The Ramsey Show - App - What Student Loan Payments Will and Won’t Do to the Economy (Hour 1)

Episode Date: July 19, 2023

Dave Ramsey & George Kamel answer your questions and discuss: "Should we pull from retirement to pay off debt?" Focusing on investing vs. saving for a house, "Will student loan repayment cause inflation?" "Should I build my emergency fund or pay off debt?" "How do the Baby Steps transfer to business?" Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Here's an EveryDollar deal just for our listeners: get a 14-day free trial PLUS $15 off your first year of premium. Click the link below and start budgeting today! www.everydollar.com/george Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the pods, moving and storage studios. It's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Thank you for joining us, America. George Camel, Ramsey Personality, co-host of Smart Money Happy Hour Podcast and the George Camel YouTube mega hit. Be sure and check out both.

It's Camel with a K. He's my co-host today, Ramsey Personality. Open phones at 888-825-5225. Canada's going to kick us off this hour. Scott's with us. Hi, Scott. How are you? I'm doing great. How are you guys kick us off this hour. Scott's with us. Hi, Scott. How are you?

I'm doing great. How are you guys? Better than we deserve. What's up? All right. So my wife and I have $11,000 in debt. Um, but we also have an RRSP line that we have not used since I worked at this

job in about four years, five years, maybe, um, it has $4,000 sitting in it. I was wondering if it would be a good idea to take that $4,000 out and then pay off most of that debt. I am not a hundred percent expert on Canadian retirement plan, but I'm almost positive that if you do that, you're going to get a heavy penalty

and extra taxes. Am I not right? I haven't looked into it very well. I'm almost positive. I'm almost positive it's like our 401ks or IRAs in the States. And here we would get a 10% penalty plus your tax rate. Therefore, George and I would always tell you, don't do that. Yeah, I'm looking it up right now.

It looks like there are, depending on your province and how much you're withdrawing, there will be anywhere from 10% to 30%, just right there. Yeah. So that is unwise, because that's like taking a loan out at 10% to 30% to pay off your debt. Okay. All right, no problem. I'm sorry, I just... It's not much money.

It's not much money, so the damage in actual dollars is not huge, but percentage-wise it makes you want to throw up a little bit. Fair enough. Okay. You know, it's like I want to borrow $4,000 at 30% interest. Nah. Yeah. You know, it's probably not going to kill you, but it's just dumb.

I mean, just the numbers, the percentage just makes you go, particularly the math nerd in me. And the other piece of this is the behavior change, because it's not really solving the problem, which was we went into debt. And so I want to see you use your future income, sell stuff, side hustles, overtime, whatever you have to do to create that income to pay off that four grand. And truthfully, that's not going to take long. Yeah, you can do that. Yeah, well, 11 grand is the total. So truthfully, the whole thing's not going to take long. If you step that yeah well 11 grand is the total so truthfully the

whole thing's not going to take long if you step into a really nice side hustle you'll do that very very quickly but the big deal here is to stop the bleeding meaning get on a budget live on less than you make be in agreement with your spouse and then get in attack mode on that 11 000 and um george is right there's something happens in your brain when you quit. You're being wise looking at all options, Scott, but something cool happens when you quit looking for a shortcut. I would look for the shortcut too. It's human nature to do that. And you should look for an easy way. Don't do it the hard way on purpose. But in this case, the part of your brain that's going to make you do this the hard way is the part that's going to give you permanent change.

The other piece is that will help you step off this ledge is looking at what $4,000 would turn into 20 years from now in your investment account. That'll make you go, I'll find another way. That's a lot of money to unplug. Yeah, the 20 years from now version of me is going to be pissed off. Yeah, we don't want to do that. James is in Raleigh, North Carolina. Hi, James. Welcome to the Ramsey Show.

Hey, Mr. Ramsey. Thanks for taking my call. Sure. What's up? Hey, so a particular place in life where I've got a year or two left on my education. My wife's got a year. We're both working full-time, and we're both investing in our 401K options and match options with our jobs. And we know we're going to want to buy a property or a house one day down the road.

Good. And so we're trying to figure out, like, do we go full 15% or more in our 401k and still transit to the house? Or should we try to nickel and dime and go as hard as we can with just getting our matches and our 401k options? And then put all we can into a savings for a house. Which option would you guys recommend based on where we're at, maybe? So you guys have no debt in a fully funded emergency fund already? Yeah, no debt, fully funded emergency fund, and actually I did put away each of our 401ks so far.

