The Ramsey Show - App - You Can't Get Out of Debt While You Keep Borrowing Money (Hour 2)
Episode Date: December 2, 2019Savings, Debt, Budgeting, Retirement Tools to get you started: Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://...bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR
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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios,
it's the Dave Ramsey Show, where debt is dumb, cash is king,
and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice.
I am Dave Ramsey, your host.
Thank you for joining us.
Open phones at 888-825-5225.
That's 888-825-5225.
We appreciate you joining us.
Line three is going to start off this hour.
In Kentucky is Tom.
Hey, Tom, how are you?
Hi, Dave.
Thanks for taking my call.
Sure.
What's up?
I recently came in some money, and I paid off my credit card,
and I have enough left to pay off my car,
but I will only have like $1,000 left to put in my savings.
I was just wondering what your thought was.
Okay.
Well, we teach a process for becoming wealthy called the baby steps.
And the first premise of that is that your most powerful wealth-building tool is your income.
And so we teach people, and it has been very successful doing this, to get out of debt.
And without any debt payments, they have the money then to start investing and being generous.
And those are the things that cause people to become wealthy.
So what do you make a year?
Me and my wife make about $110,000, $120,000 somewhere in that neighborhood.
All right.
And so until you came into this money, you were basically broke making $100,000, huh?
Pretty much.
Yeah.
So it's time to change some habits would you agree yes okay so if you're
going to do all of that then i can show you the whole process and you can do this um simply doing
part of what i teach could leave you vulnerable and i don't want you to do that in other words
yes i would take the money and pay off the car and have a thousand dollars left because our baby
step one is pay off all debt except your home.
That's baby step two.
And use any money that you have above $1,000 to do that.
So baby step one is $1,000 saved.
Baby step two is become debt-free but your home.
Would that leave you 100% debt-free except your home if you paid off the car?
Yes.
Okay.
And then what we would have you do is be on a written, detailed budget,
you and your spouse in agreement of exactly where this hundred and something thousand dollars a year is going to go,
on paper, on purpose, before the month begins, every month,
as if I hired you to manage this company and your job was to make this money behave
and you'd have to report on how it went
and did it go to what you said it was going to go to for the good of you right and so you know you
you then would build up an emergency fund out of that budget of three to six months of expenses
and then we would start investing for retirement and you'd have the money to do so with no payments
but a house payment and be and be living on a plan making $100,000.
And so that's the whole process of what we would teach you.
If you simply pay off the car and have $1,000, you're right back where you were before you got the money, except you don't have a car payment.
And if you keep not handling money well and making $100,000 and having nothing, you're going to end up back in debt again.
Agreed?
Right.
And so what we have to do is change the process that got you to where you are,
and we'll use this extra found money as some rocket fuel to get you off the ground in the new direction.
And so hold on.
I'll send you a copy of the book, The Total Money Makeover.
It will show you exactly how to do all of this in detail, and it goes through the seven
baby steps, and I'll give it to you as a Christmas present.
This will help you get moving.
And you call me back if you've got any more questions as you go along.
I'm here to help.
Taylor's with us in Pennsylvania.
Hi, Taylor.
How are you?
Hi, Dave.
Pleasure to be speaking with you.
How are you?
Better than I deserve.
How can I help?
Thank you.
So I have been attacking the baby steps.
My mom gifted me FPU in September, so I've been really excited about tackling baby step number two.
I'm currently in graduate school with two more years left,
and I was content with taking out loans for this next coming year
and saving for the last year, but now I'm thinking that I should save for both,
which gets me down a little bit because I was really excited about attacking my debt.
So I just wanted to get some feedback and insight from your personal perspective.
Cool. So what are you studying in your master's?
Counseling, child and family therapy, and trauma-informed therapy. Perfect. Okay. So you'll finish your master's and get and family therapy and trauma insulin therapy perfect okay so you'll
finish your master's and get licensed in the state of pennsylvania and become a therapist
yes excellent very good how old are you i'm 25 years old oh fun good for you well you've obviously
got a wonderful heart for people otherwise you wouldn't enter into this stuff because it's a mess
if you don't uh it's and that's why i'm trying to get out of the debt so I can help people too in that way.
