Ordinary Habits Will Build Extraordinary Wealth

24:34Dave Ramsey:In 2022, you got scared? Yeah, because I lost so much during the COVID, and then I waited to get most of it back. No, you didn't. And did you pull it out? I didn't pull it out. Then you didn't lose it. You've regained it and more. Yeah. But you pulled it out in 2022. Yeah, and then I put it into fixed for 7%. Major mistake. What I do now is do fixed. Yeah, major mistake. Okay. Okay. I want you to be in good growth stock mutual funds, something like an S &P 500 type of a thing. Okay. Which I hope I can make you cry. Are you ready to cry? Okay. When you pulled that money out in 2022, if you had left it in there, it would now be$1.2 million.

25:31Dave Ramsey:That's what that mistake cost you. Because in the last five years, the stock market has doubled. You don't lose money unless you take it out. Yeah, that's when you lose money. So you pulled it out, and then the best five years in the last 20 have happened. And so you just missed the biggest wave ever. Because you pulled it out at exactly the wrong time. Your timing is preciously horrible. But if you do take that$600 ,000 and do what Dave is saying, and you've got four more years, you said you're looking at a four-year horizon. If you invest your$1 ,800 or your$1 ,900 a month, that still gets you to$1 ,042 ,000.

26:09Dave Ramsey:Yeah, you're going to be, and that's in four years. Okay. And meanwhile, and so you're going to have a million bucks if you move it into good growth stock mutual funds. and you keep adding to good growth stock mutual funds for the next five years. Don't take it out. And don't take it out. All right? Just ride it. Because you're going to be making$100 ,000 a year as a pension. Yeah. And in that five years, get the mortgage paid off. And then that house is going to be worth a million dollars, and you're going to have a million dollars. And by the time you get to 70, you're going to have$4 million.

26:40Dave Ramsey:So you're going to be fine. Live on your pension and let this all grow. Yeah, just that, you know, I grew up very, you know, hand-to-mouth, and my parents are not very good with financials, so I did the bankruptcy thing. I even did the debt consolidation. So to be where I'm getting, like where I am now, I feel like— I think you're in pretty good shape. I just don't want you to be in fixed. All right. And growing up hand-to-mouth doesn't mean to be dumb. Yeah, you've gone far beyond that at this point. Yeah, you're way beyond hand-to-mouth. You've got a$100 ,000-a-year pension, a house that's going to be paid for by the time you retire, and a million dollars will be in there if you go do what we tell you to do.

27:24Dave Ramsey:And if we're half wrong, you're still okay. Take it out of fixed and put it back in the stock market. Put it back in the mutual funds. In the mutual funds. It is the stock market, but good growth stock mutual funds, something like an S &P 500. That's what I would do, and I'm older than you. Yeah. And start describing yourself based on who you are today, not who you were 50 years ago. Yeah. I had to learn a lot and I have learned a lot because of where I came from. That's a proper narrative. Not, I have to do fixed because I grew up on a dirt floor. No, you don't have to do fixed because you grew up on a dirt floor.

28:02Dave Ramsey:Matter of fact, that's the reason to not do fixed. Scarcity. Yeah, exactly. And panic and fear and all those things. It's a half glass full thing. Yeah, half glass empty so yeah that's the thing and so but it doesn't also doesn't mean you need to take rash risks i'm not telling you to put it in crypto or go to vegas and i'm not telling you to bet it bet on draft king none of these stupid things that's the other side of the coin right where you go crazy and and so no this is a steady and boring it's just not as boring as fixed so here's a good rule of thumb folks give you a little math formula today's today's show the has been a math show today so far.

28:43Dave Ramsey:There's an old-fashioned thing that was taught to us years ago, us math nerds, called the rule of 72s. If you take an interest rate and you divide it into the number of 72s, it will tell you how long it takes a lump sum to double. So an example would be 7.2 interest rate divided into 72 would give you 10 years for the lump sum to double. Reverse it. I'm going to put, I'm going to invest it at 10 % instead of 7%. Then it will double every 7.2 years, right? And so that's basically what we're telling her. Yeah. Okay. Are you going to wait 10 years for this to double or five years for this to double?

29:25Dave Ramsey:That's kind of the formula difference between 7 and 12. That's what's going to end up. So, and that's the 600 ,000. We're not touching. And if you just said, okay, I'm going to run this thing out at 11 and a half, 11.8. which is the average that the S &P has done. Divide that into 72. Well, there you go. Now we've got about the time she retires, it's doubled, which is what you did. Yeah. And you can do that in your head. You don't need a calculator to do that. It's not bad at all. And so just divide the interest rate that you're going to invest in into 72, and it'll tell you how long it takes a lump sum to double.

30:02Dave Ramsey:So you start with$100 ,000. Then I'll be at$200 ,000. Then I'll be at$400 ,000. Then I'll be at$800 ,000. then I'll be at 1.6, and then I'll be at 3.2. And every time. And so if you divide 10 into that, it's just seven-year rolls every seven years. So take your age, and three times, 21 years from today, it's going to double three times. And that gives you some confidence that you're on the right track with some of this stuff. You can also use the Ramsey calculator, which is what we're using when we're on the air. It's on our computer. You go to our website, the Ramsey Retirement Calculator, and all it is is a basic financial calculator.

30:38Dave Ramsey:It's nothing super fancy, but it's just an easy way to do it. And you can plug in and go, what if I put$100 a month at 12 % from age 25 to age 65? It's$1 ,172 ,000. And the calculator will show you that. Okay, say, I can be a millionaire if I invest$100 a month from age 25 to age 65 at an average of 12%. Hmm. Where'd you get 12 %?

31:05Dave Ramsey:S &P has averaged 11.8 since it began 80 years ago. Okay.

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32:31Dave Ramsey:Jake's in New York City. Hi, Jake. How are you? I'm very well. How are you? Better than I deserve. What's up? I drive an older car, a little bit higher mileage, and I was wondering if it would be smart or irresponsible to buy a$45 ,000 car around there. Okay. Well, the way we determine if something's irresponsible around here is ratios, and percentages. So let's play with some numbers for a minute. Number one, you're paying cash? Probably putting down and then financing. Okay. I can answer your question then. No, it's irresponsible. You should never have a car payment. You should ride a bicycle before you have a car payment.

33:14How long have you been listening to the Ramsey Show, Jake?

33:18Dave Ramsey:A couple years now. Okay. Yeah. Cars are the largest purchase that Americans make that goes down in value. and they handcuff you financially. So you'd never need to finance one under any circumstances. There's not a circumstance ever. In 35 years of doing this show, we told somebody to buy a car and finance it. And if you're going to buy a car, you should measure all the things that you own that have wheels and or motors. And if the value of the total of those things and all of those things go down in value, if it's wheels, motors, batteries, I don't care. You add it all up and it goes down in value.

33:57Dave Ramsey:If the total is more than half your annual income, you have too much tied up in things going down in value. So that's boats and campers and RVs and Sea-Doo's and tractors and lawnmowers that are now$12 ,000 and all this crap, right? And cars and cars and Teslas and cars and trucks and anything you want to add up, anything you want to have. and I've got a bunch of stuff with motors in it. I'm an old redneck. I like things with loud mufflers and I like cars. I like trucks. I love all of it, but they all suck as an investment. And so they need to be a small part of your financial picture. Otherwise, you've got too much invested in things going down in value and then you're scratching your head and wondering why you're broke, why you're doomed to be middle class.

