The Ramsey Show - App - What Being Goal Oriented Can Do For You (Hour 1)

Episode Date: September 25, 2018

The show about you

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. This is your show. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Tyler starts off this hour in Pittsburgh.

Hey, Tyler, how are you? Dave, I'm good. How are you doing? Better than I deserve, sir. How can I help? Thank you for taking my call. So I have a question. I am a couple of months removed from about paying off about $90,000 in student loan debt in the past 18 months. Why are you doing that?

Thank you very much. And my question is, so I haven't been contributing to my 401k as of yet, but I'm fortunate to be employed for a company that contributes 10% of my income to my 401k. Not a match, but just a straight 10% whether I contribute nothing or to the max. Hallelujah. Yeah, so it's pretty good. My question was, I know you recommend 15% towards retirement, and I wanted to know, given that they give the flat 10%, should I do 15% on top of that or 5% of my income to make it a cumulative 15%? Because I also want to start saving up for a down payment on a house.

Okay. Well, once you finish what we call Baby Step 3, which is a fully funded emergency fund, that's when this question would come into play. And then you could say, well, I'm not going to start retirement at all while I save for a house, or I'm going to start at 5% while I save for a house. As soon as you get your house down payment in the bank, we call that baby step 3B, saving for a house. But as soon as you get your house down payment in the bank, then you will put in a full baby step four, 15% of your income going into retirement. Because the money that they're putting in is not putting any strain on your budget at all.

And by the way, neither does 15% of your income. And so I want you to contribute 15% of your income. The beautiful thing is, I mean, you're going to have a pile of money going in there. It's awesome. You know, once you get going. And you're young. How old are you? I'm 26. Oh, yeah.

So you get that house down payment saved up, and then you're going to be putting 15, and they're matching, or they're not matching, but they're contributing 10, and all of that is your money. I mean, you're a millionaire by the time you're 40, dude. I hope so. I mean, I'm assuming by then you're making six figures. What do you make now? My flat rate is $120,000.

You're already making six figures at 26 freaking years old. What do you do? I'm a physician assistant. Oh, good for you, man. I've been working like crazy as much as 20, 30 days in a row, 12-hour days. So I'm actually, with all the overtime I'm working, to the chagrin of my girlfriend, I'll probably make $170,000 this year just because I'm trying to get the student loans knocked out. And you did. And you did. Yeah, probably by December, I'll have them knocked

out. But I'll probably cut back the amount I work, and it should be closer to 120 moving forward there. The highest correlation data point, one of the highest correlation data points we find among the wealthy people is not that they are high-income earners. It's that they're unbelievably goal-oriented. You have set the goal and become a physician's assistant. That is no small hurdle to leap that you jumped. Then you set the goal and worked like a crazy man again to pay off the debt. That is no small hurdle to leap.

The rest of this, dude, once you know how to do those two things and you know how to work like you know how to work and you've got an income like you've got, you're going to be in such good shape. I'm so proud for you. I can see the 36-year-old you so clearly, and you're going to be in such good shape. I'm so proud for you. I can see the 36-year-old you so clearly, and you're going to love him. He's awesome. Way to go, man. Proud of you.

Very well done. Open phones at 888-825-5225. John is in Richmond, Virginia. Hey, John, how are you? I'm fine, Dave. How are you? Better than I deserve. How can I help?

I have two quick questions for you related to buying a house and baby step number six. My quick financial background, my wife and I are in our mid-30s. We've got one toddler. My wife just got a promotion, so before taxes, we're going to be taking in about $290 a year. That's combined. Touchdown. taking in about $290,000 a year. That's combined. Touchdown. We have no debt. We've got about $60,000 saved for a down payment on a house,

$30,000 in the emergency fund. We're contributing to the 401K and my little man's college. I also invested in the stock market about 10 years ago, and I have about $130,000 in an E-Trade account, where about $30,000 is basis and $100,000 would be long-term capital gain if I sold it today. So my question is, we're moving to a different state because of my wife's promotion, and with her new job track, we're going to be moving about every five to six years. And we were looking to buy oh

i was thinking about renting because we were not going to be there for that short of a time but one of the benefits that my wife's company gives is they'll pay closing costs for buying the house as well as selling it when we have to move her company again makes Makes it a no-brainer. Yeah, so my two questions are, one, should I sell what I have in the E-Trade stock to bump up my initial payment? And two, should I, I know Baby Step 6 is about... Paying off the house. Yeah, should I be doing that early, even though I know I'm going to be leaving in five or six years? Sure.

