The Ramsey Show - App - Write Down Your Goals to Watch Them Come Alive (Hour 2)

Episode Date: February 27, 2019

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Starting point is 00:00:00 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I am Dave Ramsey, your host. This is your show. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Michelle's in Fort Myers, Florida. Hi, Michelle. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you for taking my call.
Starting point is 00:00:59 Sure. What's up? I am 63 years old. I have just been recently divorced. I recently refinanced my house for 15 years, and I have been trying to put as much money towards my house, anything I'm getting a lot on my mutual funds in comparison to the interest rate I'm paying on my loan. And I was wondering, now I know what you say about paying off your house, but I'm 63 and I want to be able to have a lot in my retirement for when that time comes. And I was wondering if you still think that I should work on paying off my house first or I should try to stuff as much money as I can so I have a nice nest egg when I retire. I assume you're debt-free other than the house. I am.
Starting point is 00:02:03 Okay. And what's your income? $60,000 a year. Okay. Cool. And do you have your emergency fund of three to six months of expenses? I do. Good.
Starting point is 00:02:15 And how much other money do you have in savings that's not with your financial advisor? Well, I just... How much cash is in your emergency fund 20 000 okay you have any other cash laying around uh just uh not really not anything too i have like 5 000 in a savings account okay all right. And what is owed on the home? $127,000. Okay. And how much is in the investments with the advisor?
Starting point is 00:02:55 About $175,000. Okay. Cool. All right. Well, that includes my $20,000 emergency fund. That's like in a savings account with the financial advisor that I could liquidate anytime. Okay. All right.
Starting point is 00:03:12 Your emergency fund's at a money market with him. Good. That's a good plan. All right. Well, what we would tell folks to do is to be putting 15% of your income away for retirement and any other money paying it extra on the house above 15% of your income. And so that's about $9,000 a year. And do you have a 401K at work? I do.
Starting point is 00:03:37 I have a 403B. Okay. Is there any money in that? And I put 15. Well, that's included in the 175. Okay. I put any money in that? And I put 15. Well, that's included in the 175. Okay. I put 15% in that. Good.
Starting point is 00:03:50 And I'm getting anywhere from 12% to 15%. I had gotten on my, you know, it showed on my last statement. Good. On some of my mutual funds. And my finance on my house is only 3%. Right. This is not about interest rate. This is about where we want to end up when you're 75.
Starting point is 00:04:14 Okay. Well, I'd like to retire before I'm 75. Well, I'm just saying, but when you're 75, you don't want to have a home mortgage. No, I don't. Well, you just signed up for one to 78 i know but i had to okay but let's not let's not keep it okay this is not this is you're arguing with me about three percent over twelve percent on your mutual fund but i want you to get the house paid off so that when you retire you have a paid for house now we don't have to be in a super hurry about it.
Starting point is 00:04:45 I'm putting 15% of your income. I'm adding another $10,000 a year to your investments, plus your investments are going to grow. And if you work seven more years, you know, you're going to have $300,000, $400,000 in your investments at that point, and you should have your house paid off by then. Yes. By 70, by then. Yes. By 70, not 78. Yes.
Starting point is 00:05:09 And by just doing what I'm talking about, 15% of your income into retirement, everything else above that going towards the house. I'm not suggesting you stop your retirement savings. I'm just saying limit it to 15% of your income for now. So $9,000, nine ten thousand bucks a year going into your 403b and good mutual funds that are growing and doing well which sounds like yours did fine then everything else i get my hands on i'm going to throw it at the house and and let's say you look up and you got 30 000 bucks left on the house and you want to quit work, and you've got $400,000 invested.
Starting point is 00:05:48 Well, take $30,000 out of your investments and pay off the house and be done. Quit at that point. But that's, you know, I'm looking at about a seven-year plan to get you to 70, making $60,000 a year from 63. You just took a 15-year mortgage at 63, which puts you at a 78 unless you pay extra on it. And I don't want you to be 78 years old with a mortgage. You don't want to be 78 years old with a mortgage. And the good news is you have a modest home price or mortgage amount that you can knock out.