34:47Think about this. And this is something I've spend a lot of time thinking about. If you synthesize the data, you're going to end up with about 60 % of working Americans having car payments. Then you look over and say, well, that's suspiciously close to the amount of people who are living paycheck to paycheck, which is also suspiciously close to the amount of Americans around 60 % would say they are concerned about retirement because they don't have enough saved. That is a very interesting correlation.

35:14Dave Ramsey:it's the car payment and they're concerned about their student loans for their kids yes because they still have theirs yes because you have a car payment that's what's keeping you middle class it's what's keeping you paycheck to paycheck that's the money that you should have been reinvesting for your future it's tied up in your car payment yeah and many of us have two so in the car industry that they're the cars that they're building today are just fabulous us they're engineering works of art i mean they're the most of the cars there's a few of them piece of crap but the vast majority of cars today are phenomenal the and boats for that matter phenomenal vehicles and uh compared to you know uh whatever the back in the day okay they don't make them like they used to thank god they're a lot better now you know uh but the car industry has also done a excellent job of making people associate their personal worth with what they drive instead of looking at maybe your net worth yeah absolutely but i am what i drive have you seen those things the jokes about if you drive this you're this yes i have and some of them are funny and some of them you can't repeat and so um but yeah they're funny as crud and so but it's i mean And if you really look at it further, it's in direct opposition to what people say their intentions are.

36:40Yeah. Because when you talk to most people, I say, well, what do you want for your life? What do you want for your family? Well, I want for my kids. I don't want my kids to live the life I lived. I want to be able to send my kids to college. I want to be able to retire. I want to be able to play golf. Right? Yep. You say all these things about what you want, but you're not showing it with your dollars if you're carrying around a car payment.

36:57Dave Ramsey:With your actions and your behaviors. You're exactly right. You're exactly right. So, Jake, you got us off on a tangent. Yes, you did. We're preaching to everybody else, not just you now. But no, you don't get to buy the car if you're going to do what we say. Not that one anyway. So, you know, that's the angle. And, you know, you talk about that. That's a funny thing. When we started talking about this years ago, I was doing a seminar with a guy in the financial world. And he said that their company had done surveys and asked people, you know, do you think it's important to save for your children's college?

37:31Dave Ramsey:97 % said yes. Yes. How many of you are saving for your children's college? Three percent. Really? Wow. 97 percent aren't doing what they say is important. Yeah. And that is very interesting. Very interesting number. I don't know if it's that today, but people will say they're not doing it because they can't and they leave it there. And that's not the reason. Exactly. Choosing not to. Declan is with us in Atlanta. Hi, Declan. What's up? Hey, how's it going? My question is, I was a third employee at my company. I own about 1.5 % of it. I was offered to buy back my shares at a$50 million valuation, which in my opinion is low for the company, which is fine, just because we're trying to clean up the cat's a little bit.

38:16Wait a minute. I misunderstood you.

38:18Dave Ramsey:Did you say you own 1.5 % of the company? It's worth$50 million? Yes. Your one and a half is worth$50 million? No, no, no. The company's worth$50 million. Oh. Okay, so it's capitalized at$50 million. Can you sell your one and a half for$750 ,000? I could, in theory. Well, no, it's not a theory. It's a question. Yes, I could. Okay, all right. And so, all right, now your question's what? I mean, I think the company's worth about$250 million, so it's quite low. So that's why part of the reason I wanted to sell. I thought you said it was worth$50 million. The shares are being offered to be purchased back at$50 million by the company, at a$50 million valuation.

39:03Dave Ramsey:Uh-huh. Okay. All right. And you're how old? I'm 29. And what do you make a year? $155. Okay, cool. All right, and your question one more time. You think it's worth a lot more than the valuation that they're offering to buy back at. And so your question is what? My question is, so I bought or I exercised my options to purchase my shares this year, which cost me about 90 % of my savings between the actual purchase of the shares and the AMT tax. So on the surface, I would never have sold the shares at the$50 million valuation because I think the company's worth about five times as much. But I'm wondering if you think it's a bad idea to distill my savings by so much.

39:53You already did it. Well, I can still sell the shares that I purchased at the$59 valuation.

40:03Dave Ramsey:And you bought them for what? I mean, it varies in range from like$15 per share up to... I mean, you said you cleaned out your savings. What was the number you put to buy the whole thing? Oh, well, I haven't paid all this. It's the AMT tax. I don't have to pay until I actually pay taxes in 2027 for the 2026 tax year. Honey, what's the check you wrote to buy the shares? I paid$17 ,000, but I'm expecting to pay another$80 ,000 in AMT tax. Okay. All right. So you got$100 ,000-something including tax invested, and it's worth$750 ,000? Yes. Okay. So let me ask you this. If you had$750 ,000 in the middle of the table in cash sitting in your kitchen table, would you go buy these shares?

40:49Dave Ramsey:You would because you think they're worth 5x that. Correct. Yeah. I wouldn't. It's too big a gamble for me. Scares crap out of me. It's a startup company, brand new, and it's not even publicly traded, I don't think, is it? No. This is private stock. Yeah. And so their valuation is up to them on how they run their accounting. Yeah. which is why it's all over the place. And when they choose to drive liquidity. Are they planning to take it to an IPO at some point? I think it's more likely that we sell, which is another reason I chose to buy the shares when I did, because of the QSBS laws and the tax protections that are provided upon a QSBS liquidation.

41:28Dave Ramsey:Okay, so let me tell you, this is a – you're playing the roulette wheel in Vegas, and you've got it distilled down to where you don't think there's risk here. but basically you put$100 ,000 on the table and so far they stacked chips in front of you that we think we can get$750 for and you're going to push the$750 back on to another bet open to get 5x that or 10x that and sometimes you don't hit red sometimes you hit black and you get Zippo. So you're sliding all your chips in the middle of the table, James Bond. This is a high-risk play.

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43:40Dave Ramsey:Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Jade Walshaw, Ramsey personality number one bestselling author is my co-host. Michelle's in Pensacola. Hi, Michelle. What's up? Hi. um so we're trying to figure out how we can get out of this constant spiral of going into the red every month um my husband has been teaching for 10 years and he only makes 50 000 and so he has a second job working at a grocery store that um they can only schedule in part-time so but most he makes$80 a week. And then he's also trying to do lawn care on the side, trying to see if he can't find somebody to sell woodworking stuff to.

44:31We've both been door dashing, overeating, sparking all the side gigs that we can. And it feels like we're just spinning our wheels. And we have no clue where to go to get income up. He's applied online, and I've been listening to you for a few days. I know that you have to know somebody, and so that's been hard for him to find something else with a teaching degree. He's tried going into the military, and one branch said, no, you know, your GPA isn't high enough, actually, for that route. And so I don't know if I've heard about where you can make digital marketing stuff and sell it on Amazon and it's passive income, but I don't know how legit that is.