Well, you don't know anything, but you think you are. Yeah, sure. Absolutely. And you've got $200,000 in addition to the leaving in five to six years? Sure. Well, you don't know anything, but you think you are. Yeah, sure. Absolutely. And you've got $200,000 in addition to the sale of your house to put on this. You've got $60,000 laying around doing nothing, you just said. And then you've got $130,000 in the E-Trade, so that's roughly $200,000, $190,000, on top of the sale of equity from your house. And, yeah, you pay off the house.

Here's the thing. When you pay off that house, when you pay off the house in that city, and then you move and you sell that house, they're going to give you a check. You're not spending the money. Right. You're stabilizing your life. And one of the key data points, again, that we find when we study wealthy people is they get their homes paid off. Because with a paid-off home, their life is stabilized, their relationships change, and they make different career decisions, and there's a different level of stability

um i mean we've just done detailed research 100 of the foreclosures occur on a home with a mortgage you know it's just it changes your situation when you don't have a mortgage and uh it changes so many parts of your life that you didn't even realize it touched so yeah get it paid off as fast as you can, even though you likely will be transferred and are moving because you're going to sell that house, no closing costs, and then you're going to put all that money in your pocket and you're going to go do it again. And every time you do this, it's real money, too. Have you ever noticed, folks, when you spend money that's yours out of your bank account

or real cash in your hand that you make different purchasing decisions than if you use borrowed money to buy something never notice that that's true of a house too by the way so when you get ready to buy a five hundred thousand dollar house and you got five hundred thousand dollars in your bank account and you go well i'll just get a mortgage and then you end up getting a six hundred thousand dollar house or a seven hundred thousand dollar house and that's what happens but if you get that if you got to take the money out of the bank account to buy the house because you don't borrow money anymore you're like i think we're going with the cheaper chicken yeah i think we are yeah it's you make different decisions when you pay cash for stuff you just do it's not about

being cheap it's about being wise you get it paid off dude get it paid off as quick as you can you're doing so good man what great income wow income. Wow. Touchdown, baby. Proud for you. This is the Dave Ramsey Show. It's time to take another look at your budget. That means scouring every expense and making sure you're not leaving any money on the table. One of the biggest expenses is your mortgage payment. I recommend a quick Churchill checkup. In just five minutes, our friends at Churchill Mortgage can tell you if you could save some cash each month. They've helped thousands upon thousands of my listeners keep more cash in their pockets through a smarter mortgage. I want you to call Churchill for your checkup and see if you can lower your monthly payment, or better yet, see how you can pay off your house early.

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Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. Thank you for joining us, America. We're glad you're with us. Alex is in Little Rock, Arkansas. Hi, Alex. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking the call.

Sure. What's up? Well, I have a question. I wanted to see what you would do in our situation. My husband is about to lose his second job, which is the only thing that's been keeping us afloat. And I'm not really educated, and I can't seem to find a job that pays me more than minimum wage. I just don't know how we should go about finding better paying jobs okay um what is his second job his second job is he he does the bob truck um at his work but it's like a second job he makes like 22 an hour when he does that

okay so it's kind of like overtime at his work. Yeah, it's just because he usually does not dispatching there. So what's he make in his main job during the day? He works at night, and before taxes he makes $1,400 every other week, and after taxes it's like $1,100, so not very much. How many kids you all got? We have two. Okay. All not very much. Yeah. How many kids you all got? We have two. Okay.

All right. Yeah. And how much debt have you got not including your house? We have probably $12,000 on our car, $2,700 on furniture, and $1,200 on a credit card, $800 of which was a loan to my dad that he's supposed to be paying back. You're broke and your husband is working overtime to pay bills you can't afford to pay and you loan your dad money. Yeah.

That was dumb. Yeah, I know. Okay. So we need to cut up the credit card and never use it again. We've got to get you on a written budget. Okay. So we need to cut up the credit card and never use it again. We've got to get you on a written budget. Okay. On the short term, you know, it is just finding another extra job short term, and it could be a lot of different things.

