The Ramsey Show - App - What to Do With an Inherited House (Hour 2)

Episode Date: November 15, 2019

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. Thanks for joining us. Open phones at 888-825-5225. Rhonda's in Philadelphia. Hi, Rhonda. Welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call.

Sure. What's up? So my husband and I just found you a few months ago, and we started working our baby steps. We have a car that's leased and a car that's been financed, and we just were planning to pay them off. And then I heard a segment about you helping a caller get out of a lease and how much you're overpaying it. So now we think we just don't want to do that, and we want to get out of the lease.

So I'm not sure how we do that now that we've got our emergency fund down to $1,000 and we don't have the money to just go out and buy one right now. Right. You're working your debt snowball. So how much debt do you have, not counting your home? We're down to $98,000. Whoa. What are the student loans? Yeah, student loans and two cars and lines of credit. Okay. And the balance on the lease, the payoff on the lease, the early buyout is what? $32,000. Okay. All right.

And what is the car worth? $29,000. Okay. And what did you say, again, your income is, your household income? Before taxes, it's about $175,000 a year. Oh, that's good news. You're killing it. Very good.

Thanks. Okay, cool. Well, that's a lot of room. Okay. So how much is left on the lease? How many months? We just made it one year, so we have 24 more months on the lease. Okay.

And the payment is how much 463 a month okay so you're either going to pay three thousand dollars now but which is the difference between the early buyout and the cost of the the value of the car or you're going to pay $12,000 to continue to lease the car. Right. Yeah. I think you're probably better off with $3,000 than $12,000, don't you? Yeah. But then to get another car, is it okay to just get something less expensive

and have a payment for a few months until I pay it off? Or do I need to save up all that money cash over a few months and pause pay it off or do i need to like save up all that money cash over a few months and pause the baby step and then buy the car outright well we could um put at the front of your debt snowball six thousand dollars three thousand to buy a car and three thousand to get out of this one okay and so the first the first thing you do is build up six thousand dollars to get out of this car and get because that gets you gets rid of 32 000 of your debt right which is kind of nice you know so right you get kind of a junker car and then as quickly as you get out of debt of course with your fabulous income you guys are going to save and move up into decent cars

right with cash yeah so this is not a long-term thing. I mean, you should be debt-free in less than 18 months. And so two years from now, you're buying a nice car. Right. With cash. Yeah. I just hope I don't find something that'll last me two years. That's $2,000.

Well, two years. Really, two years. That's all you're talking about. Because you'll be out of debt in 18 months. Yeah. I'm calculating like 12 months because I took up another job and my husband's doing some consulting. Good.

All right. So as soon as you're out of debt, you build your emergency fund, then you start saving and move up in car. So it's 12 to 18 months, you're buying another car. Okay. So we just won't go get another note. We'll just try to get it. Yeah, just get you a beater or something to get around and get rid of this thing

because that accelerates the 12 months even, right? It does. It does. Yeah, I think I'm doing that. It would take four months to knock it out. What do you guys do for a living? I'm a project manager, and my husband works in IT at a college. You're both doing very well.

Congratulations. Thank you so much. Very well done. Good to talk to you. Thanks for calling. Jason's with us in Spokane so much. Very well done. Good to talk to you. Thanks for calling. Jason's with us in Spokane, Washington. Hi, Jason. How are you?

I'm doing well, Dave. How are you? Better than I deserve. How can I help? I've got myself in a mess. I'm an attorney, but I have my own shop. Basically, I've got about $400,000 in debt. I'm working for a new firm now, so I have a steady income.

A lot of that debt is taxes, student loans. I'm looking at a Chapter 13, which will be starting shortly. So my question is, one, should I do that? And number two, if I do that, how can I save money so that when I come out of it, I'm in a better spot? What's your income? About $100,000. Okay. And break the $400,000 in debt down for me.

What's it owed against? $115,000 student loans, about $40,000 back taxes to the IRS, employment taxes from MMO and stuff. $55,000 in business line of credit. $20,000 credit cards. $70,000 in vehicles that were being stupid. One is already, I've surrendered one already. And some other random debt. You're single?

