Your Circumstances Don't Matter, You Can Still Become Debt Free!

you can be intentional about your character you can have money and a career you are the hero in your story live from the headquarters of ramsey solutions broadcasting from the dollar car rental studios it's the 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 america open phones at triple eight eight two five five two two five that's triple eight eight two five five two two five david is going to start off this hour calling us from jerusalem no less israel hey david how are you i'm fine dave thank god how are you i know i know the answer but how are you better than i deserve sir how can i help awesome uh well first of all thank you so much for taking the call um we love what you do thank you our ten-year-old daughter has around forty six thousand dollars in a family trust the trust allows distributions to pay for college but it triggers a capital gains tax whenever that distribution is taken her my dad her grandfather has suggested we take a distribution of about 21 000 now really plus the tax burden so let's call it say 26 or 27. net of tax would be 21 000 to buy a prepaid college fund from from the state of florida where we're moving back to no and okay no and even though that guarantees four years no matter how high the costs and tuition go in the future and no matter what happens in the stock market yeah the um what you're guaranteeing is the rate of return on your money is the inflation rate of tuition tuition inflation rate for the last 58 years is 7.2 percent average okay i guess everyone's a little worried about what it's been for like for the last eight to ten everyone's a lot of things but the actual math is that it doesn't go up at all doesn't go up at all doesn't go up at all and then they spike it one year and so everybody goes into drama queen mode uh where you're much better off i think to invest in good growth stock mutual funds if you have that option and um in a 529 where it's growing tax-free and you're gonna outpace you're gonna outpace the growth rate of inflation for tuition okay so that's the second part of the question would you take a distribution now and put that net into a 529 now to grow tax-free yes or just leave it yeah and not leave where it is to grow tax deferred right because tax deferred obviously is all going to be taxed later tax free is going to be tax free later and um i'm also making a quick assumption here that the funds in that trust fund probably aren't invested in good growth stock mutual funds uh no i think they are okay we've talked about it okay good well so you either okay so here's what we're gonna do then let's assume the exact same rates of return in your equation right yeah so you leave it alone and it grows at we'll call it eleven percent okay it grows at ten eleven percent okay and uh and one hundred percent of what you take out is taxed or you take it out now and you pay a fifteen percent capital gains i'm sorry i should i'm sorry interrupt i should tell you most of the principle was family gifts so it'd only be taxed on the capital gains above the gift amount okay so a 15 so we're not reducing the account at as whole by 15 we're reducing it by maybe five percent or whatever right right then then it's going to grow from there 100 tax-free so would we rather have we'll make up a number 95 of this account that grows from now until college 100 tax-free at 10 or 11 or would we rather it grow tax deferred and all of it be taxed or virtually all of it be taxed all the growth be taxed uh when you get there so the difference is tax on all of that growth versus a five percent cut today and um that's there's you're gonna you're gonna come out with the tax free much better off got it okay thanks so much you see how i did that i i do and and the longer the longer it stays in the family trust the more the greater percentage of it will end up being capital gains because it's going to keep compounding exactly and the greater percentage of it will be yeah it'll be taxable and uh if we were putting it into an account that became uh taxed at ordinary income later versus leaving it there in capital gains we wouldn't do that we'd leave it in capital gains because that's a lower tax rate right but that's not the case in the case of the 529 you're putting uh how much is in the account well for her about 46 000 right now okay all right yeah you're gonna have to look at we'll see with a smart vester pro or somebody to help you select a 529 that will allow that much you may have to move it in two tranches uh some one year some this year some next year in order to get it all moved but either way the the principle still stands that uh the concept still stands that you're going to be better off to with a tax-free growth than a capital gains growth assuming exact same rates of return so interesting call man thank you appreciate you checking in hope things are going well there in israel i'm ready for you guys to open back up over there so we can come visit again open phones at triple eight eight two five five two two five jonathan is with us in olympia washington hi jonathan how are you i'm doing good dave about yourself better than i deserve what's up uh hey i just uh had a question for you we are my wife and i are on baby step two and things have been going pretty good um over the last year we paid off about thirty thousand dollars in debt way to go um thank you yeah the only problem i'm having i have the the ramsey plus every dollar app going on and everything but the problem we have is the miscellaneous category things that we don't buy every month um i'm trying to keep it within the parameters that i've set is it seems like it's almost impossible i know it's not but it's just it's hard to plan for what might come up like for instance you know we just got a little twenty thirty dollar things you know death by a thousand because hey um like we just got a puppy and we they would get a baby gate for it you know and uh to keep it from going all over the house was twenty thirty dollars or we ship off uh a package to a family member and pay the postage for that you know another fifteen twenty dollars how what's the best way to really keep that in check and where we're not you know arguing over it all the time for these things that we don't really know what's going to come up how much are you putting in there um i have a set of 100 a month okay and and so the discussion is how long you been doing this how many months um since last may so almost a year okay so out of a year how many times has this been a problem every month pretty much yeah okay is it the sense that one of you thinks the other one is overspending or have you just simply underfunded this account that's kind of what i'm wondering if maybe i've underfunded i mean i try to be really strict and i have you know i have adjusted the budget every month like you say it can change um do you have good records you have good records on uh if we want to get real nerdy on where the money went that came out of that account um probably not that great i mean it's from here now so there's there's two options okay there's two options one is lighten it up a little bit just make it 150 and let's move on okay uh okay and there's nothing wrong with that because you're just recognizing that you have a miscellaneous need that is higher than you've been budgeting for and we need to have reality in the budget versus mythology the second thing you could do is you could find a trend that a certain you need a new category that splices off and you need to put 50 in that new category that keeps showing up in this miscellaneous over and over and i don't know what that new category is it could be puppy i don't know what it is but and you know that could be that that category is what's draining you dry life is full of firsts as the first and longest serving christian health cost sharing ministry chm has shared medical expenses for its members since 1981. we believe you should have the freedom to focus on your health while being supported by a community of believers giving you the opportunity to create many more firsts thank you for joining us america our famous ten dollar sale is back it's here you can now learn how to make faster and real progress with your money when you check out our famous ten dollar sale you save up to sixty percent on over 40 of our best selling books and budgeting tools like debt-free degree from anthony o'neil the proximity principal from ken coleman plus these of course make great gifts you can shop the 10 sale at the online store at ramseysolutions.com you can get all of my books there at ten dollars all of rachel's i think the new one even is down to ten now so check it all out and uh man there's some deals there that's uh that's uh and while you're there you can register to win our uh ramsey cash giveaway we're giving away five hundred dollars every week and a grand prize of five thousand dollars cash of course no purchase necessary got to be 18 to win you can enter daily so text cash to 33 789 if you want to register for that cash 233 789 and of course ramsey solutions.com on the store that's where the ten dollar special is shane is in mobile alabama hi shane how are you uh better than i deserve that you publish yourself just the same sir how can i help um well my mother is set to receive a settlement from an accident probably in the sum of maybe the hundred thousand dollar range and of course because i've been through your financial peace university and stuff like that i'm the son that she calls for financial advice good um you know when i told her i said you know i said let's i said let's call dave and see what dave has to say because my mother is 60 my father's 65 he's set to retire this year and i told her i said i just don't want y'all to blow this money let's call see what they say maybe they have an elp local you know somewhere around huntsville they can talk with y'all and you know try to steer you in the right direction okay all right so what's the rest of their financial situation look like um i don't want a lot to you so i know they have a house i'm not sure i want to say maybe it has five or six years left on it that they could possibly pay off vehicles are paid for um and things of that nature so they've been pretty responsible yes sir yeah these people aren't acting like they're in congress or something no sir no sir she she just you know she's um i will say this she they kind of help my little brother out who lives up there near him and that's what i told her i said just you know i said do what you do i kind of don't want to don't don't call them ask me for something and then get mad when i tell you you know what you need to hear not what you want to hear oh good for you good for you that's a good word um well i i think the the biggest thing is people like that that are fairly responsible don't do stupid things on purpose they do them on accident because they did not have a purpose and so the wisest thing i can tell you is they do need to decide before the money gets here exactly where it's going to go we're going to put 10 000 on this we're going to put 8 000 on that we're going to give the little brother 2 000. uh we're going to invest it we're going to pay off the house i don't know you know whatever but every one of those dollars and it doesn't all have to be one place is my point but every one of those dollars needs an assignment before the money gets here because if it doesn't get an assignment that's when the money has a tendency to wander off exactly and even with somebody that's responsible because they feel like they hit the lottery now is she okay from the accident is everybody okay medically yes sir yes sir she uh she actually got um she had she had back surgery probably five years ago which had nothing to do with the accident she you know she retired and like i said my dad he just had shoulder surgery two weeks ago so you think they've got a little bit of a mortgage and that's it yes sir if i'm not mistaken that's it but you know no no loans or anything like that because well i would make sure they had an emergency fund i'd make sure they had an emergency fund i would you know pay off the house um i would give some of it i would enjoy some of it and i