The Ramsey Show - App - What's Next After Becoming Debt-Free? (Hour 3)

Episode Date: February 11, 2020

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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 am Dave Ramsey, your host. This is your show. Thank you for joining us. Open phones at 888-825-5225.

That's 888-825-5225. Ryan starts off this hour in Philadelphia. Hi, Ryan. How are you? Hey, Dave. How are you doing? Better than I deserve. How can I help?

So I'm currently a 20-year-old student, actually, about a week away from finishing my sophomore year. And I'm scheduled to graduate in about two years with around $20,000 in student loans. Okay, I'm having trouble understanding you. Can you speak directly into your phone, please? Oh, sorry about that. I'm currently a 20-year-old student, and I'm about a week away from finishing my sophomore year, and I'm scheduled to graduate in about two years with around $20,000 in student loans. So my question to you, and this is a pretty open response, is what type of plan can I create so when I get my first paycheck, I know exactly what to divvy my money out to

and what I can do to set myself up for long-term future financial success. Gotcha. Cool. What are you studying? I'm going to be a nurse. Great. Good for you. Excellent. Good.

And so you're a sophomore, and how are you going to pay for the next two years of school? Well, my parents are currently taking care of that end of it, and so I'm just going to graduate and have that $20,000 of student loans to deal with. Okay. So they've got the next two years, so you won't have any more debt. No, correct. The the twenty thousand dollars is going to be what i graduate with good good for you okay cool all right then as soon as you graduate what we're going to do the first goal is to graduate and to not add any more debt so work enough budget carefully enough watching your every dollar behave that you have to work with, you know, cut, you know,

be very, very, very careful to not add any debt to this equation. Okay. So first goal is do no more harm. Kind of almost a medical thing, right? And so then when you graduate, I would start working the baby steps. The first check you get, you're going to, again, with no more debt, you're going to set up your household. You're going to be getting an apartment and buying a used couch and hooking up your electricity and that kind of stuff. As soon as you can find any money,

any wiggle room in your budget, which may be a few months into getting a paycheck, actually, your first goal is to save $1,000, and that's your starter beginner emergency fund. Once you've done that, then you start your debt snowball, and that's attacking your debts smallest to largest. Now, is the $20,000 broken down into several smaller loans, or is that just one loan? I'm pretty sure it's subsidized, unsubsidized, all that type of federal loan. I'd have to look deeper into that, but I'm pretty sure it's just $20,000.

You got it in several different tranches, though, several different batches you got it. So you probably got some $5,000, some $6,000, whatever. So you just list those debts out by the balances, smallest to largest, pay minimum payments on everything but the little one, and attack the little one with a vengeance, and work your way right through them from there. Pay minimum on everything but the little one, and attack the little one. The good news is, as a nurse, you should be debt-free in a year.

You should pay off $20,000 a year. Just live on beans and rice, rice and beans, and clear that debt as fast as you can. Once it's clear, then I want you to take the steps necessary to begin to build your emergency fund of three to six months of expenses. Okay. Adisagi is with us, and he is in New York. Hey, how are you? Hey, Dave Ramsey.

I'm very good. Thank you for taking my call. Sure. What's up? So I just finished paying off my student loans. Yay. Yeah. I'm really excited and I'm really happy.

And I'm just looking forward to starting my emergency fund, getting that off the ground. And me and my girlfriend would also like to, by the grace of God, be married within the next year or so. Yay. Good. Things are going good. Yeah. And we want to save up for our first house, but we're also both interested in going back

to school, and we're trying to navigate whether or not we should go back to school first versus actually buying a home. Okay. What will it cost to go back to school, and how long will it take you? So school for me is a PA school, physician assistant school, and that ranges between about $40,000 to $80,000 for a two-year master's program full-time. Okay. Okay.

