in your ear, the Holy Spirit prompting you, and that would be unusual. It doesn't happen very much. So what I tell people to stop all giving except their tithe while they're getting out of debt, and the tithe being for evangelical Christians, Orthodox Jewish families, so on, which is a tenth of our income going to our local church. And lots of Scripture indicating that.

Shantae is with us in Santa Barbara, California. Hi, Shantae. How are you? Hi, Dave. Thank you for taking my call. How are you today? Better than I deserve. What's up? Okay. I've taken your Peace University class at our church, so I'm so grateful and thankful that my husband and I have done that. It was fantastic. Good.

He is retiring this year, at the end of this year, and he's getting a payout of $130,000. And the tax accountant has told us to, in order for us to shelter his money, we'd have to put it in a, I think it is a 957, something similar to that. So my husband was thinking, should we pay off our house with that money and be taxed on that for shelters and money? Okay, the lump sum that's coming, is it coming out of a retirement plan or just a bonus, a retirement buyout? A bonus.

I think he had so much time on the books that they had to pay him that. Okay, so this is just compensation. It's taxable. And what your accountant's talking about is a 457. A 457 is called deferred comp. And you can put it in a 457 and not take the money, in other words, and you would not pay taxes on it until you did take the money because you're putting off, delaying your compensation,

deferring your compensation, deferred comp, and that's what the 457 is. Your accountant is right. That's a good way to avoid the taxes, but if I were in your shoes, I would take the tax. There's no penalty on this. I would pay the taxes and pay my house off. Okay. Okay, because we owe $157,000 on our home. Our home is valued about $800,000.

Wow. We've had the house for 16 years, so we just started paying extra on our house every yeah so how much is this how much is this retirement buyout um it's 130 000 but i do we do have our um we do have a savings of about 40 000 so we can make the difference up if we did that that's not in retirement the 40 Exactly. It's in our savings account. Okay. And you have an emergency fund on top of that? That is part of the emergency fund.

Okay. All right. And what's your household income? What we're paying out every month is about... Mm-hmm. Your household income. Oh, income. He's bringing in...

It's about $10,000 a month right now. Okay. All right. Well, your $130,000 check is going to look a lot like $100,000 when it gets home after taxes. Yes. And if you put $30,000 with that, you're going to have $10,000 in your emergency fund. That's pretty slim. I don't want you going below $10,000 on your emergency fund.

Okay. slim i don't want you going below ten thousand dollars on your emergency fund okay so if you come up a little bit short uh then go ahead and pay it all on the house and then pay off the little bit as quick as you can but keep at least ten thousand dollars for your emergency fund okay because you're in baby steps four five six at this stage of the game right yeah exactly we don't want to go backward uh and do away with baby step three paying off your home is a great thing it's one of my favorite things to hear people doing but paying it off and having no emergency fund is not what we teach people to do i don't want you it's not an emergency so i don't want you to drain your emergency fund but if you take some out of it

and then rebuild it take it down to about 10 and then rebuild it that's okay that doesn't me, but I don't want you to pay off your house and three weeks later have an emergency. You'd be digging up bushes in the front yard selling them trying to make something happen here. Jennifer's with us in Minneapolis. Hi, Jennifer. Welcome to the Dave Ramsey Show. Hi, Dave. I will say from the year 2008 until April 2017, you were a cuss word for me. However, my husband, I had a moment where I was fed up

and I realized that what this man's speaking, the Lord speaking to him is the truth, so I want to thank you for being that instrument. I go from cuss word to instrument. Look at that. My husband and I will be debt-free in two weeks. Yay! And I'm really excited about that. My question is, I have a chronic illness and I'm working from home. My husband and I have been having one car for the past two years.

So we've been sharing that. So what I was concerning about, and I was talking to my husband to think about this, is for the emergency fund, should we save up three months and save up $5,000 for him to have a car? Yes. Because his work commute is not very far. Yes. Or save up all six months. Okay.

Get your three months in place and then get the car added. The car being added is a real need, but at this stage it's not an emergency. You've been living without it for two years. So you can live without it for a few more months, but then it's one of the very first things after you get a basic emergency fund in place that I would do if I were in your shoes because it's really, really, really inconvenient. Yeah, it is. And the power steering in my car is out, so he's like, I just, you know,

it's one of those things that he's looking forward to over debt, you know, becoming debt-free. Yeah, yeah, get debt-free and then put three months of expenses away so you've got a good, solid, rainy day fund, and then save up and buy a car. I'm with you. I definitely would do that as soon as I got my emergency fund in place. But it's not an emergency, and so we're not going to do it before the emergency fund. We're going to do it after.

So get your three months in place and then get her done. Way to go, Jennifer. Proud of you. Very, very well done. Open phones at 888-825-5225. Dan is on Twitter. Dave, what do you think about REITs, Real Estate Investment Trust, as a diversified way to invest in real estate?

Well, basically, from a function standpoint, a REIT, a Real Estate Investment Trust, is a mutual fund that buys real estate. Mutual funds that buys growth stock, that's a growth stock mutual fund. This is like a real estate mutual fund. In the sense that you are investing in real estate yeah yeah sort of sort of it's a lot different than actually owning real estate though as you have absolutely no control over it number one um or over the tenants or over the maintenance of the property or the purchase of the property or any of that. So what you're looking for, you're buying a mutual fund that buys real estate, and you look for one that has a good, long track record.

There are some of them out there that have done very, very well, that have actually outperformed the S&P. And you'd want one that has outperformed the Standard & Poor Index, the Standard & Poor 500. If you've got that, then that's a REIT I might invest in. Long track record outperforming the S&P. I don't do that because I buy real estate straight up and pay cash. But it's not a bad thing if you pick the right one. Hey, guys, it's Blake Thompson, Chief Production Officer for The Dave Ramsey Show.

This hour's up, but you'll find more on our YouTube channel, where we have over 6 million YouTube views each month. You can find debt-free screams, millionaire hour clips, Dave rants, and so much more. Go check it out.