The Ramsey Show - App - When to Start Investing and When to Wait (Hour 1)

Episode Date: January 3, 2019

The show about you

🎵 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. I'm Dave Ramsey, your host. You jump in, we'll talk about your life and your money. It's a free call at 888-825-5225. That's 888-825-5225. Monique is with us in Durham, North Carolina to start off this hour. Hi, Monique. How are you? Hi, Dave. Thank you so much for taking my call. Sure. What's up?

All right. So my question is, my husband and I are kind of stuck on this issue. He does a lot of contract work outside of the home because he's a part-time student, and he makes about $1,000 to $2,000 a month doing so. And so last year, we didn't set aside money for taxes, but we're right now in the process of saving for taxes for April. And so we're wondering, starting this year, if we should go ahead and start setting the 20% aside for our taxes. Yes. Okay. Because we didn't know if we should just keep using. There's two things you have.

There's two problems. Number one is it's going to build up and it's going to end up being a lump sum and you're going to get smacked. And you don't want to always be behind. Right now, for April, you're behind. Yeah. And you're trying to hurry up and catch up kind of thing and uh if you'll just as a matter of course say contract labor means he has his own small business that's what it means by definition and so every check he needs to set aside about a fourth of it and 20 25 something like that and just set it over in a savings account and that'll keep you from ever being behind the eight ball like you kind of are right now right yeah and uh again and it just you know if he had a job making a thousand dollars they'd be withholding on him

true and so he all we're doing is just withholding on him. You're just having to do it because they don't because he's contract labor. Now, the second problem is other than just that's the biggest problem there is that. But the second year that you're doing this,40 in a quarter you have to file a quarterly estimate of your taxes and pay your taxes each quarter that are due for that quarterly estimate if you don't you get penalized in addition to having your taxes and will be charged interest on that oh wow and so this year last year you last year you were okay to not do it, but the second year that you're doing it, they say, all right, now once a quarter you have to file a little return.

And it's not hard to do. You can get in touch with one of our tax ELPs. They'll help you do it. It's one page, the quarterly is. And it's basically what did you make, what were your expenses, the difference is called your net profit times your tax rate. And you send them a check for that amount, which will be at the end of April, right? Or at the end of March.

April 15th, you'll have that due for the first quarter in addition to last year's taxes. And so you've got to withhold this month for start withholding on yourself. And that will keep you from getting in a cash flow problem and then also keep you from getting penalized. So it's not real difficult math to do. It's just the discipline of getting in the rhythm to automatically withhold on yourself when you own your own business. When you take money from the business and bring it home,

when you contract labor, that's all of it. You just get the check. It comes home. You don't really have any expenses probably associated with this then that's all profit and that profit then obviously is taxed at your tax rate and unless the household income's up over a hundred thousand you're probably okay to do it to withhold it about a 25 percent rate that'll cover your both sides of F, which is your self-employment tax, which is 15.3 total, and then on top of that your income tax. Both of those are collected by the IRS, obviously.

Robert is with us in San Antonio. Hey, Robert, how are you? Good afternoon, Mr. Ramsey. How are you doing, sir? Better than I deserve. What's up? All right, sir. Some time at the beginning of this month, a friend of mine passed away, and he left the will.

And in the will, I get $100,000 in cash, and then he owned businesses. And he owned two shopping centers. I get one of the shopping centers. The shopping center is taxed at just over a million dollars. Wow. So his sister, who is in the business with him, has a buy-sell agreement in which they have the first right of refusal to buy the businesses, which is a dry cleaning business and the two shopping centers that are in question. The rest of the businesses and the other shopping center in question go to his other sister.

But I'm entitled to the one shopping center, and I am am going to sell it to him i don't want it and i just don't understand you know maybe what is it an inheritance tax it might be is it a gift tax you don't have no taxes none okay it's all tax-free here's why your basis on inherited property your basis is what your gain is calculated against your basis is market value at the time you inherited it so what's the shopping center worth i'm guessing i haven't done any comp scenario but i'm guessing 1.5 okay and so if and you just inherited it recently right and so no the will was probated today. It was sent to me to probate today. So, I mean, so your basis is 1.5. As long as you sell it for 1.5 or less, you're going to have no taxes.