And then you'd have to save up the money to pay for that instead of buying a house, right? Yeah, I guess that's the dilemma. Okay. It's kind of prioritized. Right. And what about her? If she wants to go back to school, what would she pay? She would pay, well, it's a nursing school,

and we'd probably aim for like a state school, so hopefully about $20 40,000 okay all right and what are your all's degrees in now um so i got my degree in a respiratory care but i work in a cath lab where you know people get stents and get diagnosed for uh coronary artery bypass surgery what do you make uh last year I grossed $105,000. Okay. And PAs make a lot more than that? Starting

off, no, but over the course of the career I make what I make with, including overtime, so I have to make about 60 hours a week. Okay. And what does your wife make now? Your girlfriend wife-to your wife make now? Oh, well, she's my girlfriend now. Your girlfriend, wife-to-be, make now?

She makes about $50,000 a year. Okay. All right. So her getting her nursing degree would probably give her more immediate lift, more bang for the buck than your PA would. Long-term, your PA is a good investment. I don't disagree with you. But short-term, your PA is a good investment. I don't disagree with you. But short-term, she would get an immediate raise for less money.

I mean, she can get the nursing degree for a fourth of what you can get the PA. So probably I might keep working and get her through that and let that increased income on her part help either get the house or get, you know. Basically, you've got three things to lay out her nursing your pa and a house and you just need to decide which order to put them in okay and which one goes first i'm probably going to do the nursing first because it's the the least expensive and the best raise for the dollar for the dollar spent okay yes and then that gives you more money to do the other two things with whichever order you do them in whether you buy a house first or do the pa first either

one i don't care but um the thing i've learned is just how do you eat an elephant a bite at a time and we just need to lay out which one of these things do we want to do first and if you want to delay investing a little while your baby four, while you knock these three things out, even if it's five years or something, you've got legitimate thing here that the rate of return on your investment is excellent here. And so in terms of you're investing in a type of education that is going to cause you to make more money

versus if you just took that $50,000 in and invested in a mutual fund, you're going to make money on it, but not as much as you're going to make on buying an education that causes you to make more money. And so you are a better investment in this situation than a mutual fund is because of your career choices and your fields that you're going into. And so that's the way you look at it. It's just a calculation at this stage of the game.

So then you put those three things in whichever order you want to put them in. It's your life, and there's not a right or wrong answer on that. This is the Dave Ramsey Show. You know what I've learned after talking to so many people who have been victims of ID theft? They feel violated and they have a sense of fear and intrusion. It can be overwhelming. It's scary and infuriating at the same time. People question your character. You try to figure out how it happened and you worry it's going to happen again.

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Do not wait until it's too late and you have to go through this nightmare on your own. Go to Zander.com. millions of you listen to this show every week and have for some time millions of you are fairly new to the show but in either case if you are listening to the show and you hear somebody ask a question and you answer you play the game i'm going to answer faster than dave does because you're riding along in the car listening. If you already know the answers to the questions, but you're listening just because people are entertaining, and this show is entertaining in that regard, you like helping people with money. That's what that means.

You know the answers to these questions. And you can't resist at dinner telling somebody the answer to the question if it comes up. If that's the case, then you're the perfect person to become a Financial Peace University coordinator. Financial Peace University is our nine-week class. It's a year-long subscription, and part of the subscription is you get online access to that, online access to every dollar plus for a year connecting to your bank, and you get to go to the class somewhere, and a kit that goes with it that's nine weeks long. The nine-week class we need volunteers for.

Any given time, we've got about 10,000 of these things operating, and it doesn't take a ton of time. You don't have to be a financial genius. You don't even have to answer the questions like we're talking about. You just have to care about the subject and care about watching people's lives be transformed. You see, when you're coordinating one of these classes, you have a front row seat to watch people be transformed.

It's pretty cool. So one of our advisors would love to talk to you about becoming a Financial Peace University coordinator. It's very easy to do. Just text the word LEADER to 33789. That's the word LEADER to 33789. LEADER 33789. That's the word leader to 33789. Leader 33789. Ashley is in Birmingham.

Hi, Ashley. How are you? I'm good. How are you? Better than I deserve. What's up? So my husband and I have a turf grass business that is less than a year old, but it's been very successful,

but we've just found out that we are moving for his job, and we cannot figure out how to price it. We have someone who works for my husband who's been helping us run it. He's been very involved, and he's probably going to purchase it. How do we price what it's worth? Okay, turf grass. You're doing fertilizer or you're installing actual turf? Fertilizer. Okay. Turf grass. You're doing fertilizer or you're installing actual turf? Fertilizer.