The good news is there's a lot to do in Little Rock. And then on the long term, what I would both of you do is, uh, how old are you? We're only 21 and 23. Okay. So I would ask myself, what do I want to be when I'm 41 that makes, instead of making $35,000 a year, that makes a hundred thousand dollars a year. Okay. What do I want to be?

What, what, what makes me smile when I think about doing that that pays well? And that's part of the reason I'm smiling. Okay. You know, sometimes people say, well, living your passion means you have to be broke. No, living your passion usually means you're not broke, actually. You find something that you really are passionate about, and you become world class at that. So let's say that you wanted to be X, Y, or Z when you were 41, and he did too. You sit down and talk about that tonight, by the way.

Then you start asking yourself, okay, what is keeping me from doing that? And what you led with was you said, I'm not educated. Okay. You don't just generally need to be quote, unquote, educated, but you might need some training in a particular field to be a certain thing, right? A young man I was talking to earlier in the hour went and became a physician's assistant, a PA, okay? And, you know, that's a pretty heady, pretty academic field of study. I mean, it's just right next to being a doc, right?

And so he's dropped some serious brain power into that and some serious money into doing that. But it also took him about six or eight years to become that. And now he's making $120, $170 a year. Now, I'm not saying you need to go do that, but if you said, that's what I want to be, then you immediately would know I need to get trained in that area. But another example might be that your husband says, hey, I'm pretty good with computers.

I've always wanted to get in technology. You don't need to get a four-year degree to make 100 a year in computer world, in the world of programming and so forth. And so he might go learn some programming at the local tech school. He might get in some programming groups where he's mentored. He might get some of the Microsoft cert, certification programs, and those kinds of things. We hire lots of tech people here at Six Figures and above that have zero college but tons of tech certifications because that proves in that world that they know more than actually having a four-year degree in information systems usually.

So anyway, you find out what it is you want to be, and you say, what are the steps to become one of those? Do I need to go take some classes? Do I get in an apprenticeship program? I don't know. Maybe, I remember many years ago, my mom, who was a high school graduate, decided she wanted to be in the real estate business. And you know what you have to do to be in the real estate business? Pass the real estate test.

That's all. Now, some states are now requiring an undergrad, but most states, you just pass the test. And then you get a job selling real estate. And you go out there, and you're the best real estate salesperson in the world. And lots of those folks do not have four-year degrees that make big money in that world, as a matter of fact. But it's what are you wired up to do, and what do you want to be someday? And the good news is you've got plenty of time to do and what do you want to be someday and the good news is you got plenty of time to do it but let's let's aim at something because if you aim at nothing you're going to be 41 and making

what you're making now okay you'll be stuck yeah stuck is no fun okay and it is also no fun being broke all the time so you gotta work you gotta work part-time jobs in the meantime you gotta pay the bills right now, right? And if you can get your income back up, you can probably keep this car. But otherwise, you may have to get rid of this car because car payment is killing you. You've definitely got to cut up the credit cards, and you've definitely got to quit giving other people money. You're freaking broke, okay? You're not in a position to do that right now.

I hope someday that you've lived like no one else, and then you're able to live and give like no one else. But no more of that. No more of that misbehavior. And so your husband apparently has a CDL, commercial driver's license, so maybe he can drive something else. Maybe he could get on with somebody else at night or during the day, or maybe there's some dump trucks that need to be driven. There's a lot of construction around Little Rock right now. I don't know. I'm just making this up as I go.

But you need some part-time income, and you need a long-term goal, and start taking the steps towards that long-term goal. Hold on. I'm going to send you a copy of a book called Start that will help you with that process. John is with us in Oklahoma City. Hi, John. How are you? I am truly better than I deserve.

How are you, Dave? Just the same. How can I help? My wife and I, we've been married less than a year. We got out of debt. And lo and behold, a month later, she came up to me and told me that she's pregnant. Yay! So that, yeah, that threw me for a loop.

But my question is, we're on baby step three, and I'm just trying to figure out, do I need three, four, five, or six months' worth of expenses in my emergency fund? Baby on the way. I think six would be a good target, don't you? Yeah. You can always crank it down later if you wanted to, but, I mean, it's not like you could have too much money in your emergency fund. Actually, you could.