Starting point is 00:06:19 So you can do this. But, you know, no, I'm not going to pay nothing on the mortgage and put more in retirement. Absolutely not. That would be absurd. You need to pay extra on the mortgage, and let's have about a seven-year plan to knock that out. And during that time, you can be putting 15% of your income away. You're going to be just fine.
Starting point is 00:06:39 You're going to be just fine if you do that. Shane is with us. Shane's in Huntsville, Alabama. Hi, Shane. How are you? I'm doing pretty Hi, Shane. How are you? I'm doing pretty good, Dave. How about you? Better than I deserve. What's up? Well, I just had a quick question.
Starting point is 00:06:52 I was wondering if Chapter 7 bankruptcy would be the right thing for me. I have three car repossessions and a foreclosure on my credit report. I also have credit card bills and probably about $3,000 in medical bills. Okay. What's your income?
Starting point is 00:07:15 $60,000 a year. What happened? How'd you get here? Well, I'm originally from Connecticut. Long story short, I moved to Texas. I was working in an oil field, making $150,000 a year, bought a house, inherited a family, and that family grew, so I bought another car, and I bought another car. Do you have car debt now, not counting the repays? I'm paying on the car now, but it's from a buy here, pay here place.
Starting point is 00:07:50 I know. I didn't have a choice. What's the balance on that car? Nine. It's not much. $9,000. Okay. I can have it paid off by next year.
Starting point is 00:08:00 Do you have any other debt? Other than what I just told you, no. Okay. All right. And what's your household income, did you say? $60,000 a year. $60,000, yeah, you said that. Okay.
Starting point is 00:08:15 All right. I'll tell you what, I want to walk you through this for a second when we come back from the break and give you a good long answer because, I mean, you call me up and say, should I file bankruptcy? That's and say, should I file bankruptcy? That's like saying, should I file for divorce? I don't want to give you a 30-second answer to something that important. So you hold on.
Starting point is 00:08:31 We'll talk about this when we come back from the break. This is the Dave Ramsey Show. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based on New Testament principles, Christian Health Care Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major health care costs. Christian Health Care Ministries is the original health cost-sharing ministry.
Starting point is 00:09:20 A Better Business Bureau-accredited organization, CHM members share to pay each other's medical bills. It's not insurance. It's Christians financially and spiritually supporting each other. It's what Christian Healthcare Ministries has done for over 35 years. And our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. All right, we're talking with Shane in Huntsville, Alabama.
Starting point is 00:10:09 He was on the oil field for a while, got a bunch of cars and a house, and ended up getting a couple repos and a foreclosure. He's got $3,000 worth of credit card debt, $9,000 on a car, making $60,000. He wants to know if bankruptcy chapter 7 is a good option. Is that a fair summary of what you told me, sir? Yes. Okay. Let's go through these things piece by piece and see if there's options that are as good or better than filing bankruptcy.
Starting point is 00:10:36 On the mortgage, what type of mortgage was this, VA, FHA, or conventional? It was an FHA. Okay. They will not be chasing you for any difference, so the bankruptcy will not have any effect on the foreclosure. So the foreclosure is just on there as your bad credit, and it will be for seven years. It will keep you from buying a home for four years. Okay.
Starting point is 00:11:02 On a mortgage. That is not affected by the bankruptcy it doesn't the bankruptcy doesn't help that it just adds to the bad credit that you would have okay the car repos have they contacted you for the deficit balance because they take the cars and sell them and come after you for the difference of what they sell for versus what that was owed. Have they contacted you for that deficit balance yet? Yeah, they've sent me letters in the mail with the balance. What are they saying? How much is the balances?
Starting point is 00:11:33 Two cars are for, one car was for $7,000. Another car was for $7,500. And the third car was for $5,200. Was for what? $5,200. $5,200. That's the balances after they sold them? Yes.
