The Ramsey Show - App - When to Consolidate Student Loans (Hour 1)

Episode Date: March 7, 2019

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Live from the headquarters of Ramsey Solutions Broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I am Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. 888-825-5225. Phillip starts us off this hour in Phoenix. Hi, Phillip. Welcome to the Dave Ramsey Show. How's it going, Dave? It's really good to talk to you. You too, sir. How can I help? So me and my wife finished Baby Step 2 in February, beginning of February.

We're on track to finish Baby Step 3 by the end of May or June. Good for you. So I'm wondering with Baby Step 4, I have roughly about 103,000 in my 401k, and my company does a 6% match. My wife has about 15,000 in her 401k, and her company does a 6% match. My wife has about $15,000 in her 401k, and her company does an 8% match. And I know that you say to do the 15% towards your retirement investments. The majority, other than about $4,000 or $5,000 of our 401ks currently, are in pre-tax. And just wondering if I should do the full 15% going forward into Roth, or if I should do up to the matching amount and then save the rest of it

and start converting what I have in pre-tax over to Roth and use what I saved from that 15% or the difference. Gotcha. Okay, so both of you have Roth 401Ks available. Yes, and going forward, that's what we're going to use. And you obviously have good mutual fund selections in there, right? Absolutely. Okay, great.

Yeah, I would do all of my 15% in my Roth 401ks. I think you can both get there that way. Here's the rule, okay? The rule is match beats roth beats traditional it's kind of a rock paper scissors thing except there's no crossfire okay match beats uh roth beats traditional okay and you've got roth 401k with a match that's the best of all worlds with good options now you've got crummy mutual funds, you'd have to think about doing something else.

But you've got good options. You've got a Roth. You get the match. Now, the match will not be Roth. Correct. It cannot be, by law. And so that's going to continue to grow your non-Roth. And so I'm going to put 15% of there.

I'm going to convert none of this that is currently regular to Roth until you get to baby step seven. Okay. And then when you want to do some additional investing, because effectively when you convert it, you've got to pay taxes on it. And so if you convert that $103,000, it's going to create a $25,000 tax bill. Right. And we don't need that right now. We're trying to get the house paid off. Absolutely.

And that's the goal to have that done by the end of 2023. Perfect. And when you get there and you're ready to load up all of your accounts, then you transfer, you take anything that's traditional, which would have been the match-up to that point, plus the original amount that you had in traditional, and you start moving all of that to Roth. Now, in my case, I've been Baby Step 7 for years, right?

I happen to own the freaking company, too. So I match myself on my 401K, right? Okay. That match is not Roth, but once a year, I go ahead and roll it into Roth. Okay. I do a true-up at the end of the year, and I just roll anything that's not Roth into Roth, and that creates some taxes for me. Now, what that does, though, is, of course, from that point forward, it's growing tax-free, and it has the mathematical effect of

having invested that much more money, the amount you paid in taxes. Right. Well, that's why I was trying to figure out if I was putting the cart before the horse if i was trying to do that conversion since i've heard you say that before so i just want to get that clarification i do want i do want that conversion in my sights but i'm going to do it after i knock my house out because that would equate to more than 15 going in at baby step four then see right and we don't want to do that until we until we get there but 15 of your income 15 of her income it's if you both got good options, she's got an 8% match, you've got a 6% match.

Ding, ding. How old are you? I'm 30, and she's 27. Oh, baby. What's your household income? Roughly about $110,000. Oh, my gosh. This is going to be millions and millions and millions of dollars.

That's the point. We've got legacy to our daughter. Yeah. Well, you're going to be able to help other people. You're going to be able to change your family tree. Man, you're going to be an everyday millionaire 10X. I'm proud of you guys. Well done.

