The Ramsey Show - App - Where You Are Right Now Isn't Where You Have to End Up (Hour 1)

Episode Date: June 15, 2020

Debt, Business, Investing, Savings Tools to get you started:  Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

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. My co-host today on the Dave Ramsey Show, Chris Hogan, Ramsey personality, number one best-selling author multiple times, here to answer your questions about life and about money. Open phones at 888-825-5225. That's 888-825-5225. Martha's going to start us off, Chris, in Illinois.

Hi, Martha. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking Ramsey Show. Hi, Dave. Thank you for taking my phone call. Sure. How can we help? Well, I just started listening to you a few months ago, and I actually filed for Chapter 13 bankruptcy in August,

and I was just looking for some guidance as to how I should proceed. I have been able to save $1,000, but I can't do that snowball right now because I'm obviously in bankruptcy. So what would be your advice for me, I guess, how to go forward? So you're by yourself? You're single? No, with no husband. Oh, okay.

The two of you. All right. And what's your household income? So last year we made $56,000 combined. Okay. And how much debt did you file on in the Chapter 13? It was about, I want to say it was close to 50. I don't have the paper with 50. What was it that scared you or pushed you to the point that you went and filed? Well, I started, well, we started doing our budget, but we realized that we were about $1,000 in the red every time.

So we were making or we were spending more money than we were making. And we had a lot of personal loans, and they were like just the payments were coming out of our paycheck every two weeks. So it was just very overwhelming, and we just couldn't do it. Okay. Out of $50,000, what were your big payments? So we had personal loans. I know, but give me your biggest payment. What was the biggest payment that was driving you nuts? Say again?

They were the personal loans combined. The loans were the ones that were killing me. How much of the $50,000 are personal loans? It was about probably like $10,000. It wasn't that much, but the interest rate was good. How much was your car payment? Our car payment was $325,000. What about the other one?

We only had one. How much was your house payment? We rent those $800. What's the student loans? We don't have any. Which collectors were driving you crazy? We weren't at that point yet. So Martha, did you all have credit cards? We did. Okay. So you had honestly before, I'm sorry, before we filed all our payments were, were up to date. We weren't behind, but we just, it didn't matter how much, um, my, my husband drives for Uber. So it didn't matter how many hours he put in. Like every time we would go to make our payments, we would end up negative.

Yeah. And so you got the personal loans for what? What were you doing with the money from the personal loans? Well, we thought that we can consolidate some of the credit cards or other smaller loans, but it didn't work out the way we planned. Yeah. And so what you're feeling now is the opposite of what we teach with the debt snowball, where you leave them individually.

You put all of these in together, and you felt overwhelmed. And a large interest rate and a large payment. Right. And so where you go from here right now is, I want you to hear me, where you are right now doesn't have to be where you end up unless you all change your habits. See, you've got to understand that that debt is not your friend, young lady. The personal loans and the credit cards are not your friend. It's a frenemy.

It's a thing you thought was your friend that it's your enemy, and it takes from you. So one of the things to do is to really dig in and plug into financial peace and learn how to properly budget and stay allergic to debt. Because if not, Martha, what I've seen people do as a financial coach, people will end up going back into the same habits that got them there. So here's what we're talking about. The numbers you're giving us, my head keeps going sideways because I can't find the hole in the math with what you've given me

unless the $10,000 is a ridiculous interest rate in the short term, meaning you're paying $1,000 a month out on that because you should have been able to pay the payments that you were doing. I think you just got overwhelmed, disorganized, and scared, which is not a sin, but I was trying to figure out what happened that forced you into there. It wasn't somebody coming after you. It was the sense of no traction. So we're going to put you in financial peace with your husband for a year. Okay?

I'm going to pay for it for a year. I want you to stay in there. I want you to do the budget every month. Now, how do you get out of a Chapter 13 bankruptcy, which is a payment plan on your debts for five years? Well, the first thing you do is you build up $1,000. Do you have any debts that are not in the bankruptcy? If you do, you pay those first.