Starting point is 00:11:54 Okay. All right. And you got $3,000 in credit card debt and a family, you said an inherited family, meaning you married a lady that had children, right? Yes. I married a woman who had two kids, and then we had two more kids. Okay, cool. Later on, that's right.
Starting point is 00:12:13 And your total household income is $60,000, all right? Yes. So the only thing that the bankruptcy would clear would be those car repos and the $3,000 in credit card debt. Correct. would be those car repos and the $3,000 in credit card debt. And the car repos can typically be settled in cash for 15 to 25 cents on the dollar, somewhere in there. And you've got about $20,000 worth, so somewhere around $4,000, $5,000 bucks will get you out of debt there. So if you saved up $4,000 and, you know, save up a fourth of $7,000 and you call the $7,000 and you settle it, you save up, are these all with one company?
Starting point is 00:12:57 No, there are three different. Good. That's even better. Okay, good. So you could call the $5,200, you know, and, settle it for, you know, $1,250, right? Okay. And then you would call up the 7000 and settle him, you know, for, you know, a couple grand, something like that, right? And so when we start adding that up, then what we're saying is if $4,000 or $5,000 will settle those,
Starting point is 00:13:22 and it's work to do it, but it's also work to file bankruptcy, which, by the way, filing Chapter 7 is going to be between $1,000 and $5,000 will settle those. And it's work to do it, but it's also work to file bankruptcy, which, by the way, filing Chapter 7 is going to be between $1,000 and $1,500 legal fees. Right. Okay. So you've really got $3,000 worth of credit card debt and $4,000 to $5,000 worth of car debt, or car repo debt, and then you have your regular car loan. But you're going to have the car loan whether you file bankruptcy or not
Starting point is 00:13:44 unless you give up that car. Right. Okay. So your net gain would be the $3,000 in credit card debt plus $5,000 that you could clear the other stuff. So you'd be filing bankruptcy on about $8,000. Nah. Wouldn't file bankruptcy on $8,000.
Starting point is 00:14:01 Yeah, never. You got a point. Yeah. I wasn't aware that the finance company wasn't coming after me on FHA. I didn't know that. Yeah, they don't. It's a matter of policy. They technically can, but HUD, the Department of Housing and Urban Development, has a ruling that does not allow the mortgage companies to chase you for the deficit.
Starting point is 00:14:24 They pay the deficit. The FHA insurance pays the mortgage companies to chase you for the deficit. They pay the deficit. The FHA insurance pays the mortgage company, so the mortgage company has zero loss. The person that takes the loss is the government. The FHA, that's who takes the loss on the house. If there was a loss on the house, even. I don't know. There probably was. Well, honestly, I don't know, because the last time I looked at my credit bureau report,
Starting point is 00:14:45 it said foreclosed, and right under it said redeemed. Yeah, okay, that means somebody probably, that means somebody bought it for what was owed on it, probably. Wouldn't doubt it. Anyway, so here's what we're going to do, okay? We're going to let those repo people sit there and sweat right now. Okay. We're not going to worry about the FHA. We've already covered that. We discussed it. And we're going to we're not gonna worry about the fha we've already covered that we
Starting point is 00:15:05 discussed it and we're gonna get on a really tight written budget you and your wife are gonna sit down tonight open up an app called every dollar at every dollar.com it's a free budgeting app that we designed it's we spent millions of dollars it's awesome it is the best budgeting app out there and you guys lay out a budget beans beans and rice, rice and beans. You work extra jobs. She works extra jobs. We have garage sales. We are going to get out of debt.
Starting point is 00:15:33 The first thing we're going to do is chop up those stupid credit cards and pay them off really fast. Right. Every dollar I can squeeze out of the budget, I want $1, dollars set aside as baby step one emergency fund starter emergency fund and then i'm going to just attack these credit cards one at a time list them smallest to largest pay minimum payments on that minimum payment on the car and let's knock the credit cards in the head okay once they're gone let's get the car paid off. Fast. Fast. I mean, we're talking about $12,000 here and making $60,000. I want this done before Christmas. Okay.
