The Ramsey Show - App - When Luck Knocks on the Door, It's Dressed in Work Clothes (Hour 3)

Episode Date: November 19, 2018

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Music Music Live from the headquarters of Ramsey Solutions, 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 at 888-825-5225. When I say open phones around here, what that means is you get to call and you get to ask what you want to ask. We don't set the topic here. The topic is all about you and you winning with money. John starts off this hour in Washington, D.C.

Hey, John, how are you? I'm doing well, Dave. How are you? Better than I deserve, Dave. How are you? Better than I deserve, sir. How can I help? So I recently had my car totaled. It was 2008 and it was worth about $6,500 and I got that as a total loss settlement. So I'm looking to get another car, and I've always gotten, well, I guess the one time before, I did get a used car. My net worth is not over a million dollars, so I have been looking at used cars. But I went to a dealership, and they have some 2018s that they are trying to get off of the lot, you know, with the 2019s that have come in. Happens every year.

My question was, yes, my question was, do you, if those end-of-the-year deals for what have been new cars can be good enough to be similar to used cars, would you, could you buy a new car in that case? I wouldn't. Okay. Not unless you're a millionaire. Right. Do you have a lot of other money besides the $6,500? Yes, I do have money.

We will be paying cash, of course. Okay, so whatever we're discussing here is cash. Yes. Okay, all right. So here's the thing. You can do whatever you want to. You're a grown guy. You got the money, okay?

The way I look at it is this. I look at data points with people who are better than me in a space, have more experience than me in a space, have more experience than me in a space, and I say, not how can I come right up to the edge of that data, but how can I be way over the right of that data so that I'm ensured I get to be that. Example would be, I was blessed to get to know Mr. Truett Cathy that owned and started Chick-fil-A before his passing and his wife, Jean. Dan, his son, is still a friend.

Okay? And they were married. At the time I first met them, I think they'd been married 67 years. And obviously, he was a highly successful, driven entrepreneur. And so for Sharon and I to get to sit with them, even for 20 minutes, and ask a couple that have been that successful in business, that successful spiritually, that successful with their children, that successful in their marriage, 67 years, what's the secret? Now, once they tell me what the secret is, although it's not a secret,

we know that, right? But once they tell me, these are the things I would do. In other words, Mr. Cathy, if I want to be you when I grow up, marriage and spiritual work, what would I do? Give me ten minutes of wisdom here. I'm sitting at the feet of a great man, right? Then I ask him, and then I don't ask him, and then take that and go, what's the least of that I can do? No, I do right down the middle of that. You follow me?

Yes. no i do right down the middle of that you follow me yes and so what do what does the typical millionaire do in the 10 000 millionaires that we studied for chris hogan's book everyday millionaire the typical millionaire has not bought a new car in decades before they became a millionaire they didn't go well the 18s look like a good deal. They just said, we're not putting our money in crap that goes down in value and then scratch our head and wonder why we're not millionaires. We're putting our money in things that go up in value. And cars go down in value.

They're the largest thing we all buy that goes down in value. Now, you can do whatever you want to do. But the data says, the data points, the best practices, the things you want to emulate say, stay away from things that go down in value. And not stay right just barely away from them. Stay way away from them. So if you really did some detailed research on cars, the best deal on a car is around two to three years old with low miles it's taken the most of the hit it's going to take financially in value and it's got the best technology available

it's got the best um a lot of life left in it because it's a you know three-year-old car got 14 000 miles or something like that it's a very low mile car and um but the technology is only three years old the thing's got all the life left of a brand new car in it uh but it's already lost half of its value and so you let someone else take the butt kicking on this stuff and you go be rich and that's all we're talking about here. And so my point is not to pick on you, John, but my point is just a lesson for all of us is don't ask what's the least I can do and still barely win. Ask what, hey, how fast can I get there? I want to drive like no one else, so later I can drive like no one else. And that changes everything then.

But, again, you do whatever you want to do we're not going to be mad at you either way um but that's that's where my guidelines come from and that's where these concepts come from it's what i stuck to by the way now i buy brand new cars but i'm a multi-millionaire and it's a very very small percentage of my world today but when we were broke we didn't buy new cars. We drove a piece of crap. And then we weren't broke anymore. It was amazing.