45:17Dave Ramsey:It's not. Yeah. So how much debt are you guys carrying? So I have student loans from years ago that are actually in department right now. That's not causing you read then. Okay. What was your degree in? So I actually wasn't able to finish. I was dumb my first year of college. They told me, my high school said, go to a private school. It's great. And then I made stupid choices. Well, what'd you study? What'd you study? What were you interested in? At first it was chemistry. Then I changed to teaching. And right now we've got three kids, seven and under. And so to finish, I'm one semester away, but to finish, I would have to work a full-time student teaching job while paying for the college classes and have to pay for child care while I'm doing that.

46:18And so I can't finish until my kids are old enough to go into school or we can rank them up.

46:25Dave Ramsey:So wait a minute. How much is on the student loans that you're not paying on? About$60 ,000. Okay, and what debts do you have that you're paying on? Car payment? The current, yeah, we have a truck that he uses for his landscaping. Mm-hmm. I don't care. How much do you owe on the truck? Then we've got a family car. How much do you owe on the truck? We looked at the other day, we owe$24, and we could sell for$21. Good, and sell it. And what's the next one? It's a van, and it's about the same. We can get$19 out of it, but we owe$24 on it, too. I just don't know what we would do because we can't get a loan or anything to get another car, and we wouldn't clear anything to have any vehicles after that.

47:16What other debt? That's it.

47:19Dave Ramsey:No credit cards? No, we have a secured one, but it stays at zero. we only got it because of renting a car a few years ago and so it just so you're just only got 500 you're just making the payments on the two vehicles and so it's just a struggle keeping groceries then and the lights on yes okay what how much are you guys how much are you bringing in as income every month combined the two of you um so i bring home probably at most on good months That's about$1 ,000 to$2 ,000 a month. But that's only during the summer while he's able to stay home with the kids. And what's he bring home? So he brings home the$50 ,000 from teaching, maybe a week from his grocery job.

48:12Is he working four hours a week at the grocery store? He makes$16 an hour, and they only schedule him from like 3.30. $80 is$4. That's all they'll schedule him. It's not even worth doing. It's not even worth doing. It's a joke. $3 ,500 from the teaching and, I don't know, another less than$1 ,000 from the grocery store?

48:36Dave Ramsey:Yeah, from everything. Yeah. He brings home, after insurance and everything, we actually get home$3 ,000 from teaching. Okay. Plus your$4 ,000. Do you guys have a budget? How much is your house payment? The rent is$2 ,000. Okay. Do you have a budget? um i just signed up the other day for the free trial with every dollar um and so we've been trying to figure that out good so we'll start there and what you're going to find is what you've just discovered which is obviously your rent's 50 the rent's not the problem so much as the income is the problem yeah but in the meantime on that budget the way you need to line it up is by your four walls and keep those things first and foremost right now obviously you got to pay rent right you You got to do that.

49:22You got to make sure lights and water and utilities are on. You've got to make sure you've got groceries and you've got to make sure you've got transportation. Now, aside from that, all of my focus would be geared towards we've got to work, work, work, work, work and find three, four, five thousand dollars.

49:39Dave Ramsey:Not four hours a week, though, and call that a job. No. The grocery thing, you know, we've spent more time talking about it than he does working. I mean, he doesn't even go over there hardly. Four hours. It's not even worth doing. Yeah. I mean, that's a joke. He's actually talked about stopping that. What he needs to do is start tutoring. What does he teach? So he teaches PE, and that's actually something he's in the middle of trying to do, is start like a homeschool co-op. I don't want to start a homeschool co-op. I want to teach a kid to play basketball,$50 to$40 an hour. Why can't he be a skills coach?

50:17Yeah. offer everybody's in private sports why can't he do private teaching a buddy of mine that played

50:24Dave Ramsey:he played d1 basketball and um and he makes 50 an hour teaching 13 year olds how to play basketball yeah yeah like that's the the home school thing he's trying to can he work with the school can he work with the school and do a camp and put on a camp that's there's so many the point is there's so many ideas i'm worried that he's uh lost his his spark there's a whole bunch of things he's doing not at all yeah and you're listing them an hour a week at landscaping four hours a week at the grocery none of this is anything that's why you don't have any money so we need something that we're working 40 hours a week at in addition to us teaching yeah because and then by the way if you've had if you've got all but one semester in chemistry and teaching you can tutor chemistry so go over at the high school and tell people that you that you tutor kids for on chemistry and they'll come to your house in the afternoons and you charge 40 an hour okay yeah i didn't think about that i'm a chemistry major it's a whole lot better than freaking door dash or 16 an hour bagging groceries yeah yeah and these cars have to go they're insanity you guys have bought cars like you make six times as much income as you make I mean, what the crud?

51:45Dave Ramsey:A$25 ,000 truck? Are you crazy? That has got to go. So keep the van, get rid of the truck, and then quickly pile up enough money to get you a dumb butt$4 ,000 van and sell this dumb butt van. Your car payments are ridiculous.

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53:51Dave Ramsey:Today's question of the day is brought to you by Why Refi? One financial mistake doesn't have to define the rest of your life. If you've fallen behind on your defaulted private student loans, Y-Refi can help you explore low fixed rate refinancing options and affordable payment plans. Go to YRefi.com slash Ramsey. That's the letter Y-R-E-F-Y.com slash Ramsey might not be in all states. All right. Today's question comes from Grant in Montana. He says, you teach your listeners not to panic during a stock market downturn and to just hold on for the ride. Is there ever a scenario where one would consider changing their investment portfolio?

54:33For instance, if someone is getting close to retirement? That's an interesting question. Dave, I'll let you take that. What do you think? I mean, I could tell you what I, I would tend to... Well, the people say

54:45Dave Ramsey:when you get close to retirement to move it, that that is a theory in financial planning called asset allocation. The theory says when you're young, take more risk. And as you get old, move the assets away from risk because you need to be able to count on them. Target date funds. I disagree with the theory and I certainly disagree with the implementation of the theory. And let me walk you through why. Okay. So the typical financial planner that follows that theory will tell you, okay, I'm 65. At 65, you should move your money towards bonds and growth and income mutual funds, which is largely bonds and dividend paying stock companies, and get away from aggressive growth mutual funds, get away from growth stock mutual funds, get away from something that's an S &P, and move even into high yield savings.

55:39Dave Ramsey:Okay, so when you do that, you lower your returns from 10 to 12 percent down to six to or even five to eight percent would be your portfolio change. But you take less risk. The reason that is dumb is that when you retire, if you have saved substantial money, like we teach, and you get there and you've got two million dollars, you've got a million dollars, which people call here all the time that have or have the potential to. We talk to them all the time. We show people how to do that. So if you have$2 million when you retire, you don't need the whole$2 million right then. So if it goes down a little bit the next year after you retire, it's not the big deal because all you're going to be doing is living off of a portion of the returns.

56:32Dave Ramsey:You're not even going to be taking off all the returns. So if you've got$2 million and it's invested, it's making 10 % that's$200 ,000 a year you probably don't need$200 ,000 a year you're probably taking off 150 so you leave 50 in there it's growing and you never are touching the nest egg so the nest egg can go up and down without really affecting your life you don't need the safety when you would need safety is if you have no money now if you got$100 ,000 maybe right but if you've got a million It changes the whole scenario or 500 to a million or 2 million or 5 million or whatever it is. Okay.

