The Ramsey Show - App - You Can Always Cut Deeper to Get Out of Debt (Hour 3)

Episode Date: May 5, 2020

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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. You jump in, we'll talk about your life and your money. It's a free call at 888-825-5225. That's 888-825-5225. Lisa is starting off this hour in Texas. Hi, Lisa. Welcome to the Dave Ramsey Show. Hi, Dave. Dave, I have a question. My husband and I have been discussing.

He has a 401k with the employer that he worked at. He was in the oil field, obviously with the layoffs, the COVID-19, all this happening. He's no longer employed. He's laid off. He's approved for unemployment. But my question is this. He has about $28,000,000 401k things kind of go up and down we don't know if to pull that out sell it uh roll it over to an IRA what should we do I tell folks not to cash out a 401k unless it's to avoid a bankruptcy or a foreclosure. Instead, to roll it when you leave a company to a good IRA, a direct transfer rollover, and some good mutual funds. And you would contact one of our SmartVestor pros if you don't have someone to help you do that.

Click SmartVestor at DaveRamsey.com. Are you working? Yes, sir. I'm still working. Okay. With his unemployment and you working, are you sir. I'm still working. Okay. With his unemployment and you working, are you all able to make your bills? Well, I was kind of calculating that before I got on the phone with you because I thought maybe you would ask me.

So I make about $2,400 a month. His unemployment, what we saw approved, is about $561 a week. So that total, I kind of just rounded off. You got another $600 from the feds. Okay. Well, we got that. So we kind of put that to the side just, you know, once. No, I mean unemployment. Unemployment.

Oh, unemployment. He was approved for about $560 a week. Unemployed. Unemployed benefits. Okay. He also gets a VA check for disability of $1,300. Okay. When you add all of that up, can you pay your bills? Oh, yeah. We make enough to pay our bills,

but then that means that it takes away from us putting anything into the money market because we do have about $8,000 in the money market. I'm not worried about you saving money until he gets his new job. When he gets his new job, then you can start your financial plan over and say, hey, we're going to save. We're going to have our emergency fund. We're going to be out of debt. We're going to worry about all that.

Right now I'm just trying to get you fed and keep the lights on. Yeah, we can pay all of the bills. So total are monthly bills, mortgage, vehicles, insurance, all that. It's about we also give tithing. We give our 10%. It comes out to about $4,300 a month right now. Okay, so you can make that then. Oh, yeah, we'll make it.

We'll be okay. Okay. So what I would do is leave the 401k there for now, okay? Okay. Because you can't. Because you know how it's going up and down with the oil thingy? It won't matter. It won't matter. Okay. Okay, the 401k So you want his money because you know how it's going up and down with the oil thingy? It won't matter. It won't matter.

Okay. Okay, the 401K should not be in all stocks anyway. It ought to be in mutual funds. Okay. I don't know all that, but okay, I'll ask him. Okay, find out what it's in. And the, so if it's in mutual funds, it's down because of the entire economy. With COVID, it's down.

Oil's part of that, okay? But it'll come back up. And even if it is down, I'm not worried about that. What I'm worried about is there is a clause right now, the new law that just passed, allowing people to cash out their 401K without any penalties but only the taxes. If we move it to an IRA, we're going to lose that. So I don't want to move it to an IRA until we get his new job. As soon as he gets his new job, go back to the old company and do a rollover to an IRA and good mutual funds, okay? I'm doing that just in case you need the 401k,

in case you run out of unemployment and you run of money okay before he gets a new job how's his job hunt going well um he also has a cdl so he can go find a different type of job um but he's kind of been looking applying the thing is obviously not too many companies are not hiring so we're just going to wait about another month or so and see what happens. Well, I mean, keep looking. Don't just wait. But it may take a month to get on his feet. And so once he gets the new job and you guys know what your new life looks like income-wise,

you run that budget out, then you roll this 401K over because you know you're not going to need it to avoid a food shortage at your house. We don't want that. Okay, so let's hold off on rolling it. But once he's stabilized in his new job, then I would roll it to an IRA, to answer your question. Darius is with us in North Carolina. Hi, Darius. Welcome to the Dave Ramsey Show.