So how much debt do you have now?
I currently have about $7,000 in credit cards, about $4,000 on my car,
and by the time I finish this semester, I'll have about...
This semester? You're borrowing this semester?
I have already borrowed for this fall and spring.
So by the time I finish this spring, I will have about $40,000 in student loans.
Okay, and those loans are already taken out.
You already have received the distributions.
They're already applied to her.
I haven't received the distributions, but it's in the works.
Okay, well, the fall is over with, right?
Yeah, so I got in the fall.
Okay, so how much are you due to receive in the spring?
About $7,000 in the spring and $7,000 in the summer.
Gotcha.
And when will you complete your master's?
In 2022.
Okay.
And so it costs about $7,000 a semester?
It costs about $10,000 for the next two years.
I'm not taking summer courses, so the cost goes down a little bit.
And I take it from the way you said this, you're paying off debts and things.
You're working?
I am working full-time right now, making about $42 a year gross.
Good for you.
Okay. Thank you. Perfect. right now making about um 42 a year gross good for you okay perfect all right well the first goal for getting out of debt is take no more right can you cash flow the spring if you don't take that
seven this year not likely but that's what i was hoping to get on a plan for as soon as august of
next year yeah well i'm it's, you know, the first of December.
I bet you can make it.
To August?
Yeah, absolutely.
No, I bet you can make it for spring.
For spring?
Well, the spring bill is due January.
Mm-hmm.
How much do you have?
About $4,800.
How much do you have?
I currently have my $1,000 for Baby Step 1, and that's about it.
And you've got your money coming in from work this month?
Mm-hmm, yes.
Hmm.
Okay.
Call the school office and see if they have any kind of a payment plan to them through the spring.
Mm-hmm.
I'd like to break the back on the borrowing right now if we can.
Okay.
And if they'll let you pay part of it in January and part of it in February or something like that,
and you can figure out a way to, you know,
scratch the nickels out of the corner of the couch and pull that off,
I'd like to see you do that.
Because I think it's going to give you some emotional boost to do that.
Mm-hmm.
Well, I don't disagree, yeah.
Okay.
First goal is I'm not worried about you paying off
any debt until you graduate i don't want you to take out another dime
if there's any way you can avoid the spring avoid the spring but for sure from now on
goal number one is borrow no more beyond borrow no more Once you've got the money to finish school,
if you've got some extra money above that, and you want to start paying
down debts, that's fine.
But borrow no more.
You can't get out of debt
while you keep borrowing money.
That's chasing
your tail. This is the Dave Ramsey
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Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org. Mary Beth is with us in North Carolina.
Hi, Mary Beth.
Merry Christmas to you.
Merry Christmas.
Thank you very much.
Sure.
So my question is, my mother-in-law, she sold a house in another country. My husband told her that she needed to
buy another house within about a year because of capital gains taxes, but she didn't do that.
She instead gave it to us and then we bought a house. We invested in the house.
And so now she's getting letters from the IRS saying that she's going to be fined um but i my question is who's supposed to report it us or her it's not income to you
she has a gift tax on it um and i i don't know if she sells a house in another country does she
live in the united states yeah she lives in the u.s. now, yeah. Okay, I'm not sure capital gains applies to,
I'm not sure how capital gains laws apply to a foreign-owned property exactly.
You'd have to see a tax advisor on that.
I do know that you can't give $100,000 to another person without getting gift tax or if you didn't make a couple of moves.
I mean, there's a couple things you could have done.
It's after the fact now.
How long ago was this?
Four years.
Oh, Lord.
I know.
I know.
Okay.
She's probably going to get hammered with taxes.
She needs to go see a professional tax advisor.
Now, if someone wants to give another person $100,000, you can file under the unified estate tax form that allows you to use up part of your estate tax exemption as a gift.
And she could have done that and had zero taxes on it if she had simply done one piece of paper with her tax filing that year.
I don't know if she can go back four years and file an amended return and put that in
there or not.
Hopefully she can, and it'll be that simple to get rid of it.
