The Ramsey Show - App - Why You Need to Miss the Match on a 401(k) (Hour 2)

Episode Date: June 21, 2018

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 am Dave Ramsey, your host. This is your show. Thank you for being here. Open phones at 888-825-5225. Aaron is with us in Springfield, Kentucky. Hi, Aaron. How are you? I'm doing pretty good.

It's awesome to be on the phone with you. I really appreciate it. Certainly. How can we help? So my question is, I just started at a new company. I'm a truck driver, and I started at a new company to be home more. I actually get paid more, but they do a 6% match. It's an ESOP company. And I'm just curious, because we're about to start our baby steps into

getting rid of our debt. And I wanted to know what is more important, putting more money into a matching 401k or taking that money and putting it into debt now and then putting it towards the match now. I'm just kind of confused on what my first step should be in terms of that. What we tell folks to do and have told them to do for 20-plus years is to temporarily stop all investing while you attack your debt as a temporary measure. It's not mathematically correct because missing out on that match is a wonderful math thing. I mean, getting that match is a wonderful math thing.

It's a great thing. But you're not going to miss it for very long because you're going to tear into this debt really, really heavily. Here's the thing. In our culture, debt has become so normal. Everybody's got it. Everybody's in debt. And everybody's broke, and everybody doesn't have any money. But everybody's got debt.

And so it's easy to wander into debt. It is very difficult to get out of debt. And you've become an incredible inspiration towards me and my wife both, and that's why we're looking forward to doing this and bringing you along on the adventure, even if you're not personally there with us. Yeah, I appreciate that. The point, though, is that you're going to have the most progress on getting rid of the debt, which is the shortest path to wealth not a 401k match while you've got debt but getting the debt cleaned up so you can start putting 15

percent of your income into retirement which more than gets you the match at baby step four you'll end up with more money 10 years from now doing it that way because you will get rid of the debt faster there's a there's a thing about the focus. When you focus on something exclusively, that's when you win with it. And that's why, again, debt is so insidious. It's got its fingers wrapped around our throats so hard and so tightly that to get away from the stranglehold, you have got to just go all in emotionally, all in relationally, all in emotionally, all in relationally, all in

spiritually, all in mathematically. And so even though it's mathematically incorrect to stop your investing and stop, miss your match temporarily, it's the best way because it's all in. And that all in thing causes you to become debt free, which causes you to be able to build wealth faster. And so that's why we do it. That's why we say stop all investing, and you would not start your 401k, and you wouldn't miss out on the match.

But, man, you've got to get after it now. I mean, you've got to really get after it and get this debt cleared. I mean, beans and rice, rice and beans, and it sounds like you're ready to do that. Brandy's with us in Jacksonville, Florida. Hi, Brandi. How are you? Hi, I'm doing well. How are you?

Better than I deserve. What's up? Well, my husband and I have gotten a little bit through baby step two. We've paid off all the onesies and twosies stuff, and now we're starting to get into the big stuff. And we're trying to figure out what order we should do it in. The biggest portion of our debt is our boat and our newest car. We want to sell those, but we're a little underwater by a few thousand for both of them. So I didn't know if you would recommend putting those ahead of bigger credit cards and stuff

like that and trying to pay off some of the principles so we can sell those items. That's $60,000 right there that we can get rid of in 700 months. Yes, because I would treat the negative equity as an item in your debt snowball since you're going to sell it. And so you say $2,000, when does that come up in the debt snowball? If you're $2,000 upside down, then you would stop and you would say, I'm going to get this thing paid down $2,000 and sell it. And if you treat the negative equity as a debt, the amount you're in the hole as a debt,

put that in the debt snowball, that's when you would go ahead and do that since you're turning the car or the boat over. So that's a really good one. Well, that would be great because that would really get this ball rolling with that extra $700, $800 a month. Yeah, it's going to be huge when you do that. Very cool. Yeah, very good.

