The Ramsey Show - App - What Was Your "I've Had It" Moment? (Hour 3)

Episode Date: August 26, 2019

Debt, Home Buying, Insurance   Tools to get you started: Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE   Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

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. Open phones this hour as we talk about your life and your money. It's a free call at 888-825-5225. You jump in and we'll talk. 888-825-5225. Tasha is with us in Georgia starting off this hour. Hey, Tasha, how are you? Hi, Dave. Thank you so much for taking my call. Sure. What's up? All right. So first off, I'd like to say I've had my I've had it moment.

And so I've been an ostrich all these years about my money, and I'm taking financial peace now. And while I was getting everything together to see how much I actually really owe, which is about $44,000, half of it is student loans, which current and the other half about 22 000 is everything else because i was normal and it's pretty much all in collections um and while because like i said i've been an officer so i don't even know how much i owe so while going through that and really paying attention and you know getting all that paperwork and everything together i found out that one of the companies tried to sue me two years ago, but I had moved to another state.

So I guess that complicates things a little bit. So now I'm kind of wondering, what do I tackle first? Do I tackle that old debt first because I'm afraid they might try to come back and try to sue me again, or do I tackle my current debt, which is mostly my student loans? Right. And what's your income? $48,500. Good for you.

And how much do you owe on your car? I owe nothing on my car. I went and sold my car and bought a Hootie. Hey, look at you. I've had it, girl. I love it. Yes. Good for you. right when i said

i was serious about my head at the moment i'm serious so yeah now so what are you on the other 22 000 that's not student loans are you paying anything currently at all on any of that no no i have not how long has it been since you paid on any of it? Probably like 2015. Okay. And what kinds of debt is it? Mostly credit cards. There are some medical bills. Oh, and then I had a car repoed in like 2014, and so one of them is that too.

Okay. Let's do two debt snowballs. Is your student loan one single loan or a bunch of little loans? It's three loans. Okay. Let's debt snowball it and work it off first. You should be able to do that in a little over a year on beans and rice, rice and beans. Yes.

Okay. Once you're clear on that, then your next debt snowball is on your defaulted debt and um the reason we're going to work it differently is because you're not paying anything on it so it doesn't free up anything in your budget when you pay one off right and there's no debt snowball there's no snowball it just you know you're just plinking one off plinking one off plinking one off like that right so here's what we'll do same thing we'll list them smallest to largest now old credit card debt that is five or six years old will settle for somewhere around 20 cents on the dollar of the original debt okay so let's say you had a thousand dollar debt and you call them up and they go oh no it's three thousand now because we've added all these fees and interest because it's been all these years

and all this stuff you say well i don't have that i do have 500 bucks or i do have 200 bucks or whatever right and you've saved up a little bit of money and you offer them cash as settlement in full as a percentage of the original debt, okay? Not as a percentage of what they say is owed, but a percentage of the original debt, some percentage of that. And that's what you'll be able to settle it for. Now, if they're tiny little loans like $200 or something like that, you just call up and get confirmation on what they are and just pay them. Okay. Like a little medical bill that was $70 and they say you owe $102.

Oh, just pay it. It's not worth screwing because you're going to have to screw around with them for a week if you don't. So just go ahead and get it. But get it in writing from them, confirmation as to what you're going to pay as a settled amount or as just the right amount. I mean, they tell you it's $102. Okay, send me an email that that clears this debt in writing, and I will send that check to you today.

Okay, cool. And they'll send you that email. You send that check out. Okay, or you got this other one that was $1,000. They've jacked it up to $2,422, but you settle it for $300, right? Then you get that in writing before two instructions. You have to remember these two instructions. In writing before you send them any money,

and you're settling each one of these as a lump sum, no payments. Right, okay. Save up $500 and settle. Save up $1,000 and settle. Save up 500 bucks and settle save up a thousand bucks and settle save up 500 bucks and settle just like that every time and so and what you're going to find is you may have to work on these a month you have to mess with them back and forth because you're dealing with collectors and a lot of times you're dealing with collectors from debt buyers because the original doesn't even hold the debt anymore right yeah and

you're gonna have to track them down and find out who holds the debt but the two instructions are it must be in writing or you do not send them any money because you can tell they're lying if their mouth's moving do not give them money unless you have it in writing. And keep a hard copy. Print. Hit print. Don't keep the email. Hit print on the email. Staple a copy of the cashier's check or the money order or whatever you sent to that and keep it in a file for the next 10 years because this crap will come back up. Got it. It has a high rate of resurrection.