would invest some of it okay that's that's kind of kind of where i was at and kind of along my lines but i just needed your professional opinion on that yeah the idea that you don't give any of it is a bad idea i don't care how much the idea that you don't enjoy any of it and you're like hyper responsible we're gonna invest every penny and we're gonna have no fun at all no i think you need to have some of the money and it doesn't have to be a lot it's just a matter of what feels good a little bit we're just going to have some fun with this money we're going to give some of this money we're going to invest some of this money we'll pay off the house and make sure we have an emergency fund in place that those kinds of categories is where i would dump this money and all of that of course is following right down the baby steps and um you know but if you can get them to commit on a simple yellow pad exactly where the hundred is going before it gets there that's a touchdown you just scored because they're gonna they'll follow through on what they write down on that one little yellow pad one page they'll do it and they'll feel weird if they don't once they think it through but if you just chunk it in the checking account you'll look up and go well little brother got half of it you know or something stupid but thing like that and that's not gonna be okay uh navin is navin i guess is with us in cleveland ohio is it naven yeah it's nevin nevin i got it wrong sorry about that okay nevin how can i help good question for you so i work for a family-owned or family-run construction company here in ohio and currently i'm driving my personal pickup truck for both personal use company use whatever and long story short my dad would want me to upgrade to quite a bit of a newer truck and uh the company would be paying for they would give an allowance of 25 000 for this truck and anything on top of that i would have to pay out of pocket and then that truck would be i guess i could use it for company use and personal use and i guess i'm just not sure yeah what to think about this type of deal and pretty much the truck would be in the company's name then just looking to get some advice on it okay um if the company's gonna if the truck's gonna be in the company's name the company needs to pay for the truck okay so you don't put listen pretend like pretend like this wasn't your parents okay let's say you were working for me and i said okay i want you to put in ten thousand i'm gonna put in 25 000 and i'm gonna own the truck i would never do it yeah well it's dumb so no company needs to own the truck and the company needs to pay for the truck so if papa wants you to have a truck then he needs to pony up the cash what if what if uh i guess i'm a legal partner in the company what does that change anything if in the next say five years we'd be looking to take over quite a bit of the company if you if you own 51 or more then you're making all the decisions and you are the company okay but right now you're not okay until you are that no i mean i own my company so what what i title my cars to whether i title them to my personal name or one of my companies or one of my other companies is irrelevant since i own all three right it's irrelevant it's just a titling issue at that point but this is this is more of a what is best for uh you you know that's that's what we're asking here and no you don't buy a 35 000 truck and put it in the company name and you put up 10 grand in it no so if they want what's your truck worth that you're driving that's about 5 000 right now okay we'll move up to a 25 000 our trucks pretty substantial so that's enough of a truck yeah for sure one and that that's the other question where they're writing a check for 25 000 cash right yeah okay they're not signing you up for payments on 25 000. either way if the company buys it i buy either either way at the cash deal it's a debt free company as well we do everything with cash okay good good and here's the thing okay uh just i grew up in the real estate business the construction business i've been around it my whole life and uh the idea that you're taking a nice new pickup onto a construction site is pretty absurd if you've been on construction sites very long you know the guys with the junkiest pickups are the ones that have the most money and the ones that look like a dadgum silverado commercial or broke people with payments yep and so don't this would be a it's a cash transaction i got that but i don't know what we're trying to prove here five thousand dollar pickup will do everything on a construction site that a 25 000 pickup will do who are we trying to impress the subs give me a break but if he wants to write a check and you guys think you want to do it there's nothing wrong with it as long as he's paying for it and it goes into the company name and he puts up the 25k nothing wrong with that but don't put no we don't need 26k and we certainly don't need 35k with your money being on top what makes our show unique is that we genuinely care about our listeners we're intentional about choosing the best advertisers to recommend blinds.com is no exception they offer high quality window treatments at unbelievable prices and they make it simple to shop blinds shades and interior shutters with easy online ordering free shipping and a guaranteed perfect fit go to blinds.com and take advantage of this week's special savings so thank you for joining us america we're here to talk to you about your life and your money open phones are triple eight eight two five five two two five brian is with us in kansas city hey brian welcome to the ramsay show hi dave thank you um so my question today is uh basically me and my wife decided that this was going to be the best year to build a house and we're kind of finding out that's not really true so we went under contract two months ago gave our current tractor the earnest money and the deposit haven't really heard a lot back from our contractor um they haven't broken ground yet and then last week we got an email that said due to material prices increasing they have to raise the price of us um of the materials and they have to raise the price of the house so um basically i kind of pushed back on that went back and forth with them for a little bit and they said in the contract that there's paragraph 30 they have the right to raise the price based on material um so to look to my mortgage guy and he had his legal team look at it and it looks like the only out that we have is if the loan gets denied they illegally have to give us our money back um what do you think about the morality of that does that seem like a moral choice that's good does it not um just your thoughts that you that you walk away from the deal yes sir okay uh not the morality of them raising prices so what is the how much did they raise the prices uh 3.5 percent so it was about ten thousand dollars uh and the other thing in the email they said is that they can no longer lock down prices with their vendors so whenever they order say lumber for frame of the house whatever the price of lumber is that day is what we'll have to pay so it looks like the price of the house is going to increase also more than what they've already told you yes sir okay and what's the price range of the home what is the price overall uh the price was 314 and it's about 325 now okay and what's your household income about 90 000 okay well um to start with let's just say that what they're telling you is the truth lumber is going up rapidly that's not a lie um and i and they have the contractual ability to raise the price and my guess is the market's hot enough that if you don't buy the house they can sell somebody else i would agree yeah so i i don't think they're going to be harmed in this situation um but basically you'd have to get a turn down letter turning you down for the loan from your mortgage broker yeah he said that's no problem okay all right um i don't have an issue with the morality i mean the deal has changed uh nobody in this deal anticipated that the deal was going to change uh and based on the change you don't want to be in the deal you know i don't want to be in a house that i feel like i kind of got you know the bad end of the stick i don't i don't think you're getting the batting of the stick i think i think if you're if you were building a cost plus house which is how i build mine meaning i buy i pay the costs and i pay the builders a flat fee to manage the project you would be absorbing all of the increases i'm building a commercial building that we break ground on a conference center here and our steel prices doubled and we hadn't even broke ground yet and i'm that's all on me because the contractor just manages the project in a commercial project they don't they don't it's not it's not a turnkey deal they pay they pay them a contractor fee and we pay the materials and so um and steel doubled and uh so i've just got to go well do i really want to do this well yeah i'm gonna do it but i told him going by the steel and put it out there in the field somewhere so it doesn't double again in the next 18 months while we're screwing around with this thing but um but that's the reality steel plywood uh lumber packages uh glue uh wire uh there's a shortage of everything because all the factories shut down during covet and the shortage has driven the price up uh and then add to that that the real estate market got white hot coming out of covet in most areas so i don't i don't think you're being hoodooed i don't think they're messing you over if i did i just pull a plug on heartbeat just on principle but uh the other thing is this um you know 10 years from today uh is this all you're still gonna be thinking about if you're living in this house i feel like probably yeah yeah it's going to eat at you for the yeah you need to get out of the deal then because it's just going to eat at you okay but i don't think this guy's i don't think this guy's a crook okay yeah you know i didn't get that vibe from them either it's just they're asking us to take their word like hey you know we're telling you we don't know what the prices are going to be but please take our word that we're going to try not to raise the prices and yeah he's not trying to that didn't work last time yeah but i mean but but the difference is unmet expectations you guys entered into this nobody saw this lumber shortage coming and so i mean he's probably built houses 10 years and never faced this one time and all of a sudden the stinking lumber package went up you know a ton and that's the major component in a residential home is the lumber package is your biggest item on your line items and so you know he's he he's like crap now i gotta go deal now i gotta go deal with a customer who's gonna be mad like i did something wrong and i didn't do anything wrong i just got screwed myself by the situation so um i i don't think the guy's a bad guy um he is passing the cost on to you which he contractually nobody ever thought you'd ever activate that little known clause of the contract but he's able to do that and uh so but i think the biggest thing is you're just not ever going to be happy here so you're better off to be done and um you know you can sit down with them and tell them that and so you can either let me go or i'll you know i'll get a letter uh on the turn down and then i'll be let go so um he probably doesn't want to build a house for you if you're unhappy the whole time anyway especially given that he probably has a line around the block of people wanting to buy the house without you so and they'll pay whatever the prices are in most cases i don't know but i would suspect kansas city is like a lot of these other places right now zach's in chicago hey zach what's up hey dave thank you so much for taking my call sure how can i help uh i am 33 years old i'm single and i make about 107 in salary a year i'm looking to buy my first home i am pre-approved for a 15-year mortgage at 2.49 with 20 percent down the only debt i have is student loans i have 24 000 in student loan debt my realtor told me a program about a program that forgives student loan debt up to 15 percent of the purchase price of the house which would be all of my student loan debt for 24 000 but in