And, you know, sacrificing a car and a boat, oh, it's so hard, especially the boat. But here's the thing. You get another one. You get another one. If you live like no one else later, you get to live like no one else. If you drive like no one else later, you can drive like no one else if you drive like no one else later you can drive like no one else these days you know what i drive anything i want but i drove a junker i drove a beater i drove a car that the predominant color on it was bondo i drove a car that you had to give it a name because it was such a hoopty

and so i make no apologies for driving nice stuff now because i paid a price to get there some people don't like it you're you're you're too successful yeah you're too successful well you're too mouthy i mean really two that's these unbelievable so yeah yeah yeah you know you'll get you another car you'll get you another boat and do it get you do it right now go ahead and go ahead and put that in your debt snowball at this point. So, good question. David is with us in Sacramento, California. Hi, David.

How are you? I'm great, Dave. Thanks so much. Hey, my wife and I are talking about vehicle purchase, used vehicle we're looking at. And we just said, what would Dave Ramsey do? So, I said, well well maybe i'll call him so we uh we're working through the baby steps a little bit into baby step three the three to six month emergency fund and we've got a vehicle we've had for 15 years and had two mechanics

for the last year or so tell us i wouldn't put any more money into that car we're averaging we look back in our records about 200 a month in repairs on this car. So we're thinking, and the AC compressor just went out. We're going into the summertime, so it's expensive, and we're thinking maybe it's time just to get a different vehicle, or should we go ahead and put more money into this car again? What will it sell for? That's a good question, and it'll probably only bring in maybe $1,000 with the AC out.

It's got a power steering pump out. It's leaking. We keep putting power steering fluid into it. Yeah, you're done. You're done. Got a lot of creaks and groans and other things. What's your household income? About $70,000.

Okay. And so how much money do you have saved? We've got about $7,000 saved up. Okay. So you haven't got about $7,000 saved up. Okay. So you haven't got your Baby Step 2 completed? No. Well, no. Okay.

But your car basically laid down is what we're saying. Yeah, it's got a lot of problems. Yeah, so if we want to declare this an emergency, you would take $2,000 out of that $7,000 and put it with that $1,000 and buy a $3,000 car. Then when you finish your emergency fund up later, then you save up and move up in car again next year. That makes total sense. The one caveat we're looking at is we've got six kids,

and the vehicle that's breaking down is the eight-passenger Astrovan. Yeah, so buy another one for $3,000. You're going to sell a $1,000 one, buy a $3,000 one. You can do that. I mean, if there's a $1,000 one on the market, there's a $2,000. You're going to sell a $1,000 one, buy a $3,000 one. You can do that. I mean, if there's a $1,000 one on the market, there's a $2,000 one, a $3,000 one on the market somewhere. This is the Dave Ramsey Show. For years, I refused to endorse any company that claimed to get people out of timeshares.

I told my listeners it's a horrible product and that, unfortunately, they didn't have a lot of options. Then a few years ago, I sat down with Brandon Reed, the owner of Timeshare Exit Team. Brandon walked me through the timeshare industry, and I learned that you can't sell them, and you can't even give them away. And then we talked about Timeshare Exit Team's process. Every ownership situation is different, which is why they have more solutions than any other company. And that's when they earned my respect. Don't call any of the imposters out there, and there's a lot. The only timeshare exit company I stand behind is Timeshare Exit Team.

They have exited thousands from their timeshare burden this year alone. Yes, you will write them a check, but they stand behind their guarantee. They will get you out, or they'll give you a full refund. Call 844-999-EXIT. Online at timeshareexitteam.com. 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 coverings. Sitewide savings right now. Plus, you take an additional 5% off at Blinds.com slash Ramsey.

Question comes from Blaine in North Carolina. Dave, my wife and I are in baby step two, getting out of debt. We have everything but our car and home paid off. Before we started listening to you, we financed a car, but we were able to get 0% interest for the full term and no catches or stipulations. We're both in secure jobs, so is there a benefit to paying off the loan sooner than the full term? Listen, son, if you keep car payment, you're going to be middle class the rest of your life.