Starting point is 00:16:13 Then you save up a little bit of cash, and you make an offer and settle the smallest of the repos. You know, get $1,000 more saved, more saved and 1500 bucks saved and make an offer on the 5200 and you'll have to argue with them you're gonna have to wrestle them to the ground but it you know here's how your argument sounds okay i'm trying to keep from filing bankruptcy wink wink okay i'm trying to keep from filing bankruptcy. I have three different car companies that have repossessed on me. When you say that to those guys, they're going to think to themselves, statistically, this is a bankruptcy looking for a place to happen, which is how we want them thinking, okay?
Starting point is 00:17:00 So I got three people breathing down my neck. If you'll take $1,500 and settle this $5,200, I got $1,500. That's all I got. If you'll take that and settle it, you get the money. If not, I'm going to the next player. You want some money? You know what they're going to do? They're going to wallow and whine and carry on,
Starting point is 00:17:18 but eventually, if you'll talk to them two or three times, if you don't want it, I'll go to the other guy. There's three of you in line here all griping at me okay and just just just lean into them a little bit here okay and you want you want some money you want this account off your books i can settle it for you today baby now two rules when you're settling that and then i'll let you go okay two rules number rule number one is whatever agreement you get from a debt that you're settling on like those car repos you get it in writing before you give them any money if it's
Starting point is 00:17:52 not in writing it never happened you can tell collectors are lying if their mouth is moving they will lie okay just to get money on the account. And so get it in writing. And the second thing is they're going to want to draft your checking account. You do not give them access to your checking account because they'll clean you out and you won't be able to pay your rent. Oh, of course. So, you know, no, I'll send you a cashier's check or go get you a prepaid debit card or something that's got the exact amount on it, and then cut that card up and close it. Go buy one of those prepaid cards, put $1,500 on it, let them have access to that, and then shut that puppy down so that they can't completely clean you out
Starting point is 00:18:35 and leave you in a mess. So, dude, you're not bankrupt. You just needed a plan, and we gave you one. That's pretty cool for a free service. You can do this, though. It is going to be a tough 18 months ahead. But you're making less than you used to make, and you've got a mess to clean up.
Starting point is 00:18:52 So that's your 18 months of toughness. But you're going to get there. You've got four kids to feed out of this, too. You're going to make it. Hold on. I'm going to send you a copy of the book, The Total Money Makeover, to help you. It will give you the rest of the guidelines of exactly what to do and how to go win at this.
Starting point is 00:19:07 You can do this, man. You can do this. You're not bankrupt. This is the Dave Ramsey Show. Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has debt and a struggle to make ends meet. But they're starting to make headway with their budgets and smarter decisions with money. They have dreams and plans, and the only real difference is that one family has the right
Starting point is 00:20:07 amount of term life insurance and the other doesn't. Big difference. If one of the parents die, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is. Be the family that takes those deliberate steps to be different and responsible.
Starting point is 00:20:42 It really does make you the hero of your story, and it puts you on course for better things ahead. In the lobby of Ramsey Solutions, Kelvin and Navate are with us. Hey, guys, how are you? Doing great. Doing great, Dave. Welcome, welcome. Where do you all live? Houston, Texas.
Starting point is 00:21:16 Houston, Texas. Houston, and all the way here to do your debt-free screen. Oh, yeah. Love that. How much have you paid off? Over $72,000. Perfect. How long did that take? 21 months. 21 months. Man, that's good. 21 hard months. And your range of income during that time? Between $90,000 to $150,000. All right. Very good. What do you all do for a living?