order to qualify for the program i would have to take a 30-year mortgage at 3.69 percent which is about even if i pay it off in 15 years it's going to cost me about 13 000 over the two point four nine for 15 years what is the uh what is the payoff provision are you allow is there an early payoff penalty there is no early there's no prepay penalty well why not refinance it why not refinance it six months later i have to keep it for three years oh that's a prepayment penalty okay so your interest on it for three years is all you're eating not for 30. yeah not for 30. like i've never heard of this program this is the wildest butt thing i've ever heard of i've never heard of a student loan forgiveness thing but if the numbers if the deal works exactly like you're outlining it yeah for three years you pay the higher interest you got rid of all your student loan and then you refinance at the end of three years i'm doing that sure weird thanks for joining us america this is the ramsay show i'm your host dave ramsey open phones at triple eight eight two five five two two five mike is in atlanta hey mike welcome to the ramsay show what's up hey dave um thanks for taking my call just wanted to ask a question about downsizing my home okay um so here's the deal my wife and i were able to purchase a home in 2012 on a short sale for 135 um and the home value has currently gone up the tax assessor has it at like um zillow is pulling in at like 280. yeah we are wondering about now as a as a side to this i also have student loan debt i just put 22 000 down uh paid 22 000 on my student loans i currently only have 28 000 left on my student loans so the only debts we have is our mortgage and my student loans we've paid off both cars paid off her student loans all credit card debt everything is paid off way to go man you're doing great i appreciate it my wife and i've been working at it really hard how long have you been working on this huh well we purchased the home how long have you been working on this debt on the debt about 10 years now way to go and what's your household income uh household income i bring in 65 she brings it i'm a um i work at the whole i work in project specialist uh i bring in a 65 a year and my wife brings in 52 a year as a teacher good okay all right and so you only got you only got 20 something 000 left and you'll be done almost there huh exactly well i mean also including the mortgage we have uh the remaining balance on our mortgage is 114. yeah so that's that's maybe step six so but i mean you're just about finished with baby step two you're just plowing right through it you're doing good how can i help what's your question what i'm thinking about doing is repeating the same thing we did before um we're looking at uh short sale in pre-foreclosure homes in the area and we're wondering if it's pot if we could should purchase a tree uh pre-foreclosure or short sale home and then sell hours and use the uh balance to pay off the remainder of our debts we only have twenty thousand dollars in debt you got hundreds of thousands in equity sure okay and so what i'm saying is if we were able to purchase the uh short sale home and sell hours we'd be able to pay off the mortgage of the new home and or potentially be able to pay off the mortgage of the new home and my remaining student loans and once you can be completely debt free well you'd sell them you'd sell your home is how you get rid of that mortgage but the other home wouldn't be debt-free would it um well it depends on what we're able to do yeah that's the concern what we're looking for is something very similar to what we're currently uh our current situation yeah but things aren't like they were in 2012 there's not a lot of short sales listen for a short sale to go through uh the market has to say nobody's buying this house okay for enough to pay off the mortgage and very few homes are upside down right now because of the increases in value so are you is your particular market uh dormant um i don't think so we were i went online and i was able to find one property that that meant what we were looking for um it was somewhere around 135 three bedroom one and a half bath on a basement which is enough room for you know my wife and me my wife and our two boys is there something you dislike about the house you're in no there's it's not that i dislike my home we just wanted to figure out the fastest way to run out our debt and i thought that if we could buy a 135 sell ours around the 250 280 mark and use that use the the profits from our home to pay off the original mortgage and the 135 for the new home where it's close to all of the 135 for the new home wouldn't you be moving down substantially in-house even if you got a deal we're really moving down and like right now my home is uh four bedroom two and a half bath on a full basement um two-car garage so yes i would be moving down um because the 135 000 purchase on a short sale or foreclosure might be what 175 000 house right if you got a deal right right yeah so you're talking about moving down in order to get debt free house and everything that's exactly what i'm talking about okay um well don't sell yours until you've got a deal tied up for sure but if you can find a deal that both you and your wife like and it causes you to be 100 debt free and you all like that more than you do the house that you're in uh meaning you like that idea of being debt-free in a lesser house i don't have any problem with that that's not a bad strategy uh and then you know just save like crazy and you're probably going to move up in house substantially with no house payment no student loan payments you know just you know you're making 110 000 you ought to be able to pile up some cash right and move up in house in the next three to five years if you were able to pull this off i think that this is going to be harder than it sounds in your head because i think the market is so hot that there's not you're not going to find as many foreclosures and short sales as you once did okay because a house you know when everything's selling people sell a house before it goes to foreclosure when everything's selling there's no need to short sell it because they sell it right and i figured it wouldn't be as easy as what i'm thinking in my head which is why i wanted to purchase the home first and get under contract for the show if you want to run out the exercise just just have the discipline to not do the deal unless it's the real deal okay because i think this is going to be very tough in this current market um you know i i buy real estate all the time and i'm not buying real estate right now i mean you know i'm well that's not true i am but it's it's unusual situations and it's not because uh it's not like it was in 2008 where i bought a stuff at a nickel and a 10 and 15 cents on the dollar it was a wonderful year for buying real estate but the um but you know that that's not it's like quite the opposite right now in general especially when you're talking about residential stuff hey mike way to go man you're doing good have the discipline to not get so caught up in the idea that you do a bad deal just to make the idea happen because then the then the prob the idea doesn't work anymore joe is in new york city hi joe welcome to the ramsey show hey dave how are you better than i deserve man what's up question for you i'm uh 22 years old i'm getting married in the fall um have no debt my fiance and i both have no debt great we have about 20 000 in savings but most of that is going to be used to pay for the wedding and uh grad school expenses phenomenal um so my question is how much should we be into gazelle modes you know at this point you know how much can can i go out golfing can she go shopping you know how how committed to replenishing that savings should we be and should i pick up a second job even though it might take away a little time from the marriage to help replenish that savings uh to the extent that you do not have a fully funded emergency fund and you don't have grad school funded you need to run like your gazelle on fire but if both of those are funded then we can relax a little bit okay but an unfunded emergency fund is inviting problems into your life that's like sending out an engraved invitation to murphy do you know who murphy is the guy that says if it can go wrong it will right makes sense yeah and so but when you've got an emergency fund you can like chase black cats and stuff you know you don't have to worry about it so be in gazelle mode until that emergency fund is fully funded and grad school and you got grad school covered because otherwise grad school is going to turn into that right right yes sir yeah we we grab school in the wedding we'll be able to to pay for those for both of us in cash phenomenal what are you all still what are you guys studying i'm studying theology and she's education awesome very cool good for you well good then yeah as long as you're as long as your cash flow in grad school and you've got your emergency fund in place then we relax a little bit but baby steps one through three that's where gazelles are and after that we let our foot off the gas and we just go into marathon mode instead of sprint mode and you just go you slow down a little bit and start running so you can finish an entire marathon and that's four through seven at that point and that's what we're talking about here so if you're avoiding debt and you have the emergency fund in place you're paying cash for the wedding touchdown baby good job this is the ramsey show hey guys this is james senior producer for the ramsay show did you know over 18 million people listen to the ramsey show every week and a lot of those people listen on one of our 600 plus radio stations across the country to find a station near you head to thermsyshow.com this is the ramsay show you can be intentional about your character you can have money and a career you are the hero in your story live from the headquarters of ramsey solutions broadcasting from the dollar car rental studios it's the 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 america we're glad you're here open phones at triple eight eight two five five two two five that's triple eight eight two five five two five trisha is with us in detroit to start off this hour hi trisha how are you i'm great sir how are you better than i deserve what's up well uh thank you first of all i am um i owe you guys a thank you you and ken coleman because i called last year and got my dream job and making more money and much happier good for you that's awesome i'm proud of you yeah thank you so much um so i we are on steps four five and six and i have a question regarding step six for pay off the house in conjunction with step five so my children are six nine and twelve so obviously the 12 year old much closer to college is it is it okay dave approved to pay off the house first and then just help them pay cash for college or should we really just buckle down and 529 it and all those other things to get them squared away for college um it's okay to kind of meet in the middle so how much do you owe on your home uh 139 or yes 130 138 i'm sorry 138 and your household income is what um i make 130 my husband makes 90. math is not my strong suit i'm kidding okay 220 okay so do 20. you're approaching a quarter of a million dollars and you have six years to pay off a hundred and thirty nine thousand that's twenty thousand dollars a year twenty five thousand yeah um you can do that and fund college making a quarter of a million okay okay if you want to pay it off faster that's fine okay so here here's the thing here's the thing doing nothing for college i would not suggest okay because um you got to walk in the room and look at those little sets of eyes looking at you and that's just going to be messing with your brain and so if you just simply say all right we're what we're here's our plan we're gonna meet with the smart investor pro and we're gonna put a hundred bucks a month per kid three hundred dollars thirty six hundred dollars a year not spit out of 220 okay but we're gonna get the kids college fund started and then we're going to plow in and we're going to knock out this house in like two maybe three years yes and then we're going to lean