It comes back to life. It's zombieville. Okay? Now, the second instruction is do not allow them to have electronic access to your checking account. Because they will clean you out. Some of them, a high percentage of them, are crooks. Them being secondary debt buyer collectors they're just crumb balls okay and so you have to get it in writing and you cannot give them

electronic access to your checking account because you agreed to 300 and you look in there and they took 600 out and there's not a lot you can do because you owe them more than 600 right what are you going to do say you didn't keep your agreement they're gonna say well you didn't keep your agreement and then you get in this arguing match so do not let them take electronic access so you can either wire them money you can do a prepaid debit card with only the exact amount on it uh that's the only kinds of stuff you can do all right you know uh but you can send them a check if you want to but you cannot let them have electronic permission to get into your checking account and bounce around. So in writing, no electronic access to your checking account when you're dealing with collectors.

It's okay to do that when you're doing like your electric bill coming out or something like that, your cable bill. Mine all comes directly out of my checking account. That's not a problem. But I don't let people that I'm adversarial with, that I'm in an argument with, even if the argument's settled, have electronic access to my account. That's simple. So that's how you do it. Work the separate set debt snowball. And what you're going to probably end up doing is saving up a little money,

and you're going to have two or three of these in play at any given time. And you'll be going, whoever gives me the yes answer first is going to get this batch of money, and the other one will have to wait on the next batch. So you better say yes quick, and you learn to play them. And you're just going to have to argue. Just get ready to argue. And they're not nice, and you have to hang up the phone when they're not nice, and you have to go through all this crap with them.

But that's part of cleaning up your mess. Glad you're not an ostrich anymore this is the dave ramsey show we've been voted one of the best places to work in nashville 11 times you want to know how we do it well our team has been using linkedin jobs for years to find the best people from all over the country to come and help us change lives. Think about it. LinkedIn has more than 600 million active members. I'm talking about people who come to LinkedIn to make connections, grow their careers, and discover new job opportunities. In fact, 90% of LinkedIn users are open to new opportunities, but not actively scanning job boards. This means LinkedIn Jobs gives you access to an entirely different demographic.

Don't wait. One hire can change the direction of your company. Post a job today at linkedin.com slash Ramsey and get $50 off your first job post. That's linkedin.com slash Ramsey. Terms and conditions apply. you know people are funny about making a will there's something about um making a will that makes some people superstitious there's something about making a will that makes people contemplate the fact that they're actually going to die i guess you're kind of looking down the barrel of a gun aren't you i mean we have these meetings about we have these estate planning meetings around here. Once a year, we get all the leadership team and the Ramsey family together and go over exactly what the plan is if Dave dies in the next 12 months.

It's a real cheery meeting. I always have a little Monty Python moment, like, I'm feeling much better. It's just like, golly. But that's diligence. You do plan for things. If you love the people, you're going to leave behind and we've done detailed research doing a will does not make you more likely to die you are going to die so you need a will everyone needs a will i know it's awkward i know it's awkward. I know it's uncomfortable. I know it's morbid. But here's the deal.

Seventy-four percent of parents of our Ramsey research team, we found that 74 percent of your parents don't have a will. This is ridiculous, y'all. That's just dumb. You need a will. Everybody, because, listen, if you don't, then other people decide about your stuff. Other people that aren't bright, like the the government don't let them do this now now august is ridiculous august is national make a will month oh joy that's what a dumb idea but anyway it's still at least it reminds you joy who sat down let's let's have we make will month? I guess the make-a-will people wanted you to do that. But you need a will anyway.