57:10Dave Ramsey:And so I'm, you know, I've got substantial assets, millions and millions. So I've moved zero to safety. And here's the other reason that's dumb. Okay. I'm 65. I'm in good health. All right. I'm not overweight. I don't smoke, all that kind of stuff. Right. So all the statistics say once you make it to 65, average death age of a male now is 74, females is 76. But that includes infant mortality. Okay. So when you make it to 65, the average death age is more like 90. You got a long ways to go is what you're saying. So I got 25 freaking years for that to make 6 % or make 12%. And I'm not doing that.

57:56Dave Ramsey:So that's just dumb. So that's why I think the asset allocation theory is just bogus, because it assumes everybody's going to need all the money right now, which you don't, and that you're going to die right now, which you're not. I think you're right. I think this question is probably someone who doesn't have a lot there. And when it downturns, it probably makes them feel the significance of whatever they're pulling off of it. Now, what I would do to his question, and it's a good question, is there ever a scenario considered changing the investment portfolio? Yes. I would change my investment portfolio when I have a mutual fund that is not keeping up with other mutual funds of its category.

58:36Yeah, I agree with that.

58:37Dave Ramsey:And so if I've got a great, you know, the S &P 500 is the baseline of the stock market. And so if my growth stock mutual fund is not outperforming that regularly on average over a long period of time, not on, not in one day, right not in one month not even in one year but if i look at mine about once a year and i go okay is this thing trend lining it should be competing with the s &p and beating it above it yeah if it's coming in less than the s &p i should just be in the s &p it'd be dumber okay be easier i could just dumb it down um and so and i've got aggressive growth stock mutual funds i don't compare those to the s &p i compare those uh to the other indexes that are measuring that market right so i want to though other aggressive growth stock are, is mine underperforming them, then I would change my portfolio.

59:29But you're not changing your strategy. You're just changing your funds at that point.

59:34Dave Ramsey:I would change the funds. I would even change the strategy, but only over a long viewpoint. When you ask this kind of question, when you change your investment portfolio, it's often people that are looking at it every day. And that'll drive you nuts. Yeah. So you need to think on this. think in blocks of time of a year and five years and 10 years and when you think of blocks of time like that then is there something indicating you need to change your mix yeah that'd be okay that'd be fine and um or if something has happened and you know your your view of the world is different okay that's fine so i'll give you an example um if i died and sharon looked at what we were doing and said okay i understood it when dave and i were doing it but i don't like it i don't like that i i'm gonna go all safe just because i want to sleep better uh-huh well she could do that that would be okay and so if i talk to someone that's 78 on the air here and i'm talking to them they just they any amount of variance is going to cause them to stay awake at night i'll just put them in high yield savings that's fine just i'd rather you sleep at night then then you know do this but there's all kinds of evidence that says you'd be fine doing it the other way but if your emotions can't handle it then that's a that's your risk tolerance then we wouldn't do that we wouldn't tell you to do that but um no i uh the the funny thing about the financial world and it seems like today's been the day on this it really has last two days but is that uh the stuff we're taught in that world in georgia studying the cfp materials right now of certified financial planning materials and he and i are having this great discussions over some of the crap they're shoveling out and um he's learning some good stuff academically but it's also is that they present this stuff like it came from the bible or something like it's absolute truth because it came from this group of nerds and this asset allocation model that you have to move to safety as you get towards 65 years old is taught with such fervor that it's as if if you don't believe it you don't believe in the law of gravity or something and so me being on the air for 30 years saying i don't believe it i think it's a bad plan uh all those guys they go bananas on dave ramsey they could the dave ramsey doesn't know he's gonna oh he's gonna cause all these people to lose everything they own they're all gonna be poor because of dave ramsey no they're not they're gonna have a lot more money so um but um do you have the same philosophy uh for things like 529s as the child gets closer to uh yeah same one keep the same yeah because here's the thing you're not taking the risk the day they go to college some of that money is not going to be touched for four years that's right it still has time and so if the market if trump bombs iran and the market drops it has time to recover panic and take it all out and lock your losses in you know in 2008 when the market went in half people talked to warren buffett and said mr buffett you lost a trillion dollars today or you lost a billion dollars today he goes i didn't lose anything i hadn't sold it you know you lock your losses in when you sell it as long as you're holding it you're riding the roller coaster and no one gets hurt on a roller coaster except those that jump off in the middle of the ride and so the same thing's true there now what you could do if you're coming into college and let's say you got two hundred thousand dollars um i might pull the first year out and put it in high yield savings put 50 over there you got it and then that other 150 and then maybe the next year i you know i start talking about that uh but the chances of that statistically being down over four years?

1:03:05Dave Ramsey:Very slow. Almost zero. Yeah.

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1:04:56Dave Ramsey:Well, we wish we could get to every call and question here on the show. If you've got a money question and you want an answer for your situation, head over and use Ask Ramsey. You go to RamseySolutions.com, and Ask Ramsey is our free AI tool that's built and trained only on proven Ramsey principles and answers. So we didn't put anything else in the data set, so you're not going to get anything except a Ramsey answer. If you want an answer from the Internet, go to the Internet. But if you want an answer from Ramsey, go Ask Ramsey. Your question today is easy at RamseySolutions.com. Ask Ramsey. It's a great AI tool.

1:05:38Dave Ramsey:We're trying to train it to be smart aleck like me. It hasn't quite got there yet, but we'll get there. Ask your question today, RamseySolutions.com, or click the link in the description if you're on podcast or YouTube. John is in San Francisco. Hey, John, what's up in your world? Hey, thanks for taking my call. Sure. How can we help? So I'm dealing with three pending debt collection lawsuits right now, And I have another account that's still in collections that's probably going to turn into a fourth lawsuit if I don't get it resolved soon. I'm trying to negotiate settlements, and it's been pretty overwhelming.

1:06:15It doesn't make sense to hire an attorney to fight them or even look into, like, Chapter 7 as a last resort. I don't think I'm there yet, but I wanted to know all my options. What's the amount?

1:06:26Dave Ramsey:How much do you owe these guys? So the four in total is$21 ,000. Mm-hmm. 21.6. The two I'm trying to negotiate, you know, the lowest will come down to$6 ,000. You know, I'll try to offer them$3 ,000, but, you know, they won't budge. I do have around$8 ,000 in savings just to try to deal with this. Okay, so you've got two in court, is that right? So three in court. Okay, and the three in court are how much? Give me the amounts on those each. Okay. So one's$3 ,100. The other is$4 ,300. The other one is$5 ,500. Okay. And these are credit cards or what? They were personal loans that I took out in my early 20s.

1:07:29So you can't take the$8 ,000 and clear the top two?

