The Ramsey Show - App - When Done Properly, Education Is a Great Investment (Hour 3)

Episode Date: January 6, 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. Open phones at 888-825-5225. Reagan starts off this hour in Washington. Hi, Reagan, how are you? Doing well. How are you doing, Dave? Better than I deserve. What's up? I've got a question. My wife and I are on baby steps four, five, and six.

I'm in the military here, and I have an income of about $57,000, and we've got about $10,000 in our three- to six-month fund. Good. But we've got a rental property in Provo, Utah. It's appreciated pretty well. We're wondering if we do have debt on it though. So we've got 160,000 on the rental and then we just bought a house when we moved here because we should be here for a bit and it's a great market. So we've got about 330,000 on this home

here. And we were wondering, we have tenants and we've had tenants uh in the provo uh home should we sell the rental uh and just cash flow the next one or uh what would you suggest i'd sell the rental and pay it down on your personal home okay so how much how much equity have you got in the provo property uh about 50 000 oh not much at all. Okay. All right. No.

With that small amount of equity, that represents more risk than it does blessing. I definitely would sell it. It's a long-distance rental. You don't have a ton of margin in this at all. Yeah, I'm getting out of that puppy. If you can get out of it, and I'd call that a win, and I'd be done with it. And here's my thing. You said you're going to be there a while.

When the military is moving you all over the place, don't buy houses unless you're going to be there long enough for the house to go up in value enough and the market's hot enough that you can sell it and make money on it without having to rent it. In this case, it's worked out for you. So you're going to get out without any trouble. You're going to sell the house in Provo, put the money down on the house in seattle and you're going to be just fine and um by the way thank you for your service we appreciate you very much tj is with us in dc hi tj welcome to the dave ramsey show hi dave ramsey how you doing today better than i deserve what's up uh thanks man I got a couple things for you.

First off, I'm also in the military, and I'm deploying to a combat zone in exactly about five weeks. While I'm deployed to that combat zone, currently here I'm not contributing to my TSP because I'm in Baby Step 2. Correct. And I'm also a student of FPU. Mm-hmm. In that combat zone, being tax-free, I'm in extra money. Should I still stay out of TSP while I'm going through Baby Step 2? Yes.

Okay. It all goes on to Baby Step 2. Every dime goes on there. The only difference is you're going to get some extra money and you're going to get some tax-free money. Okay. some extra money and you're going to get some tax-free money okay and uh with the help of your team i'd also like to lead uh fpu uh for my deployed troops that are going to be working for me well i'd be honored to help you do that and uh we'll be honored to serve them in that way

you hold on i'll have kelly pick up and we'll make sure that happens for you thank you for your service tj and you be safe brother thanks for calling in thank you for your service, TJ, and you be safe, brother. Thanks for calling in. Thank you for your service. Janelle is with us in Wisconsin. Hey, Janelle, how are you? Hi, Dave Ramsey. It's an honor to talk to you. You too. How can I help? My question

is, I'm 63 and a half. Okay. Can you hear me okay? I heard 63 and a half. Yes. Yes. I'm 63 and a half. And where I work as a nurse, they're no longer offering my pension. I'm at a place where I can either cash it out, roll it over, or keep it where it is. We roll it over. And I'm not really sure what to do. My cash value is about $99,000. Let's roll it to an IRA in good mutual funds. Here's why. Okay. Let's walk

through why, not just do it because Dave said, okay? Number one, when you die, the pension dies with you right correct and when you die and you have 99 000 in your uh ira it doesn't die with you that money has a beneficiary that is one of your heirs so that that money's not lost in other words so that's one reason to do it the second reason is the pension is calculating their future payout and their future growth rate based on 6.5% to 7%. I know this because it's a regulation that requires them to do so. Not more, not less. Okay? And if you can put it in good mutual funds and make 10% to 12%,