And if you hadn't thought about it, you need to name guardians for your children so the government doesn't decide. And you need to go ahead and tell Bobby that since he's doing heroin, we're not leaving him any money because we don't want to finance his heroin with our death. And go ahead and let you know bobby and you know as long as you're doing drugs you're not in the will dude because we love you and we wouldn't want to be the cause of your overdose so you know we're not going to be involved in this and you just go ahead and deal with all this family stuff and but some of you like you think denial is a river in

egypt and it's just like you do it you just live in denial so no no no no no you need to do a will here's the thing we built a little will free will preparation checklist it's completely free doesn't cost anything that means it's free and it helps you get your will ready so seven things the seven areas like naming guardians beneficiaries that kind of stuff what are you going to do about this what are you going to do about that and it helps you make that little list, and it's completely free. And then once you've done the checklist, you can set your actual will up in about 10 or 15 minutes.

So you can download the free will preparation checklist for National Will, make a will month, oh my gosh, and just text the word will to 33789. Text the word will to-789. Text the word Will to 33-789. Jenny is in Indiana. Hi, Jenny. Welcome to the Dave Ramsey Show. Hi, Dave. I already know you're better than you deserve. Some things are predictable.

We are huge fans of you and the work you guys do. You will find it funny to know that we read as a family on a road trip read aloud with our kids, Smart Money Smart Kids, and had great discussion and really appreciate the work you guys do. That's fun. How old are your kids? I have three teenagers, 13, 14, 16. Oh, that is an interesting discussion.

Okay. Yeah, yeah. But really, really great stuff. So thank you again for the work you guys do. Thank you. How can I help today? I'll be really, really concise if I can be. The big question is, are we putting away too much for later and living two-hand amounts now?

We do have a mortgage. It's super small at this point. It's under $100,000. The house is over $500,000 in value. I had a cancer about a couple years ago, came out of it. We were grateful. And then we started to feel like, wow, life could be really short. Maybe we shouldn't live quite so crazy tight all the time.

And so we went ahead and upgraded the family vehicle. But by upgrading it, we didn't go crazy. We got a seven-year-old hail-damaged van that runs amazing to this day. And then we decided we didn't really like having a car payment because we'd never had one our entire 19-year marriage. So we've been hammering it really, really well. It's a 3% loan, so we're okay with it. It's almost paid off. I think $3,400 is what's left on it. I got a side hustle to try to kind of hammer at it. But my husband's truck is 19 years old, and it has a small extended cabin. Our poor teenagers are crushed in it. So we were thinking about picking up another 5 to 10-year-old car.

But then we thought, well, we don't really want to do a car payment. So then we were toying with the idea of, you know, we've got a lot put away for later. Is there something we should be looking at that isn't going to cost us too much in penalties, if anything at all? What is your household income? Roughly about, I would say, I don't have it in front of me exact but it's it's around 100 okay and so and you're putting 15 of your income into retirement at least i think actually more we haven't had we haven't met with a financial planner and over 10 years what we teach is for you to be debt-free everything but the house first that's baby step one two and you're not

there because you got this stupid hell damaged van okay and then we teach you to have an emergency fund of three to six months of expenses and how much is in the emergency fund oh probably 13 or 14 000 write a check today and pay off your van okay and then let's build your emergency fund to three to six months of expenses and then start putting only 15% of your income away for retirement. Above that, I would save up and start buying him a car in cash, in cash. No car debt ever again. No car debt ever again. No car debt ever again. No card debt ever again.

Crank your investments down to 15% of your household income. So if you make $100,000, no more than $15,000 going into retirement until we get his car purchased, we get kids college funded, and we get the house paid off. Okay. How much is in all of your nest egg now? You know, I pulled out the financial plan from 10 years ago. No, no, no.

Right now in the balance in all of those accounts, roughly $2 million or $2? Roughly. Roughly. Probably, I don't know, half a million. Okay. All right. So if you stop. It's always been more than what we've needed, we've been told.