So that's the answer to your question, sir. Thanks for calling. Ralph is with us in San Antonio. Hi, Ralph. How are you? Fine, Dave. Thank you for taking my call. Sure.

What's up? Well, I've got a situation with our family here where my sister has control of the finances over my mom's financial status when it comes to the house and so forth. She approached me and told me that she has fallen behind on her payments on her bills and said that she was going to use the family truck to, of course, take it to Title Max. And so I pretty much immediately explained to her not to do that because those are companies that are designed basically to take your vehicle from you and you're going to get caught up in something that you'll never be able to accomplish paying off. And sure enough, that's what she's accomplished.

She's got our 2006 F-150 with only $60,000 miles we paid cash for, or she paid cash for. It's now in Hawk, and they're getting ready to refill it. I'm confused. Is this her truck or your mother's truck? It's actually my mother's truck, but it's in my sister's name. So she used your mother's money to buy a truck? No, actually, she had a pretty nice job, some kind of a computer. So it's your sister's truck then? Well, yeah.

She bought it with her money and put it in her name. It's her truck. Correct, yes. Okay. But she left it in the driveway here for the family, and it was family. That's why it only has 16,000 miles for it being an 06 and that old. It's virtually a new truck because it's rarely used, but it's there for the emergencies and so

forth, doctor's appointments. Literally speaking, it's an old granny pickup, but it's brand new, literally. And she's got herself paying $797 a month, and those $10,000 on it, I think now is maybe $2,000. It'll sell for more than that. We can't get $10,000 for it.

Really? That's what TitleMax wants for it. No, I don't care what TitleMax wants for it. I mean, you really don't think the car is worth $10,000 in a market? You can't sell it to an individual for more than that? It sounds like a granny truck with 16,000 miles. It ought to be worth more than $10,000. If you can sell it for more than $10,000, sell it.

If not, she just lost it. She gave up the title for nothing because she got screwed like you told her was going to happen. Why in the world would you trust some random guy in a cube when getting your mortgage? Do you really think he cares about your long-term money goals? Well, he doesn't. Those companies care about getting you into whatever home loan program they're pushing that week. When it comes to ordering a cheeseburger, the meal deal works fine. But let's get real, people. We're talking about the largest investment you'll probably ever make, so don't be naive and trust an order taker who pressures you into a pre-packaged loan. My friends at Churchill Mortgage have been helping my listeners for over 25 years.

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NMLSconsumerAccess.org. Equal housing lender. 761 Old Hickory Boulevard. Redwood, Tennessee 37027. I am one of the lucky people. However, I have figured out that luck, usually, when it knocks on the door, he's dressed in work clothes. Generally, if you're lucky, some of it has to do with just not accepting your circumstances and getting about the business of changing them. So, I love my job. I run my own business.

I do this show. I speak and write. And I absolutely love it. I mean, it's crazy. I even like it on the days that are horrible, just because I love the challenge. I just love running a business. I love doing what we're doing. I love helping people. And, you know, when I run into somebody who says, I hate my job, I kind of don't understand. Just quit. You know, go find something. You don't have to quit right now, but go find something you love and go do something.

Spend your whole life doing something you hate out of some kind of a sense of obligation to what? You can usually make more money doing something you love, by the way. Now, sometimes it takes some time. Sometimes you have to put some effort into it. You have to go take some classes. You have to get a certification. I don't know what it is. But if you don't like your job, you don't feel like you're making a positive impact.

You feel like you're working, doing scummy stuff. Don't do that. You know, we've got a mission of giving hope around here to millions of people and we hire have hired about 200 folks this year and we're going to hire about 200 in the next 12 months and among those are not only high-end programmers the top you know you ruby on rail senior people we're bringing you guys in and so because then when you write code you're actually writing code for something to save somebody's marriage or allows their kid to go to college because they listen to the stuff we do, right? Marketing.

We've got an email specialist right now for our email marketing team. We're hiring an associate creative director for hiring. Hiring a couple of SEO gurus, for those of you that know what that means. If you don't know what that means, you're not qualified. So there you go. But seriously, I mean, there's all kinds of jobs at DaveRamsey.com. Just go there, click on Dave's hiring. And listen, if you're working here and you hate your job,

please quit before I find you and fire you. Because I don't want people working here that hate their job. You look like you're a weaned on a pickle. Every day is bad. Every day is bad. I hate my life. Every day is bad. I don't want to pay you, and I don't want you representing my brand,

and I don't want to work with you, and people that work here don't want to work with you. So find something that you love doing and get about the business of doing it. If you hate working here, go find something. God's got something better for you, man, than this place. You cannot work here and go to heaven. So it's okay, you know. Work it out, man. Figure it out.

