The Ramsey Show - App - They Paid Off $461,000!

Episode Date: March 2, 2020

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Thank you for joining us, America. This is the Dave Ramsey Show. Common sense for your dollars and cents. Anthony is with us in Missouri. Hey, Anthony, welcome to the Dave Ramsey Show. Thanks, Dave. It's a real pleasure to speak with you today. You too, Dave. It's a real pleasure to speak with you today. You too, sir. Thank you. Me and my wife are just starting the Baby Steps program. We're on Baby Step 2. We're both in our 50s, and I know you recommend stopping your 401k 100%. Temporarily. Yeah. With me being so close to my retirement, would it make sense to maybe drop it back? Because I'm currently at 10%. Should I drop it back to maybe 6% so I still get the free money?

Or what makes the most sense? How much debt have you got? $76,000. And what is your household income? About $135,000. And so you're going to be debt-free in under two years, right? Approximately, yeah. That's what my snowball says.

Yeah, you should be. You should do it in two years or less. I'd like to see it in 18 months. That'd be really cutting it to the bone, but somewhere in there with the numbers you're giving me. Yeah, I would stop completely. And the reason is there's an emotional benefit that supersedes the mathematical benefit.

And the emotional benefit is this. What we focus on in our lives is what happens. Okay? It's what you win at. The things you focus on are the things you win at. And trying to do three things at once generally doesn't get anything done. So, like, for instance, are you married? Yes.

The reason is you focused on her. That's how you won her, yeah? And periodically since then have focused on her, and that's why you're still married. But the point is the courtship, the engagement, the process of getting married, it's a time of extreme focus to where people don't even do anything else except think about that other person at the time. And that's the power of this. And so you're not missing out on that much free money. And the more that you hate turning off your 401K, the deeper you'll sacrifice and the quicker you'll get out of debt.

The more this bothers you, the faster you'll drive the lane and finish up. And so you do come out ahead this way, even though it appears on the short term, well, it doesn't appear, you are on the short term coming up short. But on the long term, you come out ahead because the highest probability of getting out of debt is not to focus on three things at once, it's to focus on clearing the debt. And that's why we stop everything temporarily and completely focus on that, and then completely focus on your emergency fund, and then put 15% of your income into retirement, and you'll be able to do that easily the rest of your life,

and you'll do all kinds of catch-up stuff that you've got available if you want to later when you get to Baby Step 7, and all kinds of different things you can do there that's very, very cool. Justin's with us. Justin's in Texas. Hi, Justin. Welcome to the Dave Ramsey Show. Hello, Dave. It's such an honor to talk to you right now.

You too, sir. How can I help? Yes, sir. So I am a disabled veteran and a government employee. I am married. My wife has her bachelor's, but she wants to get her further education. We're on baby step two. Our household income right now is $140,000, including hers.

Hers is $25,000. And we're just trying to find out ways so she can get that doctor's degree but not have to take out debt in order to get it. Well, I wouldn't take out debt to get it. I would not do it, or I would find a way to do it. So what's she getting her doctorate in? It's going to be either occupation therapy or physical therapy.

Okay. I wasn't aware you needed a doctorate to do PT. We've been looking. I thought it was a master's degree. It's a master's degree level, isn't it? Yes, but the colleges around us are now changing them to doctor's degree. They're saying that it's just going to extend the program maybe six months or so.

Oh, okay. All the ones in the Dallas-Port Worth area. Gotcha. So what's it cost? Per year, from what I have seen, is $30,000 a year. And she needs to do what, two years? About two and a half to three. Okay.

So she's going to invest $75,000 to get a job that pays $75,000. It's not a bad investment. It's okay. And it's typical PT range anyways, right around there. And so, I don't know. And you've got how much debt?

Not including our house, about $100,000. Okay. And how quick do you think you're going to clean that up, not counting this PT degree? I have it calculated to 18 months, including the baby steps, June 20. What would be wrong with cash flowing it after you finish that? Well, my wife, she's just been holding her career all on hold for me since the military. We're not holding on hold for you. We're holding on hold because it doesn't make sense to do it right now.