Okay. All right. So you have a series of customers that several times a year you go do treatments on their lawns. That's correct. We have about 45 customers and they pay a monthly fee. We're at about gross $4,500 a month, about net $2,600, $2,800 a month. Okay, and that's before any labor is paid? No, labor is $2,600, but we're at about $2,600, $2,800, including labor,

because my husband and this guy who works for him, they do the labor, and so that helps with my husband doing the labor. Okay, so if your husband is not there there this guy is running it um what is he gonna net um i would say maybe 3200 because he's gonna do all the work correct okay he's probably going to take this on as a full-time because it's almost to the point of being a full-time job let's pretend that um that he had to hire someone and the person buying the business was not going to do any work they were just going to own the business what would you pay someone a month to do this work

oh it's probably we pay him 20 an hour and he probably averages maybe 15 to 20 hours a week. Mm-hmm. Okay, but will that do the whole, all 45 customers? Yeah. Mm-hmm. Okay, so. Because there's some months you don't have to touch the lawn, and then another month you do. Okay, so it sounds like the business is going to net, say, $1,500, say $1,800.

Let's say $20, 20 000 a year just for round numbers if i pay if i wanted to buy it and i live in nashville and i wanted to hire somebody to run it and and do the work what am i going to make on my investment as a business owner okay which is really what the business is worth after labor okay otherwise you just own your job okay yeah and you don't want to buy a business to just own your job. So the proper way to value it is take $20,000 and roughly times four, maybe five. So it's probably worth $80,000 or $90,000, maybe $100,000, something like that, based on what you're telling me. Is there any equipment involved?

Yes. What is it worth? I would say we equipment equipment valued about 13 grand. Okay, good, good, okay. Well, this is legitimate. Now, the question is, this old boy that's buying it, he doesn't have 90 grand, though, does he? He does not. And I doubt this is a bankable deal, so he may be paying you out of his profits as well if you sell it to him which we're fine with

yeah as long as he gets as long as he stays open you are so should we develop a contract and a note and a note because he's borrowing ninety thousand dollars from you okay okay or whatever you agree to sell it to him for. If you sold it to him for $50,000, I don't care, but somewhere in that $50,000 to $100,000 range is roughly what this thing's worth based on what you're telling me. About five times your net, four times your net. That's a 20% to a 25% rate of return, which a small business is a high-risk investment, and so that's a nice rate of return and a high-risk investment.

Okay, thank you. Yeah, that's what you rate of return and a high risk investment okay and yeah that's what you're looking for but you know yes you need a contract yes you need to have a note meaning that he is signing up for this debt he owes you because if he turns around runs the thing in the dirt no pun intended um you know you're going to have nothing i mean you'll lose your equipment you'll lose everything because you know if you don't have a way to repossess the equipment but you he could he could run off all the customers and then you repossess just the equipment that could be all you could get back and there's no way to collect from a broke guy and at that point he would be broke so yeah make him a deal and if

he could come up with cash on the barrel head like his mother will give him part of his inheritance ahead of time give him an even better deal you know 90 000 if we finance finance it if you come up with cash i'll sell it to you for half that right now and i would i would take my cash and walk if i were you good question mandy is on the line in kansas city hi mand Mandy. How are you? I'm great, Dave. How about yourself? Better than I deserve. How can I help? So I have a question. So we are going to be debt-free in December.

Yay! Yes, yay. We do already own our house, and we own some land, and we're wanting to build a house on that. So my question is, do we save up the difference? It's going to be $150,000 difference from what we would profit on our house. Should we save the $150,000, or should we get a loan to do it even quicker than what we're wanting? What's your household income?

$120,000. So how quick can you save $150,000? Three, four years. Yeah, I i'm thinking three you got no payments correct yes yeah how old are you i'm 29 okay and um the house that you're living in uh is how large uh as far as square, 3,000 square feet. Oh, okay. All right. And how many kids you got? We have two together, five in total.