You've got to get rid of car payments. Car payments are a mindset. And no, you should pay that off as soon as possible or you should sell the stupid car. You're in baby step two and when you're in baby step two, you pay off your car. You pay off everything

but your house. And it's not about interest rate rate it's about cash flow and risk and famous last words we're both in stable secure jobs nothing's ever going to happen bad to us well you haven't lived very long i mean stuff comes and stuff goes and things happen. And when you don't have a single payment in the world and you have a pile of money and stuff happens, it changes everything. But when you rationalize your butt off due to interest rates and other things and you keep buying stuff or you keep debt because of the, oh, it's a low interest rate. What's that mean? It's not a bad backache. I mean, really? Get rid of it. get rid of it get rid

of it jay is in fort payne alabama hi jay how are you i can't complain dave how about yourself better than i deserve what's up uh so i'm a uh sophomore at a junior college uh here close in town and i'm looking to transfer next fall and talk about housing and stuff like that we actually have a camper at the lake about 30 miles from campus and i was just wondering what would be better just to live in that camper and commute back and forth or just go ahead and live and house in our apartment right there on campus. How are you paying for it? Which one? Either one.

How are you going to pay for school? How are you going to pay for housing? For school, they have a transfer scholarship that is whether you keep your GPA above a 3.5 or not. And that covers $3,000 for four semesters. And so I'll be going straight into the nursing program. My dad and my parents, they've agreed to help me on the housing, and the rent for the camper is only like $200 a month. That's kind of what they're looking at, but as far as commuting back and forth and gas.

So you're going to pay cash for it? Yes. Okay, and they're going to help you a little bit with housing if you live on campus? Yes. Okay. And you're going to be working? Yes, I'm working right now. But, I mean, you'll be working when you get there?

Absolutely. Good. Okay. $200 a month to live on campus doesn't bother me. The $200 a month is the camper on the lake. Oh, I'm sorry. That's my bet. That's $200 for rent for the camper to sit on the lot at the lake.

Okay. Is it already sitting there? Yes, it is. So who's paying the rent on the lot now? My parents. Oh, okay. And then if you live on campus what will that cost uh the average for apartments there it runs about uh 2600 a semester okay can you pay that um no i'm not i'm not exactly sure okay how it boy all right well i mean it's not an option if you can't

pay for it right so we just got if it's a if it's an option and you say i've got to work extra and i'd rather i'd rather work some extra hours so that i can live on campus instead of make the commute and instead of living in the camper then fine. But if you want to live in the camper, that's fine. My grandparents had a lake house, we called it, that I lived in when I was in school, and it was more of a, it wasn't a lake house, it was more of a cabin, a glorified cabin at best. And it didn't have heat in Tennesseeennessee and so we used the fireplace to heat it in the winter the first year the second year we put heat in it um and that's what i did but i love the lake too right and so i was in heaven because i was living on the lake

and so you know that that that was you know and and people got, and I was driving. I drove 26 miles to campus is what I drove to campus, and I did that. I lived in that house the entire three years I went to that school. The last three years I was in school at University of Tennessee and drove back and forth. And the house at that time, it was a reasonable property, but it wasn't like luxurious. It was a lake weekend cabin. Again, it didn't have heat and hair at all and we put we put window air conditioners and heat in it as we stayed there a little while longer because i kept working while i was in school but but i i did that truthfully no i didn't

i wasn't doing that to save money although i did save money i was doing it because i love being on the water so you got to just think this through but you can't do the campus thing unless you got a way to pay for it so you need to think about how you're going to just think this through. But you can't do the campus thing unless you've got a way to pay for it. So you need to think about how you're going to pay for campus if you're going to do that and where that money is going to come from because it's not just magically going to appear because you signed a lease. So if you've got a plan to live on campus and you want to do and sacrifice whatever it takes to cause that to happen, to keep from A, living in a camper, and B, driving 30 miles, then that's fine. I don't have a problem with that.

But pay cash for it. That's all I care for. And just have a plan. And that will walk you right through it, dude. You can do this. Maurice is with us in Detroit. Hey, Maurice, how are you? Hey, God bless you, Dave.