into the 529s harder and we'll be in a position also to cash flow college okay assume assuming you do a good job of training your children on how to select a college that is appropriately priced uh yes oh i mean being that we're in michigan they're a little bit more costly here but yeah but not but i'm not talking i'm not talking about an expensive state school i'm talking about a hundred thousand dollars a year or something like that you're not going to have that kind of money i understand and so and that's okay by the way they'll they'll survive i promise but i mean you can go to the university of michigan on the plan we're talking about without any trouble at all or michigan state university either one both great schools both have great great curriculums and uh you can you know if they graduate from there i'll hire them either either way so yeah i went to ut it was very affordable yeah university of texas yeah yeah well i mean it is and um kelly's in here giving me hook and horn signs so but the uh uh and deloney's not here he'd be doing he'd be like doing some kind of disco dance right now but um anyway the uh uh but the yeah the uh yeah it's it but even they even in that case michigan is not twice texas it might be 50 texas but it's not twice so very affordable very doable but we're going to train them like we have to anyway that they need a job while they're in college uh that they need to get really good scores on their acts so they can qualify for scholarships because free money is always free and um and on top of that mom and dad are gonna do a good job of saving money and on top of that mom and dad are not gonna have a mortgage by the time the first one gets there so we can even cash flow it all right let me let me tell you what you're setting up let me give you a future prediction okay just because i i you're you kind of got this thing right in front of you and i want to i want to pan back a few years here's what happened at our house we did what you're talking about only we weren't using 529s because they didn't exist then we just had utmas meaning the mutual funds were just in the kids names okay so we had enough money to pay for our kids college in each of their names by the time they got ready to go to school and of course we were completely debt free and this ramsay thing was kicking off okay it was actually starting to be profitable and so we cash flowed all three of our kids college and the pile of money that was in their mutual funds we handed to them at graduation to start their lives off that's awesome and that jump starts that generation into being millionaires really quick that's right so that's what you're really setting up here so don't over fund the 529 because i think you're gonna be able to just put some money in their names that you hand to them after you cash flow their college because you'll be able to cash flow college because oh by the way we're talking about six years from now you're not gonna be making 220 anymore you're gonna be making 320 yes so more than likely yeah i mean your your income's going to go up something i don't know exactly what but i mean that's very predictable so um and so will tuition costs but but but you're going to be great you you have really thought this through you're doing a great job but doing zero for college while you're in four five and six just do 50 or 100 bucks or something just to start to get the muscle moving and it kind of allows you to emotionally check the box that i'm not a bad mom or something you know you're not but you see what i'm saying and it just helps you go that way good question jason's in kansas city hi jason how can i help hey dave how are you thanks for everything that you do we appreciate it thank you how can i help well quick question uh mortgage questions again here uh we have about 500 extra per month and we're on baby step six that we can throw up the mortgage good is it i think i know the answer is it better throw it at the mortgage and work that principle down or is it better to think about investing that and and using the interest and then you know 10 12 years down the road for the arbitration paying it off at that time using my money to help me pay that off faster yeah in the study of millionaires that we did studying ten thousand millionaires we found uh almost zero that did your second plan almost all of them did the first plan just pay off the mortgage that's my answer and so what we're doing here is we're studying skinny people and whatever skinny people do if we want to be skinny we're doing skinny stuff you know and that's how it works and so it's best practices is what we're laying out and and that's how also as i've talked to the way i put all these principles together a thousand years ago when this whole thing just started you know 30 years back jason was i talked to old rich people not young rich people i'd been him he was stupid and lost everything i didn't want his opinion i talked to old rich people and the things they told me were boring and didn't even sometimes hardly make sense but they were just like get out of debt stay out of debt live on lessons you make always be generous always be living on a plan you know it's just common sense only it's not common anymore it's like having a superpower this is the ramsey show hey folks i got a great option to help you pay for your education the army national guard the army national guard believes you are the next greatest generation because you have proven that even in adversity that you have what it takes to succeed that's why they offer benefits like tuition assistance career training and a paycheck to help you avoid debt no matter what your goals are the army national guard can help you get there visit nationalguard.com to find out more when it comes to making big money light or life moves like buying a home or getting married or having a baby it's likely the last thing on your mind to make sure you have the right insurance i understand that big changes are overwhelming but what would be even more overwhelming is to find yourself in a situation where you and your family are in the hole because you weren't covered if not having the time or energy is what's keeping you from getting the right insurance coverage use one of our endorsed local providers or elp insurance agents to help elps are independent agents who find you the best coverage at the best price all you got to do is text the word insurance to 33 789 and you'll get a free quote doesn't cost a thing text insurance to 33789 i'm dave ramsey your host thank you for joining us open phones at eight eight two five five two two five jeremy is in columbus ohio hi jeremy welcome to the ramsey show hi mr ramsey how are you doing today better than i deserve what's up thank you it's a pleasure to be speaking to you so my question today is i'm castling my way through flight school and i have 40 grand in my savings account and i also have um 20 grand in a mutual fund and another 20 grand in my 401k and my question was do you think it's wise for me to buy a plane to help me try and save rent money or should i just continue renting and invest that money in something else just trying to get your thoughts on that buy a plane yeah it would save me i pay like 120 an hour to rent like for flight school i do it for i'd buy one for in between 30 and 40 grand did you divide 120 into 30 000 and realize that's a lot of hours i did yeah like there's no break even on that yeah however you know now the thing about a 34 30 or 40 000 airplane is is that that's a plane that's probably not going to lose a lot of value as a matter of fact since you're kind of hanging around this stuff all the time you might actually slip up and buy one way under market and make money on it is that possible that's what i was thinking as well yeah yeah i also didn't want too much totaling up in stuff that goes down in value well it's not yeah i i don't i don't want you to either but we're not buying a two million dollar jet here we're buying a little single prop that's um exactly just to build something to build out yeah what's your household income i'm saying i'm only 20 i make right around 70 a year what's your car worth 12. well you know here's the thing again i i've um got lots of friends that own planes and poke around airports and stuff and planes are a real weird world as you know uh but that look that little plane there if you if you sneak up if if you could get one that was appraised at 40 and you bought it for 30 i would do it yeah but if you get one that's appraised for 30 and you buy it for 30 i wouldn't do that i just wasn't sure if i should be putting my money in something else you know in mutual funds in more mutual funds or if you think i'm okay to invest in something like that it's um it could go down in value and it is still with your car less than half your annual income yeah yeah and so uh if you okay let's see if we put thirty thousand dollars in a mutual fund and it made ten percent that'd be three thousand dollars if you put thirty thousand dollars in a plane that's worth forty and you save all of the rental fees and then you turn around and sell it for forty in a couple of years uh you and that's possible it is yeah because of the way that market works but now again the thing you've got to do is you have to have the emotional discipline to not get in an airplane fever and then just go buy something and pay what it's worth because if you pay what it's worth this is not a good idea you'd have been better off to put in mutual funds right and i would be paying with cash i don't care about that i know that but i don't care about that my point is if you don't buy it under market five or ten thousand dollars to where you can turn around and sell it at at at least what you paid for it later or more then this is not the math doesn't work on this you're following me right yeah that makes sense so you have to steal one yeah and otherwise you don't buy it so i'm putting the money in mutual funds and then i'm just going to kind of casually wander around a few airports and see if i can sneak up on an airplane that somebody needs to really sell bad and uh but if you don't if you and if you never find one that's okay just pay your rentals and you'll be fine yeah yeah i was kind of hoping to use my mutual fund money anyways for down payment on a house don't then don't do it that's fine so yeah you're the one calling me about buying an airplane so i don't care but yeah um yeah if that there's nothing wrong with that plan either that's a great plan and here's the great news is you're doing everything you're doing with cash you're actually thinking about it and you're paying uh and you're making money while you're doing all this so you're not telling me uh i'm gonna go 200 000 in debt to be a pilot which is a dumb butt idea okay uh so and cuz let me tell you as you know uh there's something addictive apparently about flying um as the pilot uh these pilots get yeah they they're addict it's like being on radio they you know it's it's addictive so you gotta be careful with it open phones at triple eight eight two five five two two five mary is with us in dallas texas hi mary how can we help hi hi thanks for taking my call sure um so all right my husband and i are starting to look into buying a house in the future sometime and we've run into a unique situation he is still on the mortgage uh for the house that he lived in with his ex-wife they've been divorced about four years and uh we discovered that it never made it into the divorce decree that she had to refinance that house we have talked to her about this for a while she was saying i'll do it i'll do it and then we get a call from a lawyer saying she doesn't need to refinance and now she won't even talk to us about it and she's saying she doesn't have to refinance she doesn't want to get him off of there she doesn't because your husband's lawyer was a doofus well yeah he didn't even have his own that's a whole other oh he was his own lawyer which is really proof he was a doofus okay so we are in a situation now where we were told by a loan officer basically that worse comes to worse we're going to have to take that as a debt when we apply for the loan yeah it's a contingent liability for sure and you can't make her