Okay. It's 100%. There's no income tax. There's no inheritance tax. There's no tax. That's pretty cool. All right. So is the shopping center...

I follow your steps. Is the shopping center paid for? I have my emergency fund and all that established. I've been contacting ELPs here in the San Antonio area. And I don't know what to do with $1.5 million, to be honest with you. I don't need the money my house is paid for. I'm not in debt. My son's college is paid for and so forth and so on the shopping center's obviously got no debt then no sir he has the loan was paid many years ago

that's bizarre why did he leave it to you i years ago i was involved in the business and I walked away because we disagreed on management of how he's doing things and I went on to become a therapist I moved on to life and you all remain friends yes sir I've known him for over 25 years wow

that's amazing so did he put you in the will originally or after you were gone actually I'm sorry I'm leaving on a big part in the will I was the executor. Yeah. And I removed myself. I passed it on to a sister who was the one who was going to buy the businesses and do shopping centers.

Okay. Because I didn't want to deal with his family. There's a little bit of infighting. Yeah, I bet. Nothing about the will, but just in general. I just don't care too much for his family and the family dynamics. I don't want to be involved. Amazing. Well, as far as what you should do with a million five is, number one, you take your time. Number

two, you never put money in something you don't understand. So if you want to buy some other real estate, you can, or if you like real estate since you were in that business at one point, or you can look at mutual funds with one of our SmartVestor pros. Those are the only two things I do, Robert. I do mutual funds and real estate that I pay cash for. I've listened to you for years. So you knew that already.

The first thing I would do, though, is just take your time. This is just overwhelming. Just breathe a little bit. Take your time. If you wait a year to make your decision, it's okay. You do need to see a tax ELP to confirm the advice I just gave you, but I'm 99% sure I'm right. So get with one of the tax ELPs to make sure I'm not missing something there. But I don't think I am.

I think you're in good shape on the taxes. Wow. What a story. This is the Dave Ramsey Show. Pure Talk USA offers smarter wireless with unlimited plans starting as low as $20 per month. You never pay data overage fees, and we never turn off your data. No contracts, no hidden fees, and if you're thinking our low cost means less coverage, think again. Our voice and data service covers 99% of Americans, and our 4G LTE network provides the fastest internet speeds like more expensive carriers. We operate on the

largest GSM network in the U.S. to ensure you receive reliable coverage virtually anytime, anywhere. Plus, you can keep your same phone and number and add multiple lines to save more. 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. Thank you for joining us, America. This is the Dave Ramsey Show. We're glad you're here at Open Phones, 888-825-5225. Kim is in Asheville, North Carolina.

How are you, Kim? Hi. I'm good, Dave. Thanks. Good. How are you, Kim? Hi. I'm good, Dave. Thanks. Good. How can I help? Recently, I inherited my grandparents' house. I mean, actually, I didn't inherit, but I'm going to inherit $200,000, but I live in my

grandparents' house, and my husband and I are having to move because of a job and other reasons. Now, we don't know. We have the $200,000, so we don't know if we should buy another house where we're moving and keep this house, or if we should sell this house and move and just pay cash or whatever. Okay, so the home that you live in you own and you inherited from your grandmother. Yes. Okay, and where home that you live in you own and you inherited from your grandmother? Yes. Okay, and where are you moving?

We owe $86,000 on it because we renovated it and added on 10 years ago. Oh. And we're moving to Tennessee, actually. That's not that far from Asheville. What part of Tennessee? Chattanooga. Oh, okay. That is a ways from Asheville. What part of Tennessee? Chattanooga. Oh, okay. That is a ways from Asheville.

Okay, cool. All right. It's definitely more complicated than this, but that's the basic part of it. I mean, it is sentimental, and so we thought we'd maybe put the house on hold for a year um but we don't want to use all the cash because and there's another job coming and it's just really complicated and we want to do eventually some investing in real estate with it because if we sold the house and we get about 300 grand for it so we'd have500,000 to start our life down there and buy a home and then maybe some investment properties is what we're looking at.

Well, 99.9% of the time I'm going to tell you to sell this house when you leave because long-distance landlording is a nightmare. Yeah, we would get a property manager for sure. Yeah, it doesn't matter. No one watches your property like you watch it, and you're not in the town where the house is. You would never live in Chattanooga and go buy investment property in Asheville. And so that tells us that you would sell it.