How are you? Better than I deserve. What's up? Hey, I appreciate you for taking my call. You know, I wanted to know, because I've been listening to the show for a while now, and I'm a huge fan of everything that you're doing. And I wanted to know, how can a person start by teaching a financial peace class at their church? Because I just got ordained as assistant pastor in April, and I've just really been inspired,

and I do think that it can help just the know, just the people I know who are struggling, and I just wanted to know, how do you go about starting that? Very cool. Well, thank you very much. Well, there's a leadership kit that has the DVDs that teach them that when you have your group that starts meeting and you go through the first nine lessons on DVD, the rest of it's all online, and they can actually watch the stuff online, too. They get that as a part of their membership for the one year deal. But as you said, the way to kick it off is the first nine weeks

of lessons are done in a group there at your church. And we charge like $300 for that leadership kit or something like that. I'll give you one, Pastor. If you're willing to teach the class, I'll give you one. And that'll help you get the class started. And so our team will hook you up and show you how to do that, how to get the class started. But basically, you just come up with a time frame that you want to teach it or lead it. They come in, they watch the DVD, and then after the DVD, there's a discussion for encouragement and for accountability. And you talk through, you know, what you just saw and how everybody's doing on their budget.

The every dollar budget's part of the membership, the whole thing like that, and that whole process. But I'll give it to you. I appreciate you being willing to lead the class, man. And that's exactly how it works, though, and lead a group at your church. So hold on, and I'll have Zach pick up, and he'll get you a leadership kit for Financial Peace University

and also hook you up with one of our stewardship advisors that will help you get the class started and show you how to get the whole process going. There's not that much to it. But anybody else wants to do that, just get in touch with us. You can jump on DaveRamsey.com, click on Financial Peace University, or just call in here, and our stewardship advisors will help you. There's about 40 of them that help churches all over America.

Deb is with us in Salt Lake City. Hi, Deb. How are you? I'm good. How are you, Dave? Better than I deserve. What's up? I have a question.

I'm 63 years old, and I have a piece of property that we've never been able to afford to build on. So we've had it for about 25 years, so we're looking at capital gains here if we sell it. And I'm wondering, I have saved for retirement, but I'm wondering if it's a good thing to do at my age to build on it. Do you have the other money to pay for it? I make about $44. Do you have any money to pay for it? I make about $44,000. Do you have any money to pay cash for the house? Oh, I've already paid for the lot, and I would have to take out a loan, I think, of about $250,000.

And I have about $80,000 in savings. $250,000 on $40,000 sounds like a strain to me, kiddo, at any age. So if you can make your numbers work on a 15-year fixed rate where the payment's no more than a fourth of your income, I don't mind you doing that at 63. That sounds like those numbers don't work. You need to look into that a little further. Okay, I need you to listen to this. Because one normal routine that everyone does can cause total chaos in your life.

I'm talking about the simple act of using Wi-Fi. When you're on Wi-Fi anywhere in public or at home, you're at risk of hackers easily seeing every site you visit and every search you're doing online. It doesn't matter if you're on your cell or your laptop. They can see you visiting websites, streaming or downloading, uploading photos, files, and more. I'm not telling you this to scare you, but I want you to be aware and take action. You need to download an app called Hotspot Shield. Hotspot Shield helps keep your connection on your own

Wi-Fi and any public Wi-Fi secure. 600 million people worldwide have downloaded Anchor Free's Hotspot Shield. Download it right now. Just search Hotspot Shield on iTunes or Google Play or go to HotspotShield.com. You can be secure in

seconds. Download Hotspot Shield by Anch anchor free today. In the lobby of Ramsey Solutions, Joe and Rosemary are with us. Hey guys, how are you? Very good, Dave. We're excited to be here. Well, we're honored to have you. Welcome. Where do you live? We live in Edinburgh, Texas. And what's that near? It's down by McAllen, close by South Padre Island. Oh, nice. Okay. Welcome to Nashville and all the way here to do a debt-free scream. Yes, we are. Love it. How much have you paid off? $172,125. And 44 cents. I love it. And how long did this take? Four years. Good for you. And your range of income during that time? We started right about $152,000 and now we're sitting right about $200,000. Cool. What do

y'all do for a living? I'm a regional manager for a Texas-based grocery company. And I'm a retail consultant for a distributor. Okay. Very good. And you brought the kiddos with you. What are their names and ages? So here we have Audrey. She's 16. And Erica, she's 14.