But find the thing, man. Find your thing. Get about your business at doing something. So click the Dave's Hiring tab at the right-hand side of the homepage at DaveRamsey.com and see if there's something there that interests you, if you're interested in what we're doing. We are a fired-up, wired-up bunch of people. Most of the people that work here are really, really smart. And the ones that aren't, we try to find them too.

But, you know, that's it. I mean, we're having a blast around here. Mark's with us in Orlando, Florida. Hey, Mark, how are you? I'm doing great, Dave. Thank you so much for taking my call. Sure. How can I help?

We live in Orlando, Florida, and right around the theme parks, there's a great business of selling or excuse me, of renting out multi day rentals like Airbnb and VRBO and one and two bedroom apartments. And the business is really going strong. Good. I think my wife and I would like to invest in one and to manage one or two of them. We currently have a place that we VRBO, so we have a little bit of experience in that. I'm asking you how to finance it or how to purchase it. The prices are anywhere from 90 to 120 for the unit. And most of the units are staying full 60 to 70% of the time. So they are making money. Our finances are we have 1.2 in a retirement annuity.

How old are you? I'm 61. Okay. Just take some out of that and buy your VRBOs. Okay. We also have 300,000 or 400,000 others in a retirement account. Okay. Whichever one hits the tax is the least. But you've got the money to buy this stuff.

I mean, buy you four or five of them if you want. So you're thinking to go ahead and just cash flow the entire amount? I wouldn't buy it if I was going to go in debt. Okay. Someone said to use someone else's money at a low interest rate, and then if the market goes south, the real estate market goes south, then it would be a little bit less upside down. It wouldn't be less upside down.

The value is not based on the mortgage. Okay. The value is based on the value. What a willing buyer will give a willing seller when the property is not in duress. And that's the definition of market value if you go to real estate school. It has not got anything to do with a mortgage. Okay. It's an illusion that broke people came up with that can't afford to buy it,

but you're a millionaire. You're a millionaire. Okay. I mean, let's say you've got $300,000 plus 1.2. What else have you got? The house has paid off. It's worth about $500,000. $100,000?

Yes, sir. Okay. Any other cash position or investment positions? We've got about $40 or $50 in the bank just sitting there for emergencies and stuff like that. So you're worth in excess of $2 million, and you're 100% debt-free. We also want to use some of that money to pay our college debt from our kids, which is not going to be a lot. How much? It's going to be about $50,000 to $60,000 for both.

Okay. So $150,000 there, and you buy $300,000 worth of property. We're still not off of a half million dollars. Oh, by the way, the $300,000 worth of property, it didn't detract from your net worth. It just, where the student loan debt did, did actually you just paid somebody else's bill but instead of a two million dollar net worth you're going to still have a you know a 1.8 million dollar net worth after you pay off your kids college and then you just convert some of this investment money into a different kind of investment called real estate which i think is awesome now here's what will happen okay

number one when you're doing the purchase and you're doing it with real money, that's your money that you've worked so hard to put in that account, you're going to be wiser and more careful with the purchase. There's something about it that when you're spending funny money, borrowed money that's not real money, you're not as careful, number one. Number two, once you've got the vrbo set up you don't have any payments you would not be financially desperate but it becomes a game to someone like you who's done so well with money that you would want the thing to cash flow and

so you'd be pushing pushing pushing to keep it rented and you might put somebody in there that you shouldn't have put in there just because you were trying to beat the payment system. But when you don't have any payments, you're just like, you can't stay in my house. You sound like you're going to tear it up with a party. And you get that feeling on, you've done enough VRBO where you've got a feeling about somebody you shouldn't have rented to? If you hadn't had that feeling, you hadn't done enough VRBO yet.

We've been doing VRBO with our place on the West Coast for about two years now, and everyone's been wonderful. We've never had a situation like that. You've never had a single person apply that you got the willies about and turned them away? No, sir. Wow. It's been a good experience. Maybe we're lucky.