Hey, how's it going, Dave? How are you doing? Better than I deserve. What's up? All right. So my wife and I just had a quick question in regards to our financial situation. So we financed a car last year. We weren't in a financially good situation, however.

So we financed it for $19,000. We currently owe $16,600 on it. We want to give it back. We are in a situation now where we just fixed up two of our vehicles, so we don't have any payments on those two vehicles. So this is the only thing we pretty much owe money on as far as the vehicle-wise. There are no financing contracts where you just give it back. That's called a repossession.

Right. So we went to the dealership to see if they could buy it back. We have money on hand. Okay, they might be able to buy it. You might buy it back. That might work. What did they offer you? So they only offered me $ me 10 000 on it they sold you a car a year ago for 19 and now they want to

buy for 10 right so and we paid um so we we paid that money down on it so currently we owe 16 6 i know i heard that part but no i'm not doing that so have you looked up what the car is worth? Yeah, so privately it's worth about $14,000. Good Lord. You got completely stung when you bought this thing. Yeah, we were in a bad situation. No, I mean, you weren't in a bad situation. You got stung. You overpaid for this car for $5,000, didn't you?

Yeah, yeah, absolutely. Jeez, man. All right, how much money have you got on hand all right so um i just got a better job so on uh savings i have five thousand now we did we did cash out our my retirement when i left the company so we'll have a check coming for that and that's going to be sixteen thousand five500. We'll have a total of about $21,000 come Friday. Okay.

We're trying to figure out the next... I'll save about $3,000 a month, too. All right. Well, the next thing is sell this car. You don't sell it to them, though, for $10,000. You sell it to somebody for $14,000. And it's going to take you a little while longer. If it takes you an extra month, you get an extra $4,000.

All right. Okay. So let's sell it. That's what we were thinking. If you don't need it, sell it for $14, and you're going to have to write a check for $2,600 difference, and you've got the money to do that. All right.

So we'll just kind of sit on it for a little bit. You've got to put it up for sale. I mean, I don't know how many people are buying used cars right now off of craigslist they might be but um you know it may take you a month but but i'll wait a month for 14 over 10 and i don't think i'm going back on that dealership's lot again good lord this is the Dave Ramsey Show. For most of us, health care costs seem to increase every year, and saving money on health insurance feels more and more out of reach.

For example, take the Olcheski family from LaGrange, Texas. Jeff and Cherise had just celebrated the birth of a new baby boy. Shortly after, they had a health scare involving one of their kids that was completely unexpected. With today's health care climate, this could have bankrupted them. But thanks to Christian Health Care Ministries, the Olcheskis were spared from a ton of medical bills. As members of Christian Health Care Ministries, they're part of a group of believers who financially and spiritually support each other.

CHM is the original health cost sharing ministry and is a Better Business Bureau accredited charity. It's biblical, affordable, and it's shared nearly $97,000 to help the Lucheski's. To be a part of Christian Healthcare Ministries, visit chministries.org. That's chministries.org. CHM is a proud sponsor of Dave Ramsey Live Events. chministries.org. A lot of folks going through hard times right now. A lot of you lost a job this year, which means a lot of you are no longer covered by your employer's health insurance.

That can be really scary, right? But look, being unemployed doesn't mean you can't have health insurance. There are health care options out there that will still cover you. Obviously, you can do COBRA, but many times, back to your old employer's insurance, many times you're going to find that to be really, really expensive. So the best option usually is just to buy something in the open market. And you can get a high deductible HSA or a high deductible PPO or whatever and shop it around against what's in your open market for individuals, and you're probably going to be cobra.

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Carlin is with us. Carlin is in Arizona. Hi, Carlin. How are you? I'm doing well, Dave. How are you? Better than I deserve. What's up?

Thanks for taking my call. So my question for you is my husband and I are on baby steps four, five, and six. Good. And we just relocated to a new city and bought a house. And as part of our relocation benefit, we get to do or have the option to do a mortgage recast. It costs $300 to do. It does not impact our interest rate or anything,

but does give us the ability to put some additional principal down and it will actually lower our monthly payment. And so my question is, is there a mathematical trick to maybe when the right time to do this would be? We have about $15,000 extra right now that we could throw at it. Unless you need a lower payment to make the budget, there's no mathematical reason to do it at all. Really? Yeah, the recast doesn't do anything except lower your payment. It doesn't change your interest rate.