I am. Recently, last year. So a divorce? Yes. And you've had a hard couple years here, brother. Yes, sir. Okay. course yep and you've had a hard couple years here brother okay um okay a chapter 13 is a payment plan as you know okay so um i don't know what it really benefits you um i mean you could put the irs on a payment plan and move them to the front of your debt snowball. You could ignore the credit cards for a while.

They're going to crash your credit, but not as much as a Chapter 13 does. You can sell off the vehicles, the ones already gone, and you're dealing with a repo collection there, which you pay nothing on for right now. And so, you know, if you just say, i'm going to list these off by importance and begin to attack them in that order put the student loan on hardship deferral put the taxes at the top of your list and pay them off very very very quickly like um i don't know uh eight months you'd be done with the irs easy making the money you're making just put yourself on beans and rice rice and beans right and uh then go through and the vehicles are gone clean up your credit cards um and then you The IRS, easy, making the money you're making. Just put yourself on beans and rice, rice and beans, right?

And then go through and the vehicles are gone. Clean up your credit cards. And then you can go settle with the vehicle. If you've been repoed, one of them got repoed or what? Yes. Okay. And the other one you're driving, right? I am.

And what's that one? How much do you owe on it? I owe $32,000. Okay. Sell it. Get you a beater. That gets rid of that debt. The repoed one, the balance is all they're coming after you on. The deficit balance, the difference between what was owed and what they sold it for.

And you can settle that for a quarter on the dollar in cash later. So I don't know that a Chapter 13 necessarily benefits you. I think you'll be out of debt faster and without as much damage to your credit just working a prioritized plan through this. And my plan would be taxes first, line of credit or credit cards second, the other one third, you know, clear up the vehicle debt with a settlement, and then start the student loans and begin to work through those. Because, you know, that's all you're going to do with Chapter 13 anyway,

is just wander through this stuff over the next, Chapter 13 is 60 months. It's five months you're going to be in that. And I think you can do it, you know, if you've got enough emotional energy left in your tank, after all the hell you've been through to fight through this. I think you can do it more efficiently without the third team, personally. This is the Dave Ramsey Show. If you're going to join this team, we want someone who cares and has a passion about what we do. That's why we trust LinkedIn Jobs.

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Visit LinkedIn.com slash Ramsey. Terms and conditions apply. In the lobby of Ramsey Solutions, Casey and Delilo drop by. Hey, guys, how are you? Great, how are you? Cool, from Lexington, Kentucky. How can I help today? We were just wondering. We had invested in some rental property using debt,

and we are looking to, we just got married this past weekend. Oh, congratulations. Thank you. And we're trying to, we're really motivated to start beating on this debt and get completely debt-free. Cool. My question was, we have quite a few rental properties. What would be a good liquid amount to keep on hand as far as repairs and whatnot before we start throwing everything else towards debt?

Okay. Well, real estate people traditionally don't keep enough liquidity. How many rental properties do you have? There's 26. Oh, wow. Very cool. And the value range is what? Cheapest to most expensive one.

Monthly or? No, the value of the property. There's one property that's got five duplexes and one quadplex. It's probably $480,000 total. And then most of the rest, there's probably 480,000 total. And then most of the rest, there's one house, and then the rest are mobile homes. Okay. All right.

So you've got quite a bit of repairs then. Correct. On the type of property you're dealing with. Correct. And so you've got to budget that, and you've got to budget vacancy. And really, you've even got to budget legal for turning over tenants against their will. Because it's part of your equation. And so you make a real good ROI likely on property like that.