you don't have a legal grounds to make her refinance it what's the balance on the loan as um last i checked it's about 79 000 so it's not like it's a huge amount but it's still a debt and they're saying that what is your household income it is about 125 a year does she pay the bill on time she does she pays it on time every every single month okay do you know what the interest rate is i do not your husband does or he can find out he's on the market he doesn't well he can call a mortgage company he can call him he's on the mortgage they can disclose to him all the details on the mortgage so here's my here's my only thought you can't make her do it no um it's worth a couple thousand dollars to y'all for her to do this so i would offer to pay her closing costs if she'll refinance and she gets a better interest rate out of the deal and no closing costs so you think it's worth just taking that bullet you don't have a choice okay you have a choice you can't make her do it right because the doofuses that sign this divorce decree he gave up ownership in the house but kept the liability it does happen all the time it's not that unique you said earlier unique it happens all the time because people don't think this through they don't think they're going to end up where you guys are and everybody does end up right where you guys are so you can either accept it as a contingent liability and forget it and not worry about it or if you want to write a check for three thousand bucks and uh you know bribe her and and you know she's got a four percent interest right now it drops it down to two something and doesn't cost her a dime out of pocket maybe then she does want to do it but make a proposal that's logical give her a reason to do it to her attorney and maybe she'll get off a center or maybe she'll just be an angry ex-wife and leave you right where you are i don't know this is the ramsay show what makes our show unique is that we genuinely care about our listeners we're intentional about choosing the best advertisers to recommend blinds.com is no exception they offer high quality window treatments at unbelievable prices and they make it simple to shop blinds shades and interior shutters with easy online ordering free shipping and a guaranteed perfect fit go to blinds.com and take advantage of this week's special savings in the lobby of ramsey solutions on the debt free stage johan and shayna are with us hey guys how are you we're very good day thank you it's a pleasure to be here it's an honor to have you where do you guys live uh we we are from maryland in maryland all right cool and how much debt have you guys paid off we've paid off twenty thousand dollars dave phenomenal and how long did this take you it took us 11 months good for you and your range of income during that time we started at 60 000 and we ended with 63 000. gosh that's amazing so what kind of debt was your 20 000 so 3 000 was a car loan and 17 000 was a credit card okay all right so you're just kind of normal how long you guys been married one year and four months today all right congratulations thank you and so right after marriage you decide to attack this dad tell me the story so it was october 2019 we were engaged in getting ready to get married in december and i was i went to a bakery because i really wanted to buy cinnamon rolls for our young women's discipleship group i was already 11 000 in credit card debt at that time and i walked into the store knowing all this and the cinnamon rolls was eleven dollars and i knew that i had um a conflict between what i wanted to do versus what i had resources to do and so at that moment when i bought the cinnamon rolls i cried out to god and i said lord jesus i have a bad relationship with money so i went home and i looked up online how to reheat the cinnamon rolls and i found a blog called stacy at humorous homemaking and she taught me how to reheat the cinnamon rolls but on the side um she had an article that says we live debt free and i clicked on that link and i read all about it and i found your plan you heard oh my god i never have gotten anybody through cinnamon rolls before this is my favorite ever i love cinnamon rolls me too this is great i like them even more now this is great wow so way to go what's the guy's name what's up stacy you said yes stacy at humorous homemaking all right way to go stacy thank you that's awesome very cool so uh you you you called up johan and said uh we're gonna we're gonna do this yes what did what did johan say i just said okay whatever you want to do yeah you learned quick i think yeah i'm glad he uh she told about the depth yeah because if we i i didn't know about this until long time it would be hard to yeah spend marriage life i think yeah yeah absolutely yeah yeah you don't want to keep secrets yeah you need to know you need to know what's going on that's very wise so uh was uh was all of this yours then shaina coming into this marriage yes johann had none that's correct so he got you and the debt yes he did then the two of you your first order of business is roll up your sleeves and knock it out and no more doubt how does it feel to be free amazing did your relationship did jesus answer your prayer your relationship with money changed absolutely yes yes he gave us a plan he he knows our hearts he knows we want to give and he gave us the plan um in order to be able to do that and how to give generously so we thank you wow you're you're incredible i'm proud of you guys very very well done what do you tell people the secret to getting out of that is uh i think we make budget and we plan planned a lot of things in budget it's helped out a lot i think yeah yeah haven't again because yeah when we went uh grocery store we just buy something what we want but it's not good for saving money so right right yeah having a plan and sticking to it yeah i also think that um the key to getting out of debt is your relationship with god because when we follow what he convicts us to do according to his word then he just provides everything and it's like i had to really wrestle with tithing and when i obeyed god's word he just gave us money month after month after month in addition to uh our salary and it was incredible just to see watching god work through getting out of debt and not only did he give us the ability to pay off all of our debt but he also gave us the ability to fully fund our emergency fund and invest 10 percent of our income in retirement for the year 2020. wow so god is good wow you guys well you had a plan and you did it so what is the secret to heating up cinnamon rolls um i think you have to put them in the oven uh i forget the degrees but i think it's about 20 minutes okay 350 i think all right my mouth's kind of watering right now i'm just saying well congratulations you guys we're very very proud of you we've got a copy of the legacy journey book for you which is my latest and it'll take you into the next steps of the whole baby steps process and on through uh completely changing your legacy and you'll enjoy it it's written from a uniquely christian perspective and also i'm going to give you an extra copy of the total money makeover book uh so you can give it to someone who needs this help because someone's been inspired by you that is in your life and this will give you a way to pay it forward so excellent good job you guys i'm so proud of you well done all right it's johan and shayna from maryland 20 000 paid off in 11 months making 60 to 63. blame it all on the cinnamon rolls count it down let's hear a debt-free scream we are dead free this is how it's done you just never know when you're sharing what's happening in your life how it's gonna show up in someone else's life pretty amazing uh find out for yourself why blinds.com is the number one online retailer for custom window coverings they're the sponsor of our question of the day you'll get free samples free shipping and with the new promos they run every month you'll save even more use the promo code ramsey to get the best possible deal robbie's in michigan the new monthly child tax credit was recently announced is it the best is it best to opt in or opt out of this not aware you could opt out i think it's just tax law if it comes to play and if it passed i missed it maybe it did pass but um it may be just something that you've got in michigan too robbie that may be why i've missed it but um anyway uh if you can opt in and uh you get a tax credit and there's no expense to you later it doesn't come back to bite you later then you would opt in if you even have the option very few tax laws give you the option to opt in or opt out so honestly i'm pretty ignorant about what you're asking about so i think i'm screwing this answer up but anyway open phones at triple eight eight two five five two two five so the point of the debt-free scream is to let all of you guys know that it does not matter what your obstacles are it does not matter what your income is it does not matter what your situation is there are now thousands thousands of debt free screams on the youtube channel i can promise you one of them is just like you very similar to you and what that proves is that you can not only get out of debt but you can enjoy the benefits of being out of debt which is the ability to build wealth the ability to be outrageously generous which is tough to do when you're broke people turns out that hungry kids are very seldom fed by hungry kids this is the ramsey show so thanks for joining us america luther is with us in athens georgia hi luther welcome to the ramsey show hey thank you uh so much for taking my call sure what's up all right uh so um i'm in baby step number two uh i only have eight thousand dollars left on my car note and i'll be debt free um my situation though is uh pretty much this time last year uh i actually got a divorce and i got full custody of my now two-year-old son and so right now i'm working a job that's pretty much a dead-end job i make 24 000 i made 24 dollars last year uh i started up a a a business that i'm super passionate about and it surrounds fatherhood and promoting fatherhood but right now i'm at a point to where where i'm living at right now i'm not paying rent it's just a friend being a friend and helping us out but they're looking at selling the uh this property and uh me being a single parent i'm not in this i'm not in a good spot to go out on my own without getting this business running but i've been so afraid to get it going i haven't even gotten inventory for it i've just done the initial startup of it so i'm wondering should i focus on carrying the baby steps out all the way to ending my debt or should i focus on uh building up this business wow how old are you i'm 28. um you got family in your area there or who's helping you with your with your child i've got one aunt uh who's in the area and she helped out a lot probably more than she could probably uh handle and i'm so thankful for that um but the friends that uh that are giving me this place they actually have another place down south uh so and i know you're really strong against long-distance landlording so i don't want to put them in that position and i'm super grateful for them helping me out but i don't want to overstep and over you know overstep my welcome well it's good that you put together a sustainable life without free housing that's being given to you out of someone's heart on the short term that's a wonderful gift and you know it's good for you to accept that gift on the long term you you're smart to say you're wise to say i i want a better plan uh because it's not sustainable to live uh to live that way um and so okay if you were to get the business moving is there not some way you can go ahead and start now how much money do you need to start it why do you need a bunch of money just do it um i guess i've just been afraid uh i've been building up my emergency savings uh because of me knowing that i only have a limited time here yeah you don't need to pay any extra on your car right now you just need to pile up cash so what do you need to buy to get to make money in this business i need it's probably about uh right under two thousand dollars uh to actually start making sales uh to get inventory in and how much do you have saved five