The Ramsey Show - App - Who Is Going to Provide for You - FICO or YOU? (Hour 3)

Episode Date: January 29, 2020

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🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us.

Open phones at 888-825-5225. That's 888-825-5225. Starting off this hour is Jennifer in Kentucky. Hi, Jennifer. Welcome to the Dave Ramsey Show. Thank you, first of all, for taking my call. I'm so blessed to be able to talk to you, to tell you about my situation. Sure.

How can I help? I am 48 years old. I'm debt-free. Woo-hoo! Yay! Yeah. My husband, I'm a widow, so my husband has passed away for the last past five months. He passed away when the last five months.

He passed away when? In September 2019. What happened? And he was a veteran. Anyway, all that to say, he's got some property that was in his name only that goes into the estate that is worth $5,000, which is a flat piece of land, basically. But I've got $500 in a CD. I've got $800 in savings. $500 in a CD or $500,000?

No, I've got $500 in a CD. Okay. thousand no i've got five hundred dollars in a cd okay and eight hundred dollars in savings and i've got fourteen thousand or basically fifteen thousand total um you know cash you know um but anyway um my question is you know should i buy this property through the estate with his kids to build a home for the future, or should I just put my money in investment like a life insurance, a retirement 401k, emergency fund? I'm really at a loss on what to do to try to build my money. Okay. What do you make?

What's your income? I make $2,000 through the VA a month. $2,000? Through his DFAS and then his DIC is what I make. Okay. So you don't work? No. Why?

Because of my health. Oh, okay. So do you have a disability income because of your health? No, but I can actually file for a disability to make more income. I would. Why are you unable to work? What's wrong? My back.

I have back issues, basically. And I'm bipolar. So every time I go back to work, i re-injure my back basically okay all right you're only 38 you said right no i'm uh 48 48 okay still only okay so you got a lot of years ahead of you that we have to try to figure out a way for you to have enough income coming in to eat and to create a future for yourself. And I forgot to tell you that I get 50% of his estate. So that's not including whatever his state is going to be because we're just now like going to court here in February the 12th. So we've got to give the creditors and all that stuff six months of... Did he own anything other than that lot? Well, the only debt that my husband

had was $15,000 in credit cards. Yeah, did he own anything? What's in the estate? What's in the estate? Just the land, basically. So if the land brings $5,000 and the boat brings $3,000 and he had more than $8,000 worth of debt, there is no estate. Right, because we still have to pay the lawyer for $2,500 retainer fee. The creditor, don't hire a lawyer. If his estate owes more than it owns, I wouldn't mess with it. Gotcha.

Don't pay $2,000 to close up an estate that makes absolutely no money for you guys because the creditors all get paid before you do. You know that, right? Right. Okay, so if you sell the boat and you sold the lot and it brought $8,000, what's the boat worth? It's not much. It's like an elderly old boat.

Okay, so if it brings $8,000, if he has $15,000 in debt and you sell off everything he owned and it only brings $8,000, there's not even enough there to pay his debts. You get zero. Right. Am I missing something? No, I just make $2,000 a month. No, am I missing something about the estate?

Other than he's got six or seven kids that I have to split. There's nothing to split. Yeah. Did you understand there's nothing to split unless you missed something in what you were telling me? Right. You follow what I'm doing with the math? Yes. We're just going to try to dispute the creditors is what our plans are.

Why? Because there's not enough money to pay them, basically. Well, yeah, but there's no reason to dispute with them. Even if you disputed with half of them, you've still got no money. Mm-hmm. You're not going to get anything out of this estate unless you missed something in what you were telling me. No. So with the money that I have you know the 15 000 um

right should i um open up a life insurance um no i mean i don't think you need to get life insurance with a disability and no one's counting on your income, right? You don't have kids at home, do you? No, not at the moment, but here in March I'll have an adult with me, which is my husband's daughter. Yeah, but you're not responsible for her if you die. Right. She's responsible for herself. Right. Okay.