If she doesn't, it may cost her $20,000 or $30,000.
Okay.
So you don't think it falls on our shoulders at all?
It's not on your shoulders at all
okay the irs is not contacting you they're contacting her yeah okay and she may or may
not have capital gains due on the sale of that property and she will have gift tax due on giving
away a hundred thousand dollars to when it's not given to a certified charity which you're obviously not
um no and without using the unified estate tax credit which you can do it's not that big a deal
unless you have a huge estate you're doing detailed planning but um but i mean it's not
really not so have her jump on the website at davramsey.com and get in touch with one of our
tax professionals hopefully one of them can go back and file an amended return and get this off of her,
and they should also be able to advise her as to whether she has actual capital gains due
on the sale of that property or not.
I don't know about that.
Just because you profit $100,000 or you get $100,000 into your hands
doesn't mean you have a taxable gain necessarily.
She could have paid down the mortgage and sold the property for what she actually bought
it for, in which case she would have had no gain but could have put $100,000 in her hand.
And so just because she got money in her hand at the closing does not necessarily mean she
made a profit on the property.
Gain is profit, and that's what the question is there.
So have her touch base with one of the tax ELPs at DaveRamsey.com and in her area,
and they should be able to walk her through it.
There's two different issues, the capital gains on the sale of the property,
whether or not, and then the gift tax.
Can an amended return be filed back four years to do away with that gift tax problem?
Ouch.
Joyce is in Florida.
Welcome to the Dave Ramsey Show, show joyce yes i am very excited
i just signed up for the finance of peace university awesome oh yes so i am excited
and just a quick note this when the student becomes the teacher my son just told me when
i told him i signed up he's oh yeah that's why I got out of debt. I said, well, thanks for sharing.
Really?
Where have you been all my life?
Right.
Exactly.
Exactly.
So we're excited now that we're finally on track, getting on track.
But we unfortunately got on a little late,
so we have credit cards that have been charged off or still in collections. And so trying to figure out how to get everything lined up to get rid of it
figuring out what to do with that yeah that's been charged off how much of that is there
it's 20,000 okay and how much debt do you have that's active and current
um 45,000 okay all right so you're not paying anything on the charged off debt today, correct?
Correct.
Right. So what we teach folks to do in Financial Peace University is in baby step two to work,
the debt snowball, and that's where you list your debts, smallest to largest. You pay minimum
payments on everything but the little one, and you attack the little one. In your case,
I would do two different debt snowballs. First, I would snowball your active debts because every time you pay off one of those,
you get rid of a payment that you're making, and it creates more room in your budget.
Do you see what I mean?
Okay.
And then once that $45,000 is clear, then we'll go address the $20,000.
How many different debts in the $20,000?
Well, the total debt is $20,000. How many different debts in the $20,000?
Well, the total debt is $25,000.
$25,000 active and $20,000
in it. Right.
The $20,000 that is charged off,
how many different debts in it?
That's five cards.
Five different cards. Okay.
I would list those smallest to largest.
I would not pay any payments
on any of them.
What I would do is save up some money and contact the smallest one
and do a deal with them, settle it, get the deal that you got in writing,
do not give them any money unless it's in writing,
and then send them a wire or a prepaid debit card or something.
Do not allow them to have access to your checking
account.
Okay.
Okay.
So let's say the first one is $2,000 originally.
Back when you originally defaulted on it, you owed $2,000.
Now you contact them.
It's been several years and they go, oh, now you owe us $6,000 with late fees, right?
Right.
And you say, well, I don't have $2,000.
I don't have $6,000.
I've got $1,200 saved.
If you'll take that as settlement in full for this debt and give me that in writing,
I will wire you the money today.
And then they're going to argue with you.
And you're going to haggle back and forth until you come up with a number.
And when you come up with a number, you get that number in writing,
and they'll generally settle this stuff for 50 cents on the dollar or what it originally was.
Okay.
And so you settle one at a time, and when that one's done in writing
and you paid it, then you save up some money, and you do number two,
and then you save up some money, and you do number three.