Yeah, so far. Well, I'm just telling you, there's wackos out there, man. You've got to be careful. These are renters is what they are. And worse than that, they're weekly renters. And so you've got some good properties that are expensive enough that that's probably filtering the thing. But you've got to watch this, man, like you've got to watch anything. So my point is I've got rental property, and when it's empty, I don't have any pressure at all.

And so I'm going to wait on a good tenant only. It changes the way you buy. It changes the way you manage your tenants when you pay cash for it. That's my point. And there's zero stress about it. Zero stress. It does not change the valuation of the property one iota. The only thing that changes the value of the property is how the economy is going

because this is a resort-type property. It's driven by how many people want to see mickey and go to universal and that's the neighborhood you're in and when the economy slows down that stuff slows down because it's freaking 200 to go in the door and see mickey now and so um it's expensive and you gotta be you know things are booming right now and so that stuff's going great guns but if it ever turned up and mickey wasn't popular for some reason, then all you've got to do is put a traditional renter in there, and that property will still cash flow like crazy because you paid cash for it.

I'd buy three or four of them, maybe five of them, pay cash for them out of your stuff. That's what I would do. I think you're good enough at it to do it, but I'd just pay cash for it. Thanks for the call. This is the Dave Ramsey Show. One question I get asked all the time is, do I need life insurance? Listen, the whole point of life insurance is to replace your income for someone who counts on you. So if you have a spouse or you have kids, yes, you need term life insurance. It's the only way to protect them until you're out of debt and have built up your wealth. You're only digging a deeper hole if you waste money on cash value plans

since it robs you of the ability to make real progress. And that's why I send you to Zander Insurance, and I have for 20 years. That's where I get all my insurance, and they only offer the plans I recommend. It is not expensive. It's not complicated. And Zander will be there as your guide every step of the way. Visit Zander.com or call 800-356-4282. You need to get this taken care of. I can give you the advice, and I can tell you where to go, but it's really up to you to take that important step to

get your family protected. That's Zander.com or 800-356-4282. In the lobby of Ramsey Solutions, Claudia is with us. Hi, Claudia. How are you? Hi, Dave. I'm doing great. How are you? Better than I deserve. Welcome.

Where do you live? Thank you. I'm from Atlanta, Georgia. Oh, fun. Well, welcome to Nashville. And all the way up here to do a debt-free screen. Yes, sir. Look at you.

How much have you paid off? I paid off $57,000. I love it. How long did this take? 24 months. Wow. And your range of income during that time? I started at $60,000 and ended at $80,000. Wow. What do you do for a living? I am a business analyst in the banking industry. Okay. Well, you've done really, really well. What kind of debt was the $57,000? I had $32,000 in student loans, a car loan, 401k loan, IRS debt, and then the rest was credit cards. Whoa. How much did you owe the IRS? I mean, the KGB. I owed them $1,300, but I wanted to pay it right away. They have the highest interest rate. You're right. Yeah, I told you to put that at the top of the debt snowball. Oh, yeah. And how much was the car?

I financed it at $23,000, but by the time I started this journey, it was $6,000. Oh, okay. All right. Yeah. And did you sell anything big to get out of debt? No, I just sold some items online, but nothing big. So what happened 24 months ago that put you on this journey to debt freedom? So 24 months ago, I hit a really low place in my life.

I was struggling to pay the utility bills, and I decided I needed to do something about it. I was really stressing out about money. And I have a 10-year-old son, so I wanted to set a good example for him. And at the same time, I pulled my credit report and saw that someone had stolen my identity and opened a couple of accounts in my name. And when I saw my credit score, it dipped like about 50 points. So this was before I found you. I was really focused on increasing that credit score. Like I just wanted that 750. So I started researching.

I went online. And I found a Facebook group that they glorified the high credit score. And someone was posting, they posted about finally reaching that 750. And reading through the comments, someone mentioned Dave Ramsey. And Dave Ramsey thinks credit cards are dumb and a credit score is just an indicator of debt and not wealth. Well, I was intrigued by that. So I looked you up online. They were hating on me, but that intrigued you. That's funny. It was a Dave Ramsey fan trolling in the comments. So I read your book within a couple of days, and I just got on the plan.