Like on a mobile home, you'll make a good rate of return on it versus what you've got in it versus the rents are pretty rich. But you're going to plow a lot of it back in, in repairs, vacancy, and legal costs and other things because of what you're dealing with. So it's a higher hassle factor, but a higher rate of return. So all of that said to say, you need to keep pretty good pallet cash. And so, I mean, you can look at the overall portfolio and judge it out however you want, but I would want to keep at least three months of payments if you have debt on each one and on each one i mean you probably have them lumped in different accounts or one account or whatever just for the rental property but if you just add up all

your payments and say times three or four okay get keep yourself pretty liquid there uh while you go about the business of paying them off okay and I'm assuming you're going to work through paying them off and keeping them, from what you're saying, right? Yes. Yes, that's the idea. Okay. You're keeping all of them, or are you going to sell some of them to get liquid? I think we're okay liquid right now, but we were just, you know, wanting to make sure

we had a good rule of thumb, I guess, before we start, because we normally don't hear people, you know, we understand $1,000 if you don't have this situation, you know, and that just don't cut it in our situation. No, I would keep your rental property as almost like a business to the side and say, you know, I'm going to have about three months of payments in the rental property emergency fund. Then over in your personal account, I just work your normal baby steps. Okay. But that's a separate issue because, yeah, you can't keep $1,000 around with 26 of them and a bunch of them trailers. I mean, you're going to have too much stuff going on.

That won't work at all. But on your personal side, you know, that stuff ought to be cash flowing. It is, right? Yeah, yeah. Like ridiculously, I hope. Right. Yeah, it does pretty well. Good.

Okay. And I assume, do you all have incomes other than that? Yeah, yeah. She works full-time, and i've got a lawn care business on the side we do and uh and i've got a small car dealership okay so you got a lot of stuff going on good very cool yeah i would begin to get those uh paid down and i have a friend uh 20 something years ago when i used to do a whole lot more active trading, daily trading in real estate, made a bazillion dollars fooling with mobile homes as rentals. He would buy them for nothing. I mean, nothing.

And the rate of return on it was just amazing because you put a renter in there versus what he paid for them. It was very good. The downside is that there's no value at the end because they go down in value instead of up in value like other real estate. And so if they got dirt under them, at least you got the dirt when you're done. But that thing drops in value every year pretty dramatically. But if you don't have much in it and you're cash flowing like a bandit, it doesn't matter was his formula. He was using it as a cash machine rather than the long-term investment with, you know, a typical house would go up in value. And so that's how I'd probably try to look at those.

I wouldn't want to get into expensive mobile homes as rentals. I don't think that'll work at all because they're going the wrong direction. But it's an interesting cash machine. It really is. So very cool. Well, congratulations on the new marriage. Thank you, sir. Does that help you?

Yeah. All right. Thank you very cool. Well, congratulations on the new marriage. Thank you, sir. Does that help you? Yeah. Yeah, thanks very much. Thanks, guys. Open phones at 888-825-5225. Sam is with us in Columbus, Ohio. Hey, Sam, how are you? I'm doing good. Good.

How can I help? Okay. I am a new listener, and I'm calling for some guidance. I'm working on saving up $5,000 so that I can purchase a new car. So that will allow me to go back to college, a community college. However, I also have some student loans from the last time I was in college, a private school that I went to. And I'm just wondering whether I should continue working on saving up for that used car or should I just throw all the savings that I have right now towards paying off that loan before I even,

you know, think about saving up for a car and going back to college. So you don't have a car? No, I don't. How old are you? I'm 21. 21. Okay. Yeah. And going back to college, you said? Yes. Okay. Because I went to private school. I lived on campus. I was an RA for a year and a semester, and then I dropped out due to just, you know, mental health and me just realizing that I could not afford going there. And, yeah. So how much school debt do you have? Right now it's $7,000, and the interest on it is 4%.

Got it. Okay. And you're living at home, I take it? Yes. Okay. And you're working? Yeah, I work. Yes, I work.

I work at a donut shop, $10 an hour. And how much are you making total? $10 an hour. I know. In a month, what are you making? About $1,200. Okay. All right.

Yeah, I'm thinking about picking up a second job as well. Yeah. I might do something different than $10 an hour or in addition to that. I mean, you can make $20 an hour babysitting. Yeah. And, you know, so, I mean, walking dogs you can make more than $10 an hour. So I might do some things different to try to make a little bit more money if I could. And to accelerate this whole process, because at the end of the day, $10,000 changes your life.