It doesn't change how fast you advance the debt reduction in the event you add principal. It doesn't change anything. It just changes the way the payment. It's not helpful down the road. Nope. Sorry. It's not helpful down the road. It just changes the payment calculation. All it it's not helpful down the... Nope. Oh, sorry. It's not helpful down the road. It just changes the payment calculation.

All it does is change the payment calculation. Okay. And it doesn't matter down the road if, let's say, we have an additional $1,000 surplus per month and more of it's going towards principal? Nope. It's simply... What is the number of years or number of months or whatever left on your mortgage right now? 15. It's branded. We just bought it. Okay. So why would you recast it? What is the number of years or number of months or whatever left on your mortgage right now? Fifteen.

It's branded. We just bought it. Okay. So why would you recast it? You would recast it to what? Just a lower payment after you set the principal down, right? Right. Okay.

And so if you threw some money at it and then you recast it, you're now paying a payment based on a new lower principal payment. Follow me? The interest is exactly the same if the interest rate stays the same in the recast. You're paying the exact same amount of interest, and so when you pay extra principal, it has the exact same effect. It doesn't do anything except lower your payment. I wouldn't do it. I wouldn't do it. Don't do anything with it. Don't do it. Just start chunking principal on it and keep paying

the higher payments. Because here's the thing. All right. The interest is calculated on a typical mortgage, a Fannie Mae, an FHA, a VA, monthly. All right. And so round numbers, let's just use an easy number. Let's say you had a 3% mortgage. Okay. That is one quarter divided by 12. Okay. Is one fourth of 1% per month on your outstanding balance. Okay. Follow me. So when you pay the payment the next month one quarter of one percent three percent divided by twelve multiplied towards your outstanding balance at that moment whether you've reduced the principal or not and all the rest of your payment beyond that amount goes towards principal and so if you lower your principal, the amount going to interest in your next payment goes down. And more of your payment goes towards principal simply by lowering the principal every month.

You're sliding forward in the amortization schedule mathematically. And so that's a bunch of gobbledygook to say if you just chunk principal on it, you're going to make exactly the same progress as if you recast it and chunk the same exact amount of principal towards it. Let's say you reduced your payment by $200 a month, but then you decided, well, we were already paying $1,000 extra. We're going to keep paying $1,300 extra now. And so you're going to be in exactly the same place if you paid it out. So I wouldn't do it at all. I would just chunk on the principal and get her knocked out.

Really good question. Hey, thanks for the discussion. Open phone is at 888-825-5225. AJ is in Arizona. Hi, AJ. Welcome to the Dave Ramsey Show. Hey, how are you doing, Dave? Thanks for taking my call. Sure, man. Welcome to the Dave Ramsey Show. Hey, how you doing, Dave? Thanks for taking my call.

Sure, man. How can I help? So me and my wife, currently we just got married last year. We have two kids, and we just kind of came into a bit of money not too long ago. So as of right now, our savings account, our bank, is looking at about $24,000, and we have about $4,000 liquid, um, just kind of at the house. Uh, debt wise, we have about $5,000, uh, combined debt together. Um, and we have two kids and right now where we're living, it's not bad. The nice, nice, nice neighborhood. We're in an apartment, but we're growing out of it. And we're kind of wondering right now with this money,

should we look into buying a home? I do have a pretty steady job right now. So we're kind of thinking like, you know, with everything going on, should we buy a home? Should we wait? Our background, where we come from, our parents, no one ever really owned a home before, so we can't really reach back and talk to them. So we figure kind of reach up to you and see what do you think our best options would be. Cool. How long have you been married? We got married last year in October.

Oh, congratulations. Where did the $24,000 come from? So, recently I got my car totaled out on the way to work. So, a bit of that came from the settlement. I want to say about $16,000 of it came from the settlement. The rest of it came from just like, you know, us saving. And we found out about you before our wedding. So, you had a paid-for car that got totaled?