Awesome. Way to go. Well, that puts you at baby step 3B, saving up for that down payment. And truthfully, this is kind of a choose- own adventure. You could invest anywhere from zero to 15%. And the faster you get the down payment saved, the faster we get back to investing. And it really comes down to your urgency on getting into a house. Yeah. We don't want to put more than 15%, but anything less than 15% while you work temporarily on the baby step 3B, which is the down payment, house down payment, is okay. So George is right.

Choose your own adventure. You could do the match and no more. That wouldn't make a lot of sense. You could do nothing and just pile up a big old stinking down payment for the next 24 months. During that 24 months, you're going to finish your educations, probably get raises, and set you up to make your house buy and then step back into that 401k with 15 and start paying off that new 15-year mortgage as fast as possible oh that's very encouraging i didn't know if it was bad to go down to just the match i guess that was what my worry was it would be if you were if you're trying to say back in baby step two we

would tell you to just go all the way to zero regardless of match oh while you're in baby step two right yeah back there where you're you're had debt but you don't have that debt so you're sitting squarely uh at this place where it's a temporary thing it's a one two year time period while you're saving for your down payment on your home the larger the down payment obviously the smaller the debt or the hopefully you don't buy more house. But yeah, and that puts you in a position to really go win with that. Choose your own adventure. That's a good way of looking at it. That's how I've always seen it, because there's really three options, 0% and really stack up, or do the match, then stack up, or 15%. You can do somewhere in between too, but most people do one of those three options. I personally like trying to hit that mark of 15% and then getting even more intense on

the down payment but i'm just wired weird well and you know i would i might say which one i like more based on how old i was okay he sounded super young if i'm in my 20s i'm good we go zero because you got plenty of time for compound interest to kick in on the on the investing later but again we're okay ramsey the ramsey way is choose your own adventure zero to 15 anywhere in there but i could go to zero easier when you're 25 than when you're 55 and you have a lot more to catch up on yeah and you really want you want to get in that house exactly exactly but uh you know there's two major things folks that we find with the millionaires that we've studied that cause them to become millionaires. One is steadily investing in retirement and good mutual funds, 401Ks, IRAs, all right?

Steadily over time investing. The second thing is a paid-for house. Those two are the biggest two elements that we see cause people to be a millionaire. The typical millionaire we studied was 51 years old. They had like a million and a half to $2 million net worth. Let's say they had a million and a half dollar net worth in our case study that we usually would find they had like a half a million, $600,000 paid for house, and then they had like $700,000, $800,000, $900,000 in their 401 case.

And so that's generally how we saw them getting there in that first $1 to $5 million worth of net worth. Those are two big things. And there's a lot of reasons that those two things show up with millionaires all the time because, A, they're both really good wealth-building tools, but, B, they follow the idea of slow and steady wins the race, not the hare. The tortoise wins every time I read the book. Never read it once, and they went, hare scores this one.

Nope, you don't get to choose your own adventure in that puppy. The tortoise wins. The ugly, steady, slow, not bragging turtle wins. This is the Ramsey Show. The Ramsey Show question of the day is brought to you by Neighborly, your hub for home services. Neighborly is the place to find reliable help for your home from trusted, locally owned businesses like Mr. Appliance, Mr. Handyman, Precision Garage Door Service.

Great Company. Visit neighborly.com today to find home experts that you can trust that are available to serve you. Today's question comes from Michelle in New York. With student loan payments starting again soon, I'm hearing a lot of people talk about an unintended consequence will be a big hit to the economy. With that money going to student loan payments instead of being spent at retailers they're saying maybe this could drive us into a recession do you see this happening no it's not enough money it's not big enough it relative to the size of the gross domestic product the gdp so there's not a big enough tail here to wag this dog so mathematically so i know I don't see that happening. And let's just say it did.

Walk us through this. So what? Like these people don't need to pay their bills just because we might face a recession? No, absolutely no. And here's how we also know it didn't create a recession. Did you notice that all these people having all this money to spend did not cause a boom? That's true. If you had an extra 400 bucks.