Jonathan is in Durham, North Carolina. Hi, Jonathan. Welcome to the Dave Ramsey Show. Hey, how's it going, Dave? Better than I deserve. What's up? So, me and my wife were recently married in June of last year. We made ourselves through the baby steps, are currently debt-free, have $21,000 in emergency funds. And I was lucky enough at my job this year to get a sizable bonus, about $6,500. So I cleared about $5,000. And one of the things that I really wanted to do with that

money was to actually help my mom pay off her debts. And she has about $10,000 in credit card debt. And I talked to my brother, and we would go about half these to help her pay off that debt. So, you know, we're well on our way to having a sizable down payment for a home, and I wanted to know if that really fit within the plan because it's, you know, giving outside of the last step, so it's before the last step occurs. Yeah, we don't wait until the last step to do giving, so you're fine to do giving wherever you want to do it how's your wife feel about this she she said she supports it she's behind it 100 percent yeah she said that it would you know it

would make my mother happy and it would make me happy that she supports it so yeah mom needs to go and mom needs to go through financial peace and cut up her freaking credit cards. Yeah, well, Mom doesn't use her credit cards anymore, but it was more of a fallout from my parents' divorce. How long ago? So 20 years ago. Yeah, it's not an excuse after about five years. You can't blame $10,000 in credit card debt on something 20 years ago. No, I agree.

The thing is, I don't want to enable financial misbehavior or laziness by giving this gift. So I'm fine with you giving the gift, and I think Mom's on track, but I think Mom is a little bit wounded still. She's kind of walking with a limp from this divorce 20 years later, still talking about it like it was yesterday. Let's her in financial peace i'll give it to you to give her okay okay thank you to make sure that she doesn't you don't have a recidivism rate right we don't fall back off the wagon after you paid this i mean can you imagine how your wife's gonna feel if she runs fifteen thousand dollars up in credit card debt five years from now? She probably wouldn't be too happy about that. Yeah, I wouldn't.

So let's make sure mom is healed, not just helped. And I'll help you with that. I'll give you a financial piece to put her through. Let's put her in the class, make her a member in the online, and let's do the stuff we've got to do here. But, yes, definitely I would do that. I think you're generous. You're a wonderful guy. Look at you helping your mom.

That's good stuff. Let's just make sure that helping is really helping. That's what we always want to do. I'm just, I have the gift of cynicism and so I never want to give a drunk a drink. I always want to help people and sometimes we do stuff that we think is helping and it's not. I don't think that's the case here. I think mom's okay. She hasn't used her credit cards. It hasn't gotten that's the case here. I think mom's okay. She hadn't used her credit cards, hadn't gotten worse, just not gotten better. Let's work on this.

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We're so confident you'll love Pure Talk USA that we invite you to try our service risk-free. Visit puretalkusa.com or call 844-862-3677. Enter promo code SAVEDAVE and receive 50% off your first month. That's puretalkusa.com. Thanks for joining us, America. We're glad you are here. Christy is in Philadelphia. Hi, Christy. Welcome to The Dave Ramsey Show.

Hi, Dave. How are you? I'm so happy to be speaking with you. Well, you too. What's up? Okay, so I had a question. We have about $170,000 in debt. Eighty of that is student loans. But my wife refuses to believe that we should pay that off first because she thinks she's getting the financial forgiveness for that in the next like three years or so. 43 of that is a home equity line of credit and 22 of that is a car with zero interest. So we weren't sure, you know,

how we should pay off and which we should pay off first. Well, we teach you to list your debts, smallest to largest, regardless of the interest rate. Pay minimum payments on everything but the little one and attack them in that order. Even if one has a 0%, like the van has a 0%? Yeah, like regardless of the interest rate. Okay. Because we're not worrying about interest rates. We're trying to clear the debt.

What's your household income? It's about $170 when you put both of our five jobs into it. Okay. And you probably ought to just, like, Google student loan forgiveness, and you will find that it's not occurring. Like 35,000 people have applied for forgiveness and like 96 have gotten it. And so it's the biggest scam ever perpetrated on the American public, it looks like. It's an absolute disaster.

So I would not be waiting on the government to fix my problems, even if you're feeling the burn. I don't think it's going to happen, so you do what you want to do but if i were in your shoes i'd clean this dadgum mess up and i wouldn't wait on somebody else to do it for me thanks for the call steven is in utah hi steven welcome to the dave ramsey show hi dave thanks so much for having me sure um so i recently won a job playing drums and percussion in the Marine Fleet Band. So later on this fall, I'm going to be shipped out either to Hawaii, Okinawa, California. I'm not sure yet. Taking Financial Peace University, trying to figure all this stuff out.