1:07:33Dave Ramsey:Yeah, you could. Have they offered you settlements on any of these? They offered$6 ,000 to take out of the first two that I mentioned. Love that. Okay, that's$7 ,400 discounted to$6 ,000. Okay, so you could do that, and then you'd be down to$2 ,000. And then you got$5 ,500. Now, personal loans, are you talking about with a bank or a rip-off finance company or what? yeah it's uh it was just like through the bank or through you know um just through you what do you what do you make uh 95 a year why are you behind on these little bitty loans if you make 95 a year so i only started making 95 for i think about a year before that i was making maybe 65 at most yeah but if you make 95 you could have cleared 21 in one year why haven't you

1:08:31uh well i i also have uh some some more debt on top of that how much um twelve thousand dollars on what uh credit uh so about seven thousand dollars in credit cards and the rest in the

1:08:47Dave Ramsey:student loan okay what about how much do you owe on your car uh no car payments are you married uh yes and well not married i have a girlfriend and and one kid okay how old are you 31. okay and you're is this family to is this i'm putting family in air quotes is everybody together like you all live together yes and you're all contributing okay okay i mean i yeah i do want to get married, I just want to deal with the debts first. I don't want her to be liable for any of this. She's not going to be liable for it. Yeah, that's neither here nor there. I think part of cleaning up the situation, all of this is a mess, not just the financial side.

1:09:35So part of cleaning up this situation is going to involve the relational side too. And I think you'll be shocked at how much peace you get from putting a nice little bow on your family situation and making it legal. And then now you can actually have real support as you go and start cleaning up this mess. And to Dave's point, you make$95 ,000 a year. I would.

1:09:54Dave Ramsey:You are not bankrupt. That's one of your answers. Okay. Yeah. You're not bankrupt. Take the money that you have, clear off the first two. Now you've got the$5 ,500 one and you never said what the fourth one was. Well, it's... The fourth one was$9 ,200. 92. Okay. And that one's not even in court yet. So you kind of have to focus on what you need to focus on. The first two that are in court, you can clear those. And then you're not going to be far away from getting the money that you need to clear the third one. You make enough money to just pay these things. Yeah. Especially if you get settlement offers.

1:10:29Dave Ramsey:So pile up, you know, you've got 8 ,000 now. We're going to spend six of it and get rid of these two. Get it in writing before you give them any money. Don't give them money unless you get the settlement in writing. Did the offer, the$6 ,000 offer come in writing on email? Yeah, I can ask for it. The only thing that concerned me was that they wanted like my bank account number. No, I'll wire you the money or I'll give you a prepaid debit card number. Go get a prepaid debit card for$6 ,000. Do not give them access to your checking account under any circumstances. Okay. They'll clean you out. they lie okay and so but you know you can clear every bit of this and there's nothing to panic about um i think but here's the deal you're gonna have to get proactive and get after this yeah you're in a state you've been screwing around for a year your your life is just in chaos and and you need to you need to clean it up like i said marry go ahead and marry the girl you need a budget and see where this ninety five hundred dollars is going or ninety five thousand dollars is going every year.

1:11:30You need to put some formation to your life. And I think that that's going to help you out a lot. And I think that this is just the kick in the pants you need to get there.

1:11:40Dave Ramsey:No more eating out, no more partying, no more happy hour, no more nothing. All you're going to do is work and pay bills and get your life back. Your life is screwed up upside down because you're not addressing these things and they're coming after your throat. And so, you know, You've got to address them. The good news is we can get rid of two of the four that are pending going towards this. Cut up the credit cards. Get on a budget. You can clean every bit of your debt, all of it, everything you've told us about in a year, everything. And what we'll do is we'll set you up on the every dollar account.

1:12:15Dave Ramsey:And, yeah, so our suggestion is clear those two. Get married this weekend. It doesn't cost any money. She's not liable just because you got married. and then the two of you sit down as a husband and wife and start building a life together, which involves cleaning this mess up. But y 'all are just running around and acting like you're freaking 16 years old. And you're getting your head taken off doing it. So this is no longer a game. We're down into adult land now. And that's what we've got to play. You've got to play serious. And no, you're not bankrupt. And no, you know, there's no, you don't need an attorney.

1:12:50Dave Ramsey:because if you go to court with or without an attorney and the and the question the law the judge asks is is this a valid debt yes have you paid it no guilty that's simple you lose the case because it's not a question of your character it's not a question of what happened it's not a question you didn't have a job it's not a question of your mama it's not a question of nothing just simple did you pay the debt that you owe no boom judgment okay That's simple. A lawyer can't keep that from happening. The only thing a lawyer could do is maybe, maybe could be negotiating better than you've been negotiating.

1:13:29Dave Ramsey:Because your offer here of$6 ,000 is not a great offer. But given that you've got eight, I'd get rid of it. I'd do it in a heartbeat. Plus, it's been around forever. So it's time to just case closed. Yeah. So these things, when we ignore them and sweep them under the rug, we not only get a lumpy rug. they have a high rate of resurrection. And now you have zombies walking all through your, they come up out of the grave and you have zombies walking through your house. And because we didn't deal with them. And so what you've got to do is take the zombies out fast, hardcore.

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1:16:00Dave Ramsey:Patrick's in Madison, Wisconsin. Hi, Patrick. How are you? Hey, how's it going, Dave? Better than I deserve. What's up? So I'm 23 years old. I recently graduated college, been working for a little bit here, and I anticipate my salary over the next year being about$85 ,000. Good. What did you get your degree in? I'm working in software. I studied business. Okay, good. Great. That's where life brought me right now. Yeah, well done. Good for you. $23 ,000 and$85 ,000 is no chump change. Good job. Good job. Thank you. And so I have, I guess my question here, I have about$25 ,000 in student loan debt.

1:16:43Dave Ramsey:and that's about I think it's 4.25 percent right now whereas I could initially I was trying to pay that off as aggressively as possible but now I'm kind of doing some of the math here and my Roth 401k I could hit the 24 500 limit there and that seems to be a lot more money in the long time so I did the math I like calculate the difference between what I would Otherwise, I'd probably otherwise do about$10K towards that per year. So it's really looking at$15 ,000 per year compound up until I retire. And it almost seems more the math checks out to where maxing out the wrong. You're leaving things out of your math formula, though.

1:17:33Dave Ramsey:The things you left out of your math formula are probability of completion and also risk. and neither one of those are mathematically factored in, and you've added risk by leaving the student loan in place. And here's what we found. We did the largest research project on millionaires in North America ever done. We studied 10 ,167 of them. The number of them that said, Dave, we became a millionaire by not paying off my student loan and instead investing was precisely zero. No millionaires did your plan. None. They all said, I'm going to get completely clear of debt, have a clean life, be 23 years old and making$85 ,000 and be investing aggressively.

1:18:23Dave Ramsey:You should pay off that$24 ,000 in one year or less if you're making$85 ,000 and you're 23 years old. and then start your 401k. And don't put a dime in investments until you get that stupid student loan cleared up. This is not a freaking pet. It's not a leverage project. You left risk out of your equation. I guess I'm just worried about, like. Okay, you do what you want to do. I told you what to do. Now you go do what you want to do. Aaron is in Cincinnati. Hey, Aaron, welcome to the Ramsey Show. Hey, thanks for having me. Yeah, so my question is, we're basically baby stuff five, I would say, somewhat.

1:19:13Dave Ramsey:My wife's family, they have 30 acres. They gifted the kids all an acre. And we sold our house last December, and we moved in with them. And her uncle is going to be the one building the house at a much better price than what we could ever buy. And so my question is, so we have the numbers of basically$130 ,000 down for the house. And I'm wondering if I should, depending on how the build goes, to cash in my wife's 401k of$37 ,000 in case things go over at the end. I have$127 ,000 in my 401k, and she's a stay-at-home mom with our two kids. No, you should not cash in a 401k to do a build. And no, you should not be$37 ,000 over on your build.