thousand okay so why can't you start it with a thousand dollars uh i can i can uh cut back on uh the products that i want to launch and i can launch you know two or three instead of five or six you're launching them online uh yeah that would be the uh that would be the plan okay so someone sees your product online and orders it right how long does it take to produce these products if people ordered more than you had in inventory uh it would be about uh two weeks uh would be the uh from production to uh getting it in hand and shipping it okay all right so if you put on the website delivery in two to three weeks that would be telling the truth and you could buy a limited number of uh of items in other words you don't have to have a full stock if you can do a two-week turnaround right uh yeah that's correct okay well let's get that going tonight oh okay oh i mean you don't you you know 500 worth will get you enough to get the website going right and then you just anybody that orders something you reorder every two weeks you use their money to build it from there right uh yeah that's correct yeah can you order one offs um i can but it's just uh more expensive it wouldn't be yeah it would be more expensive yeah i'd carry more overhead for them instead of like bulk orders no you'd carry more cost of goods sold or cost right yeah yeah and so you can't afford bulk holders dude you're broke yeah and you don't want to order bulk in something that you don't even know if it can sell yet correct so you you want to limit the amount of stuff you throw away when you launch a new product because one thing's for sure launch a new product you don't know what you don't know right you're going to learn some stuff in this process believe me i've done a bunch of what you're talking about doing and so it's going to go slower than you thought you would so uh in the meantime let's also look for a better job okay yeah i can i can totally do that yeah because you're you're looking for an excuse to do that yeah yeah i mean you need because listen if you could get a job making 40 that would change your world yeah yeah uh right now what's kind of holding me back is uh uh in the area that i'm in uh it's so rural that uh not a lot of places are uh really paying that much uh but uh i can definitely start looking out further well let's try this okay if you found a job making 50 000 and it was not in the area that you're in you would move yeah i would and you could afford to move right so um you know let's move to town all right yeah that i'm good with that because because this this business unless you just hit a nerve and the thing just goes zoom zoom which very seldom happens most things move if they burn slow they don't burn fast it takes a little while to get things moving you adjust the product you make it a little better you change the design a little bit and every time you do it sells a little bit more a little bit more a little bit more but very seldom do you just launch a singular thing and it becomes a huge massive hit the one thing it's that's just very very unusual in business and so as you adjust this product and get it to where it's where it's really selling like crazy it you may it may take you 18 months to two years uh meanwhile you're starving to death and gonna end up homeless right right yeah so i want you to get some stable employment under you uh check out ken coleman's website he can help you a bunch with that i'll send you a copy of his book the proximity principle to help you begin to think about a different uh even if it's a short-term career so if you work a new job that's a better job that pays double what you're paying now which is still not an ultra high paying job by any stretch of the imagination you give yourself the financial patience to raise your child without worrying about being hungry and to be able to run this business without having to live out of the business for a little while and it keeps you from making desperate choices in the business and uh it'll move you in the right direction so hey man you got a tough road but you are you're a strong guy and you're gonna do this you're gonna figure it out but uh because you got a lot on your plate no question about it but i think you're going to make it i think 10 years from now you're going to look back and go wow those are some tough times and i learned a lot during those times our thanks to james childs our producer kelly daniel our associate producer i am dave ramsey your host we'll be back have a friend or family member that needs a daily dose of ramsay advice in their life let them know about the ramsey call of the day podcast it's a quick hit of advice about life and money in under 10 minutes check out the ramsey call of the day podcast wherever you listen to podcasts this is the ramsay show you can be intentional about your character you can have money and a career you are the hero in your story live from the headquarters of ramsey solutions broadcasting from the dollar car rental studios it's the 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 triple eight eight two five five two two five that's triple eight eight two five five two two five joseph is with us to start off this hour in puerto rico hi joseph how are you i'm doing well dave thank you so much for taking my call i appreciate it certainly how can i help all right about five years ago i'm gonna give you kind of a snapshot of who we are and what's going on here so that uh you can kind of answer my question when i tell you the end of it here uh we moved to puerto rico about five years ago to start a new ministry and uh we rented our home and about three years ago our small group bible study we're trying to decide what's our next bible study going to be and we're like we all stink at managing our money we all give our lives insecure insecurities and you know we're just not very good at it we're living paycheck to paycheck we're not saving for retirement so our small group bible study decided to go through financial peace university so the eight of us uh took this course together and um in the last three years we've paid off about ten thousand dollars in debt uh we've saved our thousand dollars emergency fund put 25 000 in the bank for our six months of emergency you know reserves and started finally investing in retirement um and like i said uh we've been renting our home and um about six months ago our landlord came to us and said hey i he moved to texas about five years ago and uh when we took the we started renting here and he came to us and said hey i want to get out of this house i want to sell it but i'm going to give you guys the first option and so he's like i'll just ask for what i owe on it um and we're like started panicking we're like okay we don't have money to buy a house right now because we're just putting all of our money into retirement and trying to save up for that because we were so behind on it and um so we started looking around for another place to rent the rental market here is totally dried up um there's so many people moving here for the tax benefits in puerto rico that all rentals are just like astronomically high um and so we're looking back now at at purchasing this home um it's you could sell it for about two full see there's there's houses in the market right now for about 249 250 same houses in our neighborhood um he owes 200 on it and so we have our we don't have the 20 down payment per se saved up but we have our six months fund and we have our about twenty five thousand dollars between our two emergency no no i'm sorry not emergency it's about twenty five thousand dollars between our two iras and then we have our ten thousand dollars invited money that that just came in so we have that money sitting there and we're planning on using that towards putting our 20 down on the house even if you don't put even if you don't put down 20 that's okay on a first home purchase the only problem is you're going to get the pmi but it's not a requirement that we give you in financial peace university on your first home purchase that you put down 20 as long as you understand that you're taking out pmi and so you're getting private mortgage insurance which just adds to the expense of the house obviously so um yeah yeah i would uh scrape together and add some to the 10 i would not use your emergency fund i would not use your ira but if you can buy this house and put some money with that 10 and uh or if you back your emergency fund down a little bit and say it's six months and we're gonna back it down to three months that's okay because it's still in the three to six months range but we're not going to use your emergency fund we're certainly not cleaning out your iras but i would stop adding to them right now while we work on this how long have you got to purchase it how long will he give you um well we we actually went into the contract with them so we were in the contract process so why did you call me or you already did your deal yeah i guess because i'm nervous about you know that question of whether or not we should liquidate the ira no you should and uh use all our money and that's where i was kind of not finding an answer yeah no you should kind of find that so i've never told i've never told someone to liquidate an ira to buy a house ever um no you shouldn't but the 10 000 will be enough that should get you into it and anything else you can scratch together between now and closing how far can you delay the closing stop your retirement savings and power cash on pile cash on power cash on sell everything in sight pile cash on to get you a good strong down payment on top of that ten that's all fine and again if you crank down that if you have a six month emergency fund and you back it down to three months that's not the end of the world uh you may want to beef it up later again but as long as you're in that three to six months range but no we're not using the whole emergency fund i wouldn't use a dime of your retirement account and then um the payment needs to be a fourth of your take-home pay on a 15-year fixed rate and you should have known that from going through financial peace university we did teach you that so hopefully that does fit in with your income in this situation but it sounds like it's a good buy and um and you're you're at the right place to do it you're just trying to scrape together some nickels out of the corner of the couch to make it work that's all you can pull it off john's with us in dallas hi john welcome to the ramsay show hey dave what's up better than i desire yeah i advise at a college and i got in trouble with my bosses because i told some students coming in for advising that i didn't think general studies was a good choice of major and my bosses are putting pressure on me to promote this degree and all of our degrees equally and you know you talk about useless degrees a lot i was just curious what do you think of the general studies degree and what would you do if you were in my situation and i think i'm just going to hang up and listen thank you thank you i appreciate your call um general studies degree assumes that all education is profitable in the marketplace and we've proven that it's not um education is important the more you know the better life you'll have and if you know some of the things that the marketplace actually appreciates then the better income you'll have but um you know which is why i read like a maniac still and i haven't been in college in years and so adding education adding knowledge um even if it's just weird knowledge on a hobby you're working on that still just adds to the quality of your life and so in that sense a general studies or a liberal arts degree or whatever you want to call it is uh is fine just for a well-rounded life but it is not the equivalent of some of the other degree fields uh and in terms of what the person can do with their life as a result of it uh and so you know you'd be much better off uh not going to college and uh getting some technology certificates uh you make a lot more money and uh uh you'd be much better off studying a field of study that uh you know young people coming out with supply chain logistics degrees now are making eighty ninety thousand bucks coming out they're not coming out making that with