The Ramsey Show - App - Using Math in Financial Decisions Doesn't Account for Risk! (Hour 1)
Episode Date: July 1, 2021Debt, Investing, Home Buying Sign Up for a FREE trial of Ramsey+ TODAY: https://bit.ly/3rZTUAx Tools to get you started: Debt Calculator: https://bit.ly/2Q64HME Insurance Coverage Checkup: ...https://bit.ly/3sXwUn5 Complete Guide to Budgeting: https://bit.ly/3utmVXi Check out more Ramsey Network podcasts: https://bit.ly/3fHhbVE
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Live from the headquarters of Ramsey Solutions,
broadcasting from the Dollar Car Rental Studios,
it's The 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.
Thank you for joining us.
Open phones at 888-825-5225.
That's 888-825-5225.
Dr. John Deloney, Ramsey personality, is my co-host today.
We invite you to be part of the program, and he and I will be answering your questions.
He's author of the best-selling book, Redefining highly popular podcast the dr john deloney show where we talk about he
talks about mental health boundaries relationships things that are going on so you can weave those
questions into uh the show today if you want he's here to help and i've always got an opinion i'm
an expert on my opinion the phone number triple, 888-825-5225.
Delaney's starting us off in Fort Wayne, Indiana.
Hi, Delaney.
How are you?
Hi, Dave.
I'm good.
How are you?
Better than I deserve.
What's up?
Well, my husband and I own 10 acres of property that our current home is on,
and we are considering parceling some of it off and building a new property,
a new home on that. And my husband and I are just having a hard time kind of swallowing the idea of spending that much on building a new home. So we were just kind of looking for some
personal advice as far as is it appropriate for us to spend that much money. Okay.
Well, one of two things is telling you this,
either emotion from all the years of frugality to get to where you are,
and so the facts are not that you cannot afford it, meaning you can't afford it,
or you're getting ready to build too much house,
and the arithmetic is telling you that,
and you just need somebody to say it out loud for you, okay?
So how much money are you going to spend on the house?
Probably about $800,000.
Okay.
How much money do you have?
Well, between equity and our home, we probably have around $250,000 in equity.
And how much in your nest egg?
About, like, you mean our...
Like your 401Ks, your retirement, your investments?
Oh, yeah, yeah, yeah.
About, probably about another $250,000.
Okay.
And how old are you?
I'm 32.
Oh, okay.
And what's your household income?
About $350,000.
Okay.
Well, the guideline that we use is that can you afford to put the house on a 15-year fixed rate
where the payment is no more than a fourth of your take-home pay?
And so the answer to $800,000 is yes, you can do that.
Mm-hmm.
Yeah.
Okay. Now, here's the trick 15 year fixed rate and a plan to go ahead and get it paid off with your fabulous 350 000 income even faster than 15 years the average
millionaire in the ramsey research that we did 10 000 of them we studied pays off their home in 11.2
years so i want you to knock this thing out you have a fabulously large shovel your income is amazing what do y'all do uh i'm a nurse practitioner
and my husband is a cpa you're both going to keep working yes we will what's wrong with your current
house uh well we have four small children so we don't have quite enough bedrooms.
And just like they're mostly desires.
We could definitely make it work, but it's mostly just, you know, desires for a little bit extra.
And that's where we're, like you said, we've been living frugally for so long.
And now it's like, okay, are we okay with taking this next step and spending this kind of money or should we you know use it to benefit in other ways now you said equity in your home
is your current home paid for um no we have about 250,000 would you sell that property off when you
do this yes we would good okay yeah then i i would do this okay uh now the trick is
for little kids you can't call me up and go oh we decided to cut our income in half
because i'm gonna stay home yes yes you gave you gave that right up when you bought this house
yes and another we pay about forty,000 a year in child care.
I know.
So in about three or four years, that won't even be on our budget at all.
So that's another area that we'll gain more cash flow to.
Well, the key part of this equation is just your income to your payment,
and you can make that work.
And not just make it work.