Do not get on a payment plan
with old bad debts just settle them for lump sums that you've saved up and gotten in writing does
that make sense yes yes so that's a different plan than the first one the first one is you're just
going to list your debts smallest largest pay minimum payments keep paying them then attack
that little one when that little one's gone you take that payment and throw it on the next one
every month,
and everything else you can squeeze out of your budget
until those two are gone.
Then you throw it on the third one.
Then you throw it on the fourth one.
Every time you pay off one of those,
you've got more wiggle room in your budget.
So by the time you've gotten used to doing that
and you got rid of $45,000 worth of debt,
you'll be able to save up the money to lump sum
one of these cards a month probably on the old debts.
Right, right.
Okay.
So work it as two separate debt snowballs as you get to your baby step two.
And any time, again, say it out loud, any time we're settling old debts,
you always get it in writing because you can tell a credit card collector
is lying if their mouth is moving.
It's a filthy business, horrible business,
and they lie, cheat, steal, and that's why you don't give them access to your checking account
because they will lie to you. Well, they work for Discover. That means they will lie to you.
You will discover that. It's ridiculous. These companies are horrible in their credit. They
violate federal law on a daily basis.
It's crazy what they get away with.
So you have really got to be careful and really got to be strong and do not give them any money unless you get it in writing.
And it's going to be a fight.
You're just going to have to struggle through it, argue, push back,
scrap and claw, that kind of thing.
You'll get there. You'll get there.
You'll get there.
I'm proud of you.
You get after it.
You call me if I can help more.
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GRIP6.com. In the lobby of Ramsey Solutions on the debt-free stage, Alyssa is with us.
Hey, Alyssa, how are you?
Good. How are you?
Better than I deserve.
So where do you live?
Dallas, Texas.
Very cool.
Welcome to Nashville and all the way up here to do a debt-free scream.
Yes.
Love it. How much have you paid off?
$50,000.
Cool. How long did this take?
12 months.
Good for you. And your range of income during that time?
$62,000 to $78,000.
Very good. And what do you do for a living?
I'm a marketing manager.
Very cool. Cool. What kind of debt was the $50,000?
Student loans, a car, and a credit card.
Cool.
So what happened that made you decide to tear this up?
Because you tore it up, girl.
I did.
Tired of paying my salary, I was just going into debt.
I was like, I don't have any money left over.
So that was kind of, that was it.
You just got disgusted.
Yep.
I'm working too hard to be this broke.
Exactly.
And then what'd you do?
I decided to lower my living expenses, and I bought an RV on Craigslist for $800, and
I renovated it, and I lived in it for 12 months.
Whoa!
Yep.
Did you have an apartment you moved out of, or a house, or what?
Yes, a two-bedroom.
Okay. All right. So you dropped your rent. What was your rent before? would you have an apartment you moved out of or a house or what a two-bedroom okay all right so
you dropped your rent what was your rent before um after utilities and everything about 1200
okay so you weren't quite saving 1200 because you had to hook the rv up somewhere
yes what did that cost 435 okay so it saved you 800 bucks a month yes and uh you got weird fast
that's crazy i like to get weird it's okay i love it
that's awesome good for you so what motivated you how did you do i mean you just looked around and
did the budget and said no and how did this all unfold i'm just pretty intense and competitive
so i was like i'm i'm a sprinter i'm not a marathon person. So I just got after it, delivered pizza, made art, logos, built websites, plus my full-time job.
Whoa.
So side hustle city.
Yes.
What was the most profitable side hustle?
Making websites.
Oh, okay.
Yeah, that makes sense.
Yeah.
Okay.
So you've obviously got that ability then.