Starting point is 00:21:38 I work in sales, car sales, and the vitae teaches at a community college very good what do you teach i teach psychology very good fun what kind of debt was this seventy two thousand dollars student loans man yeah most of it was student loans the majority of it okay so a lot of hard work in that i hear you cool so what happened 21 months ago that put you guys on this journey? Well, we had taken the class right before we got married. So it's kind of like the premarital counseling for us. And then we actually didn't start until like the end of that year. And so actually I was looking online and I saw this girl. She was like, I paid off $36,000. I was like, honey, we can do that. Like, we can actually do that. And so December 2nd, we said, you know what?
Starting point is 00:22:28 Let's get it down. Let's write it down and let's do it. All right. Yeah. So it came alive then. Yeah. Came alive. That one testimony kind of sparked the whole memory from the class.
Starting point is 00:22:38 So you've been married about two years or so? Three years now. About three. Okay. Very good. Fun. So the class is good pre-marriage counseling. Oh, yes. About three. Okay. Very good. Fun. So the class is good pre-marriage counseling. Oh, yes.
Starting point is 00:22:46 It is. Yeah. And then it was kind of stored back there and kind of came back alive is what you're saying. For sure. The Financial Peace University class. Yeah. Well, and it was more so one of those things to where I feel like we knew the information,
Starting point is 00:22:57 but we didn't write it down. Right. We didn't have, we didn't, it was a moment where we put pen to paper and we said, we're going to commit to doing this. We know this is what we need to do, but we're going to do this and we're going to get this done. The inspiration and the information have to be at the same time. Oh, yeah. Yeah.
Starting point is 00:23:13 Oh, yeah. Very good. Way to go, you guys. How does it feel to not have any payments? Oh, my gosh. We're actually able to do all the things we want to do. So travel. We always do like a vision retreat at the beginning of the year.
Starting point is 00:23:27 Talk about, you know, what we want to do and what we want to see in our marriage. And now we're able, instead of just going to like a hotel like right around the corner, we can go somewhere nice, you know, and actually kind of really get an experience and, you know, dream more. It feels like a car was on my shoulders and now it's gone. Yeah. So the weight has been lifted off. And what's weird is you get used to carrying that car around. Sure. And you don't even realize it's there until it's gone.
Starting point is 00:23:53 Right. It's like, wow, I can breathe. Yeah. I didn't even know I had trouble breathing. I can breathe. Exactly. You know, the borrower is slave to the lender. It's a very real thing.
Starting point is 00:24:02 That's very cool. So what do you tell people the key to getting out of debt is? You paid off $72,000 in 21 months. I would say the key is, I mean, one of the first things, writing it down. Writing it down and be willing to do the odd things or the strange things. You know, there's many times where our friends would be going out to dinner and we'd say, hey, you know, we're going to go home and cook. Or there's a lot of sacrifice that was involved.
Starting point is 00:24:28 Novati at one time was, you know, working three jobs. She was teaching at the school and she was tutoring students and she was working at an academy. I was putting in a lot more hours. We were, you know, selling things. We were, you know, we had gazelle-like intensity. Right. The question was, how bad do you want it? Right. We had gazelle-like intensity. The question was, how bad do you want it? And we wanted it bad, bad enough to where we stopped some of the spending or going out to eat.
Starting point is 00:24:51 It feels weird to just go, and I feel bad going to buy clothes. I have money to go buy clothes, but it's still like, it's just developing those habits. But we wanted it that bad. And so the question I always ask people is, how bad do you want it? You can know what to do, but how bad do you really want to pay off this debt? Are you comfortable with that car being on your back, or do you want it lifted off, and do you want to breathe? You truly got to be sick and tired of being sick and tired. There you go.
Starting point is 00:25:16 You really do. I've had it. You got to have that moment. And when that happens, it changes everything. Yeah. Very cool. And that's what happened, so. Wow.