1:20:06Dave Ramsey:You need to do a budget in detail and then pick the appliances and the tile and the flooring and the brick and the roof that fits the budget. Right. And if your uncle does know what he's doing, the budget should be accurate. Right. I guess the concern was her sister and brother both build houses by the same guy, and I guess what gets thrown around is always it's going to cost what's going to cost, and they try to stay within budget. Oh, so he doesn't know what he's doing. I guess one could assume that, right? Yeah. I mean, because I just built a house, and it was millions of dollars, and it was within 1 % of budget.

1:20:55Dave Ramsey:Because the builder put the budget together. We went over the budget before we broke ground, and I told the decorator, my wife, and the builder, this is the freaking budget. We're not spending more than this. So make it work. And guess what? We did. Okay. All right. Don't plan to fail. No, I don't want to plan to fail. Well, I mean, you're hiring a guy that fails. The last two times he failed. And you're already thinking about cashing in a 401k. How am I going to cover the failure? No, we're not going to do that. That's not an okay way of doing this. This is what happens when your uncle builds your house.

1:21:33Dave Ramsey:You know, they draw the plan on a paper bag on the hood of a pickup. I sure hope not. God, no, no, no, no, no, no, no, no, no, no, no. Don't do that. No. Guys, when you're building a home, the reason people screw up building homes is You need a detailed blueprint that produces a detailed budget, that produces a detailed schedule, line by line by line. So before you break ground in June, you should know in March we're putting in the trim. The cabinets are going in in February. We know exactly when they're happening to the day, February the freaking 12th. And the cabinets are going to cost this because we bid them out.

1:22:14Dave Ramsey:the uh the plumbing fixtures are going to cost this because we bid them out there's this many bathrooms this many toilets and this many sinks and we're not buying the engraved sink we don't have a budget for it or we are buying the engraved sink because we have a budget for it whatever i've done both but yeah the gold inlay crap or whatever that goes in the formal powder bath shoot me but i did buy it i was gonna say i know you got it though yeah you know i got it you know It's SWI. Sharon wants it. But we didn't make it up after we started. You didn't go over budget. That was in the deal when we started.

1:22:48Dave Ramsey:The powder bath gets extra upgrade, right? But when you set your budget, surely a portion of it is that contingency, that 1 % or whatever that it will go over. Well, I mean, you can have in your mind a contingency or whatever. And you just have the money to cover it. But don't plan on, well, we just don't know we're making this crap up as we go. Yeah, you can't do that. You know, no, because I mean, I built a house one time and a country music star built a house across the street and it took them two years longer and they spent literally twice as much money. It's unbelievable. To build the exact same square footage.

1:23:25Dave Ramsey:And both of them massive houses. Both of them massive. But because the country music star and her decorator used the, I'm going to build by change order method. I'm going to make it up as I go. I'm going to look at it and then decide I don't want it and change it. Yeah. And they would put stuff in, tear stuff out, put stuff in, tear stuff out, reorder stuff. The builder was ready to shoot them both. It was like a career house. He couldn't get away from it. It was like the worst nightmare next door to the best possible scenario. So you don't have to do that. And if your relative is incompetent, don't use your relative.

1:24:01Yeah, because he knew that going in.

1:24:02Dave Ramsey:Yeah. And, you know, well, he's giving us a good deal. He's not giving you a good deal if he's going to be$37 ,000 over. That's not a good deal. That's not, that's not, that's, you have to have a predictable environment in these things and control the controllables. It's project management. And when you do that, then you're going to be fine. And be careful about building on family land where we're all in a compound. What happens when you want to sell it? Yeah, that's a good point. Who's going to be pissed? All of them. Because you broke up the commune. You're locked in. Yeah. But daddy gave me a free acre.

1:24:36Dave Ramsey:Yeah, but it comes with you're stuck there forever. And the number of times you want to live there forever is pretty close to zero. So be careful with that part, too. Nope, we don't cash out 401ks to go cover overages that shouldn't have occurred because we should have had a good budget. Moral of the story. And that's how you do it. So my builder and I were laughing about this. He's become a good friend. The last three guys that built houses for me are all good friends. because we simply developed a plan and executed the plan. You didn't give them a headache. And I'm the easiest guy. I wrote checks exactly when I was supposed to because I had the money.

1:25:14Dave Ramsey:And there's no bank involved. There's no appraiser involved. Yeah, that's great for them. There's no bull crap involved. And so we just write a check, build the house, and write a check, take a monthly draw. They get their money. They stay on track. They don't have any issue with me as long as they're on track. And if something's wrong, we come over, we look at it, we fix it, and we keep going. We stay on track. So he said you need to write a book on how to build a house, but it really wouldn't be that long I just covered it in that segment

1:26:00Dave Ramsey:Welcome back to the Ramsey show in the Fairwinds Credit Union studio Jade Walshaw, Ramsey Personality, number one bestselling author, is my co-host today. Katrina is with us in Minneapolis. Hi, Katrina. How are you? Hi. Great. Thanks for taking my call. So my husband and I are new to your show. I recently just finished your book, and we have an entirely different view of our situation than we did a little while ago. Thank you. I'm going to cringe really bad when I read this, by the way. So I'm sorry in advance. Okay. All right. So we have$620 ,000 in debt outside of our mortgage. Whoa. Yep. My house is worth$800 ,000.

1:26:47My husband makes$880 ,000. I make about 70K. Bulk of this is medical school debt. But I guess what I'm interested to hear your opinion on is just how fast or what level of gazelle-like intensity that you say do we need to go over or do we need to shovel ourselves out of this? I'm wondering, after finishing your book, you know, I'm like, we need to eat beans and rice. We need to sell our house. We need to sell our vehicle. and I've just kind of got this overwhelming weight on me.

1:27:30Dave Ramsey:I don't think you need to sell your house, but I am going to recommend you get really, really serious about this. Now, let me make sure I've got my numbers right here, okay, because these are wild numbers. He makes$880 ,000 and you make$70 ,000 for a total of$950 ,000 a year income. Yes. That is so cool. It is. Congratulations. What do you do? really hard what's he doing hospitalist okay um he's a what he's working hospital hospitalist yeah wow way to go okay and you have six hundred and ten thousand dollars in non-mortgage debt that's all your debt except your house yep and okay let me just ask a simple question then so But$610 from$950 still leaves$300 ,000.

1:28:23Okay.

1:28:24Dave Ramsey:Why could you not just pay this off in one year and still have a pretty decent life? Yeah, I think we can do it at a pretty intense rate. Our expenses, we have four kids. His student loans are astronomical. The student loans are what we're talking about. Yeah. So$950 minus$610 is$340. Yeah, what are the expenses that you need that would stop you from doing what Dave is saying? I mean, I'm thinking about your mortgage. How much is your mortgage? I think we pay easily over$7 ,500 a month. Okay. We have a suburban payment. No, the suburban payment is part of the$610. That'll be gone. Yes. Yeah, so, you know, as of right now, my husband kind of told me he thinks we could get the car and some of these additional things taken care of immediately.

1:29:23Yeah. No, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no, no.