you'll make more while you're alive off of the 99%, and certainly the whole 99% would go to your heirs. You'll make more when you're dead. So it's a double win. Click SmartVestor at dave ramsey.com it'll drop down a list of the smart fester pros which are the mutual fund people that we recommend there's 1200 of them in the nation and you pick the one you want and you sit down with them they have the heart of a teacher and they do stuff the way we teach here on the air and they'll help you pick some mutual funds out and instruct you on how to do the rollover a direct transfer rollover into an IRA

and that's exactly what I would do with your pension Carla is with us Carla is in Georgia hi Carla how are you hi it's an honor to speak to you. You too. How can I help? Hi, so my question is kind of long. It's relatively long. So I'm originally from Florida. Me and my family, they moved here two years ago to Georgia. But I didn't find much luck here, so I moved back to Florida. I ended up getting a good job and I had a roommate, but I ended up in an accident. So I ended up losing my car and I was relying on Uber and everything. But I still had enough money to pay to my roommate and get to work and go to my therapies.

But I mean, now my roommate had an issue. They had to move. So I ended up moving back to Georgia with my family, and I'm just, like, in a stress situation. I don't know what to do because I feel stuck here. Okay. What kind of therapy? I went into an accident, so I had to go to a chiropractor. And I also had a surgery in 2015,

so I have to go every, like, six months to my doctor in Florida. Yeah. What do you do for a living i do security security and how old are you i'm 21 21 okay all right so it sounds like you didn't make enough money to survive when you went to florida because life is gonna happen there's gonna be car wrecks and crazy roommates and stuff like that's going to happen. And you were making basically minimum wage plus just a little bit, and you starved out is what happened.

And so in order for you to move to Florida, you've got to have a better career, which you probably need a better career anyway. I'm not sure you're making any money yet. So what do you want to be doing when you're 41 That makes $100,000 a year Because it's not security unless you own a security operation Yeah, something definitely In the medical field

Okay, let's start making a game plan On where you want to be when you're 41 And taking the steps Of what the next 20 years look like If that leads you through Florida Great But I'm not going to just, quote, move to Florida, unquote. No, you need a plan. You need a freaking income. You starved out, kiddo. That's all that happened. You weren't making enough to survive. And I'm glad you had a

safety net for your mom and dad to come back to for now. And let's lay out a game plan to make a big life for you. This is the Dave Ramsey Show. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major health care costs. Christian Health Care Ministries is the original health cost-sharing ministry. A Better Business Bureau-accredited organization,

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Eric is with us in Maryland. Hi, Eric. Welcome to the Dave Ramsey Show. Thank you. How are you? Better than I deserve what's up um i'm calling i have a um i currently um have a mortgage on my primary residence um i do have a home that was left to me by my grandmother several years ago and um after she

passed away my mom lived in there um then she passed away So the house has been vacant. How long has it been vacant? It's been vacant a couple of years. What are you doing with it? That's why I'm calling. I think emotional attachment to it. My mom passed away and was living there. So I haven't done anything to it. It needs work done. It's in an up and coming neighborhood. It's around like the major hospitals and colleges. Um, there's a major developer buying properties in there around the neighborhood. And I've actually had people contact me. Um, I have one gentleman that wants to purchase it for 51,000 like as is. Um, but he's going back and forth with it. So I don't, I feel uneasy with that yeah um so i was wondering um what your thoughts are with what i should do with it and if i did sell it what what i should

do based on the debt that i have what i should pay off well it sounds like you've kind of gotten past some of the um normal grief and nostalgia given that it was your grandmother's house and your mama lived there when she passed there's a lot of emotional tie into that and it took a couple years for that to clear and now it's starting to clear am i missing something um no i feel like it's time i need to pay off debt and so yeah all right then it's time to sell it and the best way to do that would be to get a high quality high octane real estate agent involved click elp at daveramsey.com and you'll find uh you'll find there some some people that are some of the top real estate people in your neighborhood and that way you're not screwing

around with some jack leg investor who may be offering you half of what you could have got for it because you know you all you know is it's a good neighborhood and the house needs work, but you don't have any real solid data on what the house is actually worth. And knowing what it's actually worth will really help you price it properly, and it'll also help it sell quickly. But that way you know you didn't leave money on the table. Some of these areas are so stinking white hot that it doesn't matter what condition it's in. People are buying stuff for teardown.