It wasn't all the way paid for. I think I owed maybe just a couple hundred bucks. But I mean, so what are you driving? I don't. What are you driving? We have one car right now that's totally paid off. Okay, so do you need to buy another car? We do need to buy another car okay all right

that's a good thing okay cool all right so here here's the you know you've been listening to us it sounds like so you know the baby steps probably right the first thing we're going to do is pay off the five thousand dollars worth of debt okay you got 28 000 to work with 4000 in loose cash, $24,000 in the bank. Did I understand that right? Yeah. So $28,000 minus $5,000 is $23,000. You're debt free. That's baby step two. Baby step three is an emergency fund of three to

six months of expenses. What's your household income? As of right now, it's only me working. So she's kind of doing a stay-at-home mom thing for the time being. But we're trying to get her back out working as well. What is your household income right now? About $85,000.

Okay. All right. And so if we said an emergency fund of $5,000 a month to operate your house, you said you're saving $3,000 now, right? Per month? Yeah, what did you say you're saving $3,000 though, right? Per month? Yeah, what'd you say you're saving? Per month with the pay. Okay, so what does it take to operate

your house right now, a month? Three grand, four grand? I want to say maybe two. Yeah, I want to say four. Okay, you got several kids you got a you know you got uh gas insurance rent okay you start adding up you need to be doing a budget you need to get your every dollar budget going but we're going to call it four grand and we're going

to say uh three to six months of expenses let's call your emergency fund 15 grand out of 23 that leaves you eight to buy a car with. No, you're not ready to buy a house. You're going to have an emergency fund. You're going to be debt-free, and you're going to have a car that you pay cash for, $8,000. And then you're going to start saving aggressively. Before you start your retirement savings, you're going to start saving for your down payment on your house, and you'll be ready to buy a house by this time next year, especially if she gets that job.

Hold on. We're going to put you guys into Financial Peace University. You need to be in that, and we're running a 14-day free trial on it right now, and Kelly will put you guys in it, and you can get started on it. This is the Dave Ramsey Show. Hey, folks, there's literally never been a better time to try online grocery. My friends at eMeals make it incredibly easy for you. eMeals creates a shopping list based on the meals you want for the week and then directly sends it to Walmart, Kroger, Instacart, Shipt, or Amazon Fresh. Your choice.

Head to eMeals.com slash grocery. Find what delivery and pickup providers are available in your area. Try eMeals free for two full weeks. That's eMeals.com slash grocery. Andre and Anel are with us from Sacramento, and it says on my screen you guys are debt-free. Congratulations. Thank you. Thank you so much.

Well done, guys. How much have you paid off? We paid off $53,000. How long did this take? It took 24 months. Good job. And your range of income during that time? We made in between $101,000 to $116,000.

Very good. What do you guys do for a living? I'm an environmental chemist. And I'm a music teacher. Most of my income comes from private guitar, ukulele lessons. And then I teach at a Christian elementary school. Oh, very cool. Good for you guys. So what kind of debt was the $53,000? It was $42,000 of student loans. About $2,500 in family loans, and the rest of it was credit cards and credit lines. Okay. So how long have you all been married?

Eight years. So what happened two years ago that lit you on fire on this? We heard some friends talking about Ramsey and budgeting. So then one of our friends, Eric, gave us the Total Money Makeover audio book, and we listened to it that night, and that night we did our first ever budget. Wow.

It started. So both of you sat down and listened to the whole audio book? Yes. And then sat down and did a budget just like that? Yes. Just like that. Off to the races. Here we go. Boom. Just like that. Off to the races. Here we go.

Boom. Just like that. Very cool. Very cool. So I'm kind of curious because, you know, obviously some things you heard in the audio book or, you know, the equivalent of having read the Total Money Makeover, something clicked. What was it that made you go, we can do this, we've got to do this? Kind of just the organization, like the simplicity of this baby step plan

and like all of the truth that you give at the beginning and we're like, oh, man, we didn't realize a lot of this stuff. We've been doing everything wrong. Let's start doing it right. And so that's kind of what made us want to do this yeah so Eric was your biggest cheerleader I'm guessing or who else we had a lot of friends that would cheer us friends family we ended up leading a Spanish under the theater's FPU class oh very cool we were their support group and they were our well we were a support

group yeah as soon as you start leading it you end up being sucked in a different way and because you can't you can't lead something and not do it that's right yeah so uh so so that's awesome that you did that did andres's financial piece that's very cool good well congratulations what's the main thing out of all of this that you tell people when they say, how did you pay off $53,000 in debt? I mean, that makes you an expert right there, right? So what do you tell people the secret to getting out of debt is? You have to get a budget.