But, I mean, right now, all this is is comfort food, man. I mean, this is meatloaf. You just got some money sitting there, and it makes you feel good, right? And so it's not about the calories. And so just load up on it, and let's pile it up. And you got nine months to build a really big, fat, juicy emergency fund, and then you can do something with some of it if you want to and crank it down a little after baby and mama come home.

Congratulations, man. This is awesome. Proud for you. Tristan is with us in El Paso. Hi, Tristan. How are you? I'm doing pretty good. Blessed for the situation I'm in.

How about yourself? Just the same. How can I help? Well, my issue was I was a federal firefighter with the Department of Defense. Injured on the job. Pending back fusion surgery. It took Department of Labor four months to start paying me. So I boosted my savings, ran up some credit cards.

I ended up losing one vehicle, got repossessed, and then I got caught in a cross-collateralization clause with a local credit union, which I had known nothing about. They wanted me to do a money buyback loan for the Jeep. And they said if I didn't do that, they were coming to get my wife's minivan. My wife, then they came and repossessed my wife's minivan, then tacked on my credit card I had with them. And they said, you owe us $60,000.

If you don't pay us, we're going to take you to court and get the money. So I ended up having to file Chapter 7 bankruptcy myself. My wife wasn't on any of those debts. They were all in my name. That was the only option I had because I'm on workers' comp. And I get $3,020.75 every 28 days. My wife doesn't have any income now, but I was able to get her. I'll tell you what, I want to hear the rest of your story and see how I can help you.

It doesn't sound like you've been having no fun for a while. Hold on through this break and I'll help you. This is the Dave Ramsey Show. Okay, things are getting pretty weird out there. I thought the Equifax breach was bad enough. It exposed the personal financial info of half of all Americans. Now we have breaches affecting almost every U.S. citizen, and the data stolen is more personal and equally dangerous. One company had over 230 million consumer files hacked, which included not only the home address, but info related to religion, pet lovers, smokers, you name it.

And the businesses were not any luckier this time, with 110 million files hacked. It really is no longer a matter of if, it's when you'll become a victim. That's exactly why the only plan I've ever recommended is through Zander Insurance. They cover all types of identity theft for families and businesses, and they take over all the work if you become a victim. I use it for my family and my entire team. Call 800-356-4282 or visit zander.com that's zander.com All right, we are talking with Tristan, who was injured on the job,

and the net result was $50,000 in debt and into a bankruptcy and trying to figure out how to start again. I know that's a quick summary of what you already told me, Tristan, but that's where you find yourself now. You're coming out of a Chapter 7. Right, Chapter 7. When was your meeting of creditors? Meeting of creditors was March. So you're

done. Like 7, so I'm done, yeah. Meeting of creditors. So you have no debt, right? You have no debt unless you had IRS or student loans. Correct. And my wife's you had IRS or student loans. Correct. And my wife's the only one with student loans. I have no student loans. My wife, she ended up getting a little scholarship to become a realtor, so she's in class as we speak for the next six weeks, and she'll be able to obtain her license.

Okay. So that was one step. How can I best help you today? I just don't know from my point i mean i'm on that workers comp uh i'm 33 years old and i might have to go on federal disability retirement or as well as social security disability and i just i want to see how i can myself you know get out of that how i can i, I had a 730 credit score, you know, and then I had to file this bankruptcy and it totally put me into the dump. And then I'm always in pain because my back, I have to get a fusion.

My lower extremities decrease reflexes and they twitch on their own because of the myopathy squeezing my spine so what a horrible thing that's my question to you is i don't know how to dig myself out of this how to build my credit back up well i don't want to build your credit back up credit credit is what caused your file bankruptcy we don't need to be in debt again debt is no fun that didn't help you here so what we do need to do is try to build some wealth and get some margin so that um and you've got the current income plus you're either going to qualify for these other incomes um you know the social security and federal and so forth or which will add to it i mean you could have a pretty decent disability income there now the question

you want to ask yourself above that and you you're obviously dealing with a lot of pain, but you can start asking yourself, is there anything I can do that I can make more money than this disability will pay me? And the answer to that is yes, there probably is. But if you can look through the cloud of the fog of pain and see it, obviously you're not going to be doing something where you're lifting with a back like yours, but you've got a good mind. I've been talking to you for two segments now, and you're intellectual, you're articulate, and so I think you can do a lot of things with your mind that don't involve your back