Now, the only reason you would not sell it would be just the emotions and the fact that you're tied to this home by family ties, right? And that's the only reason you would keep it. But it's not a financially wise or investment wise thing to do, to keep it. You're going to keep it in spite of it not being a good idea. And that's okay if you choose to do that. You're just saying, you know, the nostalgia of this home overrides the fact that it's not a good decision. Mathematically, I'm going to lose some money in order to keep this house. That's what you're saying, if you keep it.

But I personally wouldn't keep it. I would sell it. I'm not real tied to stuff like that. I mean, I'm nostalgic. The older I get, the more nostalgic I am, but I'm more nostalgic on something that is an item rather than a piece of property. As a matter of fact, I've been real clear with my kids upon my death and my grandkids as they get older. I'll be clear with them that no property we own is is our legacy no business that we own is our legacy our legacy is our family our legacy is and so i would rather them be more concerned

about you know owning the old man's bible than keeping his house that kind of thing so something like that is what i get nostalgic about but you can decide what you want to do. But would I sell that? I would. Yeah, I surely would. It frees up. That cash, it'll go with you anywhere you want to go. And I would take my cash and I would go to Chattanooga and start my life.

Brian is in Los Angeles. Hey, Brian, welcome to the Dave Ramsey Show. Dave, it is such a pleasure, my friend. I tell my Mexican family that you're the white father I wish I always had. Okay, I'll take it, brother. The white hillbilly. I love it, man. I love your values.

You're the best. You're awesome. How can I help, man? Well, Dave, 2018 has started incredible for me. To say the least, two of my goals this year was to pay off my car and to start investing. And I've already accumulated enough money to open an index fund through Vanguard, which is what I wanted to do. But I still need to pay off my car. So I don't know which one I should do first.

My car is worth about, I have to pay off about $5,400. That's what's left on it. And I have $3,500 saved up. So $3,000 is necessary to start an index home with Vanguard. So I don't know which one I should do first. Okay. Well, Brian, we teach a thing called the baby steps, and that's the way that that's the framework with which we make decisions on which to do first, which to do second, those kinds of things.

And we found that, you know, most things we do are baby steps. Most, you know, if you're going to build a house, you lay the foundation before you put the walls up. You don't you know, you don't start building the roof until you've got the walls up. Right. And so you do things in order so that things build out the way they're supposed to. So our baby step number one that we teach is $1,000. Your first thing you do is save a beginner starter emergency fund of $1,000. And then once you've done that, then you become debt-free, everything but your home. And then once you've done that, after baby step two, you go to baby step three, you go back to that $1,000 account, raise it up to three to six months of expenses for emergencies this is all before you start investing and then baby step

four as you start investing and that's 15 of your income going into retirement and then of course um baby step five is if you have kids and you're going to save for their college and six is pay off your house early seven is the last one and that's with the house paid off and no other debt, emergency fund, you've got money going into mutual funds. Now you do nothing but become wealthy and be outrageously generous along the way. So all of that to say, you've got $3,500. I'd set $1,000 aside towards my emergency fund. I'd throw $2,500 at the car.

I'm going to get the car paid off as quickly as I can, and then I'm going to build my emergency fund, and then I'm going to start investing in retirement. Does that make sense to you? Yes, sir. That's exactly the way the framework would lay out in your situation if I understood everything. So thank you for calling in, sir.

Happy New Year. Jack is with us. Jack's in Austin, Texas. Hey, Jack, how are you? Hey, David. That's in Boston. Wow. Okay. Well, Kelly's from Texas, and she can't tell David. It's actually Boston. Oh, okay.

Well, Kelly's from Texas, and she can't tell the difference between Austin and Boston. So what's up, man? I get mixed up all the time. Yeah, right. With that accent, for sure. How can I help? Yeah, so I work in sales, and I'm getting a pretty large commission check coming up here soon. Cool.

And I'm 31, getting married this summer. Yay! Right now we're renting a place. So I've always, you know, I wanted to buy a property, like buy a house maybe, or even a townhouse or something. But it seems like the market is at an all-time high right now, so I don't know if I need to wait or what your thoughts are on that, if I need to wait until the market comes down a little bit. Yeah. I wouldn't wait until the market comes down a little bit.

