The Ramsey Show - App - YOU Are Your Secret Sauce (Hour 3)

Episode Date: May 13, 2019

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Music Music 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 Amy in Columbus, Ohio.

Hey, Amy, how are you? I'm good, Dave. Thanks for taking my call. Sure. What's up? Well, my husband and I are on baby steps four, five, and six, and we are building a house. And we don't know really what to do between our current home and our new home. We need to move into our new school district to get our kids in school there, which was the primary motivation for us building there in the first place.

So we can't decide if we want to rent an apartment and a storage unit or if we want to go ahead and build a pole barn on our property, which is an eventual goal anyway, and either park a camper in the barn and live in the camper and then sell the camper when the house is finished or finish a living space in the barn and live in the barn okay and we don't know what to do um would you um sorry i know it's a lot it's okay it's okay it's just a lot of choices and i'm trying to think of where the main goal is the school district and so yes um i mean you can if you're willing to live in the camper that is the cheapest way to do the goal right i think so because we want to build the barn eventually anyway and we have the cash to do it oh you do i'm just okay yeah we do if you sell

if you sell your home and move into the pole barn with the living quarters or with a camper, either one, you have the cash to do all of that and pay cash for the build? Well, we have enough cash for a dumb payment on a construction loan. Oh. Yeah. Okay. So every dollar you spend on the pole barn means you take out more mortgage on your house. Correct.

Probably not doing that one. Because we're going to take out the smallest mortgage on the house possible, get it paid down before we start building pole barns with living quarters in them. Okay. Which is a toy. My husband's going to be very disappointed in that. Well, that's a toy. It's a toy. It's an outbuilding.

Yes. Okay. I like the idea. I don't mind you having one. I think that's cool. I've got a farm. I'm planning a barn on it right now just to have it. Another reason for thinking down that line as opposed to renting is I'm looking at how much it's going to cost for us to rent an apartment and a storage unit for like nine months,

and it's like $13,000 that we're never going to see again. And then knowing that we're going to probably build a barn eventually anyway. Well, how much does a pole barn cost? The barn itself, we're at about $40,000. Okay. So $13,000 or $40,000. It doesn't work. We don't get to keep the apartment. I know, but It doesn't work. We don't get to keep the apartment.

I know, but that doesn't work. You're spending an additional 27 and using a 13 rationalization to do it. Yeah. It doesn't make sense. No. I would either rent an apartment or I would buy a camper, depending on what you can stand. How long is it going to take to build the house? About nine months.

From now? Hopefully, yes. Okay. So you're in Columbus, Ohio in a camper in the winter? Yes. That sounds like I'm an apartment. Yeah. I was hoping for the apartment option myself but that's what i'm

trying to make my husband happy too that's what i'm doing well i mean listen guys are guys i'll just speak for all guys we are willing to live under a bridge and we don't notice that's why we don't understand things like decorating there's exception there are some guys who actually have decorating taste but i don't really give a flip where i live as long as it's warm and dry and uh we don't think about things like that so for him this sounds like a great adventure for you it sounds like i'm living in a barn so um yeah i'm gonna go rent something i i i would If I woke up in your shoes, I would rent as cheaply as I can and get the school district thing accomplished and get the money freed up out of your house and then step on that builder and let's get out of that rental as soon as possible, thereby saving money.

And I wouldn't rent until I had to because, in other words, like towards the end of summer. Okay. You can start your house without selling yours can't you yes we can i just i'm kind of subject to availability of the apartment complex there's not much to choose from where we're moving yeah don't don't don't yeah but let's not let's pay the least we can pay in rent which means we're going to rent the cheapest thing as late as we can and pull it off i'm not suggesting you miss some kind of window of opportunity but don't don't cook up some window of opportunity out of insecurity that's not there

either okay so be be wise and let's let's rent as little as we can because what you said earlier is true basically we're paying tuition to this school system is what we're doing yes in rent yeah yeah and so i and i i would what's your household income about two hundred thousand oh good lord yeah thirteen thousand dollars go rent something yes okay yeah absolutely yeah i'm sorry yes Yes, absolutely. Do that. Do it. Do it. Do it. That's what I would do. Thanks for the call. Open phones at 888-825-5225. You got to admit, though, that's pretty cool. I make $200,000 and she's willing to live in a barn. What a wife.