All right, so you don't need life insurance. I would not spend any money on that. What you do need is you need to budget the money that you have with the income you have, and let's first create an emergency fund out of that $15,000, and we can call that $5,000. That's our emergency fund, and that leaves you $10,000 to begin investing for the future. But no, you do not need to buy this piece of ground. You do not need to build a house on it, And you don't need to spend a bunch of money trying to settle on an estate that you're going to get nothing out of. Now, if there's more

things that he owned that you're not talking about that make you have more than $15,000 worth of things to sell off to pay off the $15,000 in debt, then you might net something. But it doesn't, with what you've described to me, you're not getting anything out of this estate. And you don't owe anything, but don't pay an attorney $2,500 to get you nothing and do nothing but wrap up an estate. I would not do that. I would call the bank and tell them, good luck. There's nothing here. I'll send you a death certificate. He's gone. And I wouldn't spend the money to do that. If you can do it for a couple hundred bucks or something, that's fine.

But there's no way I'm giving a guy $2,500 to settle on this estate with a negative net worth. And he should have had, the attorney should have had the integrity to tell you not to do that. Yeah, that's integrity, or a lack thereof. This is The Dave Ramsey Show. I love talking about companies that know how to do business right. You've heard of Grip6 belts, right? Well, if you haven't, it's the only belt you can get online with no holes, no flap, and no bulk. I'm talking weightless, and the buckles come in really cool designs and are interchangeable. I personally own a number of these belts, and they're so comfortable you forget

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comes from Blinds.com. They have a satisfaction guarantee that is 100%, and that means if you mess up even, they guarantee that. You ever had a company that if you're stupid guarantee if i'm stupid guarantee that's pretty cool if you mess up and mismeasure the blind they'll replace it for free if you pick the wrong color and it comes in you just go i just hate that i'm just dumb i shouldn't pick that they replace it for free you get free samples free shipping and with the new promos they run every month you'll save even more use promo code RAMSY to get the best possible deal. Bob is in Kentucky. Should my wife and I prepare mirror wills?

We'd like to leave the surviving spouse everything, and then the surviving spouse would change to leave children and grandchildren. Would individual wills be better? What a mirror image will is, Bob, is if either one of you die, you leave the other one everything, and then the same thing happens in both wills if both of you die at the same time, like in a car wreck or something. And so, yes, I would do a mirror image will in those cases

because it saves you money in the process, and if you don't have your wills done, hit mamabearlegalforms.com, and they'll help you get them done, but a mirror image means that you don't have unique separate estate plans. Your estate plans overlap with the exception of, you know, it's cut and paste. If you die, she gets everything. If she dies, you get everything, and if you both die, we have the exception of, you know, it's cut and paste. If you die, she gets everything. If she dies, you get everything. And if you both die, we have the same plan.

And that's the essence of a mirror image will. Brianna is with us in New York. Hey, Brianna, welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking my call. Sure. What's up? I just have a question about credit scores.

My husband is originally from Australia. We got married about four years ago, and now he has his green card. Originally, before getting into your plan, we got him a credit card, obviously with a very low limit because he was basically starting off as, like, a new person in America. So, you know, build a score. And then we started listening to you and scratched that. He's scared about not having a credit score.

I was just wondering if you can give me some advice on what I can kind of tell him to say it's okay not to have a credit score. Okay. So help me. You started on our plan. What do you mean by that so we have a thousand dollars in savings and now we're on baby step two and you decided to get out of debt why yeah why'd you decide to get out of that because i went from 14 why did he decide to get out of debt with you? Because we're on the same page.

We both realized that our saving account went from like $14,000 to like $3,000 in a matter of a year, and we didn't know why. So it was all eating out, vacationing, all that sort of stuff. That's getting on a budget. Why were you getting out of debt? Just to hopefully become a millionaire one day, start a family. Okay. Does he think that too?

Yes. He has debt back home that he wants to pay off just to of him believes, and you, like I do, that the shortest path to wealth is to not have debt. Correct. Okay. And so how is that congruent? How is that consistent with wanting a credit score? Because the only reason to have a credit score is to borrow money.