It wasn't enough money to cause an economic boom when they were all blowing it on vacations. As a matter of fact, one study came out last week where Jade and I were reading this the other day. It came out and said that like 80% of the people spent all the money on vacations, retail, drugs, and alcohol. Wow. And even, well, I mean, if there's a recession in the cocaine area, that's probably okay. I can deal with that. If there's a little crack recession, I think we can handle that part. But I'm thinking the alcohol retailers are probably okay they made enough money during covid to last them about 10 years oh they made out like

bandits on that man it was the big i mean remember the wine bottle stacked up and the pictures of that at the curb during during the during the covid quarantine like when alcohol delivery became hot yeah i can't leave the house you bring it to me yeah and lots of consumption was a big deal yeah i'm just saying so anyway all kidding aside it to me. Yeah. And lots of consumption was a big deal. Yeah, I'm just saying. So anyway, all kidding aside, it didn't cause a boom, so it won't cause a bust. And that illustrates my earlier statement that it's not enough money relative to the size of the economy to tank the economy because it didn't make the economy, so it won't break the economy. However, what it is going to do is it's going to put a pinch on the 99 percent. I cannot believe this number. Ninety-nine percent of the people that didn't have to pay payments on their student loans

didn't pay anything on their student loans. One percent used all of this chance at no interest to get out of debt. 99% took the approximately $15,000 per person that it saved them and blew it. And it's gone. And now they're going to go, oh, no, my budget's tight, just in time for Christmas. Well, and the scary part is a lot of people got refunds from their student loan servicer. So the student loan company says, hey, here's your $10,000 in payments back. The government will forgive it.

You'll be fine. They give them $10,000, reinstate their loan balance, and lo and behold, no forgiveness. And that puts them in a real pinch if they spent that money. Because most people said, well, I'll hold it in savings. Humanity has told us that we don't make great decisions when we just have a pile of money sitting there. So that's really scary. And also people who bought really expensive cars in the last few years, really expensive houses in the last few years, who now have to make those payments on top of student loan payments. So could that cause some foreclosures and repos? No. The people that went over the edge on stupid

are always going to get caught. I did that once and I got caught. So stupid will catch up with you. It's got a real impact. This is like your skinny dipping line. It reminds me of that one. Yeah. It was actually Warren Buffett's. It wasn't mine, but I stole it. Yeah.

You can tell who was skinny dipping when the tide goes out. So there you go. The tide is going out, people. That's what's happening. Prepare yourselves. Get clothed. Yeah. But I think you're safe, Michelle, from a recession.

Maybe not a personal recession, but certainly a national recession. Kim is with us. Kim is in Tucson, Arizona. Hi, Tim. Welcome to the Ramsey Show. Hi, George and David. So I'm so happy to be talking to you right now. I have just so much gratitude and want to call and say thank you for helping.

I just paid off all my student loans. You're one of the 1%. Yeah. And oh my gosh, that's been such a journey. It feels like for years and years and years, I was trying to stay. Well, that's a little cut off one of those years for years and years. I was trying to figure out how do I pay off all my student loans? I felt like I was, you know, I made a great salary, but every year I'd get my, you know, W-2 and I'd be like, oh my gosh, what did I do with that money? And I was just living, you know, I, I, I was trying to have a budget, but I really went, I didn't do a zero based budget. I just went with like, all right, if I want to continue living my life, then how much is left over for paying off student loans. Um, and it really wasn't an effective way of managing that problem. And so I got really tired of it. And actually I, um, I just, I met the man I'm going to marry and it really kicked me into gear on getting my finances taken

care of because he, um, you know, he had all of his finances taken care of. And so I wanted to bring that to our relationship and have all of this cleared away before we decided to get married. And so, um, I got into gear last July. I really got serious about the baby steps. And, um, in just one year I paid off the remainder of my student loans, which was $45,000. Wow. And, um, definitely missed out on like buying new clothes and, uh, you know, taking a vacation. Um, I could have, could have, you know, it could have been nice to have some retail therapy, but, were a couple moments where I did celebrate bigger milestones. And with three loans left, I took myself out shopping and gave myself a conservative budget and made the most with it. But yeah, I just am so grateful.