and that you could maybe even run some kind of a business where you control your hours, so if you're having a really bad pain day, you just don't work that day, you know, that kind of thing. But you could control some of that with some kind of a thing that you're using your mind to create income. That would be your long-term thing. But as far as bouncing back, you know, let's get the incomes going, whatever they are, whether they're disability incomes or self-employed incomes or a new career income that doesn't involve the disability. And then with that income, let's rebuild our lives. And that's what Sharon and I did, Tristan.

I mean, we just said we're starting over. It's been 30 years since our Chapter 7 bankruptcy. And we said we're going to learn from the bankruptcy. And so what are we going to do? Well, we're not going to borrow money anymore. It didn't work for us. The borrower is slave to the lender. And we're always going to have savings, lots and lots and lots of savings.

In the house of the wise are stores of choice food and oil. And we're always going to live on a written budget where every dollar has an assignment. No one gets anywhere big accidentally. No one accidentally becomes wealthy and stays wealthy. Now, sometimes someone accidentally buys a winning lotto ticket, but that is not a proven method to begin to build wealth. What a proven method to build wealth is you do it on purpose with a plan.

And Jesus said, don't build a tower without first counting the cost lest you get halfway up. And you're unable to finish. And all who see you begin to mock you and say, this man began to build and was unable to finish. And that's what happened to me. I built a tower, a house of cards with no good plan. And it came crashing down, shock of shocks, you know. And so you learn your lesson you say you know i'll never be in a position again where the credit card where i got cross-collateralized twice in my

bankruptcy so i know exactly what you dealt with there pisses you off at a whole new level and you know i got i got dealing with banks and all their little tricks anything they could pull to um you know to take me down and take me out and i I'm not bitter. I'm just really bitter. And so I hate banks. Only time I go into a bank is put money in there or if I'm going to buy the bank. But other than that, I don't want to go in there. So the only thing to do with those people anymore. I'm never going to put myself in a position that if someone comes to pick up my car,

it's because it's broken and I called them to come get it. It's not any other reason they're coming to get my car. And they did that before, and it's no fun seeing, you know, someone tow your stuff off because the borrower is slave to the lenders. I'm never going to be in that position again, and I'm always going to be in a position to give and be charitable because

there's always somebody that needs help. And, you know, you just start having some things that you say never again and always. Never again am I borrowing money and always I'm going to do a budget. Never again am I going to be in a position that this bank tells me what to do, and I'm always going to be generous, and I'm always going to save. And, you know, you just put yourself in a position to do those things. So hold on.

I'm going to send you a copy of the book, The Total Money Makeover, which is the plan that we have used to show millions of people how to come from where you are, where I was, or from better places. But all of us heading to a better place financially. Living like no one else so later you can live and give like no one else. You've been through a real tough time. You financially got your teeth kicked in. And you've been medically hurt. I mean, you're hurting.

That's two big blows. And it knocks the stuffing out of you. But you can come back. You can come back. And we'll help you. We're here to help you. Hold on. I'm going to send you a copy of the book.

Adam is with us in Columbus, Ohio. Hi, Adam. Welcome to the Dave Ramsey Show. Hey, Dave. How are you today? Better than I deserve. What's up? Hey, just you quick question

uh first things take my call and everything you've uh taught us to do uh me and my wife are set to complete baby step three this month so my question is in regards to retirement i just started a new job and i'm not able to contribute to my 401k for a full year um and fully funding my roth only gets me to a third of the 15 you recommend what about hers um she will fully front her 15 will be fully funded with a roth and her five percent that our company matches okay go ahead and put more in hers just put more in hers yeah load hers up you're not trying it doesn't matter whose name it's in because we're married and you have rights to each other's money, morally, relationally, and legally, okay? If you get divorced, you get her 401K, half of it.

I mean, that's how it works. So, you know, so load it up. And the household income between the two of you, what do both of you make together gross before taxes? $145,000 a year. Okay. And so we take 15% times that, okay? And that gives us $21,750, okay? And so you can put, how old are you guys?