All living there? Two live there full time. Okay. All right. So this move up is a luxury? Yes, very much so. Okay. And so I'll wait three years and pay cash for my luxury.

That's what I was thinking. I just wanted to confirm with you. I got to tell you, man, once I get out of debt, the chances of you getting me back in, it would have to be some big reason, right? Right. That's what I'm thinking. That's what Sharon and I did. We were living in a house we had paid for for 13 years.

We lived in that house, and we saved up and paid cash for the home we live in that house and we saved up and paid cash for the home we live in now which we built and paid cash for the building of that and we actually ended up keeping the other one that was paid for in your case you're going to need to sell it to be able to do this as quickly as you're wanting to do it so i think that's a good move very well done congratulations man you guys are killing it at 29 years old. Ding, ding, ringing the bell. Love it, love it, love it. Very well done. Stacy's on Facebook. Dave, what are your thoughts about apps that give you cash back for shopping when you scan in your purchases?

If it's worth your time, you just look at it and see what's going on. I mean, it's like couponing or something else. How much time are you going to invest in this? Are you going to make 22 cents on what's going on? I mean, it's like couponing or something else. How much time are you going to invest in this? Are you going to make 22 cents? Or what's going on? And is there something else going on? Are they collecting data on you that you don't want them to have? I kind of get tired of Big Brother.

I unplugged Alexa. She scared me. But you've got to be careful about that. But just be thoughtful. And what's the return on your time? Is it worth fooling with? This is the Dave Ramsey Show. I love talking about companies that know how to do business right. You've heard of Grip6 belts, right?

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I'm really proud of these guys. Check out this month's special offers for my listeners at grip6.com in the lobby of ramsey solutions greg and jennifer and the tribe are here. Hey, guys. How are you? Hey, Dave. We're doing good. Welcome. Where are you guys from? We're from Atlanta. Oh, fun. Good to have you guys. And all the way up here to Nashville to do a debt-free scream.

Yes, sir. Very cool. So who have you got with you, names and ages? Let's see. We have Steven, who's 15. We have Ella, who is 13. We have Addie, who is 11. And we have Charlie,

who's seven. All right. Very cool. Stephen's reminding me he's 16. Okay. All right. That's good. Sorry.

It's good to be reminded. And how much debt have you guys paid off? $372,000. All right. How long did this take? It took eight and a half years, but really focused on the debt in the last five years. Gotcha.

And your range of income during that time? From $150 to a bit over $200. Okay, cool. And what kind of debt was the $372? The house. You paid off your house! We did. Looking at where, people!

Yes. Love it. Absolutely. Way to go, you guys. Very well done. What's this house worth? Probably about $500. Cool.

Whereabouts in Atlanta? We are in the North Lake area. Okay. Fun. Cool. Good for you. Neat. Thank you.

Well done. How old are you two? We are under 50. But over 40. With a paid-for house. Somewhere in that decade. Exactly. With a paid-for house, no less.

Did you ever think by the time you were this age you'd have a paid-for house? No. Not really, no. Most people don't. Way to go. So what happened eight and a half and slash five years ago? Actually, it probably all started about 20 years ago when we got married. And one of my best friends from high school, their wedding gift to us was your book.

Wow. And so that was the first we had ever. Back in the day. 20. I think it was, yeah, it's probably one of your first books. Yeah, Financial Peace probably. I think it was. And so Mindy and John gave us that book, and they talked you up,

and they said, you know, a happy marriage is a marriage that starts on the same page. So we read your book, and kind of Greg brought a little bit of school debt into our marriage, and I immediately, we sat down and decided that that was the first thing that had to go so okay we paid that off pretty quick and then really started on the right foot um but you know we bought a house about 10 years ago and decided that we didn't want to be paying that monster off for 30 years so we just kind of buckled down and and got focused good deal good deal very well done so what do you tell people the key to paying off your house is in your 40s i would say focus you really have to be laser

focused on it there's a lot of distractions you got to learn to say no to a lot of four reasons to say no around there's almost 40 reasons to say no right and And it's a lot of it's a lot of balance, like, you know, watching your friends do a lot of things that you don't get to go and do, too. And really just learning to do other things that are fun for a family that aren't quite so expensive. Cool. Well, I mean, you make good money, and you've obviously had a good life. You haven't, like, scrimped too bad, but just focused on the house and got it knocked out, right? That's right. Pretty much, yes.