You know, it just depends on where it is and what kind of neighborhood it is in in the city and so forth. I mean, in Nashville here, we've got people tearing down houses left and right. It's crazy. And it's just the dirt under them is more valuable than the structure as a building lot. And so that's what creates that in these gentrified neighborhoods. And it sounds like you may have the possibility of that going on. So get with a good real estate agent. Click DaveRamsey.com.

Click ELP on there for real estate, endorsed local provider. That means it's someone that's local that we endorse. And we're very, very careful with these folks. We spend a lot of time following up on the leads that we send to them. And like you, make sure you're taken care of, make sure they're doing their jobs. They don't work for us, but we, you know, our rule for ELPs is we don't want to send you there. If we wouldn't send our mother there, you wouldn't send your own sister there, that kind of stuff. So that's how I feel about you guys that are my listeners. So we took, we're gonna take care of you. So that's what I

would do. I think it is time to sell it. I think you've, you know, it took a little time for, for, um, you know, for some of the emotions to clear. And that's just natural. That's okay. No shame in that. But, um, but you do need to make a move on it because the house is sitting empty. It's not good for the house. I, it deteriorates. And so it's just, it's, it's, it's smart to get something moving on it. Good question, man. Thanks for the call. Brad is in North Carolina.

Brad, welcome to the Dave Ramsey Show. What's up? Well, thank you for taking my call. Just wanted to ask a question regarding graduate school. I'm looking to go back and work on my doctorate and wanted to see what your thoughts were in terms of maybe pulling back, not necessarily pausing and stopping retirement, but pulling back on retirement in order to be able to cash flow

this graduate school pursuit. Okay. And what is your PhD going to be in? Organizational leadership. And why do you need that? I'm currently in school administration and just wanting to probably give me an opportunity for the next step in my career. That does make sense. If you're going to stay in the school administration field, yeah, that's going to probably kick a few doors down for you. That makes sense. Yeah. Okay.

So what's the Ph. that's going to probably kick a few doors down for you. That makes sense. Yeah. Okay, so what's the PhD going to cost? It's right around $30,000 to $35,000. Okay, and what will it increase your income? Potentially, you know, $10,000 to $15,000 projected. Okay, so you've got a three-year break even once you finish it. How long does it take you to do it uh no problem potentially three uh could take four if i stretch it out a little bit just in terms of financial piece of it and what's your household income uh about 80 how old are you uh 37 yeah I would do it. Okay.

You know how I decided this? Just so you've got the decision-making paradigm. I believe that education, when it creates an income, meaning it actually has utilitarian market value, you don't get a degree in underwater basket weaving, you act left-handed puppetry, you actually get a degree in something that is utilized, which you are doing. Okay? $10,000 a year return on a $30,000 investment is called 33% return. Right? Yep.

And it's perpetual, like as long as you're alive. Plus, it's probably more than that over the scope of your life. That's just the initial bump. And it opens up doors in your career. Translation, Brad is a better investment than mutual funds. They don't pay 33%. Right. That's how I did the analysis on answering your question. It's just I'm looking at the numbers, and the numbers are saying you are a better investment.

And it's not a real high-risk investment. With what you're talking about doing, I mean, I'm not an expert on the education field, but I know enough having coached folks for 30 years that what you're saying appears to be true to me. But the bottom line is that education increases your market value more than the same money invested in a mutual fund would. Okay. So you are a good trade for a little while. We don't want to stay out of mutual funds forever and stay out of retirement planning forever. But education properly done is a wonderful investment. Okay?

Sounds great. Thank you for your time. Thank you, sir. Get after it. Open phones at 888-825-5225. Let me define properly done. He didn't say he was paying $100,000 for a PhD in organizational management, which would mean he was getting screwed because people overpay for this crap because they get it in their head that they have to have it to succeed.

You don't have to have it to succeed. It just opens a few more doors. Success is not based on your degree. It's based on you, what you learn with the degree, the doors it opens with the degree. But your ability to get up, leave the cave, kill something, and drag it home is what makes you successful. You've got to get after it, baby. And where you went to school is freaking useless. Don't tell me that stuff.