I'm 31 and she's 30. Okay, you can put $5,500 each in your Roth IRAs. And so that's $11,000 of our $21,750. So we need $10,750 going into her 401K. What does she make a year? $52,500. Okay. She probably could get $10,000 into her 401K.

Okay. And you'll be there. And then next year, if you want to balance it out a little bit and back hers down and put some over in yours, that's fine. But the goal, you see what I'm doing? I didn't ask about the individual thing until I had to to get to the money. But we're talking about $145,000 household income times.15, and that's your baby step four. Then how can we cause that to happen anywhere in the house

that keeps the government's hands off of it? And in your case, it's Roths and and wife's 401k should be able to get you there i think it will i think it will i'm pretty sure it will and then next year when you qualify for you by being there a year at your work and you can start your 401k you can back hers down a little bit crank yours up a little bit especially if there's a match over at your work and that kind of thing but for this year that's what we'll do hey man life man, life is good. You've got a good income. You're out of debt. You're saving money. You're in the top 4% of the public.

It's a low bar, but you're in the top 4% of the public. This is The Dave Ramsey Show. We'll be right back. Thanks for joining us, America. Running and growing your own business can be absolutely overwhelming, but you do not have to do it alone. The Business Boutique Academy is Christy Wright's online training group where she teaches you exactly what you should be focused on for your business so you can earn money, make an impact, and have the freedom and the flexibility for what matters to you most. This is your opportunity to invest in your dream and take your business to the next level. Academy enrollment is open now, but it is only for this week. It's a one-week open enrollment until Friday.

Join today at businessboutique.com, or just learn more about it and see if you want to join. Businessboutique.com. Carl is with us in Phoenix. Hi, Carl. Welcome to the Dave Ramsey Show. Hi, Dave. How are you?

Better than I deserve. What's up? My wife and I are contemplating whether she should go back to work so we can pay off our house that we're having built right now in roughly five years. It would take to pay off the house. You said five to six years it'll take? Five to six years it'll take to pay off the house, yes. All right. And what do you make? I make about $85,000 a year.

Okay. Your phone is breaking up. You're going to have to get where I can hear you. You make about what? $85,000 a year. Okay, your phone is breaking up. You're going to have to get where I can hear you. You make about what? $85,000 a year. Okay, good. And what would she make? She'd make about $45,000.

And how much do you owe on your home? We will owe $261,000. And how old are your children? We have one daughter who's 15 months. Okay. Does she want to go back to work? She's kind of torn, 50-50 right now. You guys can do whatever you want.

Your home is going to be paid off in either five years or eight years the only question is whether she's going to be in work while this is happening um it'll be eight years if she doesn't go back to work by my calculations maybe a little sooner um or the the house is going to be paid off in five years by your calculations if she does go back to work. If she hates it, I would say if her whole goal in life is to be at home with that baby, then she stays home. I wouldn't give up three years on my mortgage for that. But there's other ladies that are, for instance, Rachel Cruz, my daughter, who thoroughly enjoys working, were she at home full time, it would not be good for Rachel.

Probably not be good for her kids. She needs to be out doing stuff, you know. And so, you know, it just depends on how you're wired and what does your wife want to do, not want to do about the house. But what does she want to do if she wants to be about the house, but what does she want to do? If she wants to be in the workplace, yeah, use the money, pay off the house early. But if she doesn't, I would not do it just to pay off the house three years sooner. Because that's really all we're arguing about here, and I wouldn't do it. Hey, thanks for the call.

Ann is with us in Connecticut. Hi, Ann. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking my call. Sure. What's up? So we have a rental property that became our worst nightmare. We can't afford the mortgage anymore. We put it on the market for a year. I've asked the bank if they can refinance it because it's at an 8.37 interest rate, but they denied it because they said it was underwater.

It's in an LLC, but the mortgage is in our name. And I just don't know what to do anymore. We're like, every month we're paying towards like, you know, a couple thousand, four or five thousand. What do you owe on the property? We owe right now $242,452.80. Okay, and what's the property actually worth? If we really wanted to sell it in the next 90 days, what would it sell for? We've been having it on the market for $260,000, I think.