And I want to know if I should try to sell my car now or wait until later. Well, you're not moving to the fall right i'm sorry can you say that again you said you're moving in the fall yes sir um boot camp is going to be probably closer to october and it's about 12 weeks long and then of course after that i'll be out of it yeah and so you're talking about because you're going to be overseas you don't need a car or you're trying to get rid of the debt on the car or both um a little bit of both it's mostly the debt on the car i owe about 5400 on it um the monthly payment's like 169 but my insurance is like 130 right now so you know and i make only about 2424,000 a year. I also have a student loan that's $14,000. Then I have the Best Buy credit card, $1,700.

Then I have a Visa card that's about $7,800. What will the car bring? I'm trying to do the baby steps. What will the car sell for? According to Kelly Blue Book, the car would sell for about $7,000. Okay. And so what would you do if you sold the car now for transportation between now and the fall when you go into boot camp? Well, Utah has a lot of really good public transportation,

and luckily I do some work at the University of Utah, so I can use that for free. But there's also a lot of used cars I've looked at for about $400 or $500. My commute is pretty short. I mean, I probably drive maybe 30 minutes a day. So that would bring, of course, that would get rid of the payment, and then my car insurance would be drastically lower. I have to have total coverage because of the loan. Okay.

And then you would just sell that little car when you got ready to leave, right? Yes, sir, or now if it makes better financial sense. No, I'm saying the $500 car. Oh, yes, yes, I would. Okay. So, yeah, I might do that, but I probably would upgrade a little bit. It sounds like you've got a couple of thousand dollars in equity. You would get rid of the payment you could have a two thousand or fifteen hundred dollar car uh that you pay cash for right now if i understood your numbers correctly and um that gets the insurance down dramatically

uh and you know and and here's the thing too go ahead and shop uh talk to uh you know go to davramsey.com and talk to your yourP for insurance, for property and casualty insurance, and have them tell you what kinds of car. Because the type of car that you buy, even if it's a $2,000 car, a $2,000 Camaro is going to be a lot more expensive to insure than a $2,000 F-150, okay, as an example. All right. So certain cars are more expensive to insure for liability or for full coverage. And so just the type of car does matter.

So I'd do a little bit of thinking about that before you jump and make the move. But, yeah, I mean, if you could sell this one and move down into a cash car that's a cheap car to get you through to October with your income being what it is, and you can begin to attack those student loans as rapidly as you can, and then, of course, you're going to head off into boot camp. So, and congratulations on being awarded the opportunity to be in the band. That's pretty incredible, man, and thanks for serving your country. Alex is with us in Michigan. Hi, Alex. Welcome to the Dave Ramsey Show. Hey, Dave and thanks for serving your country. Alex is with us in Michigan. Hi, Alex.

Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my call. Sure. What's up? It's my understanding that saving for a house is Baby Step 3B. Correct. And my husband and I will be debt-free next year,

and by the end of the year have our fully funded emergency fund. Wonderful. We're 25 and 28 years old with kids and we'd like to save for a house but my question is do we just solely focus on saving for a house or should we do baby steps four five and six all simultaneously while doing that your choice that's why we call it 3B. Sometimes people are really, really concerned about retirement, and they're willing to delay saving their down payment by saving less due to having put some into retirement. Sometimes they delay retirement because they're all wired up about getting a house.

Either one's okay. Either one's okay in this, because it's a temporary thing. It's not like you're going to do this for 10 years. You're going to do it for three years, whatever it is that you choose to do with your baby step 3B. So you're fine. I guess my biggest worry was us not being able to have a good retirement fund if I put it off longer. You're 25. Yeah. If you start by 30 and you do what we teach and you save 15% of your household income from 30 to 65, you will retire a multimillionaire.

Okay. Well, thank you so much. Yeah, you're going to be fine as far as that part goes. But you just got to decide, you know, what's important. Actually run the numbers out and look at it and talk about it and say, okay, how much can we save towards a house now that we're debt-free? And, you know, we want a house for the kids and that kind of stuff. And we've got these other things going on. Once you break through baby step three, you start making some different choices.