And with your marketing background, yeah, that makes sense. Good. Very good. Good for you. That's fun. So how did you
get connected to us? I actually took a financial piece when I was 21. I was in college. I took it
through church. It wasn't really clicking because I didn't have any money and I didn't think it
applied to me. And then I just graduated. Then you didn't have any money and I didn't think it applied to me and then I just graduated then you didn't have any money yeah and just accepted how things work
like oh I have a big old job I deserve a car let me take out a loan and then I kind of woke up one
day and I was like this is not how I want to live so I actually pulled out my old box, which were CDs. And I just went through my
book again and listened to your CDs. And then the hardest part was going over how much I owed. I
kind of avoided that. That was kind of like a weak process for me looking at that. And it's like
having a term paper do. Yes. Yeah. It's weird. But the weird thing is once you do it, it's like,
it's bad, but I can do this. It's not as bad as it felt like it was gonna be yes right yeah so
getting getting it all written out and written down is uh it's emotionally painful but once
you're done there's this cleanliness to it yes having clear goals and just milestones
okay so you took it when you were 21. You got out of college. You
got into debt. You wake up broke. You get the old CDs off the shelf. So how old are you now?
I'm 30. Okay, all right. So it's a nine-year journey back to the FPU box. Yes. Okay, all right,
good. Well, we want to be there whenever you need us. So I wish it had helped the first time,
but I'm glad we were there the second time. Yep.'s perfect very cool so how did you end up in financial peace university in college did you
say your parents gave it to you no i went to church and they just offered it and i think
i don't know why and i'm sure someone was like you should take this oh okay yeah and you did
but it didn't take yeah okay it's cool i like cool. I like that. You come back, get the CDs out, and game on.
Yep.
So once you decide, though, it's all the way.
I mean, you move into an RV.
How many people thought you were crazy?
Everyone.
Everyone.
My coworkers.
Do you have any cheerleaders?
Yes.
My family, my friends.
Really?
Okay.
Who was the biggest cheerleader?
I think my coworkers, because I see them daily, and I had some interesting stories.
So they weren't thinking you were crazy as much as they were cheering you on.
Yes.
That's good.
You've got a good group you work with then.
Very good.
Very good.
Good for you.
So what do you tell people the key to getting out of debt is?
I mean, you went all in.
I think setting boundaries.
And that's what I'm doing with my money.
I set boundaries to it. And it actually, I noticed when I got a hold of my money
and setting boundaries to that,
it kind of trickled into the other areas of my life,
like health, dating, and it was really weird.
It was like, what's my responsibility and what's yours?
Henry Cloud would be proud.
I read that book.
That's a great book and a great guy.
Okay.
Good for you.
So $50,000, you're living in an RV.
You did it in 12 months making $62,000.
So on the side hustle, how much did you bring in?
All the side hustles combined.
I have not calculated that.
Okay.
All right.
What would you guess?
Were you making a couple grand a month?
Yeah, I'd probably say $12,000 to $15,000 on my side hustles.
Okay, so $20,000 probably over a year, give or take.
Okay, that makes sense.
That puts you at $82,000 and knocking off $50,000 and living in an RV.
So you still got the RV?
No, I sold it.
I actually made a profit.
I sold it for $3,000.
You bought it for $800.
You renovated it.
I did.
Okay, so how much did you
spend on the renovation? I just cash flowed that. My parents helped me a little bit because I don't
have any money. Yeah. All right. So you sold it for a profit over that, even over the renovation
cost at $3,000. That's awesome. And so did you move into an apartment or what'd you do? Yes. I
moved into an apartment with a bathtub and a full kitchen.
It's amazing.
I can like cook a full meal.
It's great.
He makes you appreciate the little things in life, doesn't he?
Absolutely.
Yeah, nothing taken for granted anymore.
You're incredible.
You're a rock star.
I'm proud of you.
Very, very well done.
Excellent job.
Wow.
I mean, you get her done.
That's impressive.
Very impressive. So what was the
hardest part of this whole process for you? I think there's a lot of things. I know I lived
in a trailer park and I wasn't growing up. We never, we rented houses or I lived in a house.
So that was an adjustment a little bit.
But I guess it was probably working full time and then not stopping and doing my side hustle was probably the hardest.
Yeah, just the emotional and the physical drain of just hard work.
Yes.
Yeah.
For 12 months.
I mean, you did it for a long time.
Yeah.
And now you can breathe.
Yes.
And it feels great. Yeah, it does feel great. I'm so proud of you. Well for a long time. Yeah. And now you can breathe. Yes. And it feels great.
Yeah, it does feel great.
I'm so proud of you.
Well done.
Well done.