Nope. Brittany. Brittany's with us in Springfield, Missouri. Hey, Brittany, how are you? I'm good. How are you? Better than I deserve. Brittany's with us in Springfield, Missouri. Hey, Brittany, how are you? I'm good. How are you? Better than I deserve. What's up?

So I recently just kind of run into a little dilemma. I had applied to work for the Postal Service back in February, and I got an interview. I went through all the processes to get this job. The application told me I'd be making roughly $2,200 a month, which would be great for my financial situation because I have a lot of bills. And I am a little over $7,100 in debt. And that was going to help me out a lot. Well, when I got hired on, after all the training and everything, my boss had told me that I was more of an on-call type of position

rather than a regular. So the last pay period that I had, I worked three days only. And my paycheck was $300.17. And I had to scrounge for money, donate plasma, all of that, just so I could pay all of the bills that I have. And I've been wanting to get another job, but being on call, I have to be available almost all the time. And when I'm called in... How old are you? I am 23.

Okay. All right. You have a car? Yes. Okay. You live at home or on your own? I live with my boyfriend and his parents. Okay.

You don't work at the post office anymore. You got screwed. You got screwed. You got screwed. Okay? You need to go find a job. And delivering pizzas, driving Uber, cleaning houses. You can make more than $2,200 a month cleaning houses. And walking dogs.

I mean, you're done with the post office. Go to the next thing. Hold on. I'm going to send you a copy of Ken Coleman's new book, The Proximity Principle. It'll help you with this. This is the Dave Ramsey Show. This is big news, guys. You need to stop and listen.

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That includes entree leadership. That includes Rachel's books, Hogan's books. Check it out, guys. Yeah, everything's there. So the Ramsey Fuel Your Summer giveaway all going on at DaveRamsey.com. Steven is with us in New York. Hi, Steven. Welcome to the Dave Ramsey Show.

Hi, Dave. How are you doing? Better than I deserve, sir. What's up in your world? All right. So I'm working on my debt snowball right now, and my wife has about $128,000 in student loans that we're working on paying right now. Good. So I'm hoping that I can get this done in about 36 months.

I've been doing it since the beginning of the year already. And the way the loans are, there's $63,000 in one government loan, and that's the final one. The other $65,000 is like six smaller loans and the ranges of the interest rates on them are like nine to 13%. So I was wondering if while I'm working on the snowball, if it would be a decent idea to go get like a loan from a bank at say like 6% interest and continue to pay it off the way that I'm paying now, just with a lower interest rate. So over the course of the three years, it accumulates less money. Well, it's not going to be over the course of three years.

It'll be over the course of a year and a half. And it's 3% spread you're talking about, max, on $60,000 is $1,800. Okay? Okay. So it would be okay to do. I'm not sure you can get a 6% loan. Can you? Have you checked that out? Well, I went on to the big local bank around here.

It's like TD Bank. And they said that it would be anywhere in the 6% range. Fixed. Yes. If it's not fixed, it's not going to help. I mean, it saves you $1,800. It doesn't solve a $128,000 problem, but $1,800, if you send it to me, I'll take it. Of course, yes.

But here's the thing, okay? Here's what I'm trying to point out, and I want to get through to you, okay? Sometimes, those of us, you are on task you are game on you are focused you're trying to do everything you can to make this go as fast as you can okay and um uh oftentimes when people get on in this situation they feel like they did something big by moving the loan to a lower interest rate and what i'm pointing out to you is it's not that big it's 1800 bucks 1800 out of 63 000 is not does not fix your problem okay it's it's uh you know it's not much so you didn't do much but you helped it a little but the big thing you did

was you now have a plan you are now now focused, and you now are intentional. That's worth $128,000, not $1,800. Okay. And working extra and tightening the budget and selling so much stuff the kids think they're next so that we get this done in 30 months instead of 36 months and all that kind of stuff. That's worth a lot more. It's worth tens of thousands of dollars more than a cheaper interest rate. Because you're not carrying this interest very long, I just don't want you to feel like you did something big. It's okay to do it.