True. He's nervous about whenever we buy a house in the future. We own a house now that I purchased before he was even in the picture. So he's nervous if that will, you know, have, we'll have an issue buying a home if we don't have credit scores. Have you all heard of and heard me discuss manual underwriting where you go to a mortgage company that works with people that don't have credit scores like Churchill Mortgage and they do a traditional underwriting method that does not involve a credit score

and allows you to get a mortgage at exactly the same interest rate you would have if you had a premium high credit score. Have you heard me discuss that? Yeah, I listened to your book. Has he heard me discuss that? Not yet. Okay. So he's dealing with partial information then?

Yeah. Because he's worried about getting a home, so he's thinking about going into debt, but yet he wants to get out of debt because debt's not good, but I'm going to go into debt so that I can get more debt later in the form of a house because I don't think I can get a mortgage without a FICO score, which is incomplete information. Those aren't facts. You understand?

Yeah, I understand. So it sounds like you guys need to talk through, and he needs to understand that you can get a mortgage without a FICO score. And it's, you know, you don't want to have a medium FICO score. You want to have a huge one or a zero. And the good news with him is he doesn't have much of a FICO score, so it won't be hard to destroy it. Exactly. And you want it to go to zero.

What about me with like a 700 and something score and now working through this whole plan yeah when you pay off all of your debt 100 and all of the accounts are closed there's no outstanding debt of any kind now you have a mortgage on your current home correct okay you're, you're correct. Under my name. Yeah, your credit score is going to continue to be there. Okay. It will drop as you pay off these, but it won't drop so low that it'll keep you from getting a house as long as you keep your home paid on time. But, I mean, if you, like, pay off a credit card and close that account, it will drop your FICO score.

So should I keep them open until I'm ready to close it? No, no, no, no. Quit playing with that. It's inconsistent. You cannot tell me in the first five minutes of our conversation that you want to get out of debt and then keep all these snakes in your house. You've got to stop it.

You've got to stop it. Who is going to provide for you? You or FICO? As long as you think FICO is your provider, then you need to stay in debt and you need to play footsie with FICO. But if FICO is your provider, the only way FICO provides you anything is you go in debt. That's the only way I'll get a car is go in debt. Then you keep playing with FICO.

But if you finally understand that the only way you get a car where you're going to become a millionaire is you pay cash for the car and you're not going to have any payments, then you don't need FICO to buy you a car. You buy you a car. So what's the source of your success in the future? You are FICO. And this is the decision you have to make out loud. And you can't do ish. Because, you know, what I teach you is going to take FICO away from you. So you should fully embrace stupidity and go deeply in debt and keep your FICO score up. Or you need to go extreme the other way. There's not really safety in the middle.

Doing a little of both, a little FICO, a little Dave will get you killed. Don't live. Don't try to live in the middle. You're going to a little fico a little dave will get you killed don't live don't try to live in the middle you're gonna get it's gonna be ugly don't do it this is the dave ramsey show In today's world, technology and innovation are crucial for any company's success. But the primary focus should always be on you and meeting your needs. That's why you get the best of both with Zander Insurance and their term life plans. Zander uses time-saving technology like over-the-phone applications, voice or electronic signature, text message updates, electronic policy delivery, and even plans with no medical exams to speed up the process of getting you the protection your

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That's Zander.com or 800-356-4282. Anna is on the line in Peoria, Illinois. Hi, Anna. Welcome to the Dave Ramsey Show. Congratulations on being debt-free. Way to go. Thank you very much. How much have you paid off? I paid off $29,529.20. Way to go. How long did this take? About 54 weeks. 54 weeks. So a year plus or minus.

Okay. And what was your income during that year range? $70,000. Okay. What do you do for a living? I'm a physical therapist. Cool. Cool. That's a lot to pay off in one year, making $70,000. Yes. Did you sell something big? Nope. That was all hard work, no selling anything. How many money and savings you threw at it?

Nope. All beans and rice? Yes. You did nothing. It was a lot of sacrifice and hard work, but definitely worth it. Well done, well done. Proud of you. Very good job.