Yeah, okay. So you've overfunded that and underfunded some of these other areas. Okay. And yes, you do need to make some adjustments, and it's just a matter of we're going to save up and buy a decent truck. You've got a half a million dollars. You've about got your house paid off, as you mentioned, and we've got to get this stupid van

and clean up some of the little stuff around the bottom of this and then work your way back up but limit your investing to no more than 15 of your income until you get his truck paid off you get college fund or you get a new truck they're not brand new but you get a new truck you pay cash for and uh a better truck and then you are funding the kids college and and then we're paying off the house when that's done and only when all of that's done would you put more than 15 percent into retirement and that's what we teach with the baby steps it's all outlined very in very much detail in the total money makeover so thanks for the call we appreciate you summer is on youtube watching us and says is the 25 of your income rule for your house payment calculated on one salary or both it's 25 of your

household income your household income would consist of a married couple both of your incomes if you're single it's your income because you should never buy a house with someone you're not married to. That will get you into a real world of hurt. So there you go. Richard is on Facebook. What type of insurance, life insurance, is the insurance to absolutely stay away from? Any life insurance that has a savings component. Cash value, universal life, whole life, anything like that.

Indexed universal life, variable life, anything that has a savings component to it. You do not save money inside of a life insurance policy. You save money anywhere except inside of life insurance policy. Go to ZanderInsurance.com and you can get a quick easy quote on the only kind of insurance we recommend, which is term insurance. Zander, Z-A-N-D-E-R, insurance.com. Let's talk about low interest rates, baby. I know right now that Churchill Mortgage can get qualified buyers into a 15-year conventional loan for well under 4% with no discount points or no hidden fees. Listen, if you're even thinking about buying a home or refinancing, do it right now. These rates are incredibly low. Here's what I'd like you to do. fees. Listen, if you're even thinking about buying a home or refinancing, do it right now. These

rates are incredibly low. Here's what I'd like you to do. Take 10 minutes and call Churchill Mortgage and see what you can qualify for. So even if you have to get creative and buy something further out of the city to get something you can afford, now's the time to make the move. That's why I'm sending you to Churchill Mortgage. I trust them to look out for you and your budget. Don't miss this opportunity. You can secure these low rates now for up to 90 days through Churchill Mortgage. Call 888-LOAN-200. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, TennesseeN 37027

In the lobby of the new Ramsey Solutions Headquarters on the new debt-free stage, baby! Sean's here. Hey, Sean, how are you, man? Dave, I'm great. How are you doing? I am better than I deserve. Welcome. Good to have you. Where do you live? Outside of Kansas City, Missouri. Fun! Well, that's where our new daughter-in-law's from, so we love Kansas City. Good stuff, guys. Good stuff. So you're all the way down to Nashville to do a debt-free screen.

Yes, sir. Yes, we are. How much have you paid off? Paid off $23,251 in 14 months to the day. Very good. And your range of income during that time? Starting around $38,000 up to $70,000 doing side gigs and my main job. You doubled up, man.

Yes. Doubled your income in a year. Yes. Lots of side gigs. Lots of side gigs and my main job. You doubled up man. Yes. Doubled your income in a year. Yes. Lots of side gigs. Lots of side gigs. I delivered pizza when I didn't have the girls. I shot fireworks and sold fireworks as a side gig and anything I could find to do to save money I tried to do it. What was the best paying side gig? Delivering pizza for sure. Really? Yes. So what'd you make in a month or like if you worked how many days and what'd you make i would make anywhere from 15 to 1800 and about four nights a week in a month a month yeah okay so about 1500 a month four nights a week yes that's not bad not bad at all not bad very cool well that adds a bunch i mean that's 18 20 000 a year right there yes put the firework stuff on

that it comes up and then what do you do for a living? I'm a production manager for an aerospace company in Lee's Summit. Oh, great. Okay, cool. What kind of debt was the $23,000? It was a broken arm on Samantha. I had a car that I financed through a girlfriend's credit. Uh-oh. Yes, I had a 401K loan.