And then if not, you put your Chapter 13 as your only debt snowball item, and you're going to save up and pay it off in one fell swoop working with the Chapter 13 trustee, not your lawyer. Call the Chapter 13 trustee's office. 98% of the Chapter 13 trustees do a great job they're one of the few bright spots in the whole bankruptcy system and so uh go in there and work with them they'll either allow you depending on your district to pay extra payments like it was just a debt but get it out of there get it paid off inside of the five years lump sum or extra payments either one is fine and you've got to be on a budget and you've got to be in attack mode. As you've noticed, the debt didn't go away when you put it in Chapter 13. Chapter 13 is just payments.

That's exactly right. So you're still paddling, and the canoe's going this way, but the waterfall's still coming up behind you. It really is. And Dave, oftentimes in these bankruptcies, people will reaffirm on vehicles. Yeah. And so that's you agreeing to either try to catch up on the vehicle or keep it. And so it's just one of those chances where, you know, you've got to use this as a moment of reset. Well, her payment didn't go down on her vehicle, secured debt. And chapter 13,

she's paying the full payment. Right. Or she gave up the car and she didn't give up the car. No. And so, you know, the only thing that could have gone down would have been some of these other payments on the unsecured stuff, and it goes down either because they've reduced the total debt, and if that's the case, then we can still pay it off in the debt snowball. Do you typically advise people to let the car go? In a Chapter 7, always. Okay. In a Chapter 13, there's very few times I put somebody in a Chapter 13.

Right. Because it's just paying payments. And that's what you're going to do yourself. And you're already paying payments. That's right. And so I'd rather you work something. I would have sold the car and avoided the 13. That's the way it probably would have been if you'd come to us ahead of time with coaching.

But she's already there, and we'll help you, kiddo, where you are. I understand how scared you are. I can hear it in your voice. I remember that feeling. And you're going through a year of financial peace as our gift. And then you get to call us back someday and yell you're debt free. This is the Dave Ramsey Show. Business leaders, now more than ever, we need people with the right skills to support our communities, especially the frontline workers who provide resources and care for those most in need. To help, LinkedIn is offering free job posts for healthcare and essential service

organizations that need to quickly fill critical roles with the people who help us all. If you are hiring for one of these organizations, free job posts on LinkedIn can help you quickly find the right people for your frontline. LinkedIn jobs can help by screening candidates for skills and experience you're looking for and putting your job post in front of qualified people who have what you're looking for. So you can find the right person to quickly fill critical roles. To post a health care or essential service job for free, or if you're in another industry and have hiring needs, visit linkedin.com slash Ramsey. LinkedIn.com slash Ramsey. Terms and conditions apply.

Drew's calling from Oklahoma. Hey, Drew. Welcome to The Dave Ramsey Show. Chris Hogan, my co-host. How can we help? Thank you so much, David, for taking my call. Sure. So my question for you is I'm launching a new business and wondering how much of the startup cost I should pull from my savings

versus how much I should trade for equity and search out through investors. What kind of business are you starting? It's a food delivery concept. Okay. Just to give you some context, it's going to take about $40,000 to start the business, and I have $90,000 in savings. I'm renting. I own my car. No debt. And also something that I see happening in the next two to three years is getting married and starting a family and would eventually love to buy a house. And you're single, okay? Correct.

Why would you not just pay for it and own it all? Say that again, sorry. Why would you just not pay for it, you have the money, and own it all? There's nothing sophisticated about giving your business away. Yeah, okay. So you would, in this case, you would go ahead and use... No, I ask you a question. Why would you not just pay for it and own it all? Well, I guess because I've been...

This is money I've been saving up for a long time, so taking such a deep cut into it is a little bit scary. Yeah, yeah, that's good. That means you're going to be careful with it. Sure. You got the money. You got $50,000 left over after you opened the business, if I did my math right, did I? Yep.