general studies uh and so uh uh you know if uh what would i do if i'm in your shoes well it sounds like you're working for an idiot to me you know they're asking you to promote things that are as if they're equal when they're not and they're asking you to go against your integrity in other words you have to lie now to students to please your boss and so it sounds like i'm not working there much longer i'm going to be doing something else with my life i guess i've done that a few times in my life hey folks i got a great option to help you pay for your education the army national guard the army national guard believes you are the next greatest generation because you have proven that even in adversity that you have what it takes to succeed that's why they offer benefits like tuition assistance career training and a paycheck to help you avoid debt no matter what your goals are the army national guard can help you get there visit nationalguard.com to find out more have you ever made a dumb decision with zeros on the end because you did not do your research yeah me too most people make choices based on feelings or opinions especially when doing something like buying a house but when it comes to the real estate market feelings are not your friends facts are your friends so check your facts find out what you can actually afford research what's trending in home prices talk to a reputable real estate agent in your area listen if you're thinking of selling a home in this crazy market we're in right now this is not amateur hour anybody can sell a house yeah monkey can sell a house but they're not necessarily going to get the most for it right now and uh some you know some people that get their real estate license they don't know what they're doing any more than a monkey would know and so you need a pro in your corner you need somebody knows what they're doing you need to get with one of our real estate elps or endorsed local providers never buy a house without the facts and you gotta ha this isn't listen you need a pro because this is a weird market and you're you could lose tens of thousands of dollars by someone not knowing how to navigate the craziness that's out there right now and uh you really gotta have somebody knowing what they're doing right now so text house to 33 789 particularly if you're getting ready to sell a house text house 233789 paul is with us in mcallen texas hey paul welcome to the ramsey show and i love the lead end music so i just have a question i've got kind of a crux in my life right now and i could use a little advice because it's kind of tricky okay so pretty much i live down here it's an affordable way of life but i've been in a position in higher education for about 10 plus years and there's little to no upward mobility and of course you know you look at going on to further your education it's no guarantee you might make 10 000 or more you know it's not really worth the return on investment recently i was given or possibly given an opportunity to look at moving to santa barbara california to work i might add also in higher education but for substantially more i own a home which is a as i like to say large garden small farm operation here where i am and i really would not like to let it go but uh i have been trying to look for opportunities in the job market in this area for a very long time and i have not found much in the way of upward mobility again so i'm just wondering is this um potential opportunity in california even though i realize it is a very high-end expensive place to live although it is paradise um you know is it really worth looking at doing something like that even for just a couple of years to put back into the property here and renting or selling or even just you know it's really just one of those things where i'm trying to get my my finances on track and this came about what do you make now oh about 40. what would you make there yeah about 80 to 85 is the estimate of course i would fight for more but you know that's about the estimate okay oh yeah there's no hope of owning real estate in that area unless there was some long-term investment um but yeah you know it would be how did you how did this lead come about well it's through a very old friend of mine um very old colleague and he's in the opportunity and is looking for people that he can trust and and know that work hard and for good so i mean that's kind of yeah that's how it came about what do you do in higher education well i help with administering scholarships for students at the moment but i've also worked in public information and i've also worked in grant writing and this would be working in more of an i.t kind of project management situation so you have a phd in higher ed or what i do not i have a bachelor's i have two bachelor's degrees and an associate degree and i'm about to finish up a certificate in project management in the next probably four weeks who says you have to stay in higher education nobody does but i have i have tried literally i have tried it's like part of my uh work schedule week spend two or three hours looking for work and apply apply apply and i've just not i've just not hit the target for whatever reason okay um i know it's tough right i know i i think if you had other options you wouldn't even be looking at this one no i don't have many options no i wonder what i said that wasn't what i said i said if you had if you had three or four options on the table i know you told me you didn't have options but if you had if you had an 80 000 option in dallas you wouldn't even be talking about this well you're cutting out we had a bit of a cutout there okay i said if you had an 80 000 option in dallas you wouldn't even be talking about this and so i think that what this has done is it has woken you up uh and probably your job hunt technique sucks and we got to work on that and um and let's get you some more options to look at because i i mean if you want to do this there's nothing evil in what you're talking about but it sounds kind of a little bit desperate like it's the like it's the only thing out there and it's just not that's just not true that's a scarcity mentality and it's just not now just book you just hadn't been able to land the right thing so what i would tell you is i'm going to send you a copy of ken coleman's book the proximity principle and uh i and if you've got degrees in areas outside of higher education and you've been having trouble finding upward mobility in higher education in your area then let's get outside of higher education and let's start looking at project management anywhere you just got a certificate on that the project management uh pm1s pm2s or you know they're making more than you're making and uh they're certainly making more than you're making in houston dallas san antonio austin for sure and uh and i i didn't even leave your state yet so uh and i'm not against you going to the other place i it just feels like you're considering it because you feel like it's the only possible path to make more money and i don't i just don't believe that is the case so i'm going to send you a copy of the proximity principle once you get on king coleman's website i want you to learn everything he has about hunting for a job about doing your resume about the interview techniques about how to get your foot in the door and get your name out of the pile because all these applications you're filling out go in a pile with 2 000 other people and nobody ever sees your app again you get buried you have to do something to differentiate yourself and ken can show you how to do that go to ken coleman.com and he can walk you through all of that so hey man thanks for the call folks when you're facing a decision of any kind and none of the odds and the you know you've got like two options and neither one of them are great or it feels like it's very very limited or very trapped and you get kind of we all get kind of fatalistic about it it's like oh well that's the only thing it's almost never the only thing and so what i've had to learn to do is the more options i have two things occur no matter what it is you're looking at if you're looking at buying a car if you're looking at a career change if if you're uh looking for a wife i mean the more options you have the more power you have and the more likely you are to make the right decision when you only have two options and you feel trapped very seldom is either one of those the right option and so you need more options to give you power to not feel trapped and to make a better decision in every case and there's no difference with him this is the ramsey show thank you for joining us america jonathan is in lubbock texas hey jonathan welcome to the dave ramsey show hey dave how are you better than i deserve what's up hey so i'm faced with kind of a unique situation i've been pretty blessed with some amazing parents that have been great role models and all areas of life especially financially and they taught financial peace to sunday schools and even made me read financial peace which i didn't enjoy at the time but i'm super grateful now that um so i'm 19 years old i just graduated high school i'm i just i'm about to finish up my first year at a community college um and i've been able to go completely free based off scholarships and even some going back towards me for getting to put back for later and leftovers and my situation kind of surrounds i've i'm planning to continue and get a bachelor's degree and i even i'm even planning past that and want to get a law degree in the future yet through reading and having great mentors and all that i've learned through reading about money and especially through yells programs i know that the time prudence of saving for retirement so my uh my course in stems i have enough money saved my my family does to be able to fully pay for all the way up to my bachelor's degree but i have siblings too and so i understand my my law school will be kind of a cash flows system when it gets to that point but my question is um i've been putting money into my roth ira that i set up last year and um contributing as as much as i can but financially thinking smartly about you know paying for other things and i've been sitting down with my parents talking about that but my question is should i continue to contribute to my retirement savings while i have this desire to go to a graduate school that i'm not entirely sure i'll have funds for upfront no you should not okay you should stop saving for retirement and you should put all your money aside to complete the education track that you're on uh and the reason is this you uh what you can make in the marketplace extra as a result of these degrees is a lot more than you will make on a mutual fund right education that is usable in the marketplace to increase your income is always more valuable than a mutual fund now education this left-handed puppetry is not i mean you get a degree in underwater bb stacking or something it's of no value right and people get these stupid butt degrees but if you're going to go get a law degree and then you're going to use the law degree to create an incredible income as an attorney uh and get on a really strong career path of law whatever that is in whatever version of the law it is but i mean you're not gonna uh go to work for thirty thousand dollars a year for the state doing nothing i'm talking about you're going to go out there and you're going to use the law degree to make a couple of hundred or more a year as a result of being an attorney and developing a career in that area that is going to give you a better mathematical return on your investment than a mutual fund will and you have plenty of time to do your investing i don't want you to put it off forever but your education with the track you're on jonathan and the kind of a young man you are is more valuable the way you're laying it out than a mutual fund is so no i would stop and pile up cash and let's get let's get this law degree and let's pay cash for it and a big old pile of cash and if you have a bunch of cash left over because you piled up such a big pile when you graduate you got a big old pile left oh well we'll try to figure it out you know lane is in lincoln nebraska hi lane how are you doing well dave hey