The budget is amazing. And then you have to have a deadline. You know, ours was we want to be debt-free before we're 30. And we did it sooner than that. And you have to have a deadline. You know, ours was we want to be debt free before we're 30. And we did it sooner than that. And you have to get angry. You have to be mad. And then that just like motivates you. And I would also say that we kind of you have to swallow your pride a little bit and realize, hey, I haven't been doing this completely right. And let's start now. I think you have to immerse yourself in like this whole content material with the podcast. Make sure you're talking about it with people to make sure you

stay on it and then realize that you can always cut deeper. Yeah, you always can. It's just a matter of whether, yeah, that's good. That's very good. Very cool. Well, congratulations, you guys. What was the hardest part of this for you? The hardest thing for us was kind of seeing all the money each month that was leaving our pockets. That, you know, we were kind of, past mistakes, we're kind of paying for it. And, you know, life happens. We had a lot of car troubles. Our main car that we were using has an engine knock. So we had to cash flow a hoopty that was reliable

enough for my wife to continue commuting to work um and so i've been driving that that car has engine trouble and i've been driving it for the past nine months i can't go on the freeways and it has really slow acceleration that's been kind of tough but we also sold uh our jet ski and um when we sold that people knew that we were serious. Like, oh, man, we had so much fun with that thing, but it had to go. That's hardcore. Well, you'll get another one now. Yeah, we can.

Yeah, it'll be completely different now. I mean, you've got to have a car that doesn't knock, and then we can talk about buying toys. Yeah, I love it. Good. Yes. Very cool. Well, very, very good. Well done, you guys. Well done. How does it feel now that you're there? Was it worth it. Yes. Very cool. Well, very, very good. Well done, you guys.

Well done. How does it feel now that you're there? Was it worth it? Yes, it was absolutely worth it. It feels surreal. You can't believe it. It's all of this hard work, and you're finally debt-free, and we're ready to go on to the next step.

We're ready to continue. We've already got some house remodeling things that we need to do. We're starting to save up for my wife's nicer, much better car. And we've just got to keep going. Yeah. Up out of the hoopty and the knockmobile both. Yeah, I love it. That's good.

That's a good plan. I like it, guys. Well done. Well, we've got a copy of Chris Hogan's book for you, Everyday Millionaires. Because that is the next chapter in your story. You're on your way. Way to go, you two. How old are you? We're 29.

Ah, yeah, you did it before 30. That's right. I remember. Okay. Very cool. Well done, you guys. You're rock stars. You're heroes.

Andre and Anel, Sacramento, California, $53,000 paid off in 24 months, making $101 to $116. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! I love it! Woo! That's how it's done right there.

Well done, you two. Very well done. Well, if you're thinking about moving and saying goodbye to the old neighborhood and looking for a new place, buying a house is one thing, but buying and selling at the same time, especially in this mess right now, you really need a pro on your side. You need the right agent on your team. And you don't want some jumpy amateur that you end up having to take care of and manage the deal all the way through because your broker is a doofus. And I got to tell you,

man, about 20% of the agents out there do 80 to 90% of the deals. And so you want a high octane, high protein agent on your team if you're going to a real estate deal especially in an environment like this so we created a network of the top real estate agents across the country who follow the principles that we teach they're going to assist you with your real estate as professionals, but also with the heart of a teacher and making sure you know what's going on every step of the way. So go to DaveRamsey.com slash agent, and you'll find an agent that we have trained to take care of you.

DaveRamsey.com slash agent and get your real estate business going in the right direction, folks. Open phones at 888-825-5225 you jump in we'll talk about your life and your money owen is on twitter should i borrow money at a lower interest rate to pay off pay off a higher interest rate credit card sure doesn't hurt anything at all but doesn't get you out of debt. You're just moving the debt to a lower interest rate. But there's not an interest rate that pays it off for you.