By changes your life, I mean you're debt-free and you have a $3,000 car. That's $10,000, right? So how fast can we get $10,000 and where are we going to get it from? And that's what starts running through my head when I'm seeing this. And then you can decide which one comes first. I don't know that you need a $5,000 car, but you do you do need a three thousand dollar car i'll go along with you on that and i probably go get that and then make more money uh and keep making money now how are you going to pay for school when you go back um i was just uh probably just looking at financial aid and also working okay yeah just avoiding loans because loans have

not been a blessing for you they added to your stress and added to the mental health and all that stuff that you got into before because it was all it was all one big soup that was that was the problem it wasn't individual things it was when you stirred it all together it didn't work and so that financial stress didn't work in that situation so you could live at home and go to um like you said community college and you're going to study what i'm nursing good okay very good very good well i think what let's do three things one let's drop the price from five thousand to three thousand on the car i agree with you we'll put the car first. And then the second thing I would do is let's raise our income any way you can that's legal and moral without doing anything immoral or illegal. But raise your income just working all the time because the bad news is that you don't have any money and you don't make much money.

The good news is that $10,000, only $10,000, changes your whole life. That's good news. That's gettable right there. I mean, that's 10 months of an extra $1,000. I mean, let's say you picked up another job and you're making $2,200 a month. Five months, you got $10,000. You see what I'm doing? It's very, very reachable for you so you

got this you can do it you call me back if you need some more help pay cash for whatever you're doing pay cash for whatever you're doing pay cash for whatever you're doing this is the day ramsey show Folks, let's cut through the bull. Interest rates are exceptionally low, so you're missing out if you have not called Churchill Mortgage to see if you can save money on your home loan. Lots of other companies are out there claiming great deals, but don't get lured by slick advertisements. No-cost refinance offers do not mean they're free. Churchill Mortgage has a no-bull refinance. This means there are no hidden fees.

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761 Old Hickory Boulevard, Brentwood, Tennessee, 37027. In the lobby of Ramsey Solutions, Paul and Sarah are with us. Hey, guys, how are you? Hey, Dave, we're good. Welcome. Where do you guys live? Toledo. Toledo, Ohio. Oh, cool.

Where do you live? Waterville. Waterville. Okay. I was in Bowling Green not long ago. That's what I was thinking. I graduated Beachy. Did you live? Waterville. Waterville. Okay. I was in Bowling Green not long ago. That's what I was thinking. I graduated Beachy. Did you really?

I did. I actually went to ice hockey camp there when I was a little kid, a thousand years ago. Well, welcome, guys. Good to have you. Thanks for having us. And you're here to do a debt-free scream. Yes. How much have you paid off?

$72,200. Ah, very good. How long did this take? 24 months and one day. Very good. And what was your range of income through that two years? So we started out at about $110,000, and this year we'll probably be about $145,000. Excellent.

What do you all do for a living? I'm a police officer. And I'm a teacher. Ah, very good. Very cool. Great careers. You're doing really well. Congratulations.

Thank you. Very well done. What kind of debt was this? $72,000. Big ones. We had two student loans. So I had a truck for $17,000. The engine blew up in that in September, so our emergency fund was key to have.

Oh, my gosh. My student loan was $34,000. Hers was $20,000. And then we had two cell phones for $1,200. Wow. Very cool. How long have you all been married? Two and a half years.

Two and a half years. So you got married, came home from the honeymoon, and basically started this. Tell me the story. What happened? How did you decide your first goal as a newlywed couple is debt-free? Well, I mean, I took Financial Peace University as a senior in couple is debt-free well i mean i took financial peace university as a senior in college oh wow good and so i had a budget that i was you know working through and then we got married and i told him about the program and he really got on board yeah and

started doing a lot of research and started watching you. Oh, wow. Yeah. Yeah, I grew up really poor. My parents filed bankruptcy tons of times. And I remember when I was five going with my dad to church to get groceries because we didn't have any money. And I just didn't want to ever have to live like that again. Amen. Amen. That'll set you up for no way I'm going to be that.

Yeah. Yeah. And you're not. You make $145,000 a year, you don't have any debt. Yeah. Way to go, you guys. Thanks. Very cool.

And we had a baby in November. In the middle of all this. Wow. In the middle of all that, we had a baby. What'd you have? A baby girl. Oh. Thanksgiving morning last year.