And our actual story, we're a blended family. So when me and Joe got married nine years ago, Joe had two children and I had two. We came into the families with both debts. Joe has Nancy. She's 26. She couldn't be here today. She's already got her family. And Ethan is 16 and he's with his mom.

Okay. Very cool. Very cool. So what kind of debt was the $172,000? So it was all kinds of debt. Student loans that I brought into the marriage, cars, and then, of course, the home. You paid off your house? Yes, Dave.

We paid off our house. I'm looking at weird people. Yes. Way to go, you guys. So we're so excited we paid off our house. You ought to be excited. That's awesome. What's this house worth?

So our house is right about $156,000. And you own it. Yes, it's ours. I love it. We kept hearing you say on the radio show about walking in the backyard and stepping on the grass when it's yours. And it's such an amazing feeling. It is. It's amazing.

Good for you guys. So what started this process of getting out of debt? Set your hair on fire four years ago. So we had been trying to get out of debt before, but we really never were serious about it. And about four years ago, I got moved in my job from one location to another, and I was going to be asked to drive an hour there and an hour back. So at that time, I was normal, and I had a luxury SUV that I was paying a lot of money on. And we decided, well, we got to trade that in because we're just going to ruin it and put so many miles on it. So when we did and we traded it in for a cheaper car, we realized in that moment how much money we were throwing away on that luxury SUV.

And that's kind of just what propelled us into getting this going. The other thing that helped us is just listening to you. We listened to you. On my drive to work for an hour, all I did was listen to you. Listen to you there and listen to you back. So that's what helped drive me into, okay, we got to do this. We got to do this.

Bought the book, read it in the same day and brought it home to Joe and said, we've got to do this. And the funny story is, I made this spreadsheet when I got home and I put all of our bills on it and put it on the mirror in our restroom. And then I got home and I put all of our bills on it and put it on the mirror in our restroom. And then I get home that afternoon, I couldn't find it. I was like,

where's our spreadsheet? Well, Joe had seen it and crumbled it up and threw it in the trash. And I was like, why did you do that? And he's like, well, what were you trying to tell me? What were you trying to give me to know? And I said, well, this is our debt. This is our reality. So this piece of paper has been with us for four years and every time we paid off a debt we just scratched it off but for four years this paper's been with us uh went into the trash but we took it out we paid every bill one at a time so so joe she's reading books and putting stuff on your mirror and everything else what made you decide that you needed to jump in on this? Well, after the machismo wore off that I needed to get on board, I participated and understood what we needed to take care of,

and it was one step at a time. And primarily the first thing that I wanted to do was to feel that we were debt-free at one point, and later on down the road. Once you saw the light, at the end of the tunnel was not a train, you were ready to go. Each time that we crossed something out, it felt good. From the loans to the school loans, when we paid off the car, she said, you've got to do this, and I did. And I walked into the credit union with the checkbook in hand

and wrote the check. And it felt good that I wasn't making a payment. This is it. This is it. And then we did that to the second car, and it did the same thing. Yeah. Dave, I'm sorry. I know that that's what, you know, to his point,

I knew that he needed a little bit of encouragement. So when we had to make that final payment, I said, you do this. You go make this final payment on this bill, you do this. You go make this final payment on this bill. You walk into the credit union. And he did. And that's where I think it really changed. That feels good, man. It feels good. That's good. I love it. Well done. He even came home with donuts to celebrate because he's like, you know, I just did something. I just paid off this car and I wrote this check. And even the people at the counter were looking at me like, what? You want to pay it off? You're writing a check for what?

But he went in and did it, and after that, we were just on fire. I love it. That's very cool. How long have you all been married? So last week was our anniversary, and we've been married nine years. Okay. All right. And so five years kind of doing normal stuff, and then four years on fire.

Yes. Okay. And so you had two little girls when you got married. Mm-hmm. And your single mom at that point. Divorced, I guess? Yeah, divorced. So during that time, I was still making good money, but I knew that I had to start my life again.