It's a little, you know, it's a little unreal that this is, that I've reached this goal. But I honestly, like, I've reached out to so many different financial advisors along the way. And this was the most effective method for paying off my student loans. And I did it before forbearance went back in place or the government, you know, stopped the forbearance so way to go i'm proud of you how's it how's it feel to be free oh my gosh um you know what's amazing is that the cash is mine now and i'm so much looking forward to this is going to be the first bonus um that i am not putting towards debt and i oh, there's just something about being able to keep that money that brings me so much happiness. And like, this was so worth it. And, you know,

I was scared to stop retirement contribution. That was like the one thing where I was like, oh, I guess I'll do it because it's like $600 back in my pocket. But, you know, those were the things that I decided temporarily I will make those changes. And it worked. And it worked. And one year later, you're investing more than $600. Yeah, one year later. And I honestly, I thought that this was going to be at least 18 months.

Yeah. But once you get going on it, you just find. You know what else I'm hearing in your sentence structure and in your voice? honestly, I thought that this was going to be at least 18 months. But once you get going on it, you just find... You know what else I'm hearing in your sentence structure and in your voice is I think you have a newfound confidence. You believe in Kim more now. Oh, my gosh. Oh, my gosh, Dave.

That's so true. I just, oh, man, that is so true. And I just felt like being in debt kept me in a rut in so many different aspects of my life. Yeah, you not only kicked $45,000 to the curb, you kicked shame to the curb. Yeah, yeah, yes, exactly. Good for you. It was all of that. So when's the wedding?

Oh, there's not a date. First, the engagement needs to happen, but that's coming around the corner. But you're that confident. That confidence has now got into your relationships. Like, this is the guy, for sure. Oh, yeah. We've been ring shopping and all of that. So that's all in place.

Wow, what a year you've got. I'm so proud of you. Congratulations. Thanks. Hey, thanks for calling in. God bless you. That is absolutely amazing. You know, when you understand that personal finance is 80% behavior, only 20% head knowledge,

you understand that you permanently change while you are getting out of debt. It's a different you on the other side of it because your behaviors have changed and it changes who you are at a confidence level like we're talking about. The shame is gone. 100%. One year transformation. It can happen for any of you out there this is the ramsey show george camel ramsey personality is my co-host today hey guys uh you can help us out if you'd like you are our best marketing telling your friends about us and you can help us out if you'd like. You are our best marketing, telling your friends about us.

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admire that, the fact that you live in your mother's basement and troll all day long. I got to get my mom to leave a review. She watches on TBN every day, and she now sees it on a big screen. She says, you need to smile more. So I got to remember, mom, you're watching out there on TBN. Thanks, mom, for the media training. So she's my biggest critic right now yeah well and your biggest supporter that's true she's a big fan it's all in love george that's true she loves to critique mama camel and grandma too we got grandma watching tvn now yeah well and mama

camel's getting ready to be a grandma that's right we're on baby we could change her name that's right yeah all right jonathan's with us. We could change her name. That's right. All right. Jonathan's with us in Charlotte, North Carolina. Hi, Jonathan. How are you? Hey, how's it going today, guys? Better than we deserve.

What's up? Absolutely. So I've had a tough couple months. I got laid off. The light is at the end of the tunnel. And I got hired last week. Yay! Better job, I bet. I almost doubled my salary.

Whoa! Thank God you got laid off. Exactly. So that's what I'm doing. I'm trying to make sure that I'm doing what's best and what's right with that. And I haven't followed your baby steps to a T always. Well, it's time to start, Jonathan. Exactly.

Exactly. So that's where I want to make sure I'm starting this job. I'm going to get the paycheck the first month. I want to make sure that I'm doing this right from now on. Good. I have $87,000 in student loan debt, and I have $27,000 left on my car. And otherwise, I have no debt. I have $8,000 in savings. After I pay the rent at the first of the month, I have $11,500.

After I pay rent and everything at the first of the month, I'll have $8,000 in savings. So I have step one. I need to build my way back to step three. Thank the Lord I had it there during the layoff. And I still have $ have 24 000 in my rough um 401k good good and what's the new salary how much you're making the new salary is one uh 130 wow are you married i am not okay cool good for you all right so 114 000 in debt eight thousand dollars in savings and and $130,000 income.