Your gazelle intense, scorched earth, baby steps one through three. Don't do anything except one until it's done. Don't do anything except two until it's done. Don't do anything except three until it's done. Then you let your foot off the gas a little bit, and that's when you buy a couch. You go on vacation. You upgrade in car, all with cash. You save for a down payment on a house, all with cash.

And somewhere in there, shortly thereafter, finishing baby step three, you start saving 15% of your income towards retirement. And that pretty much ensures that you're going to retire in excellent condition, depending on how old you are and what your income is and that kind of stuff. Stephanie is with us in Phoenix, Arizona. Hi, Stephanie. How are you? I'm doing great.

How are you? Better than I deserve. What's up? All right. So I have a question. I just graduated from school in December, and so I'm on baby step number two. And the two big loans that I have is my car loan for $9,000 and my student loan, which is a total of around $43,000. Now, my student loans currently are separated like they're individuals, a total of 13 student loans.

And so my question is, should I consolidate? Probably not. I mean, you can put them together if you want. The big interest rate, the only reason you would consolidate is if you got a lower overall aggregate interest rate. And you're probably not going to.

But you can investigate with one of the consolidation companies and see if you can get a lower overall rate, not a variable rate, a fixed rate and a lower overall rate. That's the only time I'd consolidate student loans. Jeff and Steph are with us in the lobby of Ramsey Solutions. Hey, guys, how are you? Hey, Dave. We're blessed to be here. We're honored to have you.

Where do you live? Indianapolis. Oh, that's not a bad trip. Welcome to Nashville. Thank you. Good to have you. And all the way here to do your debt-free scream. That's right.

Very cool. How much have you paid off? $45,000 in 10 months. Wow, that's excellent. And your range of income during that time? It was about $97,000 to $100,000. Cool. What do you guys do for a living?

I'm a business analyst. And I'm a marketing director. Fun. Good for you guys. Neat. What kind of debt was the $45,000? Yeah, so we had about $7,000 in a car loan, and then the rest were our combined student loans, about $38,000 total.

Cool. How old are you guys? 29 and almost 29. Yep. All right. All right. And how long have you been married? Almost five years.

Okay. So four years in, and really you were about out of school. You got out of school, got married, right? Mm-hmm. And four years in, you look up and you go, these student loans aren't moving. were about out of school about that we got out just got out of school got married right and uh four years in you look up and you go these student loans aren't moving so what happened well um i really wanted to do your plan as soon as possible um our story we actually read the total money makeover while we were in college um before we got, but we weren't on your plan. But when we did get married, I was working on our budget every month by myself.

And it's really pretty overwhelming because we had those loans and we weren't saving any money. We were pretty normal. We both had a credit card. We were paying it off every month. We had bought some things on 0% interest. But like you said, we weren't making any progress on our debt and it was just very, very stressful. Yeah. And I think that, um, at that point I checked my student loan balance after I'd been paying pretty hefty payments for about a year

and the balance hadn't gone down at all. And that was kind of that moment for me where, you know, I knew I deferred my loans for a while, so I was just paying interest and interest. And, um, so I kind of had that moment of, that moment of, we can't do this anymore. So I remembered reading your book. I started listening to your show every day and just kind of got excited about it. And then we had kind of this other moment where we would commute into work every day in separate vehicles and we'd go at the same time. We'd kind of wave to each other driving down the interstate. And it kind of occurred to me that maybe we could just go down to one vehicle and

kind of jump start this this debt snowball so yeah that's what we did so we sold my truck radical yeah sold my motorcycle oh yeah and we took a little other money from savings and just kind of threw that at our debt and the first month we um we paid off the car loan and then her student loan and the rest then the next nine months and then her student loan and the rest. The next nine months was just my student loan, $30,000. So, Steph, you were kind of trying to hold it all together. And he comes along and suddenly gets motivated. You were like, thank you, Jesus, or what?