Wait a minute. You financed on her credit? Well, it was in her name name and i paid her for it okay yeah all right all right all right still wicked bad okay yeah it wasn't good at all but got through it um we also paid off uh 401k loan we paid off uh boy just pretty much a little bit of everything it was it was great had a credit card in there gotcha so samantha and your other daughter's name is alice alice so alice why did you break samantha's arm i'm kidding oh my gosh wow guys so what happened sean uh 14 months ago because you just went you just flipped a switch and just went crazy man i did i i got sick and tired i was sick and tired of not having any progress any any money at the end of the month, I guess.

Do you remember the moment that I've had at moment? Do you remember the moment? Yes. It was January 8th of 2018. I said, this is enough. What happened that caused that? I was getting bills in the mail that day from the hospital. Oh, I see.

You just opened the mailbox and they all fell out in your hand and you're like, life's too short. I worked really hard to not add any debt to my life for about six or seven years. And I was working through a lot of debt that I had. And I was down to this last $20,000 and I got $3,000 more in the broken arm. But, you know, I was just ready to flip it on. I took the girls to Disney World at the end of 2017. And I said, okay, that's what my Pizza Hut job was for. I was going to pay for that.

And when it was all said and done, 2017, it left me with a car loan that I hadn't had a car loan in over six years. And I had borrowed another $4,500 from my 401K to pay for the trip so after spending all that time away from the girls it was like i was further in the hole than i had even been before that and i was just mad the hurrier i go the behinder i get i was mad i heard about a few years ago and just didn't pay attention and i said you know i'm tired of doing it my way tired of trying tired of trying to, you know, figure this out on my own. So I jumped back on your wagon and turned it on. Didn't have much of a social life for about a year and just turned it on. And it's worth it.

It was worth it. It feels good to be free. It does. It does. Wow. Good for you. Who were your biggest cheerleaders while you were doing this? You know, I had quite a group that was connected through Facebook.

Oh, okay. Just personal friends and people that I know. Like the Baby Steps group on Facebook? Yes, they were a support, but I had my own group of friends that have been members that have done your program or that have worked to get out of debt. And, you know, some of them are on Baby Step 7, some of them in Baby Step 2, but they cheered me on. I had support at church. I had just support all around me. I didn't have really anybody detracting from me.

That's good. A lot of support. That's good. Well, you were working your butt off, that's for sure. So what do you tell people the key to getting out of debt is? Having a plan is very important. Being able to say, this is what I'm going to do, here's my end, and this is what I need to do to get there. So if that plan is a budget, that plan is keeping tabs of every little thing that comes along and planning ahead for it.

So I had a sinking fund set up for the girls to go to Bible camp this summer. I had a sinking fund set up for a fireworks event coming up that I wanted to do. I just had a plan. And I kind of cheat a little bit. I have all of my bills coming out of one checking account, and I get that much money direct deposited every paycheck. And so they're on autopay. So that gives me peace of mind that I know all my bills are covered.

And then I only have to micromanage this much money. This is on autopilot, and here's where I have to manage my new sins. Okay. So that really helps me out. All right. It's always good to put things on autopilot. Yes. It never messes you up.

I love it. Well, congratulations. Thank you. Well done. We've got a copy of Chris Hogan's Everyday Millionaire's book for you because that's the next chapter in your story for sure, hero. Well done. And next month I'm starting, I'm going to coordinate one of your classes.

Awesome. Yes. Thank you. Very good. Help others. Very good. Well, we've got a couple of new videos in the class that have been redone. The new one, the generosity video, the last lesson in financial peace is brand new.

We just reshot it. And it is, it's one of the best pieces of work we've ever done. It's really incredible. Not because I did it, but, I mean, just the writing, the team put together on it, the way we did it, the storytelling, it's good. So you'll really like it. Thank you for leading a class, and thanks for coming all the way to Nashville with the girls and doing your debt-free stream.

That's fun. We're excited for it. Well, way to go, man. You paid a price to win, and that's how winning happens. Thank you. We're very, very proud of you. Thank you. All right.