I would just wait until you've been married a little bit. It takes about a year of being married to get to know each other well enough to make a wise home purchase together. You buy a house right now, and then you get married in the summer, you're buying the wrong house and she'll tell you about it somewhere around August. So no, you need to just tap the brakes a little bit. It takes a year of being married to know how close to your mother-in-law to buy. Now, as far as is the market high and is the bubble going to burst, real estate is corrected

a couple of times in my lifetime, but nothing extreme except 2008. There were some pretty heavy hits. It came right back. It came back faster even than the stock market did. But I got my real estate license in 1978. I was 18 years old. The first house I sold sold for $42,500. That house today would be $450,000.

So that's the life view that I have of real estate. And so even if Boston might be a little hot, and it's not necessarily a buyer's market right now, you're just having to kind of run over there and buy something, right? That kind of stuff. Even if that's what's going on, I still would buy. You might not be the best time ever to buy, but if you're going to buy real estate and keep it three, four, five years,

personal residence in a decent neighborhood, you're always going to work. That's all you're going to work out. I mean, it really is. So, yeah, work your baby steps. Get married. Be married a little while. Save up a bunch of money. Just throw that bonus check in the bank and about this time next year, start talking about looking for a house. This is what I would do if I woke up in your shoes.

Jack, thanks for calling in, man. This is the Dave Ramsey Show. Did you know that if you combine the data breaches that have occurred in the past 12 months, almost every American has had their personal info compromised or hacked? Over 50% of our listeners and viewers tell us that they or someone in their family has been a victim. And 70% of those folks have had it happen more than once. See, this is unbelievable. Once thieves get your info, the risk never goes away, and they can use it whenever and however they choose. It truly has become an issue of not if, but when.

That's why the only plan I've ever recommended is through Zander Insurance. I actually sat down with them and we put together a plan that I felt provided the best protection but didn't waste dollars on things you could easily do yourself or were just gimmicks. The key is getting protected before you're a victim and it's too late. Go to Zander.com or call 800-356-4282. We are all at risk and it doesn't make sense to wait. Numbers don't lie. That's Zander.com or 800-356-4282. We are all at risk, and it doesn't make sense to wait. Numbers don't lie. That's Zander.com or 800-356-4282. Thank you for joining us, America. It's a free call at 888-825-5225.

Blaine is with us in Idaho Falls. Hi, Blaine. How are you? Good. How are you? Good. How can I help? Well, my wife and I are about to start Baby Steps 5, 6, and 7. All right. And so I was calling about your opinion and some advice on what types of college funds we can use to save money for our kids for college. Okay. We suggest the first $2,000 a year, you just do a simple ESA, an educational savings account. It's a Roth IRA for education, meaning it grows completely tax-free for college. Okay. And again, up to $2,000 per year per kid. You pick the mutual fund that it goes in, and it stays in that mutual fund unless you take it out,

just like doing a Roth IRA would do. If you want to do more than $2,000, then you would talk to your SmartVestor Pro or whoever you do your investing with. Again, and you would do a 529. The 529, there are several different types, and the only one that we recommend is the one where you pick the mutual funds or fund, and it stays in that fund or funds unless you move it. I don't want anything on autopilot, and I don't want to do any kind of prepaid tuition or any of that.

Simply do good mutual fund investing, and it will grow in the 529 just like the ESA, completely tax-free for use in college and higher education. Okay. And I don't understand. Someone gave me advice and told me that these funds are in my children's name. Are they in my name, or are they in my children's name? They're in your children's name, and you're the custodian. You're in charge of it until the child is 21.