It shouldn't be any trouble at all.
And then you just keep working your baby steps.
But as you find money in your budget, you're going to keep working baby steps.
Four, five, six.
Four is 15% of your income into retirement.
Five is kids' college, and six is all the other money we scraped together from something.
Any other money that comes up, bonus money, increases in income, whatever, is all going to throw it at the house,
and this house is going to get paid off in sooner than 15 years.
And that's the pattern that you want to be on.
That's where all the data points lead us.
And so specifically, you would take that $250,000, put it against this house,
so now we're at $550,000, and I'm looking at that against my $325,000 a year salary.
That's easy.
That's simple math.
Yeah, 15-year fixed rate, and where the payment's no more than a fourth of your take-home pay,
you're easily going to do that.
And so they can reach over and knock that thing out pretty quick.
Real quick.
It is a little bit emotional, but also, really, they're taking on a big chunk of debt.
Because I couldn't tell early in the call whether she had $2 million set aside or something.
I couldn't feel it.
So, again, the facts will lead you to say this is okay.
But the facts also say you have to continue the trick that you're on.
You can't change direction on.
And you also have the emotion of selling part of your 10-acre plot.
And that's your dirt, right?
Yeah.
They're willing to do that, I that's a that's pretty well decided now when john deloney
gets ready to sell a piece of dirt that's a problem this is like the counselor will need
counseling i will be hard for me to sell dirt yeah yeah you you are you are a dirt maniac i do
like land i am too i am too i one of my favorite places on the planet is my big old farm and
there ain't nothing on it but some grass and rabbits i remember going out to it the first
time bunch of spent shell casings that's i went out there and where's the oh no this is and i
thought oh this is a happy place man there's nothing else here that's incredible nothing
else here just a big old piece of dirt and somebody needs to hold the rest of the earth
together and that piece of dirt does it so that's why i'm here that's my uh my calling no i'd have a hard time parceling but
again everybody does their thing but uh you taught me this um when you start playing with bigger
shovels and you start playing with bigger zeros and it really leaning into those ratios is important
yeah it is a little bit like your trauma formula.
Facts are your friends.
What's really going on, not what's the emotion.
What's really going on is you do the math, and you look at a projection on that, and you look at the facts, and then you say, okay, why am I scared?
Why am I ashamed?
Why then do I have these negative feelings when all the math indicates I shouldn't?
Do you still, if I go look at a new truck, I still have a number from the first time I looked at a truck back in 97.
And I look at new trucks now and I sound like a grandfather.
Like, what do they do?
You know what I mean?
Because in my head it should be 17 grand.
Can you believe they charge that for a pickup?
That's exactly right.
It just stays in there.
You can hear your grandfather coming out of your own mouth.
I love it.
Your great-grandfather. Your great-grandfather.
My great-great-daddy.
With these prices.
My tire.
One wheel.
That's all I can afford.
One wheel.
Uphill both ways in the snow.
This is the Ramsey Show. If current times have shown us anything, it's that the least expected events can and will happen, and we have to deal with it. That's why everyone who has a family counting on them needs term life insurance.
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Great rates and a simple process mean there's no excuse to not get this done, people. Well, if you listen to this show much, you know we love our debt-free screams.
They're fun.
A lot of times there's hardly a dry eye in the places these folks tell their stories.
But none tug at your heart like the ones we get where a mom or dad has passed away,
and now their family's debt-free because they took care of business,
and they had term life insurance in place before their spouse passed away and now their family's debt-free because they took care of business and they had term life insurance in place before their spouse passed away now that will make you cry for sure
and that's what it looks like when you have your act together your family is taken care of
in the good times and in the bad insurance is your defense investing is your offense
you got to play both you're going to win and it's why it's not okay to put it. You got to play both. You're going to win.
And it's why it's not okay to put it off.
You got to get term life insurance inflation.
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And we've made finding a policy really easy for you with our term life calculator.