You've still got to pay it off. So it doesn't hurt anything, Owen, but it doesn't really do anything much. So let's say you had $10,000 at 18%. Okay, that's $1,800 a year. Let's say you lowered that to 10%. That saves you, it's $1,000 a year. Saves you $800 a year on your $10,000 in debt. Oh, but wait, you only got $10,000 in debt. So you're going to take like three extra jobs, be on a tight budget,

beans and rice, rice and beans, have a garage sale, and we're going to pay that $10,000 off in like, I don't know, four months, six months? The last couple paid off $53,024 months. That's $26,500 a year. So that'd be $10,000 and over $10,000 in six months, be $13 ten thousand in six months be thirteen thousand in six months that was the rate they were on so if you've only got it paid for six months then you only saved four hundred dollars on the interest four hundred dollars is nice but it doesn't solve a ten thousand dollar problem what solves a ten thousand dollar problem is getting pissed off

about being in debt and saying i'm getting out i'm selling so much stuff the dadgum kids think they're next. That's what gets you out of debt. This is the Dave Ramsey Show. Please hear me loud and clear. The government is not going to bail you out of your student loans, at least not completely and not without a catch. What they're talking about only impacts federal, not private loans, and you need to take responsibility for what you owe and pay your debt down quicker. Right now, Splash Financial is offering their lowest rates ever. With lower rates and extra

payments, you could just find yourself debt-free in the next five years. Visit splashfinancial.com slash Ramsey to see if you qualify. Our scripture of the day, 1 Corinthians 15, 58. Therefore, my beloved brothers, be steadfast, immovable, always abounding in the work of the Lord, knowing that in the Lord your labor is not in vain. Gustave Flaubert said, Be steady and well-ordered in your life, so that you can be fierce and original in your work. Ooh, that's good. Even if I can't pronounce the guy's name, it's wonderful. Carrie is with us in Florida. Hi, Carrie. Welcome to the Dave Ramsey Show.

Hi, Dave. How are you today? Better than I deserve. What's up? So I am currently 20 years old, and I am working and going to school at the same time, and I'm set to graduate in 2023. I'm currently on baby step number two and I'm just looking ahead at baby step three and baby step four and I have a quick question regarding baby step number four. So I will be able to go into a career field once I graduate from college and get into an actual career field that will allow me to retire a bit earlier than the average age. And if I'm understanding correctly, you invest in a 401k and a Roth IRA, but you have to be a certain age before you can pull that out for retirement. So if there's anything available, what would be the best option in addition to a 401k and a Roth IRA to start investing in

so that if I retire, say, between ages 45 and 50, I can pull that money out and use it penalty free. Very good question. You're really thinking ahead. You're going to do well. Well, to start with, I would not bother with the secondary investing until you get a little bit older, a little bit further in your career, because you've got plenty of time to do that. So for now, we'll go on up to baby step four and use your 401K and your Roth IRA and let that stuff, let those beginning investments be growing tax-deferred, tax-free. That's going to be much more important. Then let's say you look up and you said you were talking about retiring at 45 or 50 right yes okay so if

you looked up and you were uh 30 that would still give you 15 years to invest okay so if this question is still dinging around in your head at 30 you're 100 debt free by then uh you've got an emergency fund you've got a chunk of money because you will have been investing in your 401k for, you know, 8-10 years by then at 15%. You'll have your house paid off or be getting close. I mean, you're going to be really rocking the way you're thinking here. Okay, so you look up at 30 or even 35 years old, and this question still presents itself, then you would just simply start investing in non-retirement mutual funds, and that we call that bridge investing.

Now, more likely, the way I usually get this question posed is, you know, Dave, I think I'm going to retire at, you know, 55 instead of 59, and I'll need some money for those four years, okay? Now, if you're going to retire at 45 years old, I'll give you a prediction. You're going to do something else. You're not going to sit on the dock and fish or do nothing for the next 50 years. That's very unlikely. It's very unusual that you would be that unproductive with your life. There's not much joy in being that unproductive. Okay.