But it's not the answer to the equation. It's not the key that's going to, it's not the silver bullet that's going to unlock the door for you. Does that make sense? Yes, it does. You are your secret sauce. You are the reason this is going to unlock the door for you. Does that make sense? Yes, it does. You are your secret sauce. You are the reason this is going to work because you have had a wake-up call and you said, I'm not living like this anymore. We're cleaning this freaking mess up.

That is gold. That's the secret sauce. So go consolidate it if you want, okay? But I don't want any emotional relief from the important thing, which is you. You being game on, you being pissed off is the secret sauce. That gets you out. You got this, man. You can do it.

Proud of you. Fanny is in Miami. Hi, Fanny. How are you? Hi, Dave. How are you? Better than I deserve. What's up? That's awesome. Okay, so I'm calling because I have a question whether to go ahead and purchase another home with my husband, or I just want the best advice. I want to make the best decision possible. So we just finished paying off all of our debt, except our home. But my mother lives with us and I have two kids, a boy and a girl. So I just feel like it's a three bedroom. So now

I feel like we need to get something bigger so they can have their own room since it's a boy and a girl. It's not like two girls can share one. But the houses here are so pricey. Right now, my house is probably about $330,000. And we would have to move to a house that is approximately between $450,000 to $550,000. So I just want to know, like, should we go ahead and do it? And it's, I mean, with a 30-year loan, which I know you don't like those, it puts us, right now our mortgage is 13. So we'll go from 13 to, with a 30-fixed-year mortgage, it will go, like, between 28 to 3,200 approximately. Or if it's a 15-year loan, it would be, like, 37 to 4. And what is your take, what's your household take-home pay?

Combined with my husband, it's $140. Take-home? Well, no. What is your monthly take-home pay? With him, I own my own business, so it varies. It changes every single month.

I could have... But I mean my own business, so it varies. It changes every single month. Like, I could have three months and then it all came out. But, I mean, average annually, it's going to be about $9,000. Right. And average annually. And you're talking about taking on a $4,000 house payment. Right. Well, that's if it's a 15-year loan, yeah.

Yeah. Which is true. Yeah. So you can't. Okay, that's if it's a 15-year-old, yeah. Yeah. Which is... Yeah. So you can't... So I don't... Okay. Here's the thing. You guys can do whatever you want to do. You're adults. You make $140,000 a year. You're not stupid people, okay? What we have figured out is the shortest distance between where you are and wealth is debt-free, house and everything. And we know that from having studied 10,000 millionaires and having coached millions of people for 30 years.

And the 10,000 millionaires, the average time they paid off their home was 10.2 years. You cannot do that with your household income on a 500 000 house that's going to be more like 30 25 or 30 years you're going to be in debt your whole life and that is not the formula that takes you to wealth and so our goal here is to help you get to wealth and so that's why we recommend never take out more than a 15-year mortgage where the payment is more than a fourth of your take-home pay, which will put you about in the house you're living in right now. And now, if you need more room, you know, you've got other options. Miami is a wonderful market.

It's very diverse. And you can move to different areas, and your prices go down. We live in Broward. Yeah, yeah. So, I mean, we bought our home at $180. So the thing is, if you want a bigger home, you have to go to a cheaper neighborhood. That's usually further out, more inconvenient. But you're either going to have the inconvenience of a smaller home or you're going to be broke and have a house payment you

can't afford. That's the third option, which is not an option for me. So you're either going to be inconvenienced by a smaller home or a larger home in a neighborhood that's not necessarily where you want to live. Thanks for joining us, America. We appreciate you being with us. This is the Dave Ramsey Show. Our question of the day comes from Blinds.com. They have a 100% satisfaction guarantee. That means even if you mismeasure, you pick the wrong color, they will remake your blinds for free.