You're broke. I understand. You're $100,000 in debt. You don't need to go doing a $75,000 expenditure. And so it takes 18 months. How old are y'all? We are both 27. Yeah.

So she'll be deep into her PT degree before she's 30. Wah. Yes, sir. I mean, what's the big deal, really we we're just motivated to get out of debt we're motivated to get our lives uh you know where we want to be and i i think i i agree with your motivations i'm just saying you just have to line things up instead of stack them you don't have the only way you can stack them is debt and i wouldn't stack them line them up and just get to it when you get to it and you know you live like no one

else so later you can live like no one else i wanted to go be a pt i think the investment's a good investment i would do some more shopping on the degree cost that sounds a touch high you might get a better deal than that somewhere else considering you're just paying cash and um start working on that but just take 18 months from now you can't even hardly get your applications and stuff done and get in in 18 months into a program. It's going to take a year to get all that lined up to start with. So we're not really delaying this. And so, but no, I'm not going into debt to do it. That's absurd. Because what happens is people go into debt and then they don't complete the degree, or they don't get the license after they do complete the degree, or they never get a job

in that field, or their kid gets sick and they decide to stay home with their kids that are going and doing this stuff, but now they got a $75,000 PT degree with debt on it, which was not a bad thing, but debt only works when debt works. If everything works perfect, debt works, but those of us that have lived a little while know everything doesn't work perfect ever. It just doesn't work that way, so don't do it man please don't do it all right zeke is with us in minnesota hi zeke welcome to the dave ramsey show hi dave thank you how are you doing better than i deserve sir how can i help great so i just picked up your every dollar app a couple weeks ago and i started going through

the bills from january to get an idea about how to budget for March. What I don't know is when it comes to things that you have to pay every month, like a mortgage or an electric bill, do you item them for the month that they are due or the month that you're going to pay for them? The month you're going to pay for them. Oh, okay. So if I pay my April bill March 28th. Yeah, you would put it in March's budget. Okay.

I do recommend you try to get your mortgage in the last few days of the prior month so you're not always up in the grace period that way. And the same thing with your utilities and stuff. Pay them exactly on time with auto draft if you can so you always get the discounts, right? Oh, okay. But the idea with every dollar is what am I – I've got this much money coming in this month, X coming in this month. How much – and I want to give every one of those dollars for March a name.

What am I going to name those dollars? So that means what are you going to spend them on? What are you going to spend those dollars on? And let's give every one of those dollars an assignment, even if it's a mortgage payment at the end of the month, which is for the next month. It's cash basis accounting is how you do a personal financial budget. You don't do accrual.

With the exception of you need to obviously set money aside for things, and that's what we call sinking funds throughout the year. Like you've got a savings account for Christmas. You've got a savings account for your property taxes if you pay them in a lump sum in the fall or whatever. You know, that kind of a thing. Anything that's not a monthly that you've got to build up for, we call those sinking funds. And that's a little bit like accrual accounting. With the rest of it, it kind of a thing. Anything that's not a monthly that you've got to build up for, we call those sinking funds.

And that's a little bit like accrual accounting. With the rest of it, it's just cash basis. It's what comes in and what goes out that month. Give every one of those dollars a name. Really good question, Zeke. Thanks for letting me clarify that. This is The Dave Ramsey Show. We'll see you next time. Do you wish you could find an affordable, biblical solution to your health care costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ

to share their major health care costs. Christian Health Care Ministries is the original health cost-sharing ministry. A Better Business Bureau-accredited organization, CHM members share to pay each other's medical bills. It's not insurance. Thank you. $5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. In the lobby of Ramsey Solutions on the debt-free stage, Anthony and Miranda are with us. Hey, guys. How are you?

Hello. Hey, Dave. Welcome, welcome. Where do you guys live? La Crosse, Wisconsin. Oh, the Madison area then. Yeah. Very cool. Good to have, Dave. Welcome, welcome. Where do you guys live? La Crosse, Wisconsin. Oh, the Madison area then. Yeah. Very cool. Good to have you guys.