Okay. And they have to be used for it. So hypothetically, if they were to go after 21, they have control of that money now? Hypothetically, yeah. You know, and so the same is true as if you open any kind of a savings account in a kid's name. Okay. If you just go down to the bank and open a basic savings account, or if you open a mutual fund in their name, it's called a UTMA in that case, a Uniform Transfer to Minors Act, and the money is theirs until they're 21,

and you're in control of it as the custodian of the money. Now, of course, a practical fact is this. You're still the parent if you're a real parent and not just somebody who just raises children. Meaning I tell them what to do, and I told ours, if you think you're going to use this for heroin, you'll have trouble finding it because I will steal it. Yeah, that's what a lot of people have advised against

these types of accounts is now you know their opinion was you don't want to suddenly give them thirty thousand dollars i'm not suddenly i'm not said i don't suddenly do anything i talked to him the whole time they're growing up that there's an account here for them to go to college this is a college fund hey let's get this mutual fund statement out and look at it so when they're 12 they start emotionally grasping the fact that there's $30,000 or $40,000 laying there, and they're going to get to go to school. This is your school fund. This is your school fund.

I never really used any other verbiage for the fund. It could have been used for something else, hypothetically, but I brainwashed them. Yeah, this is used for college, college tuition and whatnot. And by the way, the people saying the types of things you're talking about are broke people. Okay. There are people that are all worried about some money that they're going to have that they're never going to have because they don't do anything. And so, seriously, I mean, save money for your kid's college. If you want your kid to go to school and you don't want them to have a student loan and you want to help pay for it, save money for your kid's college.

And, you know, do it in their name you're going to say here's the thing if you put two thousand dollars a year into an esa from baby to 18 that's 2 000 times 18 that's 36 000 in the account that account will have about 126 000 in it roughly in a decent growth stock mutual fund so that means you've got growth of ninety thousand dollars taxes on ninety thousand dollars are about thirty thousand dollars so this is a thirty thousand dollar discussion just on the esa alone if you do it from baby to 18 uh and and so yeah it's worth taking that chance for thirty thousand dollars not going to the government um and i just feel pretty confident in my ability to parent these children and not screw up

their life and not allow them to have access to something if they're misbehaving. So, you know, I mean, here's the thing. Here's the way I looked at it. Now, you can do whatever you want to do. But I told our kids, you know, if you're going to use this for heroin, I'll steal it. I got control of the money. It's in my name. I know where the account is.

I know what the numbers are. You don't have any access to any of it. I'll move it. And you're a broke person. You're going to sue me, and I've got your $140,000. Good luck with that. And I'll just walk you in front of your honor and go, this is a heroin addict, and he will fix you up, baby, you know.

And so, you know, that's old school. But, you know, that's me not stealing money for my use. It's just to protect the child from themselves. So I'm in control of it because I'm the dad. And that's how it works in my world. Other people aren't that strong, and they worry more about other things. All right, Patrick is with us in Memphis, Tennessee. Hi, Patrick.

How are you? As you always say, I'm most certainly better than I deserve. Very cool. How can I help? Well, I followed you for quite a while, and as you always say, I'm at the point where I am sick and tired of being sick and tired. Great. Tired of making debt a portion of our budget. Good.

So as we're going through our debt snowball, which we are in a current debt snowball, one of our biggest is our vehicle. The current payoff, I just looked this morning, is $32,000. The worth of the vehicle, according to NADA, is only $22,000. And so it's our only vehicle. And so I'm trying to figure out, and we're a family of four, I'm trying to figure out what the smartest decision for our family is. What's your household income? I work two jobs. One's a salary of $50 salary to 50 and the second is a part-time and

i probably brought in 20 this year yeah or this last year you own way too much car yeah and so um you know i don't think your nada number is accurate i would go to kelly blue book and look at private sale kbb.com and and private sale will be a lot closer because I think you've gotten a trade-in number on this. Unless you rolled some negative equity from the previous deal into this deal, you shouldn't have a $10,000 spread on a $30,000 car. Well, we were sort of stupid when we bought the vehicle. It's got the extended warranty.

You can cancel that. You can? Yeah. Okay. So we've got that on that, and we also, it was an emotional purchase, and so we walked in knowing that's what we want, and we walked out getting it, not paying attention to. You think you might have overpaid?