1:29:27Dave Ramsey:This is the guy that borrowed$610 ,000. Yep. Okay, his vote of doing this gradually is not a good vote. Okay, I want you to hear me. I want you guys to pay your house payment, eat, live on$150 ,000 or$200 ,000 a year, and put$60 ,000 a month on this debt, and you will be done in one year. Tell us about the list of smallest to largest. Tell us what's included in the 620. Obviously, you said medical. Obviously, you said student loan, but give us some real numbers, and we're going to show you just how quickly this is going to go. okay so we have$70 ,000 in car$30 ,000 again you're going to cringe in a jet ski $20 ,000 in an RV so um okay yeah and then the other ones are medical and then everything else is your student loans yes okay so if you're paying 60 a month you would pay off the RV and the sea do and a portion of the car the first month and the next month you'd pay off the car and then we would be down to just$60 ,000 a month going on the student loans.

1:30:37Yeah, and you'd have all those payments back, by the way. Yeah, yeah. Because what's the total of payments between the car, jet ski, and RV?

1:30:45Dave Ramsey:Yeah, that's several thousand dollars. $120 ,000, I think. No, no, no, no, no, no. That's the balance. That's not the payment. Yeah, so I go back to the simple math, and I want to just stay there, okay? Yeah. Because you guys have ridiculous numbers. So$950 minus taxes minus$610, and that means you have zero debt at the end of the year. And that also pays all the payments on all that debt because all of that's going towards the debt. Okay? So the only thing that has to come out of the balance is your house payment and food. And that's not too beans and ricey. You still got$150. That's what I'm saying.

1:31:27Dave Ramsey:Or so income to live on after I did all that. and beans and rice by the way let me just say this because i know there's somebody out there you said cringing but let me just remind you beans and rice while living in a you know million dollar house and driving a new suburban that doesn't feel too bad and keeping the rv you know what i'm saying and keeping the art right so your life is not changing that much you're just reallocating you're redirecting the money that's it yeah and think about at the end of that year where you'll be standing. $950 ,000 income and no debt at all except a house. Yeah.

1:32:01Wow. Wow. Your biggest battle here is the husband.

1:32:08Dave Ramsey:Don't do this. You don't have to convince me right now. Yeah. Don't do this gradually. Do it in one year. Mathematically, with the numbers you gave me, there's no excuse for this taking longer than a year. Okay. And you guys, you're going to have You probably have a ridiculous lifestyle, and it's probably okay once you get all this debt paid off because you make a million dollars a year. Jeez, it's pretty incredible. So I'm thrilled with your income, but I will tell you what normally happens in these situations. Doctors, people in the medical field, they have spent their whole lives in school, and they finally get out of school, and they finally get some income, and then they just go buy crap like this everywhere.

1:32:52Yeah.

1:32:52Dave Ramsey:And then they kick the can down the road and they keep their student loan around. Because they're comfortable. It's comfortable. You're comfortable. When you're making a million dollars a year, you can do a whole lot of stupid and get away with it. You really, you can be stupid for a long time and get away with it. That's right. It's different. A million dollars a year covers a lot of sins. It really does. But it doesn't mean it's a smart thing to do. So I call it doc-itis is what I call it. Because docs come out of school with a unique thing. They've been holding their breath. You know, other people went to school for, you know, 12 years of undergrad or 12 years.

1:33:26Dave Ramsey:And then they went to four years of undergrad. But add another five or six or seven or eight or 10 years for a doc, depending on their specialty. Right. And they've been holding their breath all that time. They've been delaying pleasure. Delaying pleasure. And then along comes Dave and says, delay pleasure one more year. And they're like, no, no. Yeah. That's doc itis. No. That's what it sounds like. if you hear nuh-uh, that's doc-itis. That's it. It's I don't want to. I've held my breath long enough. I've delayed pleasure long enough. I'm going to reward myself, and I'm going to put my hands over my ears and go la-la-la-la-la and act like there's not$600 ,000 worth of debt.

1:34:04Dave Ramsey:But he went and bought toy, toy, toy, toy, and didn't pay off the student loans. He had doc-itis. It's straight up. Straight up case. You can see the symptoms are all right there, doc. So I got your prognosis for you, and I got your prescription for you. One year, no life. Clear up your mess, then go have an awesome life.

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1:35:51Dave Ramsey:isabella is in houston hi isabella how are you i'm doing well dave how are you better than i deserve what's up so my question is um what order i should tackle my debt i have 170 000 in student loans. It's broken up into 12 smaller loans. There's 27 ,000 that's in a debt relief program, 4 ,000 on my engagement ring, and then 10 ,000 in a home water system. And so the issue is that the 27 ,000 in the debt relief program is not accruing interest. We came to an agreement with the creditors, and there's like a final deadline. So So the end of my payments would be June 7th of 2028. I pay$1 ,200 a month on that.

1:36:45Okay.

1:36:48Dave Ramsey:Well, then we're still going to work what we call the debt snowball, where you list all of your debts, individual debts, not categories, smallest to largest, pay minimum payments on everything but the little one, and attack the little one. Are any of the 12 student loans smaller than the engagement ring? Yes. Okay. Then that's your smallest debt. Okay. And then your next smallest debt and then the engagement ring. And when you get to the debt relief, I don't care what the plan is. Just pay it off. Okay. Pay it off early. Is it just you? No. So my husband and I both combined. So we pulled together.

1:37:38Our annual income is between 230 to 270. Correct. And so we are really just, we kind of woke up, saw where our finances were, and we were like, okay, we need to figure out how to get rid of this. So we're on the same page. We just really wanted to know, like, order of operation. Yeah. I do have baby number two on the way right now. I'm due in December. And so we were trying to figure out what can we knock out now. We do have, we were doing the every dollar, like trying to assign everything. And we do see that we have an excess of like around$4 ,500 a month. So what we were thinking about was applying all of that to the debt relief program.

1:38:20Because once we're done with that one, I could probably pay it off in maybe like five months. And that's$1 ,200 back that I was thinking that we could reapply. somewhere else. No, let's just pay off smallest to largest. Do you have any money in savings? We have about $7 ,000 in savings. What's your deductible? Deductible for delivery insurance. Yeah. For the delivery, it's like $2 ,000. Okay.

1:38:50Dave Ramsey:I might feather that $7 ,000 nest a little bit until baby comes. Put$3 ,000 or$4 ,000 more in there. And$4 ,000 a month. You haven't cut your budget yet. You're just getting started. Right. No eating out, no vacations. You're broke. No, no$20 ,000 nurseries for new babies. You're broke. Got it. You're a hundred and I mean, you're 200 and something thousand dollars in debt, but, um, no, we don't, we have learned that people have a higher probability of finishing when they have a positive feedback loop. And we've been doing this for 30 years. And the positive feedback loop is pay off the smallest to largest.

1:39:33Dave Ramsey:And the 27 is a single payment now that it is all combined in the debt consolidation thing. And so when you get to that, your water softener will be gone. Several of your student loans will be gone. Your other stuff will be gone. But you're going to get to it pretty quick. You are. And this is coming from somebody who's had the types of student loans that you have more. And let me tell you, it does feel good when you have a list of 17 or 22 debts and you go through smallest to largest. And because you did it that way, you're able to check off five or six of them off the list. Yeah, you leave them on the refrigerator with big red lines drawn through them.