You did this on about the normal pace of what we teach, and, you know, you're kind of a classic case study in terms of the numbers. It doesn't feel like you're a case study when you're doing it, though. No. When you're doing it, you actually have to say no and sacrifice to win. Now you don't have a house payment. How does that feel? It feels awesome. It does feel awesome.

I think it took a little while to really sink in, but, yeah, it's great. It's wonderful. Yeah. It sets you up mathematically making a couple hundred to do whatever you want to do. Yeah. I mean, you'll be able to build wealth and be outrageously generous along the way. It's pretty incredible. Very, very well done.

We framed our letter from our mortgage company and put it on the wall that said that we don't owe them any more money. Absolutely. That's freeing for sure. Yeah. That's pretty amazing. Very cool. What was the hardest part for y'all? You know, Greg was really very determined to sit down and do the budget and figure out where all the money was going.

And I think that was, it wasn't hard for us to agree on spending, but it was hard for us to figure out where all those dollars were going. You know, it's, you know, he said, you know, at the end of the month, I look at our bills and I can't figure out what we have, you know. And so it took a, you know, picking a number and staying underneath it and not spending so much money at the store. That can happen. That can happen. Very cool. So do you think people can still do this now that you've done it? Oh, absolutely.

Oh, I think everybody could do it. Yeah. Okay. Just put your mind to it. Yeah, that's it. Well, we've got a copy of Chris Hogan's retire inspired book for you. Number one bestseller. We want that to be, uh, and now in your Ramsey library that you've got started over there about 20 years ago. Exactly. And, um, they'll take that to the next, take it to the next level where you become millionaires and outrageously generous as you go along. So very well done. So these kids for eight and a half years have survived this process. They have. So have they been practicing their debt-free screen, though?

We have. Absolutely. We have. All right. I love it greg and jennifer steven ella addy and charlie from atlanta georgia 372 000 paid off eight and a half years that's their house and everything they're weird count it down let's hear a debt-free scream ready guys three two one Two, one. We're debt free! Yeah! This is how it's done.

This is how it's done. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee, which means even if you mismeasure or pick the wrong color, they will remake your blinds for free. You get free samples, free shipping, and with the promos, you save even more money. Use the promo code RAMSEY. Phillip is in Indiana.

I'm 23, currently in baby step 2, while paying for college out of pocket. My previous student loans are in deferment since I'm in school. Should I be focused on paying those down while they're in deferment or saving up to pay for the remainder of my school in cash? Save up and pay for the remainder of your school in cash. The best investment, young people, that you can make while you're in college is you. Pay cash. I don't worry about you. If you've got debt, I don't worry about you getting out of debt while you're in college. I'm more worried about you don't add any extra debt. Pay cash for school. Your rate of return, do that before you invest. Do that before you reduce debt. Your rate of return on an education, assuming your degree field actually is applicable in the marketplace where you can get a job and you can use the knowledge you have to make money with,

your rate of return on education, what you spend for the education versus what you get in income, is higher than anything else we can talk about, debt reduction or investing. So always paying for the remainder of your school in cash is always your first answer. And once you've got enough in the bank sitting there to finish school, your living expenses, your tuition, your books, and everything, then work your baby steps. Then work your way out of debt. Then build your big emergency fund. Then start investing and work your way right up the baby steps.

But until you have enough sitting in the bank, in cash, in your control personally, we're not going to invest. We're not going to pay down debt. Your best investment is in you when you're in school. That's a big deal. And lots of people work their way through college. I know everybody says, Oh, college is too expensive to work your way through.

They say that all the time now. Listen, if you'll just pull up what tuition costs and figure out what you can make babysitting and what you can make walking dogs and cutting grass. I mean, you can't do it on minimum wage. I understand that. Working 10 hours a week. But I worked 40 to 60 hours a week when I was in college. And I got through college in four years.