Did I miss something? No. Okay. Well, it's simple and it's hard because you're used to having that cushion of an emergency fund while being very unsafe and insecure on the debt side. And so you're in Baby Step 2. You keep saying, I've got to get back to Baby Step 3. You were never there.

We got a step in between that we just skipped. We just leapfrogged it. You can't get to Baby Step three unless you've done two that's kind of how the numeral numerology thing works so um yes so here's what we're gonna do we're gonna attack the debts and your car is your smallest one and we're gonna throw seven of your eight thousand at that and you're at baby step one one thousand dollars saved now we're attacking doing the debt snowball and baby step two attacking at that, and you're at Baby Step 1, $1,000 saved. Now we're doing the debt snowball in Baby Step 2, attacking with a vengeance. And we're going to do nothing, no eating out, no partying, no vacations, no spending money. Well, I'm tired of renting.

What? I'm tired of renting. I don't care. You need to get this mess cleaned up. Okay. You're broke. That's why you're a renter. Mm-hmm. Yeah, so let's not be broke anymore let's get this

mess cleaned up so you got 114 000 if you pay off uh 65 000 a year 70 000 a year out of your 130 you're debt free in two years zero debt at all you have paid have a paid-for car, and Sally Mae will have been evicted from your house. You'll have your life back. How old are you? I'm 30. Okay. Or you can wander along the next 10 years and be mediocre, Jonathan, and at 40 still be screwing around with the student loan debt like most people do.

Or you can punch the thing in the freaking face repeatedly until it dies. Time to get with it. Are those student loans broken up into a bunch of little loans? They consolidated, but they're still, like, consolidated federally, and I think the average on that interest rate is, like, 5.8%. Yeah. So no adding to your retirement, no life for the next 18 to 24 months. And don't withdraw from your retirement either. Yeah, 18 to 24 months, it's game on.

It's I am so pissed, I am getting this mess cleaned up, I felt very vulnerable and afraid when I got laid off and I had $114,000 in debt. So the next time something bad happens, not if, when something bad happens, I'll have no debt. It's a different feeling dude yeah but not having i mean i because i didn't attack my debt so hard i had that three months you know safety cushion so when the rain happened i was okay yeah i kind of want to have that so you know i kind of don't care what you want you You're broke. Yeah. You call me.

Dude, do this stuff. I'm going to be mean to you. Do it. Come on. I'm your coach. It's halftime, all right? Okay. Okay.

Yeah, first half, in the first quarter, you got a little bit ahead. Second half, you got behind. And now you're coming in from the half, and it's time to get with it, and let's get this thing knocked out. You get a new lease on life. You got double your – thank God you got laid off. You got double your income. Listen, I don't want you to stay with no emergency fund for long.

The faster you get out of debt, the faster you're going to have a legitimate emergency fund. That's baby step three. But listen, millions of people have done what I'm asking you to do for you. It doesn't affect me, man. But listen, don't sit and argue with your personal trainer when he's got a six pack and you have a keg. Don't argue with your personal trainer. You called us.

Do it. Do it. Do it. Do it. Do it. Do it. You can do it, man. I'm cheering you on.

I'm not fussing at you. You can do this. Hang on. Here's the other part. The student loan pause is really what saved him. And's coming to an end uh abrupt halt and so those payments are coming back and so you lose another job you owe as many payments as 87 000 makes up so next time that happens you're not safe and that emergency fund is going to get drained real quick if we don't get rid of these payments they're killing you man yeah it's your shortest distance to peace financial peace two words that don't go together like airline service

okay it's your shortest distance to peace and your shortest distance to wealth the the distance the path we're giving you please the lady just called right before you and said how wonderfully it worked when she finally decided to work it so that's tough people go well dave i'm kind of doing your plan and i got no debt except for a hundred thousand i'm like are you listening to yourself like did you just follow the plan if it doesn't work come back and yell at us back later and hear how it sounds but you can't do half the plan and they get mad when you get half the results don't call us back here's the problem george you don't even get half the results because this thing doesn't it's not linear like that doing half the plan gives you 10 of the results it's that's what

the problem with ish is it's more damaging than it sounds because you feel like you're doing something ish you know but you're not really doing anything it's like you know you're gonna it's like the people that do yo-yo dieting you know you know what i'm talking about they lose weight and then they gain back and forth back and They lose weight, and then they gain back more. Back and forth, back and forth. Then they lose weight, and then they gain back more. And so the net five years later is they weigh more than when they started considerably. And so because they didn't change permanently the grooves in our brain

when it comes to the dieting people always say lifestyle. You have to change your lifestyle. Well, that's what we're talking about. Paradigm shift, behavior, all of it. Yeah, the whole thing. So hang on, dude. We're going to send you a copy of the book, The Total Money Makeover. I want you to get a highlighter.