And no debt, right, Drew? So, Chris, the only ship that won't sail is a... Partnership. Drew, do you believe in this business idea? I do. Okay. Then walk into it as slowly as you can walk into it with as little cash as possible and own 100 of it don't sell your soul away it is not sophisticated to give up equity

it just means you were too broke to figure it out on your own or you didn't have a good enough idea to create cash to cash flow it yourself it is not sophisticated equity partners i heard a this week, I was listening to a podcast say, equity partners are like hitchhikers. They come into the car, they're grateful for the ride until they're not, and then they want to take over the wheel and kick you out. Gotcha, Perry. That makes total sense.

Thank you so much, guys. You're welcome. Thank you, brother. And see, Dave, a lot of people think you have to do that. It's either a cool thing to do, it's a great thing to say, I got investors, and it makes it sound sophisticated. Yeah, but it's not. And it's really not. It just means I'm too broke to have actually done this.

And I'm going to have a whole lot of people with opinions on this business that was a dream of mine. Yeah. And so, Drew, don't do it, buddy. And I'm going to tell you. No, worse than that. Their spouse will have an opinion. Oh, that's the extra. And we teach about that in Entree Leadership.

Those of you out there, if you're thinking of starting a business, plug into Entree Leadership. Go to EntreeLeadership.com. Dave teaches on the five D's that you need to watch out for if you're going to be a business owner, which are amazing. And it's a lot of things that aren't talked about as far as drugs and divorce and a lot of other issues. But if you're serious about this business, Drew, I want you to spend a part-time job working on this thing, meaning do a business plan.

Here's the interesting thing. When you start spending investors' money or you start spending borrowed money from the bank, it's different than when you spend your money out of your savings account. You make different business decisions. The money out of your savings account is going to cause you to move more gradually, more wisely, and be more of a tortoise rather than the hare. Yeah.

And I have seen lots of people with venture capital open up stuff and close it before i could even get turned around they just whip and then they're gone and it's just like a vapor because their commitment level to the process is almost zero yeah well you heard it with him it was emotional to talk about using that yeah that's good though that's very good which means he's going to figure out a way instead of for 40 to get started for 20. That's exactly right. That's exactly what's going to happen if he's wise, and I think he is. I think he is, too. Douglas is in Tennessee. Hey, Douglas, what's up?

Hey, Uncle Dave and Cousin Chris. How y'all doing? We've been called worse. What's up? Well, I apologize if you've covered this topic recently, but I'm wondering if in this, well, let's call it the age of the pandemic, if you've changed your investment strategy at all or if you still recommend the four types of mutual funds you've been recommending all along. Doug, I can tell you this, my friend, no change. And in looking at this, we know that when you're investing, it's five years or longer.

And I can tell you where people are feeling the heartache and headache. And those are people that are grabbed onto single stocks. And I'm telling you, they're swigging on Pepto and Maalox like it's going out of style because of the ups and downs. If someone sneezes wrong or someone hiccups, the market is doing all these things. So long term, five years or more. And when you track that five-year sector, the market always comes back. Look back at Y2K, 9-11, the SARS epidemic of 02 and 03, and even the Great Recession in 07 through 09. The market does come back. We

just have to be patient. Yeah, and the exact same categories come back. The four types, aggressive growth are your small companies, and they're the wilder ride. Growth, which is the medium porridge, the just right porridge, we called it Goldilocks. The growth and income, which is the conservative big companies, and then overseas or international stocks. And Douglas, in my mind, I personally am still invested across those four, and I can't think of a logical reason not to be, because I don't think any one of those sectors or any one of those areas of the economy is doomed on a 10-year basis based on a really bad April with a pandemic.

What do you think? Personally, I agree. I was just curious if your take had changed any because honestly i trust your financial advice better than my own well i appreciate that but the thing is this i'm not unwilling to change we're not unwilling to change if we see the landscape shift um as a matter of fact like uh two years ago i did an in-depth study on the international funds because for like 15 years, they've been the dog of the four. They suck compared to the other three. And I thought, you know, maybe I need to change this mix and dump the international.