Welcome to Nashville. And all the way here to do a debt-free scream. That is why we're here. Love it. Well done. So how much did you pay off? $461,000. Woo-hoo!

That's tall cotton right there, man. Well done. How long did this take? Five years and nine months. Wow. I love months. Wow. I love it. Okay. And your range of income during that almost six years?

I'd love to say it's more of, you know, we started at $80,000 and we averaged about $160,000. Okay. Very cool. What do you guys do for a living? I'm a registered nurse in an emergency department. And I also work at our small regional airport in the La Crosse area. Okay. Okay. Yeah, so we both have three jobs.

Miranda and I and her parents own an archery shop in La Crosse area, Wisconsin, and we own a small manufacturing business, too. Oh, very cool. What do you manufacture? Archery bow strings. Oh, neat. Yeah. Okay, cool.

Very cool. So I'm guessing five years and nine months, $461,000, that might be the mortgage. It might be. It is. I'm looking at it, weird people. you paid off your house you did how old are you two well so i'm 31 and three quarters and miranda is definitely 30 definitely 30 okay definitely barely 30 well done guys y'all are super weird yeah for sure what's this house worth? Just around $400,000 or so. Oh, man.

So that's all your consumer debt and the mortgage. It is. So how much of the $461,000 was other stuff? So $285,000 was the house. Okay. Yeah. So another $160,000. Yeah.

A lot of student loans. We both had two brand new beautiful matching cars just before we got married. That was a good idea. Okay. That's what you do. Right? Yeah. That's what you do.

And we had to kill that to get to the house, so that was the next step. So you paid it all off, or did you sell stuff? We sold just about every possession that we would have ever had. Our dog thought she was going to be sold, I'm pretty sure. So we're both big archers, but we also like firearms a lot, too, and I sold a lot of my guns, except two or three that were really important to me. And the cars, of course. Yes. Oh, man, you guys went deep.

Yeah, we went down to one vehicle a few different times just to help throw more and more cash at the debt. Wow, and five years and nine months. You were on fire. For a long time. It felt like we were on fire at times. Or at least it felt like I was on fire at times. We have a super nerd and a super free spirit, too.

So the accountability that both of us had to each other, I think, balanced us out. So what got you this fired up? Man, you guys went crazy. So years ago, I read the Entree Leadership book, and that was a big part in my business and my life at the time. And one thing that really stuck with me in that book is the momentum theorem. Focused energy over time multiplied by God, and that was our life, and it has been for the past six years, too. So it carried us through, but it gave us framework to look at life know life through a different lens it's a faith lens and that was an important thing for us oh wow very cool yeah very cool yeah the momentum theorem really is how the

dead snowball works it is it really is and you guys just took it to the whole another level took it all the way out through baby step seven yeah yeah just kept on it you didn't let off the gas you just plowed all the way through yeah drive through the wall man go yes wow game on game on so um what was the hardest part of this for y'all because this is an intensity you'd make you maintain an intensity for a long period of time i mean that's dangerous you can flame out yeah i felt like i was going to flame out a few times but you know being the free spirit i am you know i'm know, pretty like strong-willed, independent woman. And, you know, it was hard for me to buy into this, quite frankly. I work in an emergency department and my big thing was I work hard for my money. I should be able to spend my money. I see the people that, you know, die tomorrow every day.

And, you know, it was really about, you know, buying in and, you know, working as a team and, you know, following the lead of my husband and buying into this program. And it's such a short amount of time that in the grand scheme of things that we made sacrifices to be able to have the success that we have. Wow. So, yeah, you're a little bit like my wife. You're not afraid to say what you think. No.

And you do have a thought. And so that's a good thing. So this wasn't like some little milk toast, I'm going to be submissive to my husband thing. You bought the intellectual side of this. Right, exactly. It took a lot of convincing, but as soon as I looked at the full picture of it, it feels like an eternity when you're going through it. And it's sacrifice after sacrifice. You see people doing things you want to. What kept you moving when it feels like an eternity when you're going through it, you know, and it's sacrifice after sacrifice.