Oh, definitely. It was a blessing. And it was all his idea, which was even better. I didn't have to keep pushing the envelope. That's perfect. Very cool. So what's the secret to getting out of debt? You paid off an average of $4,000 to $5,000 a month here for 10 months.

That's pretty impressive. And you sold a car. That's part of it. And you sold a motorcycle. That's part of it, right? Yes, that definitely helped. Yeah, what's the secret to getting out of debt? For me, there were really two things. It was us working on the budget together and constantly talking about it, which is inevitable when you're always in the car together.

And the other thing was it just being a total mindset shift and realizing we are managing God's money. It's not our money. Okay. Yeah, I think for me it was, we we definitely want to give god all the glory because he was definitely walking through this this whole process um that was big and then just humbling yourself to the plan you know it definitely works you just have to commit to it um and then being okay with people thinking that you're weird because some of the stuff we did people thought we were a little crazy but yeah down to one car i'll get that'll raise some

eyebrows yeah yeah and then you sell your motorcycle what if you're kind of cult did you join i mean really yeah yeah so who was your biggest cheerleader outside the two of you i think our families were very supportive um you know our friends and co-workers even if they thought we were a little weird they they definitely were supportive so we appreciate them so once you decided okay we got to do something did you just get the old book off the shelf and dust it off? Or what did you do in terms of did you go through the class or what did you do? Yeah, we definitely reread the book a little bit and then we just listened to the show. I mean, we were listening to it at the gym, driving in the car every single day together and listening to it.

So that was a big part of keeping us motivated. So you're wearing a podcast now. Absolutely, yeah. Okay. All right. Very cool. Very cool. Well, congratulations congratulations you guys thank

you very proud of you very well done we got a copy of chris hogan's everyday millionaires book for you thank you and uh absolutely incredible that's the next chapter in your story you're going to be everyday millionaires you guys you're on fire you're 29 you're free how's it feel it feels amazing huge weight lifted off of our shoulders. Not even 30 and you're done. Yeah. And it's been incredible to see the way it's worked in our marriage and our faith. And we're actually in the process of helping coordinate our second FPU class right now.

Oh, wow. Connection Point in Brownsburg. So we're excited to be a part of that, too. Well, thank you for doing that. So you not only went through the class, you actually are coordinating. Yeah. We love it. Cool. Thank you for doing that. So you not only went through the class, you actually are coordinating. Yeah. We love it.

Well, and you're kind of like stuffing it in the face of these people that are saying millennials, you know, all this negative stuff. And here you are like, touchdown, baby. It's possible. It's not only possible, it's probable when you decide. And you guys are doing it. You're incredible. Well done. All right. Jeff and Steph from Indianapolis, Indiana. are doing it you're you're incredible well done all right jeff and steph from indianapolis indiana

45 000 paid off in 10 months making 97 to 100 count it down let's hear a debt-free scream ready three two one we're dead free love it absolutely fabulous well done you two very very well done well our question of the day comes from blinds.com is the number one online retailer of custom window coverings you get free samples free shipping and with the new promos they run every month, you'll save even more. Use the promo code RAMSY to get the best possible deal. Questions from Abe in Missouri. He says, Dave, my boys are 8 and 10 years old, and they want to earn money. I want to encourage their entrepreneurial spirit.

I'm curious what jobs or businesses you've seen kids this age have success with. Well, they're pretty young, and so usually chores around the house that you set up that allow them to earn some money. The thing we're trying to do when they're that age, and really from three years old on up, is we're trying to make this emotional connection between work and money. Work is where money comes from it's like magical and i want to make that connection it's the amounts don't matter the market value of their services don't really matter so you set chores

up in the house and i might have an eight-year-old that's getting paid a dollar a week to feed the dog. Well, I wouldn't pay an outsider to feed my dog. But they got five chores a buck apiece or something like that, and we outline all of that in the Financial Peace Junior Kit on how to teach you, how to teach your kids how to handle money. As far as outside jobs, outside the family, I think the thing I'm going to want to be careful of there is eight and ten years old is their dad. I'm probably going to end up having to at least oversee this from a safety perspective and that kind of stuff.