And we found some really good statistical evidence that that would be a bad idea because they run inverse with the other funds typically, depending on the type of economic strain that you run into and so they're way overdue for an upward spike which is kind of like washing my car as soon as i do it rains right so as soon as i dump those things out of one of my four then those things go through the roof and i'd look like a doofus getting out just at the wrong time so um you know we but we did consider changing it because Yeah, I remember that discussion. Because we had lots of – we got some of our smart investor pros together, and we did in-depth. We ran a whole bunch of hypotheticals on the market and historical data and looked at all of it. So we're not unwilling to change, but the good news is that something as boring and predictable as the type of advice that we have here that just works all the time

uh it's just like you know you don't have to change it much it's not like i'm suddenly going to tell people to start using their credit card or i'm suddenly going to tell people to do this so i appreciate the question uh but and sometimes we get accused i hear i read the stuff sometimes on social media dave ramsey doesn't know what he's talking about with investing i mean he's only got several hundred million dollars so i don't know how he got that. He must be an idiot. But, you know, so it just doesn't make any sense. And so, but, you know, so, you know, we're unsophisticated, and so we're one size fits all.

Well, one size of gravity fits all. You jump off a building, one size fits all. It brings the big boys down and the little boys. It sure does. Did you, what about cryptocurrency, Dave? You got some of that? Yeah. No, no.

Don't have any gold. Got some gold cufflinks. And you got a car lease? No, Dave. You don't? Okay. Nope, pay cash for it. Just making sure.

Yeah. Just making sure. I don't have to fire you today. But, I mean, you go, get people out there that are, Douglas, that are overthinking this thing. And I'm telling you. Well, that's what scaring you does. It is. It scared the crap out of people, man.

Yeah. And market dove down, and it was something so, such a weird vibe in the air. Yeah. You could smell it. Yep. And it makes people rethink things. So, I appreciate you getting the clarifying. But it's not because we're dinosaurs and we're unwilling to change.

It's because we look at the future and we say, logically, over a 10-year period of time, a 20- or 30-year period of time, what's wrong with this? Nothing. So we're not going to change it. Okay. This is The Dave Ramsey Show. show. Hey, folks. Father's Day is just around the corner. If you're looking for the perfect, unique gift to give dad, I've got it.

Grip 6 belts. If dad's like me, he's not a fan of traditional belts. They never fit right and they're uncomfortable. Grip6 belts are exceptional. Owner BJ designed a truly modern minimalist belt made of high quality materials with no holes, no flap, and no bulk. And the buckles come in really cool interchangeable designs. I personally own these belts in different styles and talk about affordability grip six belts come with a lifetime guarantee that means if your dad no longer likes the fit or style of his belt he can replace it for free plus these guys do business right they

make their products and source their materials in the u.s. So show Dad you love him and get a GRIP6 belt. To get the Dave Ramsey Solutions. Oh, it's such a good sight to see human beings. It's been happening for several weeks, but I never thought I would be just so grateful to see human beings. Dave, it's so good to see you. They're from all over. And all you people out there, you're humans. I noticed that, it's so good to see you. They're from all over. And all you people out there, you're humans. I noticed that.

It's a good thing, man. We're glad you're here. Speaking of which, on the debt-free stage, which means they probably are, Nick and Destiny are with us from St. Louis. Hey, guys, how are you? Hi, Dave. Welcome, welcome. You're debt-free, huh?

Yes, sir. How much did you pay off? I paid off $65,000. And how long did this take? It took us 42 months. All right. And your range of income during that time? Started off at $30,000 and ended up at $80,000.

Whoa, nice jump. Somebody got a job or just great? Yeah. After we first got married, I moved up to where he was stationed, and I didn't have a job at first. It was just his income. We started the journey. Okay. That was the $30,000. Yeah. Now we're both his income. We started the journey. Okay. That was the 30.

Yeah. Now we're both working. Now you're both going. Okay. So you're in the military? Yes, sir. Cool. Which branch?

Air Force. Cool. Thanks for your service. Thank you. Very neat. And you guys have been married how long? It'll be four years next week. Okay.