You see people doing what kept you moving when it was when it felt like that, because it's like running a marathon. It is. It's exhausting. But I think once you start seeing success and you start seeing things tick down, you know, we we laugh because we have a thermometer chart for paying off the house. And, you know, it was definitely him and it was definitely you know he that was the nerd in him he wanted to see it but that also really helped me too to be able to you know color in the lines all the way up to the top of that thermometer chart and sometimes just that visual aid of you know wow like we've really done this well your house wasn't like 80 it was only about 60 of your dad right you know so it was a long process, too. You know, we only had maybe two or three months of actual freedom, I think, between baby step number three and where we, you know, four, five, and six and trying to kill it.

You know, we're fortunate. We're in our early 30s and we don't have kids. You know, I think there's a lot of people in our FPU classes that want to point questions at, well, you don't have this and you don't have that. And that's very important to understand. But we all make choices with the time and the money that we have, too. And sometimes, you know, those choices you have to make are difficult. Well, you made deep choices. I mean, regardless, kids, regardless of what, you guys, the numbers here tell us you cut to the bone.

I mean, you went for it. You went for it. Do you think it was worth it? Every last second. Absolutely. I miss baby step, too. I do not miss baby step, too. So we brought this up in our FVU class last Thursday, too, and I'll keep it brief.

But, you know, we see all these families just hustling and working really hard in baby step, too, and the amount of sacrifice and intentionality you must have with your spouse or your accountability partner is huge. And I missed that. So that's what we did for the last year was gazelle intensity on steroids for sure. Yeah. Wow. Wow. Well, game on, year was gazelle intensity on steroids for sure. Yeah. Wow. Wow. Well, game on, y'all.

Game on. Well done. I mean, as young as you are with this kind of an income and no house payment or anything, you're going to be in a position to do anything you want to do. Give. The rest of your life, yeah. Outrageous generosity and be able to live like no one else and give like no one else. I'm so proud of you. Thank you.

Who are your biggest cheerleaders? Outside of our family. You know, our parents are super supportive all the way through this. We have an entire crew here of 12 people today that have been through us. Wow. Yeah. Since since the beginning. You know, Brian and your wife, Tara, you've been with me since the beginning of my walk with faith journey as a man. You've seen this come full circle. So thank you. Yeah. All the way from the brand new cars that match all the way to no cars. Right.

Pretty much. The bicycle. Down to the bike in Wisconsin. It's not Florida here. You did ride your bike to work in the snow. In the snow, yeah. It was an experience. You really did.

Oh, yeah. I was joking. No, it happened. People thought we were kidding, too. Oh, my gosh. Wow. Very well done. Very cool.

So what's your advice to someone who's listening? You know, so I think seven years ago, six years ago when we started this, we were in a different spot. We paid attention to a lot of things on Instagram and on Facebook and on Snapchat. Your daughter, Rachel, speaks to it in volumes, too, and paying attention to somebody else and how dangerous that can be. You really have to establish a why in your life and then be willing to make sacrifices and cut deep to hit that. Cutting social media was a big thing for me and not paying attention to the people around me. And what about you, Miranda?

I mean, I say buy in. You know, just buy into it and, you know, go full steam ahead. And, you know, just because you're doing this program doesn, go full steam ahead. And, you know, just because you're doing this program doesn't mean you don't, you know, the free spirits can't have things or can't do things. It's just, you know, a lot more controlled. And, and once I realized that, I mean, it, it just made it so much easier to work as a team. And, you know, you have a choice, you have a choice, you decide, I'm either going to spend this or I'm going to reduce the debt, I'm going to spend this or I'm going to reduce the debt. And you can make those choices intermittently.