I want there to be like hand grease on that book because you're looking at it all the time. Lots of sticky notes all through it. This is your guide. It is a proven plan. Ten million of these Total Money makeover books out there. It didn't happen because it didn't work. Those sales happened because this crap works. I don't know how to do nothing else, but dude, I got this down. Hang on. I'll give you a copy of the book. This is the Ramsey Show. George Campbell Ramsey personality is my co-host.

Thank you for joining us, America. Open phones at 888-825-5225. Hey, if you're a new listener and you want to dive deeper into the Ramsey baby steps, this whole Ramsey way of doing things, go to RamseySolutions.com, click the Get Started button, completely free, and we'll help you figure out what the next best step in your financial journey is. Janelle is with us in Spokane, Washington. Hi, Janelle.

Welcome to the Ramsey Show. Hi, Dave. Hi, George. Hi. How can we help? Yeah, so my question is, in short, how do I translate the personal baby steps to business? But I'll give a little background. I found you in 2016, paid off $60,000 in consumer debt and then the mortgage. And so we're on baby step seven personally.

What that afforded us to do was for me to leave my government job and open my own business two years ago. And I'm trying to figure out how much savings the business should have. You know, we keep those things separate. And is there ever a time when debt in business might, like, we have a big project we need to do that would bring in more business. Do I just practice that same patience and wait until the business can pay cash for that? Yes. Okay. Yeah, that's what I do.

We run Ramsey Businesses, a $300 million, Ramsey Solutions, a $300 million business this year. It started on a card table in my living room 32 years ago, and we've never borrowed a dime. We've had a lot of big projects projects and big is always relative to where you are right then right i mean when you're on a car table in your living room big is anything but um you know we're just uh uh we've sometimes we just had to say no to things but then we're always ready when something like a pandemic hits or when some other negative event occurs in business variables that we can't control, we've always got a pile of cash and no debt.

And so we've never laid off a soul. We've got over 1,000 team members, and we've never done a layoff. Even in downturns, even when we have fluctuations in cash flow, we don't have to lose our greatest asset, which is our people. And so we don't have to lose our greatest asset which is our people um and so we don't have to play corporate america games which is treat people like they're dirt and um so you know because we've handled done this with those principles so all of that to say um you're always going to have a tension uh between there's always going to be a shiny object in front of you. And I just have to tell myself, don't be a bass.

Okay, it's easy on our personal side. That's so easy to say. But a bass, you know, they jump on shiny objects, and you know what happens is they get hooked. And then they get reeled in the boat and filleted, okay? So don't be a bass because sometimes the bee is silent, and so you'll get that one yeah it'll come to me later but um yeah that's what i i have to tell myself that all the time because there's always something when you're in business you're in you're an entrepreneur you're excited about the opportunities

are in front of you and they all are good they're not But we always feel like they're good. All of our ideas, we think they're good. But they're not. And, you know, so what has happened is I've limited the size of my mistakes because I refuse to borrow in them. You will magnify the size of your mistakes in business when you borrow into them. Does that make sense? Yeah, it does. And then the other piece is as far as savings.

Right now I have our insurance deductible which is five thousand dollars that just sits there and then i have four months expenses because it is a seasonal business so far my goal is to not touch that four months in the winter but good but it's there should i have more than that yeah maximum of six and retained earnings six or six months of expenses in retained earnings is plenty. I've never been able to achieve that. We don't have six months of expenses in retained earnings today. That would be like bazillions of dollars, okay, today.