We got a copy of Chris Hogan's book for you.
Everyday Millionaires.
You for sure will be one.
Anybody that'll move out of their apartment into an $800 RV to hit their goals will do
anything in life.
There's nothing going to stop you, kiddo.
Well done.
Very well done.
Pay a price.
Live like no one else.
So later you can live and give like no one else.
You have defined it today.
Very well done.
All right.
It's Alyssa from Dallas, Texas.
Great story.
$50,000 paid off in 12 months, making 62 plus side hustles, and moved into the RV.
Count it down.
Let's hear a debt-free scream.
One, two, three.
I'm debt-free.
Love it.
Woo.
Yeah.
Yeah.
I think I've gotten to where I say it every day now,
but I'm just going to keep saying it over and over again.
That's a millennial.
And so those of you that think that the millennials are a bad generation,
you've been watching the news channel too much.
I got a bunch of them working here.
And there's a, yeah, there's some participation trophy deadbeat
entitled living in their mother's basement i know about those writing a blog on how to be free in
life but then there's people like alissa i mean that was impressive sacrifice sacrifice hard work Sacrifice. Sacrifice. Hard work to win.
These are character qualities that bode well for our future America.
And there's a bunch of Alyssas walking around.
We get to meet them every day around here.
This is the Dave Ramsey Show. Thank you. If you ever feel frustrated that you didn't learn about this stuff,
this money stuff when you were in school,
I mean, think about if we'd known this stuff,
how much pain we all could have avoided.
Well, we can't go backward, but what we can do is make sure
that the current generation gets this information.
Our Ramsey Foundations in Personal Finance curriculum
is now taught in 48% of the high schools in America.
The only reason it's not in the rest of them,
well, not the only reason, but one of the reasons is they don't have the money.
And so what we're doing is we're getting sponsors, local businesses,
to sponsor the curriculum in their local high schools.
If you're interested in doing that, in putting foundations in personal finance in your high school in the area,
and you get the credit for it, go to DaveRamsey.com slash sponsor.
Of course, you can always just check Ramsey Education at DaveRamsey.com and click on sponsor there.
But our guys will help you get lined up on a school in your area and for a few dollars you can make sure the next generation is smarter than you and i were
chris is with us chris is in texas how are you chris i'm doing well how are you dave better than
i deserve what's up well um so my wife and I have been listening to the podcast for a few months now, read
through the Total Money Makeover together, and then just recently completed Financial
Peace University.
Cool.
I'm currently on baby step two.
And my question for you is regarding an inheritance that we received.
So my father-in-law passed away about a year ago,
and he left my wife an inherited IRA. And we were initially just planning to take the required
minimum distribution every year. So we got to thinking about it, and we recently just had our
third child. So with child care prices going up, we were wondering if it would be feasible to
withdraw from that to pay off our debt.
Yes, I would. And enough to cover the taxes it creates. It does not create a penalty,
and I don't tell people to cash out their own retirement, but this is basically a
taxable inheritance is what it amounts to. Most inheritance is not taxable, but because this was
in an IRA, it becomes taxable to you guys, as you know.
So how much is in the IRA? So right now it's around $350,000. Whoa! And how much debt have
you guys got? $115,000. Okay. All right. Cool. And what's your household income?
Recently, we actually just both started new jobs, it went up from 105 to 160 okay all right
so you're going to take out like 150 or so to have enough to pay the taxes and
the uh and have enough to net yourself debt free okay but get advice from a tax person on exactly
what your tax bill will be because you don't want this sneaking up on you.
Yeah, no, I knew there would be additional taxes
because I think it's going to put us into a higher tax bracket.
I still have to look into that to see exactly how much that's going to be.
Yeah, you can't get in a higher tax bracket than you're in.
Oh, okay.
You're maxed, so you're fine on that so whatever it is
but you just need to calculate the taxes accurately and then that'll help you decide
hey thanks for the call open phones at 888-825-5225 you guys jump in we'll talk about
your life and your money jj is with us in tex Hi, J.J., how are you?
I'm good.
I'm doing good, Dave. How are you?
Better than I deserve.
What's up?