So right after you get married, we start the debt snowball. We start attacking the debt. Yes, sir. Tell me your story. What happened? Yeah. So we actually were going to a barbecue to learn more about the area where we were stationed to meet people. And they mentioned that their house was paid for. And we were like, well, that's weird. And that was really cool to us. And they mentioned, yeah, do you know Dave Ramsey? And I was like, well, I've heard of him growing up in the church. I remember Financial Peace. But we didn't really, you know, pursue anything. And

they told us about your book, The Total Money Makeover. And we went home and Nick was really on board. I wasn't so much because I didn't want to sacrifice at all. So he comes out. Yeah, he was really excited about it, but that kind of started. He read it, and then we started listening to podcasts and YouTube like crazy, and we just got really fired up. Okay, so what sucked you in? He started on board, but it took you a little while. What brought you around?

Yeah, I think it was just the idea that we could have this life that we had wanted. I grew up with a lot of debt in my family, and I just never thought it could be possible to live without debt. So once he really, you know, told me about everything, it brought me around. So Nick, everybody's always asking me, how do you get your spouse on board? How do I get my wife on board? How do I get my wife on board? You're a professional at getting your wife on board. How did you do that? Persistence you know you realize how much you wore her down exactly you realize how much you have you know and you think about your financial future because personally

i wasn't really taught too much about finances growing up so when i whenever i heard about you guys and you know got a hold of your book i was like we we have to do this and of course it's being persistent she i eventually wore down i love it i love it that's one technique that sharon uses that technique on me sometimes did she ever give you the look oh like you need to stop talking about this every day chris so what did you do so what kind of uh sixty five thousand dollars worth of debt was this oh Oh, gosh. Credit cards. We both had a lot coming out of college. Car loan, a vet bill for our cat, furniture, and then student loans were the big one. Okay. So you're just kind of normal? Yeah, very normal. It just sneaks up on you and you look up and you go, $65,000? Yeah. Yeah. You have that moment or your oh crap moment, right? You

said it's a vet bill. You didn't finance a cat, a vet bill you didn't finance a cat did you allowing it to live yes essentially yes okay wow so what was it that made you all say this is enough no we're gonna we're gonna do this yeah well like i said uh didn't really learn about finances too much growing up and then you realize one day you do want to stop working, and it's kind of hard to do that if you have so much debt at the end of, you know, your time working. So we both knew that that's exactly where we wanted to be. That's amazing. I saw you all holding a little motivation out there in the lobby, too. Oh, for sure, for sure. I'm sure having a kid changes things, doesn't it? Well, he came towards the tail end, but looking at him and realizing, hey, he's going to have to go to college one day, that definitely was a big motivation. This just got real.

Yeah, for sure. Yeah, absolutely. So how's it feel now that you made it? It's amazing. Unreal, honestly. It's like a huge weight lifted off our shoulders. We look to inspire others now to do the same thing. So you're having people over for barbecue, telling them everything's paid for.

Exactly. Yeah, we try to motivate our friends now and everything. One barbecue changed the whole story. It is. I love it. And it's amazing what you all can. I want you to continue to talk about it. It's not bragging.

It's factual. See, you all learn by hearing from someone else. And so you guys sharing that information with friends, let's help to change this country. And you do that one family at a time. And talk about how hard it is because it is hard. That's right. So what do you tell people the key to getting out of debt is? Well, one is the budget and sticking to it. And for us, the cash system really worked well. We did envelopes pretty much the whole time. Oh, wow. And I think physically, like what you talk about, seeing the money being spent, it really was a mental change for us

and what we wanted to focus on. And then also just keeping your why in mind. So for us, yeah, that family plan and thinking about our son and what we wanted for the future and just not wanting to owe anybody anything. Amen. Yeah. Amen. I love it. Well, good for you guys.

Very, very well done. So the Total Money Makeover book did it all. Yes, sir. All right. Very cool. We're very proud of you. We've got a copy of Chris Hogan's book for you, Everyday Millionaires. That for sure is the next chapter in your story.