And it was a struggle because I had debt. And at that time, I moved in with mom and dad. Mm-hmm. And it was a struggle. Mm-hmm. But by the grace of God, I found Joe. Mm-hmm. And at that time, I moved in with mom and dad, and it was a struggle. But by the grace of God, I found Joe, and we've done this together. Yeah, amen. You know, that's what I was thinking. If you look back, all the way back there, when it was just the three of you before Joe, before marriage and everything, and you fast forward to today, and you're standing here with a paid-for house and a great husband and great kids i mean

life is good it is you know there's probably a lady out there somewhere that's got two little girls right now listening to this it wonders if it's ever going to be okay and you're walking proof it is and uh part of the reason is because you took control of things you took the bull by the horns even if it was a big bull and wrestled him down and and so and and then joe comes along beside and goes over at the bank and pays stuff off and comes home with donuts life is good it was yeah this is good and all the way down to the house and everything wow i mean wow this is great you changed your family tree you you two. Well done. Proud of you. Excellent. What do you tell people the key to getting out of debt is?

So for us, we've heard it all the time about the budget, but it is so true. You need to sit down and do the budget to know where every dollar is going. That was important. The other thing that helped me particularly, like I mentioned, was watching the debt-free screams. When I was driving an hour to work and an hour back and hearing them, there was times where I had tears in my eyes because I could taste it. I could see it happening. And we knew that when we got debt-free, we wanted to come here. We wanted to come here and we wanted to do our scream because it was important. I think one of the other hardest things is when you have

that debt, that takes a while. So that can be a struggle. When you first start and you're paying them off pretty quick and you're scratching them off our sheet. That was pretty easy. But then when you get down to the last bills that take, you know, a year, a year or more, it's like, Oh, we got to stay at it. Joe mentioned one time that, um, you know, there was one day at the house where he was eating bean tacos. Yeah, I was, uh, I, you know, we stuck to the budget, right? We did a spreadsheet. So we had our grocery and I'm the one that does the grocery shopping. So I tried to stick to it. And one night, opened the pantry, opened the refrigerator.

And as she was out of town, I texted her and I said, can we do pizza tonight? All I got back was stick to the budget. So I said, well, okay, what else? So I saw beans and tortillas. I said, you know what? We're going to eat beans and tortillas and cheese curls. And they just looked at me like, what? It was easy.

I could have just gone and bought something out, but it stuck to the budget. And I think that's where you say, Dave, that we are weird. Yeah, it humbles you. Because other people would question Joe like, why are you doing this? People would question me too. With the income we were making, why are you doing this? What's the point? But again, it was to be here and to be debt-free and to move on to our legacy and what our future is going to be i'm

guessing your mom and dad are pretty proud huh yeah so my mom and dad are here um they were able to join us today so we brought them along and um you know first and foremost i want to give thanks to god but uh right behind them is my mom and my dad. Because, you know, they sacrificed to start our legacy, to pass our legacy to our kids. Both my mom and dad were migrant workers. So they worked in the fields along with Joe and his parents' parents. So, you know, that struggle got the hard work to get the sacrifices to where we are now. Now you're making $200,000 a year. Yeah.

That's a generational change right there. It is. And we hope the same will happen to our kiddos. It will. All right. $172,000 paid off in four years. Joe, Rosemary, Audra, and Erica, count it down. Let's hear a debt-free scream.

Three, two, one. We're debt-free! Wow! Love it! That's as good as it gets right there, ladies and gentlemen. Wow! I hate to see people waste money, and that's exactly what happens when you spend hundreds of dollars a year on ID

theft protection plans like Trusted ID, LifeLock, ID Watchdog, and any of them. Well, let's face it. Identity theft is a nightmare, and it's not going away, but there's no need to freak out and buy the most expensive plans out there because you think you're getting the best protection. Wrong. I've been telling you for years, you need to protect yourself, and Zander's ID Theft Plan provides the maximum benefits and is literally half the price. They monitor your personal info, send alerts when you're at risk,

as well as take over all the work if you become a victim. They also cover your bank accounts if they get hacked and protect your children at no extra cost. The right protection at the lowest cost. It really is the smartest way to protect yourself and your family. Go to Zander.com or call 800-356-4282. Thanks for being with us, America. We're glad you're here. We have a summer sale going on right now in the online store at DaveRamsey.com. This week you can get our best-selling kids bundle, the Adventure Pack, for only $45.99. It will equip you with all the tools you need to teach your kids about money and life. It includes Financial Peace Junior.