Yes. Okay. But they wouldn't have charged you more than a sticker. So, I mean, let's say you cancel the warranty and that's three grand and let's say 22 is 25 well that starts to change the whole picture then and the 32 becomes 29 you know um the value is actually 25 and the after the cancellation the extended warranty now we've only got a four or five thousand dollar spread you borrow the difference who's got the loan on this mess toyota yeah they're not going

to help you okay uh the the car company finances finance companies are no help at all on this so you got to go to your local credit union or your small local regional bank where you can go in sit down talk to them in person and you're going to get a a loan for the difference if you don't have the cash saved uh to cover the difference in order to get you this to where you can sell it. And then you need to go and get you the cheapest possible car that you can get with cash and then start saving to buy a better car with cash and move up in car, move up in car, move up in car. Because when you get rid of this car payment, you're going to have your life back. This thing owns you guys.

It owns you in a bunch of ways. Number one, you are well aware that the purchase process you used for it was completely impulsive, immature, ridiculous. And you're shamed to buy that every time you look at the stupid car. And so it's going to set you free to get the thing out of the driveway in that regard. I've done a lot of stupid stuff. I don't like having the stuff around me to remind me I'm stupid. I try to get driveway in that regard. I've done a lot of stupid stuff, and I don't like having the stuff around me to remind me I'm stupid. I try to get rid of that stuff. That's what this thing is doing. It yells at you, you're stupid, every time you walk out of the front yard. I want to get rid of it for that reason alone, but on top of that, it's way too

much car. And then this time, we're going to start being wise with all of our purchases, including vehicle purchases. This is the Dave Ramsey Show. Happy New Year, America. We're glad you're here. Our question of the day comes from Blinds.com. Find out for yourself why Blinds.com is the number one online retailer of custom window covering. You get free samples, free shipping, and with the new promos they run every month, you save money. Use the promo code RAMSY and you'll get the best deal. Blinds.com. Today's question comes from Jordan in California.

I have a fully funded emergency fund of $10,000. I'm wondering where to park it. It's currently in a savings account making half a percent. Knowing that money markets bring very little interest, should I park it with another online bank who gives 1.25 to 1.4 interest with no transfer or service fees? That's fine. You should be able to get up a little over one on $10,000 now. 1.25 to 1.4 interest with no transfer or service fees. That's fine.

You should be able to get up a little over one on $10,000 now. And it's good to be thinking about that, Jordan. The thing to remember mainly about an emergency fund is this. On $10,000, 1% is $100. A half a percent is one hundred dollars a half a percent is fifty dollars who cares it's not the purpose of your emergency fund now if you could get 11 instead of one percent we'd have something to talk about but we're talking about $50. So go get the $50. You hand me $50. I'll take it, okay?

But it's not going to change your life. And the point of me bringing that up is your emergency fund is not an investment. Everybody say it with me. Not an investment. Your emergency fund is insurance. You know what insurance does? It costs you money. It doesn't make you money why do you buy insurance if it costs you money because it covers your butt when things go bad that's why you buy insurance it's what your emergency fund is for it covers

your butt when things go bad it's not there to make you rich. It's there to protect other things that will make you rich. Because if you have a 401k and you don't have an emergency fund and you get laid off from your job, you know what you'll do to pay your house payment and feed your kids? You'll cash out your 401k. And they'll hit you for a 10% interest or 10% penalty plus your tax rate. So you'll get a 35% or a 45% hit because you didn't have an emergency fund, and you cash out your 401K, which was there to make you rich. By the way, the number one way that people become millionaires these days is their 401k, if you didn't know. Number one way. You're at retirement investing. So now, so what's this

mean? It means that the $10,000 is there to keep you from cashing out stuff or selling off stuff at pennies on the dollar. I've got all my money in real estate. Good. You know what real estate that sells really fast is because you're in a hurry, because you're in an emergency? You know what they call real estate that sells fast? Cheap. You have to give it away to turn it into money.

So you don't sell real estate fast. You want to be in a position of strength when you're selling real estate, not a position of weakness. Same thing with your investments, right? So your investments are protected by your rainy day fund. So your emergency fund as a financial planning tool is not an investment. It's insurance. It costs you money because you're making nothing on it.

You could have invested it and made better money on it. But you're not going to do that because it's there to protect you to keep rain off of you. It's your rainy day fund for when stuff happens, not if stuff happens. Because stuff is going to happen. And you better be ready.

So, good job getting the $10,000 together, Jordan. Good job asking the question. But always keep in mind, always remember that the main reason for your emergency fund is for insurance. It's not an investment. So go put it in a money market. Make an extra $50. That's all good. There's no problem with that.