Starting point is 00:25:24 Proud of you guys. Well done. Thank you. What was the biggest happened. So. Wow. Proud of you guys. Well done. Thank you. What was the biggest budget fight you had? Wow. Well, for me, I probably say like I wanted to go to Europe like right before we were about to finish. And I was like, honey, like, you know, we can just go. He's like, honey, like we're about to be done. You want to go travel? Like, no, we're not going. So it was like, you know like no we're not going so it was like you know like a huge thing and I was like okay honey like we're not gonna do it what do you think yes I mean that's the one that came to your mind yeah I definitely agree with that but also a lot of the the date nights like wanting to go places to do different things and and for me I'm the
Starting point is 00:25:59 nerd of course and so it's like it's in the date night budget we have this you know date night budget that's here we can't make it here you know for now anyways and so it's like it's in the date night budget. We have this, you know, date night budget that's here. We can't make it here, you know, for now anyways. And so it's like we're going to do we're going to live like no one else so we can live like no one else. That's, you know, just what I kept telling myself. And so now we can I can take her on these dates that, you know, she definitely deserves. But we had to we had to take the steps first and we had to do it in the right way. And I think that's what's important. So many people want to, you know, do things out of the wrong order. They want to live this life. They want to be in these houses. They want to be in these cars. I see it all the time in my job. And it's just like, you know, these things are great, but if you do it in the wrong order, if you do it when you're not ready, you're going to cause yourself a lot of hurt and pain. And, you know, just it's going to hurt you and your family and
Starting point is 00:26:40 your legacy in the future. Because now as two 25 year olds, we can set up a great legacy for our children our children's children and our children and our family don't have to go through things that we did yeah um because we're not getting back in debt amen has this changed how you sell cars it it it does because i can give a different perspective i can give advice so i can this is the thing and you know this and i can tell by the the people that call in i can't make a decision for someone right and I can tell by the people that call in, I can't make a decision for someone, but I can give them the best advice. I can say, this is what you're telling me. I believe this is in your best interest for you to do. And even sometimes I'd have to tell customers, I do not think you should be buying this right now.
Starting point is 00:27:22 And that's something that of course, management team, you know, feels a certain way about it sometimes, but I have to be, I can't be clear conscious. I know God has put me there for a reason. And so I have to tell people that. Now, if they still choose to do it, I can't make the decision. Because in the same way, they'll just go across the street and make the decision with someone else. But it's giving that people the information. You know, what's interesting is I'll bet it's causing you to sell more cars is what I'm betting. I bet your sales have gone up because you're authentic.
Starting point is 00:27:47 Right. And people can smell. They can smell whether you're authentic or not. That's cool. Good for you, man. And you're such a process guy. Buying a car from you would be easy. I mean, you got the rules down.
Starting point is 00:27:57 This is what you do step by step. He's got it dialed in. I mean, it would be easy because it would be easy to trust you while you're doing it. I can just see that. We make it work. I'm telling you would be easy because it would be easy to trust you while you're doing it. I can just see that. We make it work. I'm telling you. Way to go, you guys. We've got a copy of Chris Hogan's retire-inspired book for you. That's the next chapter
Starting point is 00:28:11 in your story. To not only be debt-free, but now be millionaires and outrageously generous as you go along. So, well done. Alright, it's Kelvin and Navate. Houston, Texas. $72,000 paid off in 21 months. making $90,000 to $150,000. Count it down.
Starting point is 00:28:31 Let's hear a debt-free scream. Okay. Three, two, one. We're debt-free! I love it. Well done, well done, well done. And that is fabulous. Wow.
Starting point is 00:28:53 Good for you guys. Congratulations. Open phones at 888-825-5225. Dave, what do you say to people that are single that don't need life insurance? Doesn't everyone need it? No, everyone doesn't need it. You need enough finances to bury you if you have no dependents. dependent upon your income, and you have $10,000 saved,
Starting point is 00:29:30 or $10,000 in your 401k, or whatever, and that way your mom and dad don't have to pay to bury you, or your brother or sister, or whatever, then no one is counting on your income, so when your income dies, when you die, nobody financially notices. So no, everyone does not need life insurance. You're not leaving behind two kids that need to eat and go to college and be raised and mom or dad that's left behind needs, you know, your husband or wife left behind needs to be doing that.