And I didn't die from it. And so don't tell me it can't be done. It can be done. Now, tuition was cheaper back then. And so don't tell me it can't be done. It can be done. Tuition was cheaper back then, but so were wages, baby. You make $20 an hour nannying right now. And you can get through school, people. Choose a school you can afford. Work your butt off.

You can do it. This is the Dave Ramsey Show. Our scripture of the day, precious treasure and oil are in a wise man's dwelling, but a foolish man devours it. Another version of scripture says, In the house of the wise are stores of choice food and oil, but a foolish man devours all he has. If you spend everything you make, you're a fool.

Wise people save money. That's what it says, in other words. John Tyler says, wealth can only be accumulated by the earnings of industry and the savings of frugality. You have to earn money and not spend it all. Then you have money to save. Wow, that was insightful, Dave. That's why I come around to hang out with you.

Nancy's in San Diego. Hi, Nancy. Welcome to the Dave Ramsey Show. Hi, Dave. How are you? Better than I deserve. What's up? Well, I'm 61 years old and would like to retire at exactly the same time in five years. My questions are, should I use what I have in my 403B to pay down some of my student loan debt? How much is in your 403B? I only have $17,000, but I also have a teacher's retirement account that's building up. How much is in that?

I have about $4,200 a month in retirement for that. Okay, that's a pension plan? Yes, it is. Okay, so you'll have $4,200 a month to retire on in five years, and how much student loan debt do you have? I have total $70,000, so I've got two loans, one's lower than the other. And what is your income? My income currently is $93,000. It'll probably go up a few thousand by the time I retire. Okay. And you're single? I'm single.

I own my, or I don't own my home, but I do. Is that true? Oh, how much do you owe on your mortgage? Oh, it's about $240,000. Okay. All right. So I was wondering, should I use that chunk of $17,000, which after I pull it out, I'll be taxed on it,

so it won't quite be $17,000, to get down a good portion of that student debt? No. I also have $13,000 in savings, which is my cushion. No, I would not. What I'm looking at is this. I'm trying to say, in my mind, you make $92,000 a year. Can we get you 100% debt-free in five years?

I think so. That's going to be tough, but it can be done. I'm talking about a house and everything. Oh, okay, yeah, the house will be tough. It's $200,000. You said how much was owed on the home? About $240,000. $240,000 plus $200,000. You said how much was owed on the home? About $240,000. $240,000 plus $70,000.

$70,000 plus $6,500 in credit cards. So, yeah, I know. It's a rough one. I think I came up with a good plan, though. If I pay down my lowest student loan, and then I have a teacher loan forgiveness that might kick in in two years of $17,000. That will get me down enough to make higher payments on my other loans. If I go with the schedule they gave me, my loans will be paid off in 10 years.

If I pay a big chunk now, I think I can get it paid down by the time I retire. No, it's got to be gone in five years, and I want most of your mortgage gone. I'm thinking $50,000 a year of your income is going towards debt. Yeah. Which, you know, that clears plus or minus the forgiveness, all the student loan debt, and a bunch of the mortgage. If you just say, that's $250,000. Yeah.

You need $310,000 to be debt-free. Yeah. Okay. Well. So you're not going to to be debt-free. Yeah. Okay. Well. So you're not going to quite be debt-free by the time you get to 65 house and everything, but we're going to pay that house way down, and we're going to, because I want the home paid for early sometime in this retirement. Yeah.

Me too. I'm afraid I'm. I don't want to roll into retirement with a $200,000 mortgage. Yeah, I know. I'd be happy just to get out of the student loan debt. I think I'll be comfortable after I do that and get rid of that debt. I don't. I don't.

I don't think you're going to be comfortable. I think you need to get rid of that mortgage debt, too, by age 70. Oh, definitely, yeah. I think I can do it by age 70. Well, I don't. Unless you're living on $4,200 a month, you can't from 65 to 70. Yeah, I get about 48. I clear $4,800 a month.