Wow. Wonderful. Wonderful. Well, congratulations, you guys. We're very proud of you. So what do you tell people the key to getting out of debt is? You did it. Yeah.

You have to work hard. You have to solely focus on that. You can't be focusing on retirement or anything like that. My only mistake was I should have probably, we should have had more fun things to do, like when we hit certain goals just to make them, because I think Sarah got a little burnout a couple of different times. Yeah. And so when Paul's game on,

he's game on. Oh yes. Oh yeah. It was blinders. Oh yeah, definitely. And he, yeah.

And he was working a lot of overtime and picked up a lot of extra shifts and we had a newborn at home. So yeah, there were times where I was a little burnt out. I bet. Well, it's hard. It is. It's hard.

You're living like no one else. Now you can live like no one else. Exactly. And give like no one else. So you may be somebody bringing groceries to somebody now. Oh, definitely, yeah. So one of the cool things was how God blessed us towards the end is we still had $30,000 left on my student loan.

And it was a private student loan that I had for 11 years. And I just wondered if I could get a settlement on it. So I actually saved up the whole $30,000 in one chunk and went to an attorney downtown and paid him $300 to negotiate a settlement. And they actually settled for $14,000. Wow. So I saved $16,000 by doing that. Wow.

Yeah. That's huge. Yeah. Very cool. Very good. Well, good job, you guys. Thanks. You're free.

Yes. We did it. We made it. I love it. So other than the two of you, who was your biggest cheerleaders? Oh, man. We had a couple people at the church really supporting us and uh making sure that we were following and when we did feel like we're getting burnt out or felt a little stressed

they kind of kept us motivated and kept us going so came over and help you change a diaper or something yeah exactly very good way to go you guys very cool what was the hardest part for you the working hard and being burnt out part or what else? Well, I don't get burnt out work and I could work 16 hours a day, six days a week. But I think me being gone because she wouldn't see me for sometimes three or four days. So that was really hard on her. Yeah, our working shifts don't really match up. And sometimes there would be days where we'd go three, four days without seeing each other at all.

Wow. With a newborn. So it was tough. Yeah. Yeah. That is hard. We did it, though. We're out.

And you're done. We're done. Now you can do anything you wanted to. Exactly. Will you ever go back? No. No way. I love it.

Yeah. And we recently bought a house. Yay! So that's all because we are out of debt, and we can. That's it. We can buy a house, so yeah. Congratulations. Thanks.

All right, Paul and Sarah, we got a copy of Chris Hogan's book for you, Retire Inspired. That's number one bestseller. That's the next chapter in your story to be not only debt-free, but now move on up, and let's be millionaires and outrageously generous along the way, and I think you guys will be. Paul and Sarah, Toledo, Ohio, $72,000 paid off in 24 months

making $110,000 to $145,000. Count it down. Let's hear a debt-free scream. Ready? Yeah. 3, 2, 1. We're debt-free! We're debt-free! Well done, you guys. Man, I love it.

I love it. Open phones at 888-825-5225. You jump in. We'll talk about your life and your money. Stephanie is in Atlanta, Georgia. Hi, Stephanie. How are you? Hey, Dave.

Thanks for taking my call. Sure. What's up? So I just finished reading The Total Money Makeover. Somebody gave it to me for graduation. And, of course, I graduated five years ago and never read it until this weekend. But I just finished reading it. I'm in Baby Step 1.

I've had a Roth IRA set up for about 14 months now. And I have very little debt, so my debt snowball is going to be pretty fast. What I want to know is, do I need to stop contributing to my Roth IRA? Well, the Total Money Makeover told you to. You stop all investing until you are debt-free, except your home, baby step two, and have your emergency fund of three to six months of expenses. And then you restart investing, and at baby step four, you put 15% of your income into retirement.

Does that sound familiar? Yes, sir. Okay, all right. Now, how much debt do you have? Less than $1,500, about $1,400 and like $1,420. Okay, and what is your income? I make about $24,000 a year. Okay, good news is you've not got any debt hardly.