So, you know, and you might end up in acase scenario, actually having to help them execute. For instance, if they decide they were going to keep the next-door neighbor's dog while they were out of town, you pretty much got to make sure that dog gets fed while they're doing that, or dog gets walked, or whatever it is they had promised that they were going to execute. And so there's some parenting involved here, some of your time that's involved, too. Different kids are wired different ways. We all have different ones. And so, you know, some of them are going to just be like Mr. Responsible, Mrs. Responsible, and other ones are going to go, oh, I forgot for three days, and the dog's hungry, you know. So you just you got to keep your finger on this thing.

So you need to decide. You need to be careful what it is they commit to because you're in the mix. That's the other thing I would do. So from a safety standpoint, I don't want them, you know, riding across town on a bus at eight years old to babysit or something. I mean, that's just, you know, that's silly. So it needs to be something that's done kind of in the neighborhood there, something that's done if you've got a family business, something you can do inside the business.

Those kinds of things where you can control the environment. Because the lesson here is not really the money that's made. It's the tie between money and work. Money comes from work. I meet 54-year-olds that don't know that. This is The Dave Ramsey Show. Thanks for joining us, America. Well, if you hate your job or you just don't like it, you're not alone. 70% of Americans are not passionate about their work,

and they really deep down inside are kind of desperate to do something with meaning and purpose. Well, here's some good news. Getting a job that you actually love that has meaning meaning and purpose to it, is easier than you think. And we've got a brand new book that's going to show you how to do it. We are excited to introduce the brand new book, The Proximity Principle, by Ramsey personality and career expert, national radio host, Ken Coleman. The Proximity Principle, the proven strategy that will lead you to the career you love. Now, it's on pre-sale right now. We'll actually ship it in May, but it's $19.99, and you get $20 worth of free bonus items

if you pre-order it now. And several thousand of you have already pre-ordered it. This is going to be a big book, it looks like. Very nice. Love it. If you pre-order, you're going is going to be a big book, it looks like. Very nice. Love it. If you pre-order, you're going to get the Proximity Principle e-book thrown in and a video lesson from Ken Coleman. Discover what you were born to do as bonus items.

So go to the online store at DaveRamsey.com or go to KenColeman.com or call the Ramsey Concierge team at 888-22-PIECE, 888-227-3223, and get the proximity principle ordered. And it will come to you in early May, and we'll get you taken care of there. It's an incredible book. I've enjoyed working on this project, watching from behind the scenes, watching our team and Ken put the book together. It's a good, good, solid read, good, actionable steps,

things you can do that make a difference. When you get in proximity of the people and places that what you want to do is happening, then that increases your probability of actually getting to be one of those. Steve's with us in New York. Hi, Steve. Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my call. Hi, Steve. Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for taking my call.

Sure, man. What's up? Okay, so my wife and I got married about a year ago, found out about your program about three or four weeks ago, but we were already naturally savers, so we are done with baby step three. We don't have any debt, and we have about three months in savings. Way to go. Yeah, it's good news. We also have some retirement accounts.

The issue is that, you know, we're looking to purchase a home, and we live in a very expensive area of New York. Medium home price is over a million dollars, and property taxes can be up to $25,000 a year on a home. So our question is, you is, we have a budget and we're noticing that we have a pretty good income, combined income. We're pretty blessed to have good education and have a good income. So we're not really spending more than 25% of our income after rent on things like food and things like food and, you know, other necessities.

So we were wondering, you know, I've heard, I've seen back in some of your other videos, you talk about spending 25% of your take-home pay on a mortgage. I was wondering if you could go above that amount if you're living in an expensive area and put less than 20% down, if, you know, you already have a budget and you know that 20% down if, you know, you already have a budget and you know that you're not really, you know, you could spend up to maybe 40% of your income and not be, you know, not have any kind of issues. Is that something you would recommend or what do you think we should do to start saving? So what's your household income?

It's a little over $300,000. It's about $315,000. Good for you. What do you guys do for a living? So I work in a health care IT firm, and then my girlfriend works for a large tech company. I'm sorry, my wife works for a large tech company. Okay. All right, cool. And you guys are how old? I am 31, and she is about to turn 30.