One of them doesn't mean you fell off the wagon. One of them doesn't. It's just what are we going to do now and how long are we going to stay in debt? What are we going to do now and how long are we going to stay in debt? And you just make these choices like adults rather than let things happen to you. So very well done, you guys. Congratulations. Wow!

Weird people, 30 years old, paid for a house! Woo! Yeah! Anthony and Miranda, Madison, Wisconsin, pay for a house! Woo! Yeah! Anthony and Miranda, Madison, Wisconsin, La Crosse, Wisconsin area. $461,000 paid off by 30 years old. That's their house and everything! Five years and nine months of getting it. Getting it, baby!

Making $80,000 up to $160,000. Count it down. Let's hear a debt-free scream! Three, two, one. We're debt-free! Woo-hoo! Yeah! That's how it's done right there, baby. I love it.

That's why I come down here every day. Ha, ha, ha! This is the Daveave ramsey show I'm Dave Ramsey. Omar is in Arizona. Welcome to the Dave Ramsey Show, Omar. Did I hit it? Omar, are you with us? Well, maybe I messed it up. You guys work on it.

How about Kara in Texas? Are you with us, Kara? I am. Hi, Dave. Good. Welcome. How can I help? Welcome back, sir. Well, thanks. It's good to be back. Oh, yeah, I'm sure. So I've called in before, and I made that promise to you that last time that I wasn't going to take out any more student loan debt to finish my master's degree good um so i'm not um my question is now i am expecting our second child

in august yay that's why we didn't do any student loans for the master's degree okay exactly so um i we are currently like we paused babysat you so we could just rack up money. Good. Like you've told us to. And so my question is, by the way, I just want to preface this by saying I chose my school before I met you, and so I made an emotional decision, and I'm probably way overpaying for my degree because it's a private Christian college online. Are you deep into it?

Yes, I am deep into my program now. I was supposed to graduate in December of this year, so I was a four-termer, so I was taking like 17 hours per semester. But now, obviously, since I'm due in August, I'm going gonna have to prolong that a little bit but i am deep in the program now so i can't really change my it doesn't make economic sense to change change horses i got you right exactly okay so i am we've been saving and we have about at the end of march at the end of this, with my husband's bonus coming in, and just our average savings per month, we should have about $26,000 in savings. And my next semester will start, my next term will start in May and go through August. And so that is going to cost about, I calculate about 15 grand. And so I was wondering, I use that from the savings to pay for that bill, correct?

Well, how are you going to pay for it if you didn't? That's what I'm saying. So it's actually come as a blessing because it slowed down the amount of hours I'm taking, so it's more affordable now. Yeah, per semester. But, I mean, if you hadn't stopped because there wasn't a pregnancy, you were going to be cash-flowing the degree, right? Yes, that's what I was – yes yes that's what we were working toward as well but i guess my question is my student loans that i had taken out before are in deferment because i'm in school full time but i've still been making like but i guess my let's stop stop wondering yeah what i'm what i'm

saying is is that if the baby hadn't come, you would have been reducing the amount of money you put on debt because you were cash-flowing the degree, correct? Yes, sir. Okay. And so now by using this money to pay for the degree, you're reducing the amount of money you put on debt to cash flow the degree. There's no difference.

The only difference is it's just a lump sum. So, yes, I would do that. Okay. So I guess my big question is, like, I'm paying. So, like, they're in deferment. We don't have to make a payment, but I've been making payments for the interest. Doesn't matter. If you want to make no payments and work

your debt snowball and when you get up to them hammer them that's fine it's just going to accrue if you want to uh if you want to pay some it slows down your other parts of your debt snowball right right because i don't want to take out any more student loan debt so that's i mean well that's job one job one is we cash flow job one is we cash flow the degree and we're accepting that that is slowing down the debt snowball okay right if you want to slow it down more you would pay some towards your student loans or if you want to speed up you know obviously you can you can knock out some of the other stuff above the student loans uh that are on your debt snowball list with the money you're paying towards those student loans.