You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code Ramsey and you'll get the best deal. Stephanie's in Indiana. Dave, I am in debt, $77,000 with a vehicle and student loans. I'd like to buy a house, but from my understanding from your show, I should eliminate this debt, correct? How do I start this path, and which steps do I take first? My annual income is $65,000. Well, the first thing I would do is to get on a detailed, in-depth written budget. Jump on everydollar.com and download the app for your smartphone. It is the world's best budgeting app.

Over 6 million people are using it. And it gives EveryDollar a name. EveryDollar an assignment every month. Because when you make your money behave, it works a lot harder. You'll feel like you got a raise. Now, once you've done that that then any money we can squeeze out of the budget to accomplish our goals we apply to what we call our baby steps baby step one is you quickly save a thousand dollars that's a little starter beginner emergency fund

and baby step two is we clean up all of our debt, which is your vehicle and your student loan. Baby step three, I'll come back to that, is to finish your emergency fund, go back to the $1,000 account, raise it up to three to six months of expenses. Then once you've done that, then you can start talking about saving up to buy a home. When you're debt-free and you have your emergency fund in place and you buy a home, the home will be a blessing rather than a curse. When you buy a home and you're broke, it just makes you broker. That's why they call them mortgage brokers. So, all right.

So then what do we do with the vehicle and the student loans? Well, if you pay off, what, $38,000 a year, you'd be debt-free in two years. On $65,000 income, that's tough. That's living on nothing, like air and ramen noodles. That's it. And that's possible, but you're likely going to pick up an extra income and be able to do this in two years and do something to increase your income, whether it's overtime or whether it's a side hustle of some kind. And you want the most profitable one because we want to get out of debt as fast as we can.

The second part of the equation is I don't know how much of the $77,000 is your car and how much of it is a student loan. If your car is more than half your annual income or if it is a big enough portion of this $77,000 that it's keeping you from being out of debt in two years, then that tells us your car is keeping you from buying a house. That's what it tells us. So if you're driving a $30,000 car, you need to sell your car is keeping you from buying a house. That's what it tells us. So if you're driving a $30,000 car, you need to sell your car. If you're driving a $20,000 car, you probably should sell your car. If you're driving a $10,000 car, it's not the problem.

Drive it out of 77 total debt with a 65 income. That's the ratios you're looking at. But if you tell me, oh, I've got a $32,000 minivan and I just love it, well, then that's your house. You're driving your house. That's what's going on. You bought a car you can't afford. And that's what you've got to look at.

I don't know which of these it is because I don't know what your ratios are. But if it's more than half your annual income or it's big enough portion of the $77,000 to keep you from being debt-free in two years, then you have too much car. Sometimes the car is not the problem, but it often is. That's why I'm camping on that because it's amazing the number of times I've sat down to do a budget, and I'm looking at a couple, and she's got tears streaming down her face. I would love to quit my job and go home. And after calculating the cost of her job, meaning daycare and clothing and dry cleaning and extra gas and wear and tear on the car, we say, well, you know, your budget's only about $700 off from you guys being able to quit,

and you come home and be with the baby. Oh, wait a minute. You have a $600 car payment. You're trading a car for your kid. Bad trade. Oh, you mean I'd have to sell my car? Uh-huh. But you'd get to be home with your baby, and you could make your budget balance,

because you're not in Congress. This has to balance. This is the kind of conversations I've had thousands of times over the last 30 years. So I'm not against cars. I'm just against car payments. Ben is with us in Chicago. Hey, Ben, welcome to the Dave Ramsey Show. Hey, Dave, thanks for taking my call.