It is Sean and Samantha and Alice from Kansas City. $23,000 paid off in 14 months, making $38,000 all the way to $70,000. Count it down. Let's hear a debt-free scream. Three, two, one. We a debt-free scream three two one we're debt-free love it guys yeah baby this is how it's done wow that is so important you know it just you isn't it interesting the number of times we talked to someone on their debt-free scream and the answer was not necessarily that some big event happened but something as simple as i got too many bills in the mail. I looked down and my gas tank in my car was on E.

I'm in the basement fixing a water heater. These are just life things, right? But something happened in that moment anyway where you were just ready and you said, I'm not living like this anymore. I've had it. I'm sick and tired of being sick and tired. And Les Brown, the great motivator, says people change their lives when they finally say, I've had it.

You got to have that moment. And what I'm telling you is that it is a little bit manufactured. It isn't like necessarily this really big life thing. I mean, your car being low on gas is not exactly a big life thing. The water heater going out is not exactly a big life thing. Opening your mailbox and finding bills there, that's not necessarily an unusual event. That happens to most people every month. But what's different was the way those people

looked at that situation and they went no no no i am not living like this i am not going to be owned by some freaking banker what's in your wallet money, because I got rid of you people. I'm not going to be owned by a car payment. I'm not going to be owned by medical bills. I'm not going to be owned by Sally freaking May, ugliest woman on the planet. I'm not going to be owned. I mean, she's ugly to the bone, y'all, really. I'm not going to be owned.

The borrower is slave to the lender. And you can just look down in your present circumstances and just decide today I'm disgusted. I'm not living like this anymore. You get to choose right now. I'm talking to you. You get to choose, right? Yeah, you. You get to choose. Ready, set, go. our scripture of the day hebrews 412 for the word of god is alive and active sharper than any double-edged sword. It penetrates even to dividing soul and spirit, joints and marrow. It judges the thoughts and attitudes of the heart. Colin Powell said, If you are going to achieve excellence in big things, you develop the habit in little matters.

Excellence is not an exception. It is a prevailing attitude. Justin is with us in Missouri. Hey, Justin, welcome to the Dave Ramsey Show. Hi, Dave. Thanks for taking my call. Sure. What's up?

My wife and I are 100% debt-free, including our house. Woo-hoo! Thank you, because of you. I am 35, and she's 29. Wow. We have two daughters, ages three and one, and are hopeful to possibly have one more child in the next year or two. We are getting ready to start building a house, probably moving dirt in the next two to three months with probably a seven to nine month build. The land is paid for as well. So with our paid for house and the cash

we currently have in the money market account, we have about a 60 to 65% down payment for our new house. So my question for you is, do you think we should stop contributing to our Thoroughly 1Ks, Roth IRAs, and our daughter's 529s currently until the house is built probably 12 months or so from now and add that to our down payment? Talking about probably around $40,000. Wouldn't hurt. Okay. You can certainly make up whatever ground you guys are incredibly disciplined you're light years ahead of your peers your age group you're in really really good shape you've done a wonderful job um and so whatever ground you were to lose during that 12 months you can make up without any any question because then the goal is we're back to working 15 of your

income going into retirement after you move in kids college and trying to get the house paid off so what would your loan balance be when you move in if you did that if we did the additional 40 000 right about 200 okay and so what's your projection on paying it off hopefully seven years okay all right at if it was 250 i was hoping seven years or less um so that's kind of my kind of our max goal yeah so you'll probably do it in five okay hopefully yes no because you guys you have a you've had a discipline decision making intentional decisionmaking has been good to you and so you're very likely to do it again we have been intentional and as you say um when you're

intentional and you start down this path other things tend to happen good to you and that has without a doubt been the case yeah but i mean the what it must have is you have been rewarded by doing this before, so this is not your first trip on this cabbage truck. That's correct. But your tendency is going to be towards smart stuff instead of dumb stuff, and you're going to get this debt cleaned up is what you're going to do as fast as you can. Yeah, I'd take a year off. I sure would. It's not the end of the world either way. You could go either direction.

Neither one of them is a dumb choice, but I like the idea of setting a house up to be done with it in about five years, maybe six years. And that sounds like where we're going to land here. So really good question. All right. Mary is with us. Mary is in Tennessee. Hi, Mary. Welcome to the Dave Ramsey Show.