And needless to say, my credit score goal now is a zero. There you go. Good plan. I like this plan. Yeah. And you are 100% debt free. Yes. Do you own a home? No,'m saving up well i'm still in

baby step three right now right good for you good for you well done thank you well done i'm proud of you so what's the key to getting out of debt you pay off 57,000 in 24 months i mean you've been on beans and rice kiddo oh yeah and it helps that i a vegan, so it wasn't hard in that sense. I would say the key to getting out of debt, especially to single moms out there, that you are the key to getting out of debt. Once you decide that your why is bigger than your excuses and things just start happening. Same thing happened to me. I finally decided that I was sick and tired of living like

that. Your level of disgust is what drove you. Exactly. And I just found the information. I found your plan eventually. And once I decided that I was tired of living that way, then I just stuck to the plan. And of course, the budget is huge, whether you like an app, a spreadsheet or a notebook, just sticking to the plan. And no matter how many bad things happen and try to derail you, just stick to the plan. When I was in the journey, just Murphy came to visit us so many times. My son broke his arm. so we had a really hefty emergency room bill. I suddenly got sick. And it was just, those moments were hard,

but I didn't realize at the moment that they were faith-building moments and courage-building because Murphy was going to come again in the form of a job loss. So I lost my job five months before I became debt-free. Wow. Yeah.

But amazing things continued to happen. When I lost my job, I paused the snowball like you recommend. So I piled up cash, about three months of savings. And once May 1st of this year came, my last day at work, I didn't have another job secured yet. So I just held on to the cash. But 14 days later, I found a temporary job. And it was less than half of the income from my previous job. But it was perfectly okay because I had learned to live on less than half my income.

Anyway, because you were getting out of debt. Exactly. That makes sense. Exactly. So once I got that job, I got one month's worth of severance pay and my vacation payout. So I was so strict and good with my budget that I realized that I could become debt-free that same month that I became laid off. Wow. Yeah. Okay. And now you're, now you make what? Well, I, I make more than the job that laid me off almost 10,000 more. It's about 88.

And I just, Dave, I want to tell you a quick story about that. You came to speak at Elizabeth Baptist Church. I did. In Atlanta, and I waited for you backstage. And at that time, I was getting laid off, and I let you know that I was getting laid off. And you were so encouraging. You told me that it was going to be okay because I was going to find a job making more money. And at the time, getting laid off, I just couldn't fathom that that could happen.

But once I became debt-free, I no longer had that burden of debt over me. So I just went on interviews with so much confidence. Yeah. And I always remember what you said and you believing in me. I couldn't understand that that was possible, but in fact it was. And when I got that job, it's just incredible

because I no longer have any debt. You make more money than you ever made in your life. Exactly. I love it when a plan comes together. Way to go, kiddo. I'm so proud of you. Thank you. Well done.

So getting laid off was a blessing. Well done. Very well done. Thank you. So who was your biggest cheerleader in your life while you were doing all of this? I would say my mom. She let me live with her for a year. Oh, wow.

So I saved a lot of money on rent. Yeah, and she's here with you today. Yes, she's here. Okay. And, of course, your son. My son with you today. Yes, she's here. Okay. And, of course, your son. My son, yes. And his name is? Leonardo.

Okay, and you brought Leo with you to do the debt-free scream. Yes, sir. Okay, and you're going to join her over there then. All right, very cool. Well, congratulations. Thank you, thank you. So proud of you. Thank you.

Very well done. Well, we've got a copy of Chris Hogan's book for you, Retire Inspired. And that's the next chapter in your story. There's no stopping you. No, sir. There's no stopping you. You are going places. I love this. Yeah, and if I just may say one more thing, God works in mysterious ways.

Because the month before I found your book, I had been baptized. So I decided I wanted to do things God's way. So when I read your book, it just made perfect sense that I wanted to manage my money that way. And a month after I read your book, I got that job making $20,000 more. The same job that laid me off, but it's okay. It helped a lot. That is awesome. Absolutely amazing. Well, well done, well done.

Very proud of you. Thank you. Good job. And you've changed your life. You've changed Leo's life. Yes. And I know your mama's proud as well. Yes.

So very good stuff. All right. It's Claudia and Leo from Atlanta, Georgia. $57,000 paid off in 24 months, making $60,000, no $80,000, no $88,000. Count it down. Let's hear a debt-free making $60,000, no $80,000, no $88,000. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free!