That's my point. I mean, you're making $90 now. So while you're working, I mean, you may need to work one more year. Yeah, I always have that option. So that's there. The only thing is I won't be able to contribute any more to my 403b yeah yeah i'm not worried about that part i'm worried about the income being big enough to defeat these two debts or these three debts now the credit card the student loans and then the

mortgage because if you can go into your you know the bulk of your retirement age from 70 on, let's call it, 100% debt-free with minimal in the 401k or 403b. You're not going to have a ton in there, but you've got the $4,200 coming in plus Social Security. You'll be fine. Correct, yeah. But if you go into that with a $200,000 still owed on a mortgage, you're going to struggle to keep that house. Yeah.

It's going to be a problem. So would you pull out the 403B money? No. No, I don't think $17,000 solves this problem. Okay. I'm going to leave it alone. I would stop adding anything to the 403B at this stage of the game, and I would 100% be on beans and rice, rice and beans,

and let's cut these credit cards up, attack them, and then attack the student loans as hard as you can hit them. And as soon as they're done, let's start working on that mortgage, and let's get deep into that mortgage being paid off before you quit. And if not paid off 100%, very close. I mean, get down to the last $50,000 or something, because I don't mind you living on five thousand dollars a month at all um 15 years from now think about inflation uh that's where we're looking at but and you can

do that you can do that and have a great life if your house is paid for if you're if you're sitting there with still payments on a two hundred thousand dollar mortgage you're that's going to take everything it's going it's going to it's going to mess this up. The math's not going to work. Veronica is in Dallas. Hey, Veronica, how are you? I'm great. How are you? Better than I deserve.

What's up? So I just had a quick life insurance question for you. Okay. So my husband and I were in our 20s, and he is a heavy, heavy smoker. I was just wondering if it would be smart to pull out a life insurance policy on him well it's always smart to pull a life insurance policy on people that are you're depending on their income and we recommend you go to zander insurance and you know get a quote for a 15 to 20 yearlevel term policy. And do you have children? No.

We hope to have some in five years, but it's just us right now. Okay. All right. And how old are you exactly? My husband's 22, and I'm 21. Okay. Life insurance is not very expensive, obviously, at that age, and you could usually get about ten times his income on him and about ten times your income on you.

The problem with him being a smoker is it's going to be twice as expensive. It's double. And so not to mention the fact that his health care costs are going to be higher because he's a smoker. And so there's tens of thousands of dollars in the next three to four years that you're going to lose if he doesn't quit. Yeah, and we're working on getting him to quit. We're weaning him off, you know, trying to, because cold turkey hasn't worked yet.

But by the time that we have kids, we plan to have him off completely. I just didn't know if the life insurance was a good idea. What it's going to cost you between now and the next five years doesn't make sense for him to wait until he has kids to quit smoking. Right. By the time that we have kids, he'll be stopped. No, I'm talking about by Christmas. Yeah.

That's what I'm talking about. That I would like to have him done by Christmas, too, because it's gross. Yeah. Right. Yeah I'm talking about. That I would like to have done by Christmas, too, because it's gross. Yeah. But. Yeah, not to mention, listen, it's not a moral thing. It's a math thing. It costs a lot of money to smoke. It costs you extra in your health care costs because you're sick more and more often.

You're more susceptible to everything that comes along. Your system breaks down, and your life insurance is twice as expensive, and anything else you go to get in the insurance world is going to be more expensive. And so it's just a lot of money. It's a lot of money. And, you know, so, no, I'm not waiting five years for this. You know, you can do whatever you want to do, but wait five,

wait till I have kids to be smart? What does that does that mean no we're not doing that no go ahead and do it now but if he gets life insurance right now you're going to find a smoker's rate versus a non-smoker's rate is double and it's twice as much but yes he needs life insurance everyone that's counting on it hasn't that someone counts on their income needs life insurance. Pretty simple. Thanks for the call. That puts this hour of the Dave Ramsey Show in the books. We will 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.

This is James Childs, producer of The Dave Ramsey Show. Did you know you can now listen to The Dave Ramsey Show on Pandora and Spotify? For all the ways to watch and listen, check out our show page at DaveRamsey.com slash show.