Right. But putting yourself in a financial position that you have choices to do whatever without having to be penalized with a retirement plan is still the same question, and it still says I need some mutual funds. And so what I would do at 30 or 35 years old is I might dial back how much I'm putting into 401ks because you've got a really, really good start on it, and crank up what you're putting in just non-401k mutual funds and just let them grow. And you could look up and have two or three million in your 401ks and maybe a million in your non-401ks by the time you got to 50 years old pretty easily with what we're describing. Of

course, it depends on your income and how much you invest to create all of that. But those are very doable numbers, and you could get there without a doubt. So, hey, thank you for joining us. All right, Leonard is with us in New Jersey. Hey, Leonardo, how are you? Good afternoon, sir. Thank you for taking my call. Sure. What's up?

So I'm 19 years old. I'm active duty Army, and I was just accepted to West Point. Wow. Wow. Congratulations. Thank you, sir. I'm in a stupid car fleece that I got before I started listening to your show, but I plan on getting rid of it with the SDRA benefits with orders that I received from West Point. I currently have a $1,000 emergency fund.

I cut up all my credit cards. I have $18,000 in non-retirement mutual funds with my SmartVestor Pro. But over the next four years, I'm going to have a super, super low income as a cadet, ranging from $200 a month to $450 a month my senior year. What should my primary focus be on?

Should I save cash for a car, continue to contribute to my mutual funds? How are you getting rid of the fleece? With the Service Members Civil Relief Act, sir. Oh. Hmm. You're going to turn it in? Yes, sir.

Hmm. Okay. So this is not the West Point loan that you're talking about? Correct. Yes, sir. Good. Okay. Because I think I would avoid the West Point loan.

West Point, I'm so glad you got in. That's a wonderful track you're on. You're obviously a very sharp young man to get on that track, and it's quite an honor to be accepted there and to get to go through that. But that loan scares the crud out of me that they do there, so I wouldn't do that. But you're going to use the service members and i i didn't know that would work if you got into west point that's interesting i bet it does though i bet you've checked it out so okay we're gonna get don't you have to be active

duty i mean you're not active duty at west point are you well so right now i'm on active duty sir so um i guess like with an acceptance letter and showing them that basically a pov a purchasing vehicle is not authorized at west point until i'm a junior anyways and my such low income would basically not be able to pay for the fleece so therefore so that releases you okay wow very interesting okay so you can turn it in with no repercussions then. It doesn't damage your credit, and it's not considered a repossession, correct? Correct. Okay.

All right, so we're going to turn that in. We've got no car and $200 a month up to $450 a month, and you've got no money, right? Pretty much, yes, sir. Yeah. So I'm just going to scrape together, but you've got living expenses and everything's paid for. Obviously, food, board, everything's paid for. So, you know, it's not any money, but what little money it is is clear. So, yeah, I'm just going to start saving for a car. Okay. So just piling up cash for a car. Yeah, yeah, that's simple. And, you know, I always try to keep some cash for an emergency fund, but you're in a highly unusual situation for this four years. As long as you make the grades and, you know, you do the stuff and you stay in there,

don't get halfway through this thing and get out. That would be a mess. But, yeah, let's play through the whole four years and, yeah, just get you a little hoopty car and try to set aside a little bit of money. If you don't do anything except just buy a decent car and come out with a few thousand dollars in your bank account, I think you did pretty good with the income that we're describing here. Right, right. Yeah, you got one job, man. West Point. Graduate.

That's your only financial job. And you get out of that, that sets you up, as you well know, for an incredible military career, but also lots of doors opening after that and so forth. So, because that does carry a lot of prestige. So, congratulations, sir. We're very proud of you, and thank you for serving your country. We appreciate you. Very, very interesting. Open phones at 888-825-5225.

So if you haven't caught on yet, this is the show where we use really basic ideas that are so stinking easy to understand that they will mess you up because you want it to be complicated. But yet, you need to keep in mind, some of the most profound, life-changing things you ever learn are easy to understand. They're just hard to do. Staying out of debt, being on a budget, living on less than you make, and being outrageously generous.

See, you can do that. Boy, it's tough. That puts us out of the Dave Ramsey Show and the books. Thanks to James Childs, our producer, Kelly Daniel, our associate producer and phone screener. I'm Dave Ramsey, your host. 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. In the middle of these uncertain times, Ramsey Solutions wants to give you some hope. For the very first time ever, we're giving you Financial Peace University free for 14 days. Go to DaveRamsey.com so you can watch from home.