But the thing is, since I don't borrow money, I have to sit on cash. Yeah. Because cash covers the downturns and cash covers the opportunities to buy things, to try a new project that might fail. I tried a project 18 months ago that we're still closing up right now. That cost costs us $3.2 million in losses. We lost $3.2 million. I losses we lost 3.2 million dollars um i'm still kind of aching from that but um because i love the idea i still love the idea but apparently it sucked so um uh but it was painful really really painful and i'm i'm whining in front of everyone

right now but um but yeah but that at least it was cash right you imagine i don't have to pay payments on my mistake for the next four years it's over except for the emotional scars and tears and and whining but yeah all that but yeah so that's what you want to do six months covers your purchases it covers your new ideas and it covers your downturns it's called retained earnings it's not quite an emergency fund because it does more than just emergencies so it's a retained earnings it's not quite an emergency fund because it does more than just emergencies so it's a little different in that regard and the baby steps really do not apply to business okay because the the principles that the baby steps are based on do apply to business debt free have money in the bank borrow a slave to the lender so we don't borrow money live on less

than you make a foolish man devours all he. Always have savings because in the house of the wise are stores of choice food and oil. Spread your portions to seven, yes, to eight, for disaster may come upon the land. Diversify, okay? These are biblical financial principles that grant common sense in grandma's ways of doing things. Always be generous. God loves a cheerful giver. Be generous in your personal life. Be generous with your business.

No one hates generous people. Well, that's probably not true, but they don't hate them for being generous. It's an attractive feature. I'm a generous person. People hate me, but not because of that. They hate me for other reasons that they made up in their own little minds. That's right. Well, I want to help you with this.

I'm going to gift you Dave's book, Entrez Leadership, because this is the playbook that he's built this place on, and he's been doing it for 30 years now successfully. So we're going to send that to you. I also encourage you to check out the Entrez Leadership podcast, which Dave hosts, and you'll hear some of these calls where people got themselves into a pickle because they thought, if I just go into debt, we'll have more money, and it'll all work out, and then it doesn't work out. And business gives you more rationalization even than personal does, because you think you're going to make money with the money that you go in debt with i mean so that's the ultimate rationalization and uh you know if

i just if i just had this piece of equipment you know we could do it it doesn't feel frivolous you're not going on vacation or buying a car it's not it's not a piece of equipment it's not consumerism it's actually investing but it's still a bad idea it's still a bad idea and you still get yourself in a pinch. Good question. Thanks for joining us, Janelle. Yeah, do check out the Entree Leadership Podcast. I'm enjoying it. I just took it over, and we fired George in January.

In spite of me. He's such a big deal now. He ain't got time to do the DadGum Podcast, so I had to go do it. Well, they wanted me to do this YouTube channel. I'm like, guys, I already host 17 shows around here. We've got to take one off the list. There's only so much that George can do with his stardom. I'm a lot of man, but I'm only one man.

I've been told that. By nobody. It's fine. I'm not even commenting. Okay. Open phones here at 888-825-5225. The Entree Leadership Podcast, by the way, is now caller-driven.

So people like her call in to that show all the time, and we'd love to have you do that. And thanks for joining us. And, by the way, you can come to the Entree Leadership events. We have about 10,000 small businesses between the size of five team members and 200 team members that interact with us in coaching. We have a digital product called Entree Leadership Elite,

where you can follow through the stages of business and the six drivers of business. People come to Entree Leadership Summit. The Entree Leadership Master Series will be here on campus this fall. There's about 75 tickets left to that, I think. We only allow about 750 coming into it because we keep that very small. It's very interactive. And I love working with small business people because like janelle because they're the backbone of the american economy absolutely and they inspire me

when i meet these men and women at these events i'm going these guys are rock stars and they're running their businesses debt free and so it's another reminder that you can do this differently than culture says to yeah and let me just that was not a philosophical statement that was a statistical statement 54 of the gross domestic product in America, the economy, fifty-four percent is created by businesses with less than 500 team members, by definition small businesses. So small business literally, mathematically, is the backbone of the American economy. So, I mean, you know, whatever Dell does or whatever big company does is nice or whatever.

That's fun, but it really is not the economy. It's mom and pops running heat and air companies and ice cream shops and that are running a local veterinarian clinic. They're the ones that make the world go round, man, mathematically, economically. This is the Ramsey Show. Hey, George Camel here. If you love the show and you want a deeper dive on your money journey, we've got a weekly newsletter that gives you helpful articles and tips on following the Ramsey way. Just go to RamseySolutions.com today to sign up for the newsletter. Again, that's RamseySolutions.com to sign up for our weekly newsletter.