But, I mean, I think it's not going to sell. I think it would probably be $199,000. Okay, so you're $40,000 in the hole, give or take. Right. Okay, and what's your household income? Probably $150,000. Okay. How much other debt do you have?

We have our house, our other credit cards and everything like that. How much do you owe on your credit cards? Probably like $3,000 or something. How about your cars? No cars. No car loans. Okay, good. No student loan debt? No student loan debt. Your income is $145,000?

Mm-hmm. And you're $40,000 in the hole on this rental property. Why is it upside down? Because most properties are not upside down now. It's the worst place. I don't know. It has no parking. Just everything in this place is bad.

And the tenants, I don't know what they do with the water, but every quarter the water is like over $1,000. Okay. That does not explain why the house has not gone up in value when every other piece of property in the real estate in the U.S. has gone up in value just about. Is the neighborhood declining? Is it a condo? No.

It's like a multifamily. It's probably not in the best area. Okay. There we go. Okay. So the area is declining rather than increasing. Correct. Even though it's $250,000, but that's Danbury, Connecticut, a very expensive place to live, correct?

Yeah, but this area is not good, yeah. Yeah, but I'm saying when the hood is $250,000, that's an expensive place to live correct yeah but it's this area is not good yeah yeah yeah but i'm saying when the hood is 250 grand that's an expensive place to live you say that's what i'm saying oh yeah yeah yeah so um okay uh do you have any credit left can you go down to the bank and borrow $40,000? Yeah, maybe. I mean, probably, yeah. Well, I mean, here's the thing. What we can do is project out five years. Five years from today, if you own this property,

it's going to have gone down further in value. Would you agree with me? Correct. Okay. So we're cutting our losses by nipping it in the bud and saying, all right, I've already lost $40,000, but instead of losing $100,000, I'm going to go ahead and borrow $40,000 and get rid of this thing. Yeah.

People have been asking, telling me about deed in lieu of foreclosure. If you can do it, but that's the same as a foreclosure. I mean, this destroys your credit. If you can pull off a deed that's the same as a foreclosure. I mean, this destroys your credit. If you can pull off a deed in lieu of foreclosure, if you can get them to take it back. Now, here's the thing you're looking for. Deed in lieu of foreclosure means deed instead of foreclosure. It's a voluntary repossession. But the phrase you have to get, or it's of no benefit at all, is without recourse.

Remember that phrase. Without recourse. Because that means they can't come back after you for the difference. Okay. So if we were to foreclose. They will sue you for the difference. Because we're on our primary property? They'll sue you for the difference.

Uh-huh. Okay. They'll come after you, and they're not going to sue you for $40,000. They're going to manage to lose $100,000 on this because they're going to sell it as a repoed property. And they're going to come after you for that $100,000.

So, no, we don't do foreclosure because this is inconvenient. We go borrow $40,000, and we control the sale price, and you save what's left of your credit in this situation but uh but if you can pull off a deed in lieu a deed instead of foreclosure without recourse meaning they will take the keys and walk away i don't know why they would do that with your income i think they're going to think you can pay it i don't think you're going to pull that off but if

you can get them to do that, that's fine. You can start that process and drop the price on the house and go arrange a bank loan. And whichever one happens first, get out of there. But you need to nip this in the bud. You've been trying to get money out of this. You've been beating this hammer. You've taken a hammer and beaten this rock. It's not going to bleed.

There's no blood here. You're not going to get out of this even. You've already lost your butt. Now you just have to admit it. Oh, yeah, no, we've totally admitted it. I mean, we've bought it. No, I mean admit it by writing a check, admit it. Uh-huh.

Like $50,000, $40,000 loan over at the credit union that you pay off over the next two years out of your income. And that's, you've already got the debt. All we're doing is moving it around and cutting your income. And that's, you've already got the debt. All we're doing is moving it around and cutting your losses. And that's the thing. So, good question. Sorry you're facing that. It's a horrible position to feel stuck in a piece of real estate. But this is what happens when you borrow money to buy rental property.

There you go. Tell you not to do that stuff, folks. That's why. That puts this hour of the Dave Ramsey Show in the books. Hey, guys. This is James Childs, producer of the Dave Ramsey Show. I'm excited to announce that we're now carried on 600 radio stations across the country. To find one near you, head to DaveRamsey.com slash show.