Starting point is 00:30:00 When you have a family that depends on your income, that's when you need life insurance. And so, no, young singles that don't have a bunch of liabilities and have a little bit of savings, they don't have a need for life insurance yet. This is the Dave Ramsey Show. Thank you. our question of the day comes from blinds.com brand new custom blinds from blinds.com are the easiest and most affordable way to give your entire home a facelift. With Blinds.com, you get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the magic word, the promo code RAMSY, and you get the best possible deal. Blinds.com. Heather is in New Jersey.
Starting point is 00:31:22 Dave, we're on baby step two, getting out of debt, and we're using our savings to pay off debt. Then my husband got laid off. We have about $22,000 left in debt and about $10,000 in savings. Should we hold off on using more of the savings until he gets another job? Yes, when you are in the middle of an emergency, you temporarily push pause on your debt snowball, or on your baby steps, for that matter. And you just pile up cash and preserve cash to get through the rough time, whatever it is. And that includes a layoff. Now, when he gets another job, you push play and you take $9,000 of the $10,000 and you throw it at your $9,000 worth of smallest debts in Baby Step 2.
Starting point is 00:32:08 Mark is in Twin Falls, Idaho. Hey, Mark, how are you? I'm great, Dave. How are you doing? Better than I deserve. What's up? Well, I have a little bit of a dilemma. I've been doing pretty good so far with life. I'm 37 years old, and I've been
Starting point is 00:32:27 able to grow quite a bit of equity in two houses that I own. And my question mainly is about how I would best utilize this equity to not only help pay off a little bit of debt that I have, but also maybe give myself a step up as far as getting ahead in the baby steps as far as kids, college, because I'm rapidly approaching kids going to college. Anyways, I'm just kind of a little bit tied up right now of what to do. How much debt do you have not counting real estate? I'm sorry, what's that? How much debt do you have not counting real estate. I'm sorry, what's that? How much debt do you have, not counting real estate?
Starting point is 00:33:07 Oh, okay. So I have $6,000 in one car, and I have about $4,500 in taxes that I unexpectedly had to pay this year. So that kind of came up. Got it. Okay. Anything else? That's it. What's your household income?
Starting point is 00:33:23 Other than the house. Household income is approximately $80,000 a year with myself and my wife working. I work two jobs, one part-time, one full-time. What do you owe on your home? On my home, the home we live in is $185,000. Yes, $185,000 on the home we live in. Okay, and what is it worth? Easily $300,000.
Starting point is 00:33:50 Okay, the rental is worth what? About easily $180,000. Okay, and what do you owe on it? $65,000. I just refinanced for a 15-year, five years ago. Okay. So if you had $110,000 in cash piled in the middle of the table, in your kitchen table, in $100 bills, would you go buy a rental property with it,
Starting point is 00:34:19 with that as the down payment that looks like the rental property that you own if you didn't own it? Or would you use that money to get out of debt, make sure you had an emergency fund, and make sure your kid went to college? I would definitely make sure I would have enough to pay off my debt. I've usually been pretty good about paying off debt, but, yeah, I would definitely want to pay off the debt, and I'd want to be able to prepare for college for my kids how old are the kids 16 16 13 and 11 yeah okay i i think i agree with you
Starting point is 00:34:56 i think i would sell the rental property and i would use the money to uh knock the debt out make sure you have an emergency fund of three to six months of expenses. Make sure you're putting 15% of your income away for retirement. And then I'm going to use roughly $80,000, $90,000, whatever's left there at that point, to start funding some kids' college funds very aggressively. Okay. Well, I do have a 401K with the company I work for. I work for a big box retailer, and they have a great 401k plan, great medical insurance bonuses,
Starting point is 00:35:28 all the good... They take good care of us, but I have about $180 in my 401k right now. But you're not using that. I mean, I want you to be putting 15% of your household income into the 401k after you're debt-free and have an emergency fund. Until then, you shouldn't be putting any money into your 401k because you need to clear that
Starting point is 00:35:48 out. But if you're selling this rental property, you don't have to worry about it because as soon as it's gone, we're going to take the money, pay off the debt, have an emergency fund, and then we're going to use the rest of it in Baby Step 5 for Kids College, sitting down with an investment advisor. If you don't have one, click SmartVestor at DaveRamsey.com. It'll drop down a list of the ones we recommend in your area. You choose who you want to that's got the heart of a teacher.