Very good job. Congratulations. What kind of debt was the $30,000? It was all student loans. Ah, what's your degree in? I have a doctorate in physical therapy. Okay, cool. Is that what you do? You're a PT? Yep.

Good for you. Okay. Wow. Are you single? Yes. So how old are you? I am 27. Perfect. So what made you decide at 26 years old a year ago to attack this? Well, I was very fortunate to attend undergraduate debt-free due to academic and athletic scholarships for track, and I planned to attend physical therapy school right after undergrad, but I didn't know exactly how I was

going to pay for that. So the Lord really worked things out for me. I was injured and I wasn't able to compete on the track team, but I was able to still maintain my scholarship. And then since I wasn't traveling or competing for the track team, I used that time to work four different jobs while I was still a student on the track team and recovering after surgery. Wow. And then I also applied for many scholarships. And as you've said before, I kind of made that my part-time job. And I then paid for my first year of physical therapy school in cash. But then I had to take out loans for the last two years. But then I continued to work weekends during physical therapy school and also when I was doing my clinical rotations. And then upon graduation, I accepted a full-time physical

therapy job. And my goal was to pay off my debt in one year. And I took financial peace at that time as well and got gazelle intent and made some sacrifices. And then 54 weeks later, I was debt free. I love it. Way to go. You get after it. You turned it into a competition, didn't you? Yes, I had a goal in mind and I was willing to do the hard work to get there. Yeah. Wow. Very cool. Well, and it doesn't hurt that the very profession that you chose has everything to do with transforming due to setting a goal

and doing the hard work to get there. And so you coach people in doing the very thing you're doing every day, although it's in the physical realm rather than the financial realm, right? Exactly. Yeah. And it didn't hurt to have a big shovel. Yeah, you did great. Well done. Very, very, very good. How's it feel now that you're out? Very thankful looking back as I wrote this story and seeing how God provided at every

step of the way. And now just having that peace of mind that I don't have a big burden of debt as I move forward and work these next years, that, you know, I'll be able to save up and give like no one else in the future. Wow. Wow. Very, very good. You still with me?

Yes. Okay. I just heard something cut out. Okay. Oh, wow. Excellent. Good, good, good. So what do you tell people the key to getting out of debt is now that you've done it? I would say the big things were discipline and maturity. Having the discipline to manage the academics, the athletics, and then multiple different jobs required a lot of time management to keep all of that straight and having a goal in mind.

And then also maturity, like you said, is learning to delay pleasure for the greater result. So for me, during school, it took the delaying of pleasure when I was working the weekends and then working and going to school more than 40 hours a week. But just knowing that making those sacrifices during that time would then prepare me to be able to pay off my debt sooner and give like no one else later. I love it. I love it. You're kicking it, kiddo. Well done. Kicking it hard. Very good. Who was your biggest cheerleader? Definitely my family. My parents have always been very supportive of me, and they cheered me along every step of the way. Very cool. So mom or dad instill all of this goal orientation and discipline and drive in you. Where did that come from?

Well, that's a good question. I would say they both did. And it was my dad and my coaches who also saw when I was in high school that I was good at running and the potential to go to college and then on scholarship. Yeah, very good. That's neat. Good for you. Very proud of you.

Great job. Great job. We've got a copy of Chris Hogan's Good for you. Very proud of you. Great job. Great job. We've got a copy of Chris Hogan's book for you, Everyday Millionaires. That is the next chapter in your story. This is just the first chapter. Lots of chapters to happen yet for Hannah. Very, very good. All right, Hannah in Peoria, Illinois.

$30,000 paid off in 54 weeks, making $ all cash flowed complete discipline and delayed pleasure count it down let's hear a's done right there, baby. Woo! Yeah! Man, that's so fun. Well done. Well done. It feels like when I'm on social media or when I America seems to be full of people who are angry because they got themselves in debt and they feel stuck that they can't get themselves out. And so our suggestions

are ridiculous. The things we teach here are ridiculous and they're just hopeless. And it's really sad when I compare them to the people like Hannah that I talked to on the show. There was nothing hopeless in her life. Her scholarship, her ability to compete and track went away due to an injury. What was her reaction to that? She used the extra time off to make money to pay for her grad work. Oh, my gosh. She was not a victim. She turned the problem into actually a blessing.