You've just finished one chapter. You've got to keep going. When you make $80,000 a year, you don't have any payments. You're those people. You're those people. You have money now. Love it. It's fantastic. You guys are heroes. Yes. You're heroes people. You have money now. Love it. It's fantastic.

You guys are heroes. Yes. You're heroes for your baby. What's your baby's name and age? Jaden. He's 11 months. Okay. We're going to bring him into the shot.

He has to be here for recording for YouTube. Sherry doesn't want to let go of him. No, she loves him. Look at that little man. He's a cuddler. All right. I love it. All right, Jaden.

Here we go, buddy. Close your ears. He's a little man. He's a cuddler. I know. All right. I love it. All right, Jayden. Here we go, buddy. Close your ears. Nick and Destiny from St. Louis, Missouri. $65,000 paid off in 42 months, making $30,000 to $80,000. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free!

Yeah! Woo-hoo! we're debt free yeah woo hoo that is how it's done right there absolutely amazing hey Dave they must have practiced a lot because Jaden didn't flinch with the debt free scream they've been doing it at home preparing for this

they've been yelling debt free for a while that is fantastic sometimes the babies start screaming about that time. It scares them to death. But I tell you what's powerful is to see this young couple out there holding their son who will never know about the debt mom and dad had. Yeah. Because they decided to get serious and to clean up this mess and to pave a way for this young man. And that's called a future.

And that's an opportunity. And I am very proud of them for making the change. I'm proud of them. I agree. Absolute heroes. Because you have to decide. You do. You have to just, boom, that's it.

That's right. Rachel was that age when we filed bankruptcy. That's about how old he is. You think now, she's got babies this age. Yep. That family tree is changed. It's not changed because I've sold 15 million books, although that has helped. Right.

But that happened after the family tree was changed. That's right. It didn't cause the change. The books wouldn't have sold people if they didn't say the truth, if we weren't hypocrites and we weren't living the stuff that's right so we people are i mean people are always amazed i guess we're just living such a cynical world i'm the same way i'm cynical i don't believe when i somebody says there's this i wonder if they're real you know yeah and people go you know

sure is he really has envelopes in her purse with cash in it. And she's worth hundreds of millions of dollars, but she's got envelopes in her purse. Yeah, we really do this, really invest in those four kinds of mutual funds. I really don't borrow money. I really don't have a credit card. I really don't own a whole life, and I've really never leased a car. I mean, you know, I mean, and you too. Right.

You too. You know, it is so freeing to know who we are when people say we aren't. That's right. Well, and Dave, there are three emotions, three negative emotions, guilt, shame, and cynicism that will block you from your progress. You've got to make a decision. Your guilt and shame over your past or your cynicism about others trying to help you. That's right.

It's not real. It's wise to be careful, but cynicism is not wise. That's right. It's not real. It's wise to be careful, but cynicism is not wise. That's right. And of course, shame and guilt, there's one word that offsets that, and that's grace. Amen. And you just move forward and you go, never again. That's right. Not doing stupid stuff anymore. Nope.

Look in the rearview mirror and go, that was stupid. But stop in the stupid. And changes everything. That's what these guys did. I'm so proud of them. I am too. This is the Dave Ramsey Show. Let's talk about preventing the unexpected. Imagine your refrigerator goes out. You can fix your major appliances yourself with parts and expert advice from my friends at Appliance Parts Pros.

They carry over 2 million appliance parts and offer easy returns. And anyone can do the job themselves with 3,500 repair and how-to videos, plus live chat on their website. Save money and get your parts today at AppliancePartsPros.com. Our question of the day is from blinds.com. They have a 100% satisfaction guarantee. Even if you mismeasure, you pick the wrong color, they will remake your window blinds for free. Free samples, free shipping, and the new promos are on all the time. You can even save more money.