Starting point is 00:36:12 They'll sit down with you and help you figure out what of this money can be long-term invested, like mutual funds, and what of the money needs to be just set aside in a money market to get ready for that 16-year-old. That money doesn't need to be in a mutual fund. But, you know, that other $80,000, $90 90 000 bucks after the emergency funds in place and you're debt free and you need to get on a good tight budget because you've been sloppy that's how you ended up with this debt you've become comfortable with a small amount of debt this ten thousand dollars kind of hanging around like a backache and you need to get uncomfortable with that and really tighten up and get better use of your monthly money as well
Starting point is 00:36:48 to be able to accomplish these things. So tighten up that and start doing a written budget. Get on EveryDollar.com and get that thing going. Ashley's on the line. Ashley's in Los Angeles. Hi, Ashley. How are you? I'm doing great.
Starting point is 00:37:00 Thanks. How are you? Better than I deserve. What's up? Well, my husband has a very specialized job. And he can work anywhere in the state and in the 17 most western states of this country. And we've lived in the same town pretty much our whole lives. I would like to move. My husband wants to stay here until he retires. My husband's
Starting point is 00:37:29 father and brother are trying to convince him that we should buy a house within the next couple of years. I think that we should wait until we decide where we're going to be before we start looking for a house to buy. I think he's decided. Yes, he very much wants to stay here, but he has agreed to look with me and look in different areas and just look at different things. Yeah, well, go look then.
Starting point is 00:38:00 So I feel like we should look and just know for sure where we want to be before we purchase a house. His dad and brother keep saying, no, you should buy a house now because, you know, everything's going to go up and you can always sell your house or you could rent it out. And I just think that's not the most financially. How long are you going to go looking? Well, I'm not sure my husband uh like i said he's got a very specialized job and he was actually talking about maybe just taking promotions as they come which could put us anywhere in the state how long are you going to be looking before you decide whether you're going to move or whether you're going to stay i was
Starting point is 00:38:45 thinking five to ten years you're going to look for five years yeah i i i want to know that that's crazy we're going to have some idea where we're going you're going to have no sense of direction years that don't make any sense well i didn't i figured that we won't be like looking just yet my husband like i said wants to stay here so he's kind of pushing against me as i'm i got that part trying to get him to look i got that part so but it, you know, it sounds like he's playing you. Or you think he's playing you. That's what it sounds like. I do a little bit. He's going to go on this trip or two and go looking.
Starting point is 00:39:36 And you're going to drag that out as long as you can so that he doesn't commit to staying in town. So you guys are messing with each other instead of just sitting down together and making a decision one way or the other. Y'all just need to decide what you're going to do. Are you going to stay in town or not? You got six months. Decide. Okay. And then decide to stay and be happy. Or decide to leave and he be happy. But at the end of that six months, go where you're going to go, stay where you're going to stay, and start talking about buying a house. But just dragging crap out where you two are needling each other over the next five years, he's trying to weasel around and stay, and you're trying to weasel around and leave.
Starting point is 00:40:13 Put it on the table and deal with it, kiddo. Get it out there. Let's solve this problem. Y'all are going to end up pissed at each other if you don't for five years. Gee, man, that would drive me nuts. That puts this hour of The Dave Ramsey Show in the books. This is James Childs, producer of The Dave Ramsey Show. Did you know you can now listen to The Dave Ramsey Show on Pandora and Spotify?
Starting point is 00:40:41 For all the ways to watch and listen, check out our show page at DaveRamsey.com slash show.

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