Thank you very much. We love hearing you. Thank you very much. We love hearing you. Thank you. How can I help? My husband and I just bought a Honda CRV, traded in our older Camry, 10 years old, with low mileage, and paid the balance. should get the warranty which would run if we got it for six years or 72,000 miles would be almost $2,700 no okay what about like three years that they gave us the none at all period here here's why you have you have other money in savings do you you not? Yes. Okay. How much have you got in savings? Well, in money market, we've got about 20. Okay. Let's kind of walk through for a second how warranties work, all right?

If you had 1,000 Honda CRVs like yours, and you lined them all up, and you studied them, and said, well, on average, the stuff that's covered by this warranty is going to cost $200, okay? Let's just make that number up, okay? So if you and I were going to open an extended warranty company, we would want to know the data on how often the Honda CR-V of this age breaks. And we would study 1,000 of them, and we'd say, okay, the stuff that this warranty covers on average, we can cover it for $200.

On top of that, we want to make a profit, because that's what it's going to cost us to cover 1,000 of these things. It's $200 times 1,000, right? And then I'm going to make a profit on top of that and I've got to sell get this car dealer to sell it so I got to pay them a commission for selling my warranty and here's what the numbers tell us when the research is done on car warranties 12 percent of what you pay of the $2,800 or whatever it was you said, $2,700, 12% of that, or about $250, actually covers the projected costs of the breakdown on average. The rest of it goes to profit and to marketing. And so, on average, if your car breaks down twice as much as average, you're going to come out $2,000 ahead by self-insuring through this.

Does that make sense? Kind of, yes. I'm trying. Okay. I'm trying to follow you. Okay. All right. Well, the bottom line is the average Honda of your car type, during the period of this warranty,

they will not spend more than about $250 to repair the average car. Does that make sense? Yes, but what the guy showed us at the dealership was a chart, like for electronic repairs necessary, it was like thousands of dollars it would take yeah but on average it doesn't cost that or the more or if it costs if the typical person buying this warranty if a thousand people buy this warranty for two thousand eight hundred dollars and the average cost that it fixes per car is four thousand dollars this warranty company goes out of business right because they didn't charge you enough to cover the average car yes you could

have one thing break down but honda crvs have got a great reputation as not being a bad car they're typically not lemons they have a great reputation for maintenance is one of the reasons you bought the thing you probably already knew that and so i'm taking the risk if i'm you because the average honda has about a 250 breakdown during the period of time you have this warranty i know that based on what they're charging you for this warranty and uh and so even if yours is twice as bad as average it's a five hundred dollar breakdown and you still put a couple thousand dollars in your pocket net when the smoke clears the guy trying to sell you this is trying to sell you this because they're paying him a thousand dollars to sell you this two thousand dollar warranty

of course he's got a chart to show you how to do this he's a timeshare salesman run no you do not buy extended warranties on anything that you can afford to self-insure and you can afford to self-insure through this car as a matter of fact you could buy two more of these cars if you wanted to and it still wouldn't break you so no do not buy extended warranties do not buy extended warranties on anything. Here's how you know. He spent more time selling the warranty than he did the car.

Here's how you know. When you check out at Best Buy, if you're buying a pencil, they want to put a warranty on it and sign you up for a credit card. Why? Because Best Buy actually does not make much money on a TV sale. They don't have a lot of margin at Best Buy.

They make all their money on signing you up for their credit cards, their 90-day same-as-cash which turns into credit, and their stupid extended warranties. Don't buy extended warranties. They're a profit scam for the company. Don't buy credit cards. It's a profit scam for the company. Don't buy credit cards. It's a profit scam for the company. You can tell this because they worry the pee out of you to get you to buy it.

And that tells you what's going on right there. That puts this hour of the Dave Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, it's Blake Thompson, Senior Executive Producer for the show. You know, you can listen or watch anywhere with the Dave Ramsey Show app on your smartphone. Catch the full show or watch the highlights and check out Dave's upcoming guests. Head to the App Store and download it today.