Had that extra time off to go do that. And as soon as she set foot out of school, she did not begin her whining parade. She did not call the wambulance. She did not sit around, suck her thumb, and say, I sure hope we can elect someone who will pay off my bills that I took on. All she did was go to work. She just went to work. I mean, you know what it takes to pay off $30,000 making 70? You have to take taxes out of that 70. And then you have to eat and pay rent and put gas in your car to go to work to get to 70. Let me tell you what Hannah did.

She had nothing in the last 54 weeks. No life. There was no room in there for life. But she said, I'm going to get this over with. I'm going to get this behind me. I am in charge of my destiny. I am not a victim. I am a victor.

Big difference in the people that decide that. I know sometimes you get beat down, you get beat up, but then don't get angry at everybody else. Get angry at the situation and go be

victorious. This is the Dave Ramsey Show. One of my favorite parts of this show is hearing your debt-free screams. You guys are our heroes. You've kicked debt to the curb and you've saved for the future. Now we want to celebrate with you. If you have lived like no one else and are currently in baby steps four through seven, well, it's time to enjoy some money.

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My friend Simon Sinek says, when people are financially invested, they want to return. When people are emotionally invested, they want to contribute. That's how it works. This is the Dave Ramsey Show. Thank you for joining us, America. Open phones at 888-825-5225. Nancy is with us in New York. Hi, Nancy.

How are you? Hi. Thanks for taking my call. Sure. How can I help? So I'm on baby step two right now. I have student loans from nursing school, and I'm actually back in school now for my master's, which my current job pays for. And I'm really on fire to do this.

I've already, in the months that I've been in Financial Peace University, I've paid off $15,000 just from savings and budgeting. Good for you. And now I'm looking for additional work, and I'm also planning a wedding, which we will pay for in cash. But, uh, in April, um, my question is in my search for additional work, I'm realizing that my time is very precious right now. Um, and I'm just, I'm seeking your advice about how to prioritize the school that I'm doing, um, with my current work in addition to possibly taking on more work, like I said, while planning a wedding. I'm willing to do it. I just

want to be sane about it, and I'm curious what you have to say about it. Well, I think priority number one is your current job. It cannot suffer. Priority number two is continuing on your studies, and right next to it is priority three, finishing the wedding planning, right? So this extra work is the least important in the overall priorities, but sure would be nice to have some extra money to throw at the wedding and at the debt. Sure. And so if you look at it that way, then you don't have to be as stressed about the extra work. And you say, okay, I mean, the good news is you're a nurse,

so you can do wacky stuff with extra work, right? Yes. And so you can just say, I'm going to work three Saturdays, or I'm going to work a couple of weekends in ER or whatever, and the other two weekends I'm not. And if you get yourself in too deep, you can just stop. Right. Right?

The extra work. I mean, if it starts freaking out, like if your studies start suffering or you're not able to do your regular job because you're working too much on the side gig, then you'd have to pull back or stop and so you can adjust that kind of the second because it's not a priority you don't have to um babysit and and be tender with the second job you can slap it around and make it do what you want it to do is that making sense for you yes yeah yeah so i have i do have the luxury of being a little bit picky about what i yeah what i do because there's i mean i'm getting every other text message is from a recruiter just

because i put a resume out so it's not yeah you don't have to you don't have to respond to all that i mean you just what you're looking for is, you know, what kind of shift are you working now? Actually, I work as a nurse manager now in the operating room, so I work five days a week, Monday through Friday, 7 to 3. So I don't do the 12-hour shifts that a lot of nurses do, but I do have weekends. So you could pick up a couple of 12s here and there through a month on the weekends yeah to the extent to the extent that you physically and mentally can do that without causing the other stuff to fall apart but i wouldn't work uh you know a saturday

sunday 12 every single weekend sure okay i think i think my brain would be fried and i couldn't get my studies done and so yeah we don't want to get off track on the wedding or the studies and we certainly don't want you to lose your main day job because that's your that's your career that's paying for all this other stuff by the way so they're being very kind to you so you want to be sure you serve them so uh yeah you're being smart to ask the question this way and all i'm doing is just processing it with you out loud yeah that's really all i needed i just needed to hear the priorities as a as a list and that was really helpful yeah and here's the thing you're going to get married you're going to get the degree and you're going to get out of debt. Yeah. The only question is how fast. Exactly.

