Dave, How Did You Make Your First Million After Going Broke?

[Music] today's question comes from james in california he says dave out of curiosity specifically how did you make your first million after your bankruptcy hmm that's a good ques i don't even know the story i'm not sure i do take us back i'll have to think about it so this was back in 88 so i filed bankruptcy in september of 88 and what i did after that was i went back to doing real estate deals only i couldn't uh buy real estate anymore because i had no credit and no money so no one what i would do is tie up a deal and then sell the contract to another investor that used to be a competitor of mine but we're friends and so i did you know what you might call a dry flip in other words i sell the contract positions so i go contract for a house that's worth 200 000 i would contract for it for 110 and sell it to a buddy of mine for 10 000 bucks and he could close on you have 120 in it right it's still two hundred thousand dollar house so i'm still doing foreclosure deals i got back to doing six figures in 89 again i was back making over a hundred thousand a year doing that but i had a bunch of irs debt to clean up because that doesn't bankrupt and a few other things to clean up and it took about a year and a half two years to clean that up so i'm trying to think that maybe i kept doing that um i'm trying to think if i got my net worth to a million again before we started doing financial peace i might not have so had you started this actually really starting this business slowed that down because i made less the first year i did the i did financial peace it was called life after death i was doing the radio show the radio show was losing money um my taxable income was in half the first i made 120 000 a year before i made 60 000 a year after wow first year opened this business and my income went in half so that slowed it down so it would have been a couple of years after i got this going uh you know we're starting to get a little bit of income out of this income came bomb back up over time of course because you started selling the original financial piece book and are you doing seminars and you know the 13 15 week however long it was yeah sharon and i lived on nothing even though we were out of debt by then i mean we paid off the bankruptcy we paid off the uh everything we were completely clear but we were just done and so we just lived on nothing and just piled up money and uh because we wanted both wanted the security of that margin and so what how did i make my first million so uh income and thrift is how i did it so it was not in the stock market at that point no no i mean well i had some i had uh i mean we had our 401k not 401k we had roth iras not they weren't even roth iras in those days just irs i had iras in those days ago and kids college funds going um and i'm just chunking money and stuff like that and that didn't even have any real estate except our own got the house paid off uh so yeah i was i was probably three or four years into this business before i hit another network it was mostly earned income from just mostly earned income and not spending any of it yeah none of it i mean we didn't do anything we're still driving junk cars we're still way past what we teach people to do we teach you once you get to baby steps three four five six or four five six that you can lighten up and save up and buy a car and lighten up save up and go on vacation we didn't we didn't we just piled up at what point were the baby steps developed to where you were you were following them uh post bankruptcy oh i didn't follow them uh post bankruptcy because they did i hadn't invented them i mean i hadn't laid all that out when i started teaching when i started learning after the bankruptcy god's ways of handling money what the bible says and grandma's ways these basic principles live on lesson you make always be generous live on a written plan um always be saving and investing and no debt at all and those basic five principles when i started living those out and then started trying to get other people to live them out they would start to say okay yeah but where do i start they needed it i started a little counseling ministry at our church i started teaching a sunday school class on those materials and people would say okay so what do you do first man i mean do you do you do you do you do you get out of debt first or do you put money in your in your retirement first and um you know but by then i was sure that the bigger blocker because i'd experienced it personally was debt that if you could get out of debt then you don't have any payments now you've got money to build net worth which is what happened to me yeah okay you know i got out of debt and with a bankruptcy and then paying off the irs and the other stuff um and then once all that was cleared as long as i made money and didn't spend it i could build a net worth i could build i could build a pile of money and that's what i did and so i i thought okay we got to get people out of debt first but the paying off the house was too big a thing to put in the early stages okay first thing's a thousand dollars right and then pay off the house is the second thing so we separated the house debt from the other debt and put it at the end yeah over in baby step six and we knew that you didn't need to start investing in your 401k until you had an emergency fund because i was running into people all the time that had no money except in their retirement and then they'd get in a pinch and cash out their retirement and let me tell you a 401 k is a lousy emergency fund because when you cash it out you get your taxes plus a 10 hit you know it's a 30 or 40 hit cashing out your 401k to fix your transmission or to pay the house payment because you got laid off and uh you know whatever the emergency is a 401 k is a lousy rainy day fund so funding up the 401 i get a match i know but you're broke i don't care if you get a match you're freaking broke and you're going to use the 401k when something bad happens because you got no money so we bet baby step 3 is invented actually baby step one wasn't there you were just going get out of that get out of debt it was get out of debt do the emergency fund and and what would happen is as people were working that baby step two something would come along that was little like a a tire would blow out or something or a kid would get sick and it's a 600 700 thing or something and that little six or seven hundred dollar thing would take all the wind out of their cells and they'd quit they would stop their debt snowball so we figured out that we gave him a little bit of breathing room a starter emergency fund and baby step one was born but the original baby steps when i first started teaching them there wasn't so this evolved over your experience coaching people being aware not in 25 or years but i mean but but it evolved over a period of time in the early days of massaging this material and learning how to do it it evolved but no i didn't follow the baby steps they weren't there all i knew was i'd read the bible and they said don't borrow money and i've been bankrupt so i figured out that was the truth right so i don't borrow money anymore bomb i'm done you know and i always have an emergency fund why because sharon will leave if i don't have one you know it's that simple she's not going to be without money again she's had enough of that she was terrorized by that yeah she's not going back so you get you know you get the whole security gland issue around the emergency fund that all pops up that's such an interesting question james thank you in california thank you very much because i hadn't even thought about it i never thought about where the first million came from um and then uh and then you know fast forward several years i had a lot of money by then and 2008 hit and we bought oh man we bought probably a hundred million dollars worth of real estate for 15 million dollars wow and so and you know it all came back of course and then some so that real estate has been a big part of the building equations well like the way beyond the first million or even 10 million you know by then i had net worth 10 20 million dollars probably but uh i dumped every i you know we we cleaned the table off we took the chips off the table when the when the real estate dove in 2008 and you could buy it for 15 cents on the dollar and i still got all of that i never sold any of it so um that was a home run but the first million is the hardest yeah by far wow by far and these principles once you got these baby steps dialed in and over time you went oh it works but you know what i'm from baby steps i didn't i did not even follow the baby steps millionaires i think path because we were more intense than the baby steps in terms of we didn't do nothing until we got back up there and um the other thing i didn't do is i i did get the house paid off because i don't borrow money um but the um but the 401k hadn't had time to germinate the roth iras didn't have time to germinate and grow and compound and so they weren't that big a part of it it was just literally make income spend nothing make income spend nothing until you get the pain far enough in the rear view mirror and then we can move forward but that was a whole lot more intense and raw than than i ask other people to do to get there baby steps millionaire is more the formula to get there so well thanks for taking us back very interesting thank you james that's good stuff this is the ramsey show

Channel: The Ramsey Show Highlights

Views: 278,307

Keywords: the dave ramsey show, budget money debt cash, real estate, insurance, how to make money, dave ramsey, save, credit card, compound interest, buying house, buy, snowball, Dave, How Did You Make Your First Million After Going Broke?

Id: onqwgbXm99E

Length: 9min 17sec (557 seconds)

Published: Mon Jul 25 2022