That's a separate question. And I probably wouldn't. I'd probably let that accrue and just work the debt snowball. Pay the minimum you're allowed to pay on your debts, except your smallest one, and attack the little one. When it's gone, attack the next one down. When that's gone, attack the next one down. And that's the debt snowball, as you know. You already know that. And so that's the direction I would go with it. Hey, attack the next one down. When that's gone, attack the next one down. And that's the debt snowball. As you know. You already know that.

And so that's the direction I would go with it. Hey, really good job. You've thought it through. And really don't start your debt snowball back until a baby comes. But if you want to pay tuition out of this $26,000, a little bit of it, and keep going to school while the baby's on the way, that's your choice. Omar's with us in Arizona. Hey, Omar, welcome to the Dave Ramsey Show. Oh, hey, Dave. to school while the baby's on the way that's your choice uh omar is with us in arizona hey omar

welcome to the dave ramsey show oh hey dave very very cool to be able to talk to you you too sir what's up all right well i have a question um we are on our um we're almost done with our emergency fund this month as a matter of fact and uh we're living with my in-laws so while we're saving up for a down payment for a house do we keep that emergency fund in our savings or do we put it in a market in a money market account no money market account is a savings account it doesn't matter you i would keep my emergency fund separate from the down payment fund because I wouldn't want them to get confused. And there really shouldn't be a quote-unquote savings unless you're saving for something else other than the house or the emergency fund. But if you save up for a car in the same fund as your emergency fund, you tend to spend some of your emergency fund on the car.

But if you keep it separate in a separate account, it helps you realize, oh, I'm not going over there. That's not what that's for. And so I like keeping the emergency fund in a completely separate account of some kind. I mean, it can be a money market. It can be a shoebox. I don't care. But now I'm talking about the fully funded emergency fund of three to six months of expenses.

You shouldn't be saving for a house unless you're at that stage, baby step three. And then, you know, you finish that emergency fund. Then is when you would save for a house. And it sounds like that's where you are, but just for clarification. Hey, thank you for the call. We appreciate you joining us. Blinds.com gives us our question of the day. They have a satisfaction guarantee, a 100%

satisfaction guarantee. Means even if you mismeasure, you pick the wrong color, they will remake your window blinds for free. You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code Ramsey to get the best possible deal. Today's question is from Barbara in Idaho. If I own a home and I have an IRA, will a simple will suffice? Sure. Sure. You're just directing the final distribution of whatever assets you have. But you do need a will because you have a checking account, you have a car, you have the distribution of the house, what's going to happen to it, and you do need a will to say where those things go. The IRA you can name a beneficiary on.

401Ks you can name a beneficiary on, and it'll pass outside the will directly to the person that it's named, just like life insurance does. You don't need a will for those things, but it's good to have a will and lay everything out for everything else. Because otherwise, your family has to go to court and establish all these connections and all these things with a judge and a lawyer and all this just to get your car sold, just to get your house sold. You know, and, you know, in some states they'll have to go into probate anyway, but it's hot knife through butter if there's a will. It's very cheap. It cuts the cost down way down of the legal fees all the way around. But, yeah, you need a basic will, and you can go to mamabearlegalforms.com,

and they've got a basic will package there for a little over $100. It'll get you into everything you need. So, hey, good question. Thank you for joining us on that. Open phones at 888-825-5225. There is tremendous peace, financial peace, not only when you're out of debt, not only when you're living on a written budget and a plan where you're making your money behave, not only when you have an emergency fund of three to six months of expenses,

but also when you do stuff like make sure you've got the right life insurance in place. So if that happens to you, you know your family's taken care of. You've got the right long-term disability insurance in place. You've got the will in place. These things, just buttoning your life up. It's being a button-up girl, being a button-up guy. You're doing the right stuff. It changes everything.

It gives you a sense of peace. This is the Dave Ramsey Show. Hey, it's Blake Thompson, senior executive producer for the show. You know, you can listen or watch anywhere with the Dave Ramsey show app on your smartphone. Catch the full show or watch the highlights and check out Dave's upcoming guests. Head to the app store and download it today.