I'm a brand-new listener, so I just learned about the Baby Steps this afternoon, and I'm calling you today. Yeah, so my question is, and I'll keep this brief, is I live at home still. I'm 26. I really have no monthly expenses besides my massive debt that I have accrued since I was 19. I have $17,000 in credit card debt, and I financed a $22,000 car in last October, and it has an APR of 15%. So I've obviously dug myself into a major hole my question is the concept of the the debt how much do you make um how much do you make uh 45 45 000 okay cool all right

um my question is because of the the exorbitant interest rate on the car is it still wise to start with my smallest credit card debts first and then attack the car or i would be hours should i try to refinance the car at a better rate i'm not sure where to start yeah it's almost as if i was clairvoyant with that last rant before i got to you wasn't it yeah i was listening definitely so it made sense you kind of already got a hint i'm gonna sell your car yeah this car is absurd it's 22 000 you make 45 it's insanity and it's 15 so it's insanity it's an insanity sandwich i mean it's insanity it's a double decker of insanity so yeah you need to get you about a five thousand dollar car and pay cash for it and later on you can get a nice car when you can pay cash for it and move up in car but right

now you got a mess on your hands and this car is not even close to being a blessing you think about it more than you think about life because it absorbs everything of your life. It's a blood-sucking vampire. Yeah, that's a good way to describe it. I mean, it's taking the marrow out of your bones, dude. What you thought was going to be a lot of fun has turned into a nightmare. What kind of car is it? That's a Toyota Corolla. It's very basic.

I work as a delivery driver, so I wanted a very reliable car, which it is, but I can't afford it. Yeah, $7,000 Honda Accord is a very reliable car which it is but i you know i can't afford it yeah seven thousand dollar honda accord is a very reliable car yeah yeah that is true yeah so i mean that's you know this thing's killing you man i'm sorry you called me and so i'm i'm not trying to be brutal with you you're a brand new listener i'm trying to be gentle but um oh i appreciate it though i need it the truth is that the car just, you already kind of knew down in your soul the numbers didn't fit in your life. Because the way you described it to me. You told me the APR. You know who doesn't tell me the APR?

Someone who isn't worried about the APR. You know you're getting screwed. You already know this. And I still signed for it. Yeah, this puppy's got to go bye-bye. And you may be upside down and have to borrow a little money to cover the hole you're in. And then you'll list your debts, even if you take out a $5,000 car loan and another $3,000 to get rid of this car. You're still going to list your debts smallest to largest then, and you're going to attack them with a vengeance.

And the good news is you're not afraid of work, and you don't have any overhead. And so if you kick 45 to 55, we get rid of this car, you're debt-free in a year. What if you like to have no payments, man? Could you save up some money and buy a better car for cash? You got no payments? That's where you'll be at one year from today if you do this stuff. You can do it, man. Hold on.

I'm going to send you a copy of the book, The Total Money Makeover. Seven million people have read it on how to do what you're getting ready to do. This is the Dave Ramsey Show. Thank you. Our scripture of the day, James 1.4, Let perseverance finish its work so that you may be mature and complete, not lacking anything. Thomas Edison said, The three great essentials to achieve anything worthwhile are hard work, stick-to-itiveness, and common sense. Hmm. The three great essentials to achieve anything worthwhile are hard work, stick-to-itiveness, and common sense.

Perseverance, hard work, and common sense. Perseverance, hard work, and common sense. Gosh, it didn't say a PhD from a high-end institution. Hmm, I wasn't on the list. That's interesting. If you were to sit down and tell your 14-year-old or your 14-year-old niece or nephew or your 14-year-old neighbor kid what the secret to success is? What would you tell them?

Get a degree at any cost, studying anything from anywhere, and you'll be okay? Is that what you would tell them? It's what some people seem to have heard. Worse than that, you and I are financing that garbage. Instead, we should maybe teach youngsters and oldsters it's hard work. It's perseverance. It's common sense. See, I'm a little tired of everybody talking about forgiving student loans and making student loans bankruptible

without first doing away with the problem. I admit that the student loan problem is a huge issue, and it's a major problem for some of you. I get that, and I'm not unsympathetic to that. But if it's such a bad thing that we've done to all these young people, why are we not presenting legislation to stop it? Because the only reason there's so many student loans is they're federally insured. The first thing we should do is stop federally insuring

student loans. Immediately. Right now. Then we can talk about what to do with the people that are in a mess. But you can't keep putting people in a mess and try to fix the mess. The first step is to stop putting people into the mess. It's not working. It's an abject, epic failure. It's destroyed people's lives.