Not out here in the real world where I live. And going into debt to do it, well, that would be double dumb. So we're not going into debt. We're getting an education. We're paying reasonably for it. And we're doing it in a field where our income increases. Touchdown, baby. Touchdown. In the lobby of Ramsey Solutions on the debt-free stage, Samuel and Kristen are with us.

Hey, guys, how are you? Doing great, Dave. How are you? Better than I deserve. Welcome. Where do you guys live? We live in Redondo Beach, California, just south of Los Angeles. Well, welcome to the other side of the United States. That's a bit of a haul. It's a bit of a haul. Just a little bit.

A bit cold out here, too. Yeah, really. I mean, you left the beach and you came to cold weather. All will do a debt-free scream. Welcome. How much have you paid off? We've paid off $144,567.94. Love it. How long did this take? It took a little over two years and eight months, so 32 months. Gotcha. Wow, that's impressive. And your range of income during that time?

I think it was $82,500 when we started this, and it's up to $115,000 right now. Good. What do you guys do for a living? I am a civil litigation attorney, and my wife watches five wonderful children. Ah, okay. She has a harder job. Yeah. Well, I'm thinking it's a lot tougher than litigation. Litigation's a cakewalk compared to that.

Excellent, man. Very cool. So what kind of debt's the $145? A little law school debt? A lot of law school debt. And one wonderful minivan. Ah, of course. Yeah.

Mandatory for five kids, right? Well, it would have been if that's when we bought it. But we bought it when we only had three kids. Oh, yeah. Mandatory for five kids, right? Well, it would have been if that's when we bought it. But we bought it when we only had three kids. Oh, okay. Because, you know, everyone says you got a third kid, you got to have seven seats. Absolutely. It's mandatory. Yeah, I got it.

Now you need them, though. Yeah, okay. It worked out. So a minivan and you guys are how old? In law school debt? Yeah. I'm 34 years old. And I'm 33.

Okay. And so what happened two years and eight months ago that said uh game on well uh chris and i were uh i just got in a pretty good job and uh we've been at it for a while and uh i thought we should be able to save about a thousand dollars a month to put into savings because that was just i'm a natural saver uh-huh I kept looking at the budget going, or not the budget, but I kept looking at our bank account going, money's not going into savings, what's going on? So I got a spreadsheet together, you know, lovely Excel sheet, put all of our purchases for a month in there and realized not only were we not able to save anything, we're actually spending more than we were making. Oh, okay. There's that.

Yeah, that hurt. All right. And so, Kristen, you're looking over your shoulder at the spreadsheet? I was. Okay. What'd you say? I said I need to stop going to Target. Rachel calls it the black hole of goodness. It is. Yeah. Oh, my gosh. Okay. Yeah. So, it was Target and it was eating out. Those are the two things that were like the most expensive. They'll eat you up. I think we had spent $1,000 a month that month eating out. Yeah. Oh, that's easy to do.

And I was baffled by that. I wasn't paying attention to the numbers. It was just like my wife takes care of all that stuff and I'm sure it works out in the end. And I'm a lawyer, so we should be able to make it. Yeah, exactly. Except I'm a broke lawyer. I was very broke lawyer. Yeah. So what happened then? So I was very frustrated. And so I was sitting at work, didn't really know what to do. So I looked online for financial books to read. This is right around December of, I think, 2016. And I looked online. I just looked at a list of the top financial books, and I went down to like four or five of them

and eventually got to one that said The Total Money Makeover by this weird guy named Dave Ramsey. Didn't know who that was. Yeah, or how weird he was. Yeah, I know. And I said, okay. So I read the online. It allowed me to read the first chapter

of your book. Right. And as I'm getting more excited, as I read every word, I stop and I'm like, I got to have this book now, but to buy it online from your store, it was going to be shipped to me. I couldn't wait that long. So I drove straight to Barnes and Noble. Oh, cool. Picked up a copy of it, drove home and said, babe, I bought myself a Christmas present, and we're going to read it together. All right. And we did. Hey, Kristen, did you think he lost his mind or not? A little bit.