Always remember the magic word, the promo code Ramsey. Chris, you got a question for the day. I sure do, Dave. Today's question comes from Steve in California. He visits DaveRamsey.com to ask this. I'm fairly new to your program and I'm on Baby Step 3 right now. I have four jobs, one full-time and three other substitute jobs when I feel like working on them. My question is, after Baby Step 3, how do you handle saving for retirement versus saving money for a down payment for a home someday in the future but not immediately on the horizon? Ah, well, Dave, you look at this. When you're saving for a home down payment, we call that Baby Step 3B.

This is where you want to save a minimum of 10% on the home down payment. But you want to go that route. But also remember at baby step four, you're investing 15% of your household income. Now we're investing that because if you don't save now and invest, you won't get to spend later. The government's not going to save the day for you. So the home is not immediate. So I would tell you this, my friend. I would start into baby step four right now doing your 15%. And as you start to get on the home horizon, you can pause that and start to save for the down payment. Yeah, you could. That's right.

Sometimes people do it both at the same time. Yes. And then sometimes people do a partial baby step four while they're doing their 3B saving. And sometimes they just don't do any retirement for a short period of time. We recommend no more than three years. That's right. Where you don't save for retirement and save up your down payment for your home. And like Chris said, 10% is good.

The best you can always do with a down payment, you don't have to, but it just saves you a lot of money, is 20% down because that avoids PMI, private mortgage insurance, which will run you about $75 a month per $100,000 borrowed. And it's not even for you. The private mortgage insurance protects the lender. It doesn't protect you. So you're adding extra expense on top of your payment.

Don't do it. Yeah, it's foreclosure insurance. Yes. That's what it is. It protects them in the event of foreclosure. Isaac's with us in Colorado. Hey, Isaac, welcome to the Dave Ramsey Show. Hi, Chris and Dave. Thanks for taking my call.osure. Isaac's with us in Colorado. Hey, Isaac, welcome to The Dave Ramsey Show. Hi, Chris and Dave.

Thanks for taking my call. Sure. What's up? So I am 20 years old and make a base salary of $45,000, and then I make throughout the course of a year an additional $25,000 to $35,000 off of commission tips and a contracting business I do on the side. Cool. And I'm working on baby step four and having a difficult time tracking that additional income

to put it into the 15% because that amount, that extra amount is pretty variable. It's just based on the number of jobs I do. Right. What I would do is I would project what it's going to take. What do you think you're going to produce from that job over the coming 12 months, the upcoming 12 months? And then I would take 15% of that number. Okay.

Instead of trying to do it every month. Every month would drive you nuts. Okay. Sure. And here's the point, okay? It's not like there's a perfect number, like 14.5%, you're not going to be rich, and 15, you're going to make it. You know, I mean, the point is a substantial amount of your income, which 15 is,

without going overboard so you can't get the house paid off, which 22 is going overboard. Most people don't have any room to do their other baby steps if you do that. And so our point was, you know, give the thing a good hard punch, and that's 15%. So if you miss it by a little bit because of the variable income issue here, the world does not come to an end. No, and Dave, you're not going to roll up at their house and get them if they're only doing 14.5%. Don't tell people that. Yeah, people think that.

They go, Ramsey's coming. I know, but that gets people motivated. If they all think I'm coming to their house, then they do it. Yeah, they do. Actually, I could send you. That'd be even scarier. I'm the kinder of the two of us. You're scarier.

No, I'm not, Dave. You're much scarier than I am. That's sizism. That's sizism. Just because I'm a little bit bigger, a little bit more. Well, one thing's for sure. If either one of us roll up, they're not worried about a haircut. They won't be fearful.

But listen, Dave brings up a great point. That 15% consistently over time is going to put you on another threshold. We're seeing millions of people do this. And the reality is, too, as getting out of debt, people on average are spending 35% of their income on consumer debt. We're talking about personal loans, credit cards. This is a way, again, America, we've got to get our money back so we can have a plan. Age 35 to age 65, you invest 15% with no matching in your 401K and good growth stock mutual funds at historical rates of return. You will have somewhere between the average household income. Right.