So my wife and I are almost there.
We bring about $49,000 to $5,100 a month.
She has a car that's about $35,000 that we owe on it.
She has about a 6.5 interest rate on it.
I have a fleece that I have 20 months left on it and 10 grand of the payout,
and we have no house payment.
And we've been on the EveryDollar budget app for about three months now.
We've figured out the kinks. We've done a lot of budget cutting, and we don't know how to tackle it Fizell style.
Okay.
Well, a good rule of thumb is to know that things with motors and wheels go down in value rapidly.
Right.
It's very difficult to build wealth when you have a large portion of your net worth tied up in things going down in value.
So the rule of thumb that I use, even though I love cars, is that things with motors and wheels that you own,
cars, boats, motorcycles, four-wheelers, lawnmowers, whatever,
added together should not equal more than half your annual income.
Your cars violate that.
Okay.
So one of them needs to go, or both of them need to go.
Because your household income is probably, your take-home is $60,000,
so your household income is probably $75,000, and her car is $35,000.
Right. Right.
Yeah, so you've been buying cars you can't afford.
That's what's choking you to death.
Yeah, that's what we kind of realized.
Yeah, so what is it?
She owes $35,000.
What's her car worth?
We're upside down $11,000 on it.
She's on a wreck.
We traded in for a fleet.
She didn't like the fleet about a year later so we got the car and dragged another eleven thousand dollars worth of negative equity on it
okay yeah so you guys have just been jumping around all over the place on these uh
uh car deals and these car deals are just eating you alive so yeah you you found your weak spot
it's cars and if you can stop that up this this boat won't go down because it'll quit leaking
so um yeah her her car i mean if your credit's good enough i'd borrow the 11 000 get a hoopty
put her let her drive your leased car because it's probably the nicer car because that's federal law
mom gets the good car that's federal law and so um you know make sure she gets the nicer car because that's federal law. Mom gets the good car. That's federal law. And so, you know, make sure she gets the good car and you drive the hoopty
and let's get her sold and take out an $11,000 loan
because I'd rather you have an $11,000 loan than I would a $35,000 loan
and quit buying cars you can't afford.
Now, when your lease is up, you just turn it in and get another hoopty.
And then you save up and pay cash for your move up in cars as you go along.
Hope that helps you.
Kathy is in Kansas.
Hi, Kathy.
Welcome to the Dave Ramsey Show.
Hello.
Thank you for taking my call.
Sure.
Merry Christmas.
How can I help?
Well, I am 59 years old and I have about 2,800 in retirement funds
and that's all I have. I'm currently working on baby step number one.
Good. Okay. Let's get us started. How much debt have you got? Relatively no debt.
I have about $2,000 in medical bills, and then I have, let's see, a student loan that's about $2,800,
and a car loan that's about $8,500, and that's it.
Okay.
So what's your household income?
I make about $28,000 a year.
Okay.
All right. And what do you do for living i work as a cna in the hospital okay so you're working 40 hours i work 36 hours because i work 12 hour shifts
okay so you have you work three days a week, which means that you have
four days off.
I do. What do you do at that time?
I just rest up. I have some medical
issues, so it's one
that I am thinking I can
do some extra shifts at work.
So I'm thinking about jumping
in and doing that. Okay.
Anything we can do to get your income up,
because I need you to clear the debt as soon as possible,
and with no debt payments, then save an emergency fund,
and then we'll start investing for you to have a better nest egg to retire on.
But the shortest path, regardless of your age, to having a nest egg
is to get rid of these debt payments and have an emergency fund first.
So you think it's possible?
I mean, I was thinking about semi-retiring when I'm 65,
but I don't know if that's possible for me.
I'm a widow, so I'm planning on possibly retiring on mine,
letting my husband grow, and then when I get retirement age, start collecting his.
Yeah, I think you're probably going to have to be working a little longer
than 65 with the math you're giving me.
Now, if something happens that causes your income
to go up dramatically, you might be able to do it sooner
than that. But you need to build
an emergency fund, be debt
free, and then start building your nest egg
as fast as you can from there.
And you keep listening, and we'll keep helping you, honey.
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