It's had an effect on the spiritual economy of this nation. Oh, people were trying to do a good thing, but they didn't. Well, winners never quit. Yeah, they do. They quit doing stupid stuff all the time. The student loan program federally insured by the federal government is a stupid thing, and it needs to stop now. We, the people, need to quit letting Congress, in our name, using our signature, insure loans that put young people deeply into debt so they can't breathe. We need to stop it.

Well, you're against education. No, I'm against stupidity. I'm not against education at all. But I would combine education with character of hard work, perseverance, and common sense. And since mathematically, I've proven repeatedly on the show, you can go through college and get a four-year degree without student loan debt, the idea that the federal government must insure it is absolutely ridiculous. It's moronic.

And so I don't get into politics a lot just when it's messing up people's lives. But this idea of we're going to forgive student loans, that may be something to talk about. But you can't even have that conversation logically. We need to forgive them. Why? Because they've damaged so many people, but we're going to keep giving them out. That's so dumb. It's the critical thinking skills of that statement are just moronic.

So, you know, I got to agree with some of the people on the left that we need to do something with the student loan mess. But the first thing is stop making the mess. Before you can even have a logical conversation about what to do with the mess, you have to admit it's a mess. And so why would we continue to do it if it's a mess? It's a mistake. It's a problem. It's idiotic.

It's moronic. It needs to stop. It's harming people. Your government is harming its citizens think about that i mean that's what we're all sitting around saying when we talk about these poor children that are trapped in their student loans although i know they're not all trapped i get them i mean i see them here every week getting out of debt i know you can do it i know if you've got student loan debt, you're going to make it.

And I'm not suggesting you wait around the government to fix your problem. That'd be dumber than a rock. But from a policy standpoint, the government should not be engaged in things that bring harm to people. Come on. I mean, this is proven. It is an epic, this is proven. It is an epic abject failure. I mean, is there anyone that is of a thinking person that has two brain cells to rub together that can actually look at me in the face and say,

Oh, the student loan program federally insured by the federal government is a wonderful success. Well, that would make you on the head of the list of morons. It's obviously not a success. Do some good things possibly come out of it? That's not the point. Some good things come out of a car wreck. But that doesn't mean we need to have car wrecks. That's a dumb butt idea.

And you can find good out of almost anything. You get enough manure, you can grow things with it. I mean, come on, there's out of almost anything you get enough manure you can grow things with it i mean come on there's good in almost anything but that doesn't mean it doesn't stink to high heaven and that's where we are so old tommy edison tells us the way it is the three great essentials to achieve anything worthwhile are hard work, stick-to-itiveness, and common sense. It is not a degree or a graduate-level degree from a prestigious university in left-handed puppetry. And then wonder why there's not a huge job market for left-handed puppetry, and then wonder why there's not a huge job market for left-handed puppetry, and how the entire culture has let you down, and how you now have been ripped off,

and you've been told a lie, the great lie of education, and it's just not true. Character is more important at the end of the day. Perseverance, common sense, hard work, are more important at the end of the day. Perseverance, common sense, hard work are more important at the end of the day. They're a bigger part of the equation of your success than where you go to school or what you study.

Now, I'm big on education. I want you to go to school and I want you to study. I do not want a culture full of people that have never academically trained. That is not a good thing. I love smart people. I hang out with them all day here. I try not to hire dumb people if I can figure it out.

And so we just, you know, we're careful about that. But the thing is this, folks, as everyone is all up in arms talking about the student loan debacle, maybe you and I need to start a movement where we just start destroying our congressmen and our senators with the amount of emails that we're sending saying, stop harming our children. Hashtag, there you go, hashtag stop harming our children. End the student loan guarantee debacle. Let me help you with what will happen. The number of people going to school and not watching what they pay for it because it's borrowed money will stop. Everyone will start watching what they pay for it.

You know what that will do? The cost of tuition at every school. It will drive it down. It's called a supply-demand curve. It's econ in the seventh grade. Hmm. I'm fixing a whole bunch of stuff here in about five minutes. This is why I couldn't be a politician, because I make way too much sense.

That puts us out 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. 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? For all the ways to watch and listen, check out our show page at daveramsey.com slash show.