You'll have somewhere between $7 and $9 million. Dave Ramsey's financial advice is horrible, though. Never take Dave Ramsey's financial advice. He only helps. Never take Dave Ramsey's financial advice. He only helps people by getting out of debt. That's right. And he's an absolute moron about getting people to $10 million worth of net worth. He hadn't built wealth himself. Yeah, he doesn't have any.

He doesn't have anything. So, you know, this crap that is out there, these millionaires that we meet with and talk to all the time because they did the exact stuff we're talking about is called building wealth. It really is, Dave. That's what it's called. And so because your idiot friend who's broke at a cocktail party told you don't listen to Chris Hogan, he doesn't know anything about investing, that's where these formulas come from because they actually cause people to become wealthy. And that's the idea. But it's not a thing of, again, it's a principle,

and the principle is invest steadily a chunk of your income for a long period of time, and you'll have some money. That's exactly right, Dave. And the key reason that sentence is over time, being consistent, not herky-jerky, not doing it once or twice, but consistently over time. Quit looking for the long ball. Yeah, oh, please. Just hit base hits.

Yes. Base hits, baby. Base hits. I mean, baseball's coming back, so we've got to use baseball. Okay, we'll use those more. All right. Well, at least one, then we'll move on to football. Jeremy is in Arkansas.

Hey, Jeremy, how are you? Hey, Dave, I'm doing great. Thanks for taking my call. Sure. How can we help? Yes. So my question is, what should I be doing great. Thanks for taking my call. Sure. How can we help? Yes. So my question is, what should I be doing next? And to set the stage, I'm married four years.

I have a one-year-old and a two-year-old. All of our debt is paid off with the exception of the house. And there's around $140,000 left on the $240,000 home. Way to go. Yeah. Thanks. thousand left on the 240 thousand dollar home way to go yeah and that's it thanks um and at the moment i've been giving eight percent into my 401k and my company matches seven percent so it's a total of 15 and i also put around eleven thousand dollars in the 529 about five thousand each plus or minus for my kids good Good. And I have around $30,000 in emergency savings.

So I'm kind of curious what I should be doing at this point. Should I try to pay off my house or saving more for retirement? At the moment, my house is on a 10-year mortgage. It's around $1,900 a month, and I'm throwing $700 a month additional principal at it. I heard you are not putting in 15%. You are putting in 8%, right? Yes, I'm putting in 8%, and my company matches that. Okay.

Boy, you're on the ball, Jeremy. I mean, I'm going to tell you right now, buddy, being debt-free and where you are, I'm going to tell you, there's two things that jump out at me, Dave, that he needs to do. Number one, you get to 15% regardless of the match. It doesn't matter what your company is doing because they could stop that, pause that at any time. You be at 15. And I love your paying extra toward the house.

I want you to pay even more extra toward it. Get that thing out of your life. You're saving up for college. You're investing for the future. My friend, you are on the path to becoming an everyday millionaire. You've done all the right things. It's a minor adjustment. Baby Step 4 is you put 15% of your income into retirement. The match is gravy on the biscuit. You're already doing kids college to a reasonable degree. Whatever money you can find beyond that, you put on baby step six that the order of priority is first thing's 15 percent into retirement second thing is kids college with some money that's left over

after that out of the budget and money that's left over after that out of the budget and sometimes it's found money a bonus and inheritance or other things just keep chunking all of that on the house there may not be a lot of room for baby Step 6 in your budget initially. Usually that comes later on as you go. But you have done all the right things. Chris is right. And man, you really got it dialed in. And obviously, you know our material and what we teach. And you've lined your plan up with that. And again, folks, we've seen just inordinate success from people who do that. And so not just in getting out of debt, but in becoming wealthy and in putting themselves in a position to just be outrageously generous and help others.

So good stuff. That puts this hour of The Dave Ramsey Show in the books. Our thanks to Zach Bennett filling in as producer, Kelly Daniel, our associate producer and phone screener. My co-host is Chris Hogan. This is The Dave Ramsey Show.