That's the only question. So the probability of it happening is 100%. The only question in the air is the timeline. Right, right. So you're going to be fine. You're going to do great. Way to go. I'm just glad you talk. If you talk about it out loud before you wade down into it,

then you don't feel the pressure of it, and you don't feel stuck in the extra job and overwhelmed by it. So it's very smart to do it the way you're doing it. Joanne is in North Carolina. Hi, Joanne. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking my call.

Sure. What's up? I am in two months I'll be in Baby Step 4, and I'm currently self-employed, so I'm an accountant. And I want to know, based on the IRA Roth limit, how do I maximize my 15% in Baby Step 4? Okay. Do you have any employees? No.

Okay. So your contract's self-employed, and so you can obviously do Roth IRA $6,000 and $7,000 if you're over 50. Are you over 50? No, sir. Okay. So you can do that. And then you can also look at a SEP, a Simplified Employee Pension Plan. What kind of money are you making? I make $78,000 a year.

Okay, good. Okay. Well, you can put, if you don't have employees, it's perfect for you, the SEPP, and you can put up to 13.8% of your net profit into an account, and I think you can qualify those as a Roth now. In the old days, I did one way back before I had any employees. Once I got employees, I quit it, and I went to a different kind of a system because if you've got employees, you have to pay them the same percentage.

So it changes if you start doing some hiring. But, you know, sit down with your SmartVestor Pro. Click SmartVestor at DaveRamsey.com. It'll drop down a list of the SmartVestor Pros in your area. You select which one you want to work with. Sit down with them, and they can help you get the Roth going into some mutual funds and help you get a SEP going. And between the two, you ought to be able to get to 15% of your income

for your Baby Step 4 guideline. Cheryl is with us. Cheryl's in Michigan. Hi, Cheryl, how are you? Good. I need your help. Okay. I'm on baby step two. I'm a woman in my 50s. I'm single. I have a home that I have a mortgage on, and I have a friend that is renting from me. However, her family business went south in the last couple years that she's involved in and was no longer able to pay me rent. When did she move out? She didn't.

Why? Because I didn't ask her to, and she's a good friend. So you were just trying to help her out. You're trying to help her out. because I didn't ask her to, and she's a good friend, and I didn't. So you were just trying to help her out. You're trying to help her out. How long has she been living there for free? Over a year. Okay.

I have a very good job. She's living under the poverty level, and I did something really stupid. I had an open credit card, and I allowed her to put, like, car insurance, things like that, to build that up on it. So now I just don't know in my debt snowball, do I take on that and just pay that? Yeah, it's your debt. It's your debt. Okay.

She's broke. I mean, she's making minimum payments on it, but I didn't know if I'm enabling her situation. She's broke. She's not going to pay your debt. Okay. You just gave her a bunch of money and that's fine i just wanted to do the right thing i'm sorry it's not about doing the right thing you you have a credit card that has a debt on it it's not a moral issue it's not a moral issue you they're going to sue you if you don't pay the credit card. She's not going to pay it. She's broke.

She's making minimum payments. Honey, she's not paying you rent. She's broke. She doesn't work. She doesn't have an income. She's not going to pay you. You knew that, and you gave her the money, and you gave it to her on your credit card, so now you get to pay your credit card.

Don't kid yourself. And you really have some boundary issues with this lady. It's not a healthy situation that you're in. I don't smell charity. I smell weakness. There is a difference. I'm just telling you what I heard. That puts this hour of the Dave Ramsey Show in the books.

We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Hey, it's Kelly, associate producer and phone screener for the Dave Ramsey Show. If you would like to do your debt-free scream live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you to come to National and tell Dave your story.