The bad news is your income's low. It is. Is it going up? Is there something going on there that I'm missing? I'm a hairdresser, so it's a little unsteady, but I'm also applying for part-time jobs in January. Just because of tax reasons, I'd rather all be in the same calendar year. So I'm applying because I want to go back to college.

I'm applying for jobs that have the tuition payment or tuition reimbursement. So it will be going up next year. I'm applying for basically any part-time job I can because I make my own schedule. You've got a long-term career goal of getting a degree and changing fields probably then. Yes, sir. Yeah, good. Good for you. Okay, well, you're on track.

Yeah, I would temporarily stop it. It's a temporary thing. We're not stopping it for very long. We're going to temporarily stop it and knock that $1,500 out and then build up, you know, $5,000, something like that as your emergency fund, whatever three to six months of expenses is. But it's probably somewhere around there. And so that's a $6,500 swing on where you are today, $5,000 in savings and $1,500 in debt, making $24,000. That's going to take you a little while. And you're talking about heading off to college too and so that's going to take some money and out of your budget and so it's

going to take you know it may take you a year to get back into your your roth ira but for right now i would stop it i don't want you to stop it for five years but for a short period of time until you can get some of these other things done because really there's a power to focusing on something and i really really want you to just focus on getting rid of the debt get your emergency fund in place then let's start talking about investing and by then you'll have some of this career stuff settled out so good question this is the dave ramsey show Thank you. alicia is in augusta georgia hi alicia how are you hi david i'm nervous, actually. Oh, we've never lost a patient. You'll be okay. Well, thank you so much for taking my call. I got really excited and stopped by McDonald's so my kid can be quiet in the back seat.

So I have a question. We are very new listeners. We are debt-free as of two weeks ago we just sold my husband's truck wow yeah we as soon as i heard you i was all in from the get-go um you had said not to do any of the um baby steps without like your spouse being on board so it was a whole two days for him to listen to your audio book oh wow okay to get him on board but um so we're debt free and we've been doing the envelope system for about two months now and we've always been doing four and five now i'm wondering about about baby step. My husband retires in four years.

I did big math and realized we can pay off the home in four years. However, being a military family, we may PCS in those four years. So we don't know where our next duty station may be, and we don't plan to retire here. So my question is, should we work the baby step six, or should we just invest that extra money? No, I'd go ahead and work baby step six, because you'll sell the house if you move. No, not if you move. You're going to move, is what you told me. You're not going to stay there after the military. And even if the military doesn't move you, you'll move after the military.

So we're not going to stay in this house. But when you sell the house, they're going to give you a check. Right. You don't lose the money. Right. And what you're doing is you're stabilizing overall. So 15% of your income going into retirement is baby step four. Saving for kids' college is baby step five.

And as you find money beyond that, yeah, let's go ahead and pay down the house or pay off the house, either one. Okay. Because you're certainly just going to put a for sale sign in the yard and turn that into money when you leave, right? Right, yes. Yeah. Yes. Well, thanks for your service, and tell him thanks for his service. We appreciate you guys.

Sasha is with us in Washington, D.C. Hi, Sasha. How are you? Hi, Dave. Great. Thanks for taking my call. Sure. What's up?

Okay. So, unfortunately, my mother-in-law passed away just a few months ago. She, however, did leave us two houses. So, we want to be wise in what we do with those. And so I wanted to get your advice. Where are they? One's in South Carolina and one's in Virginia. Okay.

So one has a small mortgage on it. And we're thinking about putting that on the market. And it would bring about $100,000 after the sale. And then the other one is paid off, and it's cash flowing right now. It's $1,650 a month. We could sell it quickly for $240,000, or we could put $30,000 into it in renovations and then sell it for about $300,000. Okay.

I would sell both of them now. Sell both of them now? Yep. Let me tell you how I came to that conclusion, okay? If you take the pile of money that you would have right now, if you sold without doing the renovation on the one, and the other one you put it up for sale on the $100,000 on that, you put that pile of money in the middle of your kitchen table,

and you ask yourself, would I go buy a rental that I need to do a rehab on out of state the answer would be no okay you're not going to house flipping in another state from where you live uh at least you shouldn't okay because very unwise you can get yourself in a pinch hard to watch over contractors house is actually 20 minutes away from our house. Oh, okay. That would be a little different. Okay.