It includes Junior's Adventure Storybook Set, Storytime Book Set, and digital PDFs, and the Smart Saver Bank. It's all there. We've got all these tools for you teaching your little kids how to handle money, so check it out. DaveRamsey.com. Call 888-22-PIECE, 888-227-3223. Desiree is with us in Baton Rouge. Hi, Desiree. How are you?

Hi. Thank you so much for taking my call, Dave. Sure. I was calling to ask, okay, so my home flooded about two years ago. I did take out a loan to help put it back together. That loan, I have about six months of expenses saved up. So I'm just trying to figure out where I'm at as far as the baby steps. I don't have any other loans right now. I don't have any credit cards, anything like that. Trying to figure out where I'm going to be

at in terms of the baby steps and how I budget for larger expenses. Like if I wanted to get married and eventually I do want to retire, my employer does offer some matching. I'm just trying to figure out where to put things so that I set myself up properly. As you probably have heard, baby step one is $1,000 saved. You've obviously done that. Two is debt-free except your home. Three is a fully funded emergency fund of three to six months of expenses,

and you do these in order. And then four is 15% of your income going into retirement. Five is kids' college, and six is you pay off your home early. Okay, so that takes care of every one of your questions. The money that you borrowed after the flood, was that a mortgage? It was. It's an SBA loan. Okay, and how much is it? It is about $50,000. And it's a second mortgage? Yes, kind of. You have a first mortgage, right? Yes. Okay, and how much is your first mortgage balance? About $175,000. And what's your interest rate on the first?

3.7. Okay. 3.7? Yes, sir. Okay, and what's the SBA loan? The interest on that is about 1.87 or so. All right, and is there a balloon, or is it just pay for? No, it's just pay it.

There's no penalty for paying it off early. And what's your household income? My household income is right about $3,500. It fluctuates a little bit because I work some in the service industry. Okay. The way we decide whether a second mortgage, which is what this is, is whether it's in baby step two as a debt or whether it's in baby step six as part of your mortgage is if it's more than half your annual income. And this is more than half your annual income. And so it is your it is part of your mortgage.

And I would just leave it with baby step six. And so you are debt-free except your home. Do you have your fully funded emergency fund of three to six months of expenses? Yes, sir. Okay. Then that would move you to Baby Step 4, which means you need to start putting 15% of your income into retirement. Okay.

All right. And once you're doing that, do you have children? No, sir. Okay. Then we skip baby step five. That's kids' college. And above 15% of your income going into retirement at baby step four, five is kids' college. Skip that.

Six is pay off the house early. So if we find any other money above 15% of your income going into retirement, you throw it towards that second mortgage. Okay. But you're on baby steps four, five, six. You don't have a five, so you're on baby steps four and six, which you do those simultaneously, and that's right where you are. Is that logical to you? Yes.

Okay. You're doing really good. How old are you? Almost 30. Okay. You're doing really good. You got a good plan. You're conservative. You're taking care of things. I'm proud of you. Very, very well done. Well played. Very well played.

All right. This is the Dave Ramsey Show. It's a free call at 888-825-5225. Thanks for hanging out with us. Renee is in Des Moines. Hi, Renee. Welcome to the show. Hi, Dave. Thank you so much for taking my call. Sure. What's up? Okay, so my question is, I am a stay-at-home mom. I'm blessed to be a stay-at-home mom. I homeschool my boys, ages seven and six. My husband is our sole provider. Our annual income ranges from $30,000 to $35,000, except for just two years ago, I started my own network marketing business. My first year, I earned $2,000 because I only did it for like half a year and was learning the ropes. Last year, it went up to $8,000,

and I'm on track this year to earn $12,000. My question is, we're in Baby Step 1, and my question is, do I take another part-time job to really get ahead of these baby steps and just kind of get us going forward even faster? Yeah, how much debt have you got? $4,000. Okay. Well, can you make more doing more network marketing or more doing a part-time job? More and more network marketing or more doing a part-time job? More and more network marketing. Okay.