first of all let me just say thanks so much for all you and your team do it's an honor to speak with you honor to speak with you sir god bless you how can we help uh yeah so hey um last year the year of the dumpster fire me and my wife were actually able to become debt free finish baby step two first time in the eight years of our marriage which was awesome great and then i guess you could say partially thanks to government stimulus if that's possible we sped through baby step three and we're able to upgrade an old car so we found ourselves at steps four five and six quicker than we expected wonderful but that's a huge blessing wonderful um i am a pastor and currently we live in the church parsonage um it is it's a very nice nice home we're thankful for it i know that's not always the case um but my question is kind of you know whether we love the church we're at but whether we're here for five years ten years or till i retire we realize that eventually we will have to buy a home and when that time comes we don't want to be starting from nothing at that point so my question is where should we be saving money for this future home i would start paying a small house payment into a mutual fund and then that's your mutual fund yeah that's just your home purchase fund later uh it could be sooner it could be later it could be much later i don't know how long you're going to be in the parsonage either but having worked with pastors for 30 years if if you just fast forward this out 30 years from today and you never save money for a house and then the your you know your pastoral career you go into retirement you don't have the parsonage anymore you don't have a house yeah exactly that's a problem and so you know i don't know whether this is gonna you know maybe you move five years from now to a different position and they don't have a parsonage then you would be ready to buy then or i don't know whether it's 40 years after from today and this parsonage is over you know and you just you spend your whole career at that church which either one's fine with me i'm you know whatever i'm open to whatever god's got for you but uh but i do know that if you save money it's gonna keep you in a position of uh uh uh well to be able to buy a house it's that simple so yeah just start you know pretend your baby six baby step six is is really there as if you had a mortgage but instead of paying off the mortgage you're building up cash to buy the house and so whatever you would put onto baby step six and you might want to just set up a mutual fund with your smart vester pro or even just a an index fund it'd be fine but just automatically draft it out of your checking account each month a small house payment depending on what your household income is i mean if you start putting a thousand bucks a month aside and you do that for a decade you're gonna have some serious money in that account to buy a house maybe even pay cash for a house so put you in really good shape zach is with us in new jersey hi zach welcome to the ramsay show thank you for having me how are you better than i deserve how can i help um so i'm 20 years old married with a kid on her life and i've been watching a lot of youtube videos for the past month or two and getting debt free is definitely at the top my priority list now good um my wife and i own two cars one of them is paid off the other one is thirty thousand dollars uh in loan um in total we have 120 000 the other 90 000 is student loans um and we're getting to the point where her car has too many miles because she drives anywhere from 40 to 60 000 miles a year um my solution to that was that she would take my car which has 10 000 miles i would take the other car and she would drive this until he needed another car works paid off um however she's since she spends so much time in a vehicle every year she's pretty particular about what she wants and so she really wants to trade the car that we have now that is thirty thousand dollars in debt and buy something that's forty to forty five thousand dollars in that um and i kind of had worked out a plan with her where we can pay off fifteen thousand dollars in six months and at that point since the payment would be gone from the other loan we would work ourselves into potentially buying that car no not a chance dude listen listen i don't give a crap what she's particular about you guys are broke you are deeply in debt up to your eyeballs and now you're talking about buying a freaking 45 000 car and put 60 000 miles a year on it and destroy its value zack that's dumber than a rock man absolutely not not a chance so our scripture of the day proverbs 3 5 and 6 trust in the lord with all your heart and lean not on your own understanding in all your ways acknowledge him and he shall direct your paths benjamin franklin said an investment in knowledge pays the best interest mary is with us in dallas texas hi mary welcome to the ramsey show thank you dave i just have a question about yearly home insurance that you purchase i own a home it's totally paid off i have no debt i have savings and i was just wondering is it prudent to and i i just made a claim and we had hail and they're going to be replacing the roof for me so uh that will hopefully last for another 20 20 years or so so i just wondered if that was a prudent idea if what keeping homeowners insurance excuse me not buying the homeowner's insurance no it is not prudent i would buy homeowners insurance okay i have homeowners insurance on my home and i can write a check and replace it tomorrow if it burns down but it is a good buy to insure it um all of my properties that i own i have insurance on and i have the ability to replace all of them financially if something happened without that but it is a it's good risk management to transfer the risk of a fire or a tornado or another catastrophic event now what i would do is i would raise your deductible up good and high so ask your homeowners i do two things one is i'd shop your homeowner's insurance if you haven't shopped it with an independent insurance agent you can go to daveramsey.com and click elp for insurance they'll shop a bunch of different companies and get you the best price number one do that okay if you haven't because you may get a much better price number two um get the price on the deductible and i'll teach you how to analyze that what is your current deductible uh i think it's uh two percent two percent that's unusual it's usually 500 or a thousand dollars or five thousand dollars or no it's it's a percentage of uh of the value of the home that they have insured interesting so how much do they have insured they have it insured for 249 000. okay so you have a five thousand dollar deductible uh basically yeah approximately okay that's a very high deductible so you probably aren't gonna you're probably not gonna gain anything by raising it from five to ten but you could ask okay because you know i'm not worried about a ten thousand dollar loss for you i'm worried about a 250 000 loss right and so if we can if you can get a substantially cheaper price by going from 2 to 4 with your company or by getting a 5 000 deductible with somebody else and our ten thousand dollar deductible with somebody else see here's the way you look at it what are you paying in premiums now i think it's uh if i'm not mistaken it's it's around 1200 a year okay so let's pretend we went from five thousand dollar deductible to ten thousand dollar deductible two percent to four percent okay uh you're taking an extra five thousand dollars worth of risk and if they drop the price a hundred dollars for you doing that from 1200 to 1100 you can divide that hundred into that five thousand and you figure out real quickly that that's 50 months um probably not doing that one but if they drop the price two or three hundred dollars for you to take an extra 5 000 risk you don't have that many claims on this then then you would you know i would take i run really high deductibles on all my stuff because again it's not the first five or ten thousand that i'm worried about it's the first 250 000 the back 250 000. nathan's with us in universal city texas hi nathan how are you doing good sir yourself better than i deserve how can i help yes sir so my question is is it wise to share a room with my girlfriend so my company is sending me on a trip to maui my one summit this year so they're sending me for a week and i get to take one other person with me i'd like to take my girlfriend with me but i don't know if it's a wise decision to lodge in the same bedroom okay are you all already living together sleeping together no sir okay so this will be violating that right right we're trying to abstain until marriage yes sir okay uh and how old are you sir 25 okay um i mean you you certainly can do whatever you want but you're asking me which is a mistake because i'll tell you so um i would get a separate call yeah i'd get a separate bedroom because uh if i'm 25 years old i don't have that much willpower right i mean really you're just asking for a situation that apparently based on you're telling me what your values are that you're going to regret you're just asking for trouble right on top of that um i don't really care how people think about the way it looks but i care about the way something looks for my wife and i don't want to compromise her reputation and i'm going to guess and say if you're concerned about this kind of thing like i would be we share that value system then i would be concerned about what people thought about my wife that's a true statement yes sir yeah so i mean you like her dad right mainly her dad honestly yeah and uh you know because you know every all of us guys are going yeah you might pull that off but you probably won't you know and why put yourself through that oh my gosh uh so now as a matter of reputation of the lady that you love we'll be very old-fashioned here we're going to protect her reputation to her dad to her friends because you've made this statement that you're going to wait until marriage then let's let's put a situation in place that leaves no one questioning that you did much less uh having to have that kind of self-discipline which uh 25 there was no chance oh so nathan you're a good young man you have a good heart we need more people like you in america today there are so few of you uh thank you sir i'm honored to speak with you today open phones at triple eight eight two five five two two five yes there are people out here like me that are dinosaurs that actually believe that we're supposed to be married before we engage in sexual activity like that yeah it's it's i know it's i know it's hard to believe for some of you you can't grasp the concept but it's a part of my christian faith i actually do believe that um i didn't always i wasn't always a christian and it's my faith has informed me on that and it's not a not a question in my mind but it seems to be a foreign concept in a culture that has become so toxic of foreign concepts um uh does my does my old heart my old dinosaur heart good to talk to a nathan that is actually concerned gallant young gentleman concerned about his fiancee and actually cares what her dad thinks what a man of honor oh don't we need more men of honor and more women of honor men of virtue women of virtue they're getting more and more rare it's almost like having a superpower nowadays so well thank you sir you did my heart good today i appreciate talking to you that about puts this particular hour of the ramsey show in the books james childs is our producer kelly daniel is our associate producer and phone screener first time i've done a show by myself in a long time i feel kind of lonely in here that puts this hour of the 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 hey it's kelly associate producer for the ramsay show this episode is over but if you heard about an event product or service and didn't have a chance to write it down don't worry we list everything you've heard about during this episode in the podcast show notes section or head to theramsi show.com thanks for listening you

Channel: The Ramsey Show - Full Episodes

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Id: DA1x9zysQkk

Length: 122min 15sec (7335 seconds)

Published: Wed Apr 28 2021