I'm not making fun of you for asking that question. But I am reminding everybody that, see, when you get to baby step three and you finally have no debt, you finally have $10,000 in your emergency fund, you really want the money to work hard because you've worked so hard to get to that point. But all you've done then is lay the foundation. When you're building a house, you're building a building, laying the foundation takes forever. But then it goes fast from there.

The walls get stood up and it goes, now the building just goes right straight up, right? And that's what's going to happen with your wealth now if you'll leave the foundation in place. But what if as soon as you got the foundation in place, you pulled it out and then you tried to build the walls without the foundation? That would be dumb. That's why we have this emergency fund. It's a building block in your foundation. So always remember, folks, it is your insurance policy.

It is not your investment. So make as much as you can make on it. But if you look at it as an investment, you will forever be aggravated by it. You'll forever be mad about it. I do not even know what the rate is on the money market in my emergency fund last year. I did not look at it. It is such a small percentage of my net worth in my overall world today.

It doesn't matter. It's not there to make me rich. Other stuff is doing that. Thank you very much. Marika is with us in Fayetteville, Arkansas. Marika, how are you? I'm doing well. How are you?

Better than I deserve. How can I help? Hey, my husband is a paramedic, and he just got his paramedic license two years ago, and the pay is not high. With a maximum increase in pay of 3% every year, would you suggest changing career paths? Not based on that alone. What does he make? He makes $42,500, but after their required contributions to retirement because of their short-term careers,

we actually only bring home, you know, paycheck-wise in our bank account about $30,000. How old is he? He is 25. What do you make? I'm a stay-at-home mom. I have a 4-year-old and a 10-month-old. What's your degree? We do have a side business doing some furniture that we do on the side,

but it doesn't make that much, and it's not steady income. My degree is I just have an associate's that I just finished in just general education. I would eventually like to have a psychology degree, but, you know, we can't pay cash for that, so I'm not continuing on to it right now. Okay. Why would you get a psychology degree? It's just something I'm really interested in. I'd like to be a family marriage counselor.

Oh, okay. Okay. That would require a master's. Okay. Cool. Yes. Neat. Well, that's a good goal to have.

So I guess the question is this. He's worked really hard to get to be a paramedic. That's why I hesitated a little bit bit which tells me he loved something about this well he loved everything about it except the pay yeah okay um and so does this lead him maybe into getting his nursing degree he's thought about it um of course we'd have to pay for that education so that's you know another expense for us. And it would take about a year to do that, but it would increase from about $18 an hour to $28 an hour.

No, I'd go more than that. I think double his income. Right, yeah, that's the starting in our city. Well, that's the starting in general. There's a lot of places a nurse can work. Right, yeah, i understand that yeah you say and the opportunities for overtime are endless like er and that kind of stuff and so if you want to hit some other goals so that's a way to be in the same general field and double your income

yeah and we talked about that um we are in baby Step 2. We only have $95,000 of debt in our house. We have a HELOC and a mortgage, and it totals up to $95,000. So we have no other debt. You're not in Baby Step 2 then? How big is your HELOC? Oh, well, I was just considering that mortgage. But our HELOC is $29,000. You're not in Baby Step 2.

Baby Step 2 is debt free except your house. Oh, I'm sorry. I thought Baby Step 2 is pay off debt. No, it is everything but the house. Baby Step 6 is pay off the house. So that means you should have an emergency fund next of three to six months of expenses and then you ought to start

saving up for a nursing degree. Okay. Or whatever it is. Whatever it is he wants to study to get his income up that also scratches the same itch that led him into being a paramedic in the first place. So my guess is the guy's a healer. I guess he's a healer. He wants to help people that are hurting. And if he does, then find a way to help him do that.

But there's lots of ways healers make more money than $30,000. So let's start to move in that direction. Good question. Thanks for joining us. This is The Dave Ramsey Show. Hey guys, it's Blake Thompson, Senior Executive Producer of The Dave Ramsey Show. This hour of the show is over, but feel free to check out our YouTube channel where we have over 2 million views each month of debt-free screams, millionaire hour clips, Dave rants, and more. All free, anytime, anywhere.