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deloney my co-host dr john del John Deloney, and I are going to
be doing an Entree Leadership Theme Hour. And if you would like to participate in that, meaning
you have business questions, can be anything about business that you want to talk about,
people issues, marketing issues, money issues, ideas, whatever it is you're struggling with or
got questions about in business, we're going to take business,
particularly small business, question that hour.
And if you want to participate in that email right now,
and Kelly will make you a part of that hour,
and just email DaveOnAir at RamseySolutions.com.
DaveOnAir at RamseySolutions.com.
And we'll get you on the entree leadership
theme hour coming up in a couple hours so jump on there and make sure you do that open phones
at 888-825-5225 albert is in austin texas hey albert how are you i'm doing good how about you
dave better than i deserve what's up so have about $140,000 in student loan debt between me and my wife.
We make about $140,000 a year, and we basically are in a position where we can either
make monthly payments of $1,400 a month and pay off all our debt in 10 years,
or we can enter into a repayment plan,
put about the maximum into our 401ks and essentially pay zero dollars for the first
five years. And then after 20 years, potentially get everything forgiven. So I'm trying to see
whether we should just start to pay it off completely or whether the repayment plan could
have some benefits that, you know, allows the save money and invest earlier because, you know, compound interest.
What's your degree in?
So I have a master's in finance, and my wife, she has a bachelor's of science in nursing.
I saw that one coming.
Okay. in nursing. I saw that one coming. Um, okay. Albert, um, I don't know what the Greek word
for irony is, but I think it's finance degree in $140,000. Well done, man. You're a smart kid,
aren't you? Well, most of it was actually for me. So before I got my master's degree,
we had about 70 grand and then that program cost
about an extra 70,000, but it did increase my income by about 30%. So I saw that as worth it.
So you increased your debt load by a hundred percent and your salary by
30? Yeah, but the amount of time it would take to, you know, kind of get that 30% increase
in my regular career,
which was I did a bachelor's in accounting, where it took me about five years.
So I saved five years of time trying to move up the ladder by just going to school one year.
Okay.
I have a degree in finance as well.
And people that are wired like me and you have a tendency.
Well, you've always heard that your greatest strength is your greatest weakness, right, Albert?
Yeah.
And I have a couple of tendencies because of my uncanny ability with math.
I'm very good with math.
And you are too, I can tell.
Because everything that you've talked about since you got on the phone is all about mathematical analysis.
And so, and John's right, you're obviously a very bright guy.
Those things are actually going to work against you in this conversation, though.
And because they've worked against me in my past. And so being the older nerd of the two of us in this conversation,
I made the mistake of thinking that I could measure all issues like risk and strain
and relationship messes with a math formula, and you can't.
And so, for instance, in the formula that you just used to justify your master's degree,
you did not have anything in that math formula for the extra risk you took on with a $70,000 extra weight.
All you did was just look at a simple ROI, and so you left life variables out of your
formula called risk, and thereby would have neutralized some of your mathematical conclusions.
But you learn that after risk knocks your freaking teeth out a couple of times, and then you go, okay, the math formula missed that, and that's what happened to me, and has more than once.
And so, we need to do the best we can do with a mathematical analysis, but what I'm going to urge you to do is to realize earlier rather than later, because it hurt me, I brought pain into my life, that math does not measure common sense.
Math does not measure risk very often.
There's a few places you can actually use a beta, an inverted formula,
and you know what I'm talking about on an investment, Albert,
but there's very few times that people actually plug risk into these equations,
which makes our math naive.
It's emotionally immature does that make any sense and so all of all of that to say no do not stay in debt 20 years
and try to screw around and get rich with your 401k while you do three versions of a two-step twirl around,
hoping some political thing is going to come along and bail your butt out of this ridiculous hole you dug yourself into.
No.