I love it! Yeah! Single mom doing that. There you go. Yeah, that one's got a fire inside of her. She sounds real sweet, but she's got a fire inside of her. That's good stuff. You know, if you lose your job, it is not a law that you take a job making less.

Matter of fact, it's not unusual at all if you just lift your head up that you actually get a job making more. That happens all the time. This is the Dave Ramsey Show. Our scripture of the day, Hebrews 13.7 Remember your leaders who spoke the word of God to you. Consider the outcome of their way of life and imitate their faith. Isaac Newton said, I have seen further, if I have seen further, it is by standing on the shoulders of giants. And by the way, if you pick up an English pound, I believe is the coin,

I believe it's the English pound, around the edges of the coin, if you look along the edges of it, not either face of it, but around the edge, it says, standing on the shoulders of giants, from that Isaac Newton quote. Justin is with us in Orlando, Florida. Hi, Justin. How are you? Pretty good. Thanks for taking my call.

Sure. What's up? Got a question. I'm on baby step two right now. I want to know if I should stay off my house in baby step two. Depending on what your answer is, is how long it's going to take me. How much do you owe on your home? About $73,000.

Okay. And what is your household income? About $90,000. Okay. Gross. Okay. Gross. Gotcha. All right. Interest rate is 10.9%.

Ooh, that's awful. It's private money. Yeah, obviously. Very bad. Okay. And you're out of, are you down, are you out of debt in Baby Step 2, not counting the house? No. I started about $220,000, and I sold one of my cars.

I was really car poor. I financed about 70,000 cars, but I got out of one. I had to save up the money to pay off the difference, obviously, for a Nissan Maxima 2016. But I still got a 2017 Silverado fully loaded. It's $56,000. I currently owe just under $40,000. Okay. All right.

So when will you have everything cleared but the house? Well, I think I can have everything but the house cleared in about a year. I think it'll probably take me another year, in less than a year, because I got $44,000 in student loans and about $20,000 in other debt. Are you selling the Silverado? Yes. As soon as I have, in about six months, I think is probably when I'm going to be in a position to be able to sell it. Okay.

All right. Because otherwise, I can't get you out in a year. I can't see $90,000 paying off $90,000. No, no, no. Yeah, no. The Silverado's gone. Okay. I ended up buying a 2004 GMC Augur.

Okay. All right. I got it for like $2,000. Okay, so you basically got the $44,000 to pay off of student loans and a little bit of other odds and ends, and you're going to do that in a year? Okay. Yeah, I think so. That's doable in a year.

Okay, that makes sense. And then you would build your emergency fund if you're following the baby steps of three to six months of expenses, and so that would be like $20,000, okay, give or take. And then you'd start putting 15% of your income away into retirement. Do you have children? Yes, I have two. What ages? 16 and 13.

Okay, and how are you planning to pay for college? And how are you planning to pay for college? I was just going to get out of debt first and see if I can cash forward. I know she's getting scholarships, too. She's working on it. Yeah. But you're not going to be out of debt by the time she goes to college if you're counting your house. I think I can get out.

I think including my house, if I get my truck gone, I think I could do it in two years. You have $110,000. It's going to be close. Yeah, okay. Yeah, but that's just going to, all right. But then 15% would be $15,000, and $20,000 would be $35,000 off of that, so you could do it in three years if you did it on the baby steps. Yeah, so the 10.9% interest is what's making me want to stick

what's the house worth about 240 okay is your credit destroyed yes okay all right you know the 10 interest rate is just it's a it's emotionally maddening but it only amounts to about three grand a year over the three years because you're going to have it all paid off. You pay it off in three years if you work the baby steps. You pay it off in two years if you don't. You understand that? Yeah. So what we're talking about here is a year.

Okay. And not a year of 10% at $70,000, a year of 10% at probably $20,000 or $30,000 because you will have paid it way down by then. Two. 10% at probably $20,000 or $30,000 because you will have paid it way down by then. Yeah, and that's if we sideline college, and you're going to cash flow college at that point. You're going to have to make college work the first year. But, yeah, the point is when we work through the math together, really you feel like you're doing some big thing when you advance it to baby step two, but you're not.