I had heard of you. My parents had done Financial Peace when I was younger. Oh, wow. I had an aunt and uncle that had done it as well. So I was a little more familiar with the concept and what was going on. And mostly I knew about envelopes. Yeah, and you were ready. I was.

I mean, you were tired of fighting this thing and not winning too. Yes. And so the two of you simply took the stuff out of that book and went to town? Yeah. So, I mean, we would read the book and it was like, I'd read a chapter to myself. And she said, why'd you read that without reading it out loud to me? Oh, I'm sorry. I didn't realize that was okay. All right. So I won't do that again. So we read it back and forth, and then that month we started, I looked online for budgeting tools, and I found your every dollar budgeting tool online, and she didn't like my spreadsheets.

No. Well, he had them hanging across my mirror. That's just wrong. That's not even subtle. No. I don't do subtle very well. You're a litigation attorney. What can I say? So I may have printed a few of those out and I may have printed out what we'd paid the month before and the red line and the black line and

stuck them on the mirror. And you may have made notes on it and- You know, something like that. Wrote stuff like, you've got to be kidding. And yeah, I might've done that. Yeah. And so that wasn't working. And so we found your every dollar and I said, this is great. You can see it on your phone. I can see it while I'm at work, and we can work together. Yeah, that's good. And we started our first budget that month in December.

Our trial budget, as I like to call it, because that was terrible. Oh, yeah, it always is. Awful, that first one. And so January, we said, start the new year. We'll do January. So that was our first budget. And we took off running and haven't the new year. We'll do January. So that was our first bunch. And we took off running and haven't stopped.

Two years and eight months later, $145,000 is paid off. Wow. What was the hardest part of this trip for you guys? Well, in the middle of it, we had a child. Well, we had two boys after we started this. One of them needed surgery, and he also lost his job at one point in the middle of it. Whoa. Yeah, so I've actually been laid off twice in my life.

Once was before we were out of debt and had never tried to put our finances together. And that was a very different experience than actually February of this year, well, of 19. I got laid off for the second time in my career just because the work was slow at the office and I was the low man on the towing pole. And it was like the best blessing in my life. We had just paid off the van. Wow. And had we not done this budget,

had we not thought about this process, we never would have thought, oh, we need to pay as much on this van as we can so we don't have a $500 payment a month if I ever lose my job again, if something like this happens. All of a sudden, December I pay it off, February I get laid off. Wow. It was the biggest blessing of my life. I used to live 13 miles from where I get laid off. It was the biggest blessing of my life. I used to live 13 miles

from where I worked and it took an hour and 30 minutes to get there in the mornings. Yeah. Thanks LA traffic. And so when I got laid off, I looked at Kristen and I'm like, we don't have a car payment. My loans can be stopped for the time that I'm off. And I've got a $1,000 emergency fund waiting there. So we can pay the minor bills that come up until the time in which I get a new job. So I actually ended up getting a better job. That's five minutes from the house. Yeah. Yeah.

I actually get to see the kids at night. Wow. We have meals together and we get to sit down. It's like a whole family and everything. It's a whole thing, yeah. Wow. Very cool. Life is good.

Yeah. I'm so proud of y'all. How does it feel now that you've done it? Pretty amazing. I was telling actually one of your employees here, we went to the mall yesterday and I thought I could buy that if I wanted to. And thankfully she didn't. No, I didn't.

That's okay. End up on one of your spreadsheets. It's like a mug shot. Oh, my gosh. No, you guys are great. This is exciting. And you brought the kiddos with you from L.A. We did.

What are their names and ages? We've got Maverick. He is two years old. We've got Corbin. He's our three-month-old. We've got Tinley. She is seven. Penelope is

four. And we've got Isabel, who is eight. Wow, the whole gang is here. Five kids from California, man. Have they been practicing their dead-free scream? We have practiced once. So this should go wonderful, I'm sure. Some of them will get it. Alright, that's perfect

though. Maybe they'll remember this and this will change your family tree. I'm so proud of you guys. It will change our family tree. That's absolutely why we will get it. All right. That's perfect, though. Maybe they'll remember this, and this will change your family tree. I'm so proud of you guys. It will change our family tree. Absolutely. That's absolutely why we're doing it. We got a copy of Chris Hogan's book for you, Everyday Millionaires. That's your next thing to do. That's what you're going to be doing.