You take your $140,000 income and you punch this mess you made in the mouth
and you get rid of this student loan as fast as you can
because all the data that we
have on millionaires says that none of them not a single one and as we studied 10 000 of them
now this is statistically significant not a single one said i'm going to keep my student loan around
as long as i can and dance with it so that i can invest in my 401k and it will offset and i understand mathematically how
you got there but dude naive doesn't even touch this conversation please set the pencil down
and go and just pay off your student loan get visceral emotional about it and get rid of the
mess quit walking around proud about the fact you've got it. It's a mess.
Now go fix it. Here's what it looks like in real life. You got a wife that's a nurse, Albert. You
have a finance job. As Dave said, there's any sort of correction in the market and they call you in
because you're new and you're young and you're gone. And suddenly your five-year acceleration
turns into a seven-year deceleration. That's number one, right? And you're new and you're young and you're gone. And suddenly your five-year acceleration turns into a seven-year deceleration.
That's number one, right?
And you're going to say, that never happened to me.
I got a graduate degree.
Cool.
Live in that world.
Step two is your wife, who's a nurse, after year seven,
says, I cannot do this anymore.
The secondary trauma is wearing me out.
Or you have a kid and you end up with twins,
and she says, I want to stay home.
Or, or, or. One of them has needs. Yeah, one of them's got me out. Or you have a kid and you end up with twins and she says, I want to stay home. Or, or, or.
One of them has needs.
You are.
Yeah.
One of them's got special needs.
You are hedging a 10 year bet.
And I don't know if you know anything about the last 10 years.
I'm not betting nothing.
Except the turtle's going to win every single time.
And I'm going to take the small step and the smart step.
This is not a
math problem it's a psychology and don't try to trick life with a math formula you're gonna get
your face smacked off don't do it pay it off three years man three years three years you need to be
debt-free in three years and then move on with your life Dr. John Deloney, Ramsey Personality, is my co-host today.
Open phones at 888-825-5225.
Jordan and Andrea are on the line in Canada.
I see on my screen you guys are debt-free.
Congratulations!
Hi, thank you. We are.
Way to go! How much have you paid off? We have paid off $129,575 in 26 months.
Woo!
And your range of income during that time?
We started at $60,000, and we are at about $135,000 now.
$60,000 to $135,000.
So did somebody get a job that didn't have one?
How do you double your income in two years?
Yes, we were on a single income while my husband went 1,500 kilometers away to school.
I supported both of us on one income, and then he came home from school, and he has been crushing it ever since.
Love it.
Got a new job.
What's his degree in?
He is a funeral director.
In what?
What's a field director?
Funeral director.
Oh, funeral.
Oh.
I thought, what field is he directing?
In what?
In funerals.
Yes, that would be the field.
That's right.
Okay.
And what do you do?
I'm a nurse.
Awesome.
And what was the debt, the $130,000?
Oh, you name it. We were totally normal. We had a nurse. Awesome. And what was the debt, the $130,000? Oh, you name it.
We were totally normal.
We had a truck.
We had a lease, a pension buyback from maternity leave.
We had financed a water system for our house, student loans, credit cards, line of credits.
You guys were like normal.
Totally normal.
Totally normal.
Wow.
We're happy to be weird now. What was the wake-up call that got you so intense to knock this out so quickly?
For me, Jordan was away at school, and he had about three weeks left in school,
and we had burned through all of our savings.
And I said, you've got to come home and work.
And he only had three weeks left.
And that was just our absolute rock bottom.
And I was so blessed to have a friend named Sarah on Instagram
who she took the time to sit down with me and do a FaceTime call
and teach me how to budget and use the EveryDollar app.
And then I got started.
We read Financial Peace and Total Money Makeover, and we never looked back.
And you made it through the three weeks alive, huh?
Yeah.
He almost didn't, but we did.
Wow, wow.
So earlier today we took a call from somebody
who is interested in playing a finance game
with their, about a very similar debt number to yours
for about a decade to 20 years.
On the other end, the other side of having this all paid off,
put into words what it feels like to not owe anybody anything.
Relieving.
Yeah, it's, you know, all the money that we have is our money.
And we can do whatever we want with it.
And, you know, it's a huge weight off our shoulders. and we can do whatever we want with it.