Well, you go where you make the most money, right? Okay, yes. My security gland goes off because we currently rent from my in-laws, and there's a lot of boundary issues. And so my patience with my network marketing business is very low because I want to get things done as fast as I can. Well, here's the thing. I just asked you where you can make the most money right now.

So I need to put more effort into it. If you have an extra 10 hours a week, where can you make the most money with that 10 hours right now? Your network marketing, or would you make more at a part-time job? In our area, I would make more in my network marketing by putting more effort into that, yes. Okay. Then that's not inconsistent with your security gland. It's consistent with it.

Because the more money you make, the faster you get out of debt and the faster you can get out of that bad, toxic situation with the rental. Yes. So we want to make the most money we can the fastest. Yes. And that activates your security gland. I mean, you know, you've got a lot of stuff pushing at you here. You've got little kids and in-laws and you're self-employed.

And, you know, there's a lot of stuff going on in your world for sure i get it there's stress here but you know the fastest way is where can we pile up the money the fastest and i and again i want you to make a realistic assessment of that i'm not challenging you but are you really making real profit after all your expenses and you're really actually making money doing this because sometimes people get network marketing and they just chase their tail and they have a lot of activity but they spend everything they make and um you know and in business that's called no profit so and then they you know they feel like they did something but you didn't do anything you just water in your case maybe you are making profit and it sounds like you are. And good. Go for it.

Whatever you can do to make the most money that's moral and legal, that's what I want you to do. Because that moves your family towards its goals, which is get that debt paid off, getting a different rental, build your emergency fund, start saving towards owning your own home someday. All of those kinds of steps. So very well done. Good, good, good for you. Open phones at 888-825-5225. Pete is on Twitter. Says, do we have to wait until the mortgage is paid off until we do a debt-free scream?

No. We have two debt-free screamers here. We have people who paid off everything, including their mortgage, and people who paid off baby step two, everything but the mortgage. We want you to celebrate your wins. You're a hero. You just

won the battle. You just slayed the dragon. You just killed the monster. You just won the Revolutionary War. I don't know. What hero are you? You know what I mean? What did you do?

And we want you to celebrate that. I know you're not technically debt-free when you still have a mortgage. I get that. I'm actually the inventor of this. I understand it. So, you know, I mean, I get it. And some of you people are Pharisees and freaked out over this. They shouldn't do debt-free screams if they hadn't paid off a mortgage.

Well, then you get your show, and you make up the rules for your show. This is mine, you know? So we can do a debt-free scream here when everything's paid off but the house or when everything's paid off including the house. We like people winning, and we like celebrating with them. We're not looking for a bunch of dadgum rules. This is The Dave Ramsey Show. Hey guys, it's Blake Thompson, Chief Production Officer for the Dave Ramsey Show.

This hour's up, but you'll find more on our YouTube channel, where we have over 6 million YouTube views each month. You can find debt-free screams, millionaire hour clips, Dave rants, and so much more. Go check it out. Folks, the real estate market is on fire all over the country. If you're looking to buy a home and you need a mortgage, don't sell yourself short by going and getting a typical pre-approval. That's a false sense of security, and it's just not good enough in today's fast-moving market. Instead, call Churchill Mortgage and get their certified homebuyer program. I'm telling you, it's a game changer.

Churchill helps my listeners become fully approved before they go house shopping. In other words, Churchill does up front what most lenders wait to do at the last minute. This gives you an advantage over other buyers and helps you close really fast. Plus, Churchill won't let you get into more house than you can afford. So become a certified home buyer and get ahead of the game. I trust Churchill Mortgage. Call 888-LOAN-200 or visit churchillmortgage.com. This is a paid advertisement. NMLS ID 1591, Equal Housing Lender, 761 Old Hickory Boulevard, Brentwood, Tennessee, 37027.