That's the next chapter in your story. So Samuel and Kristen and the tribe, count it down. $145,000 paid off in two years and eight months. Count it down. Let's hear your debt paid off in two years and eight months. Count it down. Let's hear your debt-free scream. All right, you guys ready? One, two, three.

We're debt-free! Very cute. I love it. Absolutely fabulous. Way to go, you guys. Man, that's beautiful. This is The Dave Ramsey Show. our scripture of the day lamentations 3 22 and 23 the steadfast love of the lord never ceases his mercies never come to an end they are new every morning. Great is your faithfulness. Vern McClellan said, what the new year brings to you will depend a great deal on what you bring to the new year.

Boom, mic drop. There we go. Michael is with us in Georgia. Michael, welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my call. My pleasure. How can I help? Well, I bought a business a year ago, a year and five days ago. It's an auto repair business that I was the manager at for a few years before that. Great. And so we've got two locations, doing really well. Good.

So personally, I'm debt-free except for my house. I've been a big fan of you since I was 16 years old. And so my question is, I've got an owner financing thing set up with the previous owner who was my boss for years. And so we owe him quite a bit of money for this business. And so my question is, how do you handle business debt like that in terms of your other priorities of marketing the business, getting, like, you know, when we bought the business, there was very little cash on hand, so we worked hard to put some money in the bank just for reserves. So what's your priority level in terms of that?

How would you handle that? Okay. Well, did you sign, did you personally guarantee the note or is it just, uh, the business is the only thing standing good for it? Um, I did personally guarantee the note. Yes. Okay. So it's not really business debt.

It's really personal debt. Yeah. How much do you owe him? So the business purchase was $410,000. What's the profit a year? This year we had $150,000 worth of profit at the bottom line. And did you pay yourself anything before that $150,000 happened, or was that your only income?

Yes, sir. I paid myself a little less than what I was getting paid by the previous owner. I was making almost 90 with him, and I paid myself 75 this year. And after that, you still made 150? Yes, sir. Okay, good. That's a great equation. That's the equation I was going to lead you to, and you already know it, so you're way ahead of the game.

Good. So what we teach business owners to do in Entrez Leadership is different than the baby steps. We teach you, as you said, to grow the business and to have some retained earnings for emergencies and so forth. And so of your $150, of your profit after you pay yourself a living wage, which is what you've done, very wisely laid this out, I would set aside a percentage of it for retained earnings and a percentage of it to go to him. And the bigger share would go to him. An example would be maybe 50 grand in retained earnings and 100 grand. So maybe two-thirds, one-third, 33 percent, right? or something like that uh that be that have you done in four years so our loan to him uh is at three percent interest don't care and it was set up over eight years

okay um i want you to be done i want you to be done no later than four years if you're making 100 if you're making 150 profit for the next four years, you should have him paid off in three or four years. And that's really what my question is from a business strategy standpoint. So both of our properties, we have leases on both of them. And so I want to get, I mean, I think I want to get more cash on hand so I have a potential down payment to buy one of these properties when the lease expires. I would either buy it or i would pay cash i wouldn't buy it unless i paid cash for it and i want to get him paid off first i think i want to run the business i want to run the

business is running well you're doing a good job running the business you're not in the real estate business you're in the auto repair business so let's focus on. Let's make a pile of money. You're making a living wage. Get him cleared up, and then you've got $150,000 or $200,000 a year to play with to either save up and build you a little building and move when the lease expires or extend the lease or do a lease option. Maybe lease it for five more years with the option to purchase it and save up the cash and pay for it. But I wouldn't buy real estate with your business unless you paid cash for it. And stay out of debt, man. You know, you listen to me.