It's a huge weight off our shoulders.
It's so hard to put into words the type of emotions and feelings that we have,
but that would be the best that we could put into words. It's just absolutely unbelievable and such a big relief for our family.
The horrible part of your story is also the most beautiful part of your story.
It's when you completely emotionally hit the wall at that three-week mark
and three weeks from him coming home.
And what that does is you will never go back.
Never, never.
Because of that feeling in your chest versus now there's not an elephant standing on your chest anymore.
That's right.
And, you know, no regrets.
I'm so happy that this happened to us when we were in our 20s and now we can move forward.
It would have been nicer to happen in our teens when we could have learned
and moved forward a lot quicker, but no regrets.
Just so blessed and so thankful that we were able to come across you and your team.
It's just been unbelievable.
$130,000 paid off in 26 months.
People are listening going, okay, what did they do?
What do you do?
What's the key?
What's the key for you?
Sticking with it.
Yeah, sticking with it.
It was the hardest but most gratifying process.
The hardest part for us was getting started,
like with anything else.
Getting started, educating ourselves else um getting started educating ourselves
and getting that written budget down it was a whirlwind but it was worth every stressor every
um you know every transaction we made putting that in that trend that app i still do that daily. I was just doing that before this call.
Not a day goes by that we don't track our budget. It's an absolute must.
Amen. Amen. Jordan, what about your current line of work where you're a director?
What's that? Sorry? What about that line, your new line of work puts a little bit of urgency
into the everyday? Yeah. I mean, it's definitely different
than what I'm used to, but it was a welcome change. And along with new financial responsibilities,
it really molded together nicely. But you get a ringside seat into knowing at the end of the day
where this all ends, right? You're a funeral director, and so the folks I know in that world
tend to have a little bit better grasp
of the importance of every moment,
of every day,
of the relational costs, right?
Yeah, exactly.
I mean, we're all going to end up
in the same place, so...
Yeah.
Yeah.
Way to go, you guys.
You guys are studs, man.
You guys are amazing.
Thank you.
Yeah.
So I suspect the second part of your sentence a while ago on, Andrea,
is very hard to get started,
but then every month and every debt that went away,
it got easier and easier and easier to where the whole thing was on a curve,
to where it went from very hard to ridiculously in a zone yeah absolutely and you
know now it's become a hobby um now it's not challenging we it's habitual we do it every day
we talk about it every day every transaction um and now it's it's just life and it's amazing yeah
it's part of the who's going to pick up the kids and where's the money yeah absolutely and where does it go yep that's it tell me where it went that's what i want to know
i love it you guys are amazing well we've got a copy of uh the legacy journey for you because
that's for sure you've changed your legacy and that's the next chapter in your story you're
going to be off into the land of millionaire now and beyond. And infinity
and beyond. It's the Buzz Lightyear
of finance. So yeah,
you're on your way. And
also a copy of the Total Money Makeover
for you to give to someone like the
friend gave you her time
and love off of Instagram to step
on to EveryDollarBudgeting app and help you
get going on that. Very well
done. So, great job.
Thank you so much.
Jordan and Andrea from Canada, $130,000 paid off in 26 months, making $60,000 to $135,000.
Count it down.
Let's hear a debt-free scream.
Ready?
Three, two, one.
We're debt-free!
Yeah!
I love it!
Wow.
You couldn't have lined those numbers up, Dave, between that and the last call.
Oh, yeah.
Or a few calls ago, right?
Almost the exact same income and the exact same amount of debt.
And his wife
was a nurse and she i mean it lines up so you've got one person trying to finagle the math between
10 and two decades now 10 years or two decades or somebody who had that call right it's just it's a
good warning for all of us that are math nerds that are really good with math is a is a wonderful
blessing but it causes you to try to hide the P under the shell.
And we have a little bit of arrogance in our approach to it that we think we can do it.
Because the math works with a calculator.
I mean, the regular math guy can't do that, but I think I can hide this P.
But the stinking P is under one of those shells.