Way to go, man. You guys are killing it. Congratulations. Well, here's the thing. 40% is 40% in Kansas, California, New York, Tokyo, and London. Right? Yeah. You don't get a pass on math because of where you live.

You have a fabulous income. No, I would not spend more than 25% of your take-home pay on a 15-year fixed on housing, regardless of where you live. The good news is you make good enough money to actually live in New York. Yeah, that's true. But you don't really get a pass on math because the problem is the squeeze. You're using up, you know, everybody needs to be on a budget. I'm going to teach everybody to be on a budget.

But even if you're on a budget, you're using up such a large percentage of your income on your housing when you get up above 25% that you start to be what we call house poor, meaning that you squeeze the rest of your budget down tight and you're not able to do some of the other stuff you should be able to do in terms of wealth building and, you know, making sure your emergency fund's in place, saving up and paying cash for things like Christmas cars and vacations. And when you squeeze that down in that house, yeah, you can make the monthly payment on the average month or some months, but the months where you needed to do something else,

you don't have any wiggle room. So, no, I'm not going to let you get up to 40% of your income. You make enough money to do something there. I mean, if you cheat up a little bit knowing that you guys have got great careers and your incomes are going to go up, you can cheat up a little if you want to. But don't justify it based on the idea I've got a budget. Because 40% is 40%. It doesn't matter where you are.

That's just too much. It's just squeezing down your ability to do the other stuff. The house is sucking the bone marrow out of your budget is what it amounts to. You become house poor. But I think you guys are going to be fine. You're obviously very bright people. You're obviously making amazing money for your age. You're just killing it, man, and just very, very well done.

You're going to be all right, but just don't, you know, no, you don't get a pass on math based on where you live. Mark is in Atlanta. Hey, Mark, welcome to the Dave Ramsey Show. Hey, Dave. I'm a coordinator here, and are you sitting down a hope? Generally, yeah. Okay.

We have a couple. He's a pharmacist, and she is a part-time attorney, and they have over $315,000 in student loans. And they have agreed to downsize in-house. They found another house that will give them about $80,000 to put down on the student loans. But she is concerned because he has some cancer issues from a couple years ago that, you know, if something happens to him, she would feel better if they had their three to six months money stacked away first before they attack the student loans.

And I was tending to agree with them, but I just wanted to check and see what you thought. money stacked away first before they attacked the student loans and i was tending to agree with them but i just wanted to check and see what you thought um probably not probably going to stick right with it um i think what we've got to do is we have to decide is the um you know what is the real issue here um let me tell you what i heard and if i'm wrong you can correct me i heard she's using a past cancer diagnosis as an excuse to get her emergency fund out of order that's what i heard yes okay but it's an excuse is what i, meaning that the cancer is not a real threat. Now, if you guys sit down and you talk about it and you go, look, there's like a 50% chance, 60% chance, then they may not need to be working on anything.

They may need to just be piling up cash to get ready for cancer. But if that's the case, it's either one or the other. It's like somebody going, you know, I'm afraid I'm going to lose my job. Why are you afraid you're going to lose your job? Oh, I just have this general fear. Oh, well, shut up and do the baby steps, you know. Or, no, they came in last week and laid off 10 people, and they said they're going to lay off 10 more next week, and there's only 11 working here.

I'm gone. Okay, well, you better get ready. You need to stop your baby steps and pile up some cash. There's storm clouds on the horizon. If there's not storm clouds on the horizon, no.-time attorney let me help you with this you want a hundred thousand dollars in debt to be a part-time attorney let's get our butt in gear and earn some money here and clean this mess up you two made with your student loans that's what i would do so yeah man it's mark So, yeah, man, Mark, when I was a coordinator, people cried. So you're a nicer guy than me.

You take it easy on them. But but no, unless unless we've got a real serious health issue, in which case we should not be working the baby steps. We should be pushing pause and piling up cash to get ready to deal with that health issue. I would just work the baby steps good question thanks for being a coordinator mark we appreciate you man yeah they did cry i was not mean on purpose but i just tell you the truth well you can't handle the truth this is the dave ramsey show this is james childs producer of the dave ramsey. 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

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