Yeah, okay. That makes sense. Let's get out of debt and stay out of debt. The one-third to two-thirds thing, that's kind of like a... Something like that. ...multiple-ton sort of thing. I just made that up, okay, because I saw $150,000 laying there. But all I'm saying is don't do anything with your profits except summon the retained earnings and the rest to him until he's paid off.

That totally makes sense. All that we've done this year is set that money aside. We haven't taken anything out as dividends or anything like that. You don't need to. We're trying to just kind of get ourselves some cushion here built up. You know, you're saving, you're clearing the debt, and then you're going to have all kinds of money to do all kinds of things with. Open other branches, build buildings, you'll be able to pay cash for stuff left and right,

because you're going to become more profitable as you move along. So a lot of people use like an 80-20 rule. They put 20% aside or even sometimes 85, maybe 15% into retained earnings. And the rest of it just goes on the debt until the debt's cleared because the goal is much like with the debt snowball in Baby Step 2, the goal is to clear the debt so that we've got the freedom to build wealth. But we're not putting 100% on debt in this case like we would in a personal situation even though you're personally liable that felt that was the thing that felt bad to me to have very little cash on hand because i've got you know 12 people's

families who are dependent on this if we have a couple bad weeks i don't have enough cash you need and then you're going to be going to the bank for some kind of stupid line of credit or something we don't want to do that. So that's why you have retained earnings. Okay. That really makes sense. I really appreciate it, Dave. I'm a huge fan of yours and also an Enneagram 8.

So it's helped me to sort of see how you handle yourself. It's been very valuable. I appreciate everything you do. Well, thanks. If I'd have known that, I'd have argued with you more. Have fun, brother. Open phones at 888-825-5225. The Enneagram 8 is the challenger.

We process information by arguing. All right. Justin is with us in Nevada. Hi, Justin. How are you? I'm great, Dave. Thanks for having me. It's a pleasure.

Certainly. How can I help? All right. So my girlfriend and I plan to be married in a couple years, but our combined income right now is. You don't have a combined income. You're not married. Well, household, I suppose, right?

We're living together and everything. Not legally. Okay, go ahead. True that. True that. So I'm actually in the military, and I'm going to be separating in April. And so I'm trying to I have a she actually just finished paying off her student loans. I have a car that I bought before I realized it was a bad decision.

But I only own twelve thousand at the moment and I have about 15 in the bank. It's a little bit of a unique situation because the car is worth about 19 on Kelly Blue Book private sale. We're trying to decide if we should sell it or just pay it off and then start ramping up our emergency savings. A year from today, you're out of the military in your new career.

Which would be the better decision? I'm sorry, say it again? A year from now, you have separated from the military and you're in your new career. You put a ring on her finger and an engagement is set. Which decision would be better, having sold the car and be driving a $7,000 cash car or having paid this car off out of your savings? I mean, the conservative answer would be, I would say, just have a cheaper car. That's the first option.

That's one option. It depends on what you're going to make when you get separated from the military. Any ideas for your career? Yeah, so I'm actually going to be going to school. So she's going to be taking over the majority of the finances. I'm going to still be working part-time and going to school. But I'm actually separating in April, so I separate in like four months. Yeah, and it'd be really nice to have that savings and not have that car debt.

I'm selling it and taking a $7,000 car. Okay. That sounds great. Because that leads you to where you want to be five years from now. The car is not your goal. Sure. Because now you're moving into grown-up stuff. Thank you for your service, brother.

We appreciate you serving. Yeah, you're moving into grown-up decisions now. You're talking about getting married. You're talking about, you know, moving on to your career, and the cars are just, I mean, I like cars. I've got really nice cars, but the stupid things just go down in value, and so, you know, cars are, extra nice cars are just a luxury after you've got some extra money. And right now you've got a lot of transition going on. Marriage, separation, new careers, all these kinds of things. Hey, thank you for calling in. And again, thank you for your service.

That puts us out of the Dave Ramsey Show and the books. Thanks to James Childs, our producer, Kelly Daniels, our associate producer, and phone screener. I'm Dave Ramsey, your host. 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. 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.