That's a problem.
It's just a street game at the end of the day. So, yeah.
It's tough. Tough.
This is the Ramsey Show. We'll be right back. Dr. John Deloney, Ramsey personality, is my co-host today.
In the third hour, we're going to be talking to business owners and leaders for an Entree Leadership Theme Hour. If you have a business question, go ahead and email Kelly right now, and she will put you into that hour.
Oh, you can just call?
Call.
Okay.
Just call in now if you can get through.
The lines are full.
But anyway, if you get in, she'll get you set up for that third hour if you've got a business question.
The phone number, 888-825-5225.
A couple of other show notes and things that are going on.
We're continuing to do shows about America's, what one guy calls, America's greatest legalized fraud, timeshares.
And yesterday I took calls for an hour from people the stories
are just they're they're humorous because they're so freaking ridiculous give me one like a saturday
night live skit so um if you're a timeshare owner or a time a former timeshare owner and you'd like to take this survey we're doing some research on the industry text timeshare to 33 789 timeshare to 33 789 and if you want to participate
in our next timeshare show meaning you want to tell your story about your interaction with the
timeshare business let 20 million plus people hear your story we'd love to have you do
that uh you can again use the email dave on air at ramsey solutions.com put timeshare in the subject
line put a little bit about what's going on and your phone number and kelly will call and set up
we don't tell you what to say but we need to get you scheduled for that particular hour so tell me
tell me what you heard tell me one so the funniest one was the guy who, I think the timeshare was in the Virginia area, if I remember right.
And the guy came running in to do the presentation, a room full of people, late, and jumped up on stage and goes,
I don't even know what I'm doing.
The guy that's supposed to do this isn't here.
And so I'm going to be your guy, which is a complete bit.
Oh, it's part of the gig.
Yeah, it's part of a bit.
Okay.
And he's talking about how if you love your family, you will bring them on vacation because families that do vacations, you know, they stick together, and it's a loving act.
And the only people who don't take their family on vacation just don't love their families and while he's saying this the his phone rings and he answers
the phone while he's on stage and it's his mother who's getting chemo and she's calling in
no way not his mom at all just another bit and so you know it's just like this like a saturday
night live skit this is like something you would like so chris farley how does it work down by the river you know how does it work
how does what work so like so i i you know i'm writing a book right now you looked at an early
part of it and there's a true story in there and you say the way that true story lines up
metaphorically is almost too good to be true.
And so you and I are reading this.
I experience this.
We're reading it.
But we both see it coming 100 miles away.
How does somebody in an audience not realize this bozo?
Come on, man.
Well, the guy calling, he said, my wife and I are at the back laughing, rolling our eyes.
But he said, there are people buying every bit of it.
They're like a bass on the hook, baby.
I mean, anything that's shiny, you go for it, right?
Wow.
Yeah.
It's the old W.C. Fields or Barnum one.
P.T. Barnum says, sucker's born every minute.
That's right.
Let me sell you a little swampland in Florida here, baby.
And I guess you've got a lot of people that work.
Modern day swampland in Florida is called a timeshare.
That's what it is. That's what it is.
That's what it's called.
And why do you got the one that I can't figure out anybody of any level of naivete?
Why you actually go and spend five hours with these slimy people trying and think you're going to get out of there with your skin intact.
Me and my closest friends after about two and a half hours, we're like, hey, you know going to get out of there with your skin intact me and my closest
friends after about two and a half hours we're like hey you know that's enough for you like
you're like yeah i can't do five hours and you know and i had a granola bar and an orange juice
and my blood sugar is getting low i'm getting ready to kill something here and it may be you
but yeah it's like yeah yeah but it people do it they do anything for a free something, and that's what it is.
I'll give you a free pass to the zoo if you'll go in the tiger cage and pet the tiger for three hours.
And pray you don't get eaten, right?
But you get to go to the zoo if you live through it.
I used to do when I talked to parents of new students coming into college, I would say,
Hey, and your kids get free counseling.