Well, if you want to fool with that, then it's at least in your neighborhood. So would you buy that house, renovate it for the extra profit if you didn't own it? Well, probably not right now. Okay. Then let's don't do it right now. Let's go ahead and sell it. You see what I'm saying? A good way to ask yourself if you should keep something

or when you should get rid of something is to say, if I didn't own it, would I buy it in this exact situation that I'm in today? Okay? And if the answer is no, then it's time to sell it. And you inherited both of these houses, literally. You got into this by default, right? And it's a wonderful, wonderful blessing. But I would just take that money and invest it in a way that you would invest it,

not in a way she would invest it. Okay. We're on baby step two, so I'm imagining you would tell us to just go ahead and put that towards all the debt and move on to the next step. Yeah, move on and get your emergency fund in place, and you've probably got more than enough to do all that. How much debt do you have, not counting your house? $245,000.

Whoa. Okay, so this clears up all that what in the world is that student loans no we have a business so most of it is business equipment okay 165 000 of that okay well then this that makes the answer even that much easier if you had 100 if you had 240 000 sitting in the middle of the table would you go buy real estate with it, or would you pay off all your debt? No, you'd pay off all your debt. Because you're going to have no payments. What's your household income?

About $150,000. Yeah, and we just raised it about $40,000 because you got rid of all these debt payments. Right. Yeah, ding, ding. That's a no-brainer. Yeah, for sale signs on both of these tomorrow. Okay. It's going to clean up your whole life. It's wonderful.

But you have to raise your right hand and promise never going dead again. Ever, for anything. Because this is a get-out-of-jail-free card. You might not get another one of these. So, you know, yeah, that's a great deal. That's a great situation. But never go back into debt again for anything ever. If you're going to go back into debt, I can't help you.

But if you stay away from debt, then instantaneously I would sell those properties and get out of debt. Alex is with us in Columbus, Ohio. Hi, Alex, how are you? Good, how are you, Dave? Better than I deserve. How can I help? Yeah, so me and my wife are on baby step number two, and we have about $175,000 in debt, majority student loans.

Who's the doctor or lawyer? None, neither of us. My wife is getting her master's right now in social work, and I have a bachelor's in business and sports management. We basically just want to know whether we should sell one of our vehicles or what we need to do to... What are the vehicles worth? My wife's car is about $7,400, and my truck is about $22,000.

Your truck should go, yeah. Okay. You don't need a $22,000 truck. You're $174,000 in debt to get a master's degree in social work, which is not going to pay anything like enough to have justified this debt. Right. Wow. Ouch.

Ouch. Yeah. And I make about $40,000 take-home pay right now. What's she make? Nothing. She's in school, right? Right, yeah. She has one more semester left.

Okay. Yeah, for sure you can't afford this truck. I mean, you make $40,000. You got a $22,000 truck. That doesn't fit. But you guys are going to have to work very, very, very seriously on your incomes for the next four years. You need both of you raise your incomes dramatically in the next four years to begin to clear this kind of debt up. In other words, this education that you paid so much for has got to result in income.

Right. You've got to find a way to do that. She cannot get her master's degree in social work and go $100,000 in debt and come home and be a mom. She lost that option with the way you all did this. Does that make sense? Right. So go make some money and clean this mess up and for sure sell this truck. It doesn't fit.

It doesn't fit in anywhere in this situation. I'm sorry, man. But that's, yeah, the faster you can clean this up, the faster you're going to get your life back. And that's where we want you to go. We want you to get, you know, we want you to have a great life and win. And, man, that's just a, you're staring at Mount Everest going, I got to climb Mount Everest here.

And so you're going to need the equipment to do that, which is income. That puts this hour of the Dave Ramsey Show in the books. Our thanks to James Childs, our producer, Kelly Daniels, our associate producer, and phone screener. I am Dave Ramsey, your host, and we'll be back. producer and phone screener for the Dave Ramsey Show. If you would like to do your debt-free screen live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you to come to Nashville.