It's about a year. Okay. And so it's not worth it. I would start, I'd follow the baby steps and push it on through. I'm with you. I hate that 10%. That's why I was asking about your credit. Well, it's my proof of income, really.

This is going to be my first year that I'm actually getting 1099, so I'm going to be able to file taxes. Oh, good. Okay, then listen, listen. I know I need two years of... Proof of income is not an issue. I thought your credit was gone. Okay, so run down...

It's only like 579. Okay, but run down to the credit union and tell them that you have a... What did you say the house was worth? About 240. Okay, and you can show them proof of what you have coming, what did you say the house was worth? About $240,000. Okay. And you can show them proof of what you have coming in on the $1099,000. You just have to show them pay stubs and so forth, right? Yeah.

I don't have two years of it, though. Yeah, but I mean, I'm not trying to qualify you for a traditional mortgage. You can't qualify for a traditional mortgage. But you can borrow $70,000 on a $300,000 house at the credit union on just a HELOC. They can make that loan. They portfolio that loan, meaning it doesn't have to meet any conforming guidelines. They just look at the house and go, oh, we hope he doesn't pay. That's what I thought.

I mean, I tried to do this two years ago, and nobody wanted to take it. Well, you may run into trouble, but I think I'd go shop it around a little bit just for the fun of it. But more than anything, the 10% is just emotionally aggravating. It's not mathematically that aggravating. We're talking about if it was $70,000 for three years, it'd be $21,000 in interest over the whole three years, but it's not that much. It's probably less than half of that. So it's about $10,000 worth of interest over this three-year period of time, roughly average. In the total, total, $10,000 to $15,000, somewhere in there in the interest.

And so that's not the deal with the money you're making. The good news is you have become alive, and you are addressing this. You have woke up, so you are ready to get after it. And that's what I would do. Yeah, no, I would stay with the baby steps. It disgusts me as much as it does you, but there's a real good reason to have your emergency fund in place with a kid going off to college.

There's a real good reason to have your emergency fund in place, period. And there's a real good reason to go ahead and get started on that retirement. There's not that much to it. It's only 15% of your income. That's baby step four. It does not prohibit you from paying off this house. You're going to get there. Oh, by the way, during this coming three years that we're discussing all this happening,

I suspect your income is going to go up too. Eden is with us in Minneapolis. Hi, Eden. How are you? Hi, Dave. I'm great. Thanks for your time. Sure.

What's up? My husband and I are looking for guidance for Baby Steps for the future. We're both 25. We have two kids with steps for the future. We're both 25. We have two kids with one on the way. We're both in school. I'll be done in a few weeks. I'm an RN just finishing up my BSN, and he has two and a half years left. As of right now, we don't have any student loans just because of scholarships and paying out of pocket as we've gone.

Good. We do have about $10,000 in debt. We've got $3,000 in our car, about $1,500 in a hospital bill, and the rest is a loan through our in-laws. We had two 401ks, a pre-tax and a regular. Last week, we just cashed out the pre-tax one, and we're going to use that to pay off we're going to use that to pay off some of our debt and we were wondering if, I guess based on your reaction to that you're not going to like it, we were wondering if we should cash out the rest of it and use that, well I mean we kind of did our baby steps really out of order, I mean he was working for

six years before he decided to go back to school. You know what happens when you cash out a 401k? Well, that's part of our concern is that, like, we just got X. Well, it's supposed to increase. You know what happens when you cash out your 401k? They charge you a 10% penalty plus your tax rate. So you're borrowing money at 35% interest to pay off your debt. That's dumb. No, we don't do that.

No, we don't do that. Period. Unless it's to avoid a bankruptcy or foreclosure, and you're not bankrupt or foreclosure, you have $10,000 in debt. You're named close. No, I want you to get out of debt, but I don't want you to borrow money at 35% interest to do that. And effectively, that's the math of what you're doing when you start cashing out 401ks

early. So I would never recommend that. So that's why. It's a real simple thing. It's just the math is just horrendous. It's not good for you. That puts us out of the Dave Ramsey Show and the books. We'll be back with you before you know it. In the meantime, remember, there is ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, guys, this is James Childs, producer of the Dave Ramsey Show. I'm excited to announce that we're now carrying on 600 radio stations across the country. To find one near you, head to DaveRamsey.com slash show.