And by free, I mean you give me $120,000 and they can have 12 free sessions a year.
So if you give me $100,000,
you can come to my house
and use my laundry machines for free laundry if you want.
So if you are thinking about a timeshare,
how about this?
You give me a quarter of your annualized investment
and I'll let you come stay at my house
for a few weekends a year.
How about that?
That's a good trade.
I'm in. I'm in. Careful. Somebody will email you about that. I know they will.
I guarantee you they will. Chris is in Los Angeles. Hey, Chris, how are you?
I'm doing great. How are you guys? Good. How can we help?
Awesome. So I'm single. I'm in my late 30s. I'm in baby steps four through six.
I've not been contributing to my 401k for the past 14 months because I was out
of work and just piling up cash from unemployment and severance. Fast forward, used a bunch of Ken
Coleman's resources for resumes, interviews, landed a new job. And so I've restarted my 401k
Roth contributions now that I'm working again. The question is go? Awesome. Yeah. Thank you. Thank you
very much. Ken, Ken's, Ken's resources are awesome. If you're looking for a job, everyone
should check that out. Thank you. Um, so my question is, should I increase my contribution
amount above the recommended 15% to help make up for the 14 month gap or just keep it at 15% and just focus on the road ahead?
That's a great question.
Well, neither answer is in the dumb column, okay,
because in either case you're going to be in great shape, right?
So the way I look at it is this.
You did exactly what you were supposed to do.
You piled up cash and stopped your baby steps to survive the storm,
and now we're pushing play again, which is 15% of your income towards retirement
and taking care of kids' college if that's applicable and paying off the house.
Baby step six, do you owe money on your house?
I'm renting right now, so I'm in the L.A. market.
This pile of money might be your down payment fund then,
and it can sit there for a little while until you're ready to buy.
You don't have to buy it a day, but that's when you're ready to buy.
It's still sitting there.
So here's the thing.
If you understand this idea, it'll tell you it doesn't matter which one you do.
But it doesn't matter if you don't do an additional.
I wouldn't do an additional.
I'd just keep it at 15.
Here's why.
You're not going to be in Baby Steps 4, 5, 6 for the rest of your life.
You're only going to be in 4, 5, and 6 until the house is bought and paid off,
at which point you will escalate.
You will no longer be doing baby step four at 15%.
You're going to max out all retirement at that point to keep the government's hands off of it,
and you're going to increase your investing because you're going to be in baby step seven.
You'll increase your generosity.
You'll increase your investing because that's what baby step seven is build wealth and give and so um uh
so there's a better than half of your remaining working years will not include a house payment
and you will be doing much more than 15 so it doesn't really matter if you go to 20 now
because you're still going to be over there in that baby step seven land investing
way more than 15% in the back half of this story to where you're going to be just fine.
So I wouldn't, I would just stay at 15% and I'd let that money you piled up.
I would hold it aside for a down payment above your emergency fund and then just keep moving
right along.
And then when you buy the house, your next goal is to get the house paid off.
And when you do that, you're at baby step seven.
And then the 15% no longer applies.
I love that question.
It's a really good, thoughtful thing.
But the thing that we all have a tendency to do with the baby steps or anything else is we say, okay, if I invest 15% of my income for 30 years, well, you're really not going to do that.
You're going to invest 15% until you're done.
Because your income is going to change.
Right.
And we don't know what.
But most of the time, most people's life is going to go up.
Okay?
It may go down and then go up.
But the average, the trend line is going to be upward.
So we don't know is going to be upward.
So we don't know exactly how to project that.
So if you run your numbers at 15% only on only today's income, you're more than okay there.
But guess what?
It's all upside from that.
That's right.
Because A, when you get out the backside, you're not going to be doing 15% anymore.
I love it.
B, your income is going to go up. So it just doesn't work out in linear fashion.
That puts us out of the Ramsey Show in the books.
Our thanks to John Deloney, my co-host, James Childs, our producer, and Kelly Daniel, our associate producer.
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