1:40:08Dave Ramsey:You done, you done, you done, you done. And you just keep attacking it. Yeah, that that there is a there is a positive thing to that. And what it does is actually we figured out that personal finance is 80 percent behavior. It's only about 20 % math. And so feedback loops are more important for behavior modification than the actual math is. And the math that you're using is not interest rate math. In your case, you're using cash flow math, which is not a bad. I understand that. It's not an unintelligent way of looking at it. It's just doing math didn't get you into this mess. If you'd have done math, you wouldn't have done any of this.

1:40:48And when you start looking, we're looking at the probability of you completing it. And if you start looking at it, well, if I could just get$500 back in my pocket, for a lot of people, that's enough to make them go, well, that was all I needed.

1:41:01Dave Ramsey:Yep. Renee's in San Diego. Hi, Renee. Hi, how are you? Better than I deserve. What's up? Well, the reason I'm calling today is because a couple of years ago, my husband and I went into a partnership with my brother and sister-in-law. We bought a storage unit with some warehousing and some other commercial uses, office primarily. Long story short, my brother-in-law wanted to scale and buy additional ones. Found out it's a lot more difficult to find those because they don't generally sell them. And my sister-in-law decided they really didn't want to participate in renting it anymore, which left that to my husband and I.

1:41:41We're also retired, and we had just wanted a place to park some additional money we had so that we could spread out our assets. Is it for sale? Not officially. Officially put it up for sale. Get rid of it. Well, we started down that road and contacted, my brother-in-law contacted a REIT that had been interested in it when we purchased it. I contacted another group that owns property and those kind of properties in the same city. And we contacted someone who buys storage units kind of as a collective. So you talked to four people. And, of course, three. And those three were interested, but they were trying to purchase it like fire sale.

1:42:23Dave Ramsey:List it with a real estate agent by the end of the week. Local, because we also looked at, you know what, there was a fourth one, and that was a large commercial brokerage that specializes in that. That's fine. They used a formula that didn't work because they were using a big metro area. instead of the area that was storage units in, which is scarcity of land surrounded by Indian reservations and no opportunity to expand central location. So their algorithm did not provide for that kind of new life. They obviously don't need to list it. So how the question is, if I go... Get a real estate agent that's a commercial real estate agent that knows how to crunch numbers on storage units.

1:43:07Dave Ramsey:Is the thing full? Is it full? Is it rented? Well, we upped the rents because it was under the plane. Is it rented? Some of it is. All the industrial... What's your vacancy? Right now it's 75 because we upped the rent. 75 % vacant? 75 units or 75 %? 75 % occupancy. Oh, occupancy. Okay. All right. So, yeah, yeah, you've got a pretty heavy vacancy then at 25%, and that is going to devalue it because the valuation is not based on scarcity of land. The valuation is based on cash flow. How much money does this create? And then you use a cap rate on it. That's how commercial brokerage is done. And so it doesn't matter where it is.

1:43:52Dave Ramsey:What matters is not an algorithm. It's a simple thing. If I'm going to put a million dollars in it, I want to return on my million dollars. If I'm going to put$10 million in it, I want to return on my$10 million. And I don't care about the Indian reservation, except to the extent it creates money for the bottom line of this project. And so you guys need to get your occupancy up probably because it's pretty devalued right now. See if you can get it filled back up and then raise your rents a little bit, not so much. And you're going to spend some effort on it, and then you're going to get it up for sale.

1:44:24Dave Ramsey:And what you're looking for is a commercial real estate agent that knows this. They don't have to be a large national firm, but they probably need a CCIM, which is the designation in that or something like that, so that they actually know how to run the cash flow analysis on it and put it up for sale and get it sold. But you call four people. You've talked to four people. That doesn't solve your problem. You know, you've got to get the thing on the market and get it gone. This thing's run its course. You're out of here. You're done. And don't play around with it and call me five years from now and go, we're still stuck.

1:44:57Dave Ramsey:Well, list it and sell it. Sell it. If you have to sell it at a pretty good deal, that's fine. Get rid of it. Put some money in your pocket and wave bye to the brother-in-law. Thank you.

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1:46:18Dave Ramsey:If you're ever in the Nashville area, drop by. We do this show from 1 to 4 every day, Central Time, 1 to 4 p.m., Monday through Friday. We're on the glass in the lobby of Ramsey Solutions. So folks, come by. We have free homemade chocolate chip cookies and coffee and wonderful bookstore and museum, all kinds of stuff for you to see when you're here. And we usually have 52, 200 folks sitting out here watching the show. People dropping in from every state in the union and even a couple from Canada today. So there you go. So check it out. Come out and do that. Also in the lobby there is the debt-free stage where people come to do their debt-free scream.

1:46:59Dave Ramsey:And that's where Toby and Jamie are standing. Welcome, guys. Hi, Dave. Hi, Jade. Hi, Jade. Where do you guys live? We're from Casper, Wyoming. Awesomeness. Well, welcome to Nashville. Thank you. Thank you. And how much debt have you two paid? We've paid off$176 ,000. I love it. How long did that take? Five years and nine months. Wow. And your range of income during that time? We started about$120 ,000 and currently up to$160 ,000. Good job. What do you all do for a living? We are both teachers. Awesome. I teach middle school band. And I'm a fifth grade teacher. Awesome. What kind of debt was the 176?

1:47:36Dave Ramsey:It was our house. Way to go. Looking at a couple of weirdos. That's right. Way to go, you guys. Excellent job. So what's this house worth? About$400 ,000 at this point. Yeah, I love it. And your nest egg is up to what these days? Retirement accounts are just north of$700 ,000 right now. Look at you. A couple of millionaires. A couple of baby steps millionaires standing here that are teachers. And you look young. How old are you? We are both 43. Come on now. Wow. Excellent. Excellent. You know, when we did our study of Baby Steps Millionaires and Millionaires, we found that the third most likely to become a millionaire is a teacher in the career field.

1:48:16Dave Ramsey:It's engineer, accountant, teacher. That's the order. And people always question us on that, and yet here stands two of them. Yes, in the flesh. Well done. Thank you. Thank you. I love it. I love it. Congratulations. Congratulations. Okay, so five years and nine months ago, you decided to concentrate on paying off your house. Why? So we first found Ramsey Solutions in 2008 after reading the Total Money Makeover. Immediately paid off all of our consumer debt. Since then, we've cash flowed two basement remodels, two master's degrees, three car upgrades, and a boat. In 2012, we took Financial Peace University, and I've since taught the class three times to the staff at my school.

1:48:54Wow, thank you. My pleasure. It's so much fun. And then in 2020, we decided to finally just start aggressively pounding on the mortgage using all the margin on our monthly budget. It would have been paid off even faster had I not had a car accident, which caused us to dip into our emergency fund and find a different used vehicle.

1:49:11Dave Ramsey:Yeah. Okay. Wow. Wow. Wow. Do you do voiceover work or something? We practiced this a lot to make sure that we were ready. You got this on lock. Good job. He speaks in front of audiences all the time. He's a natural. I can tell. Good job. Wow. Way to go, guys. It's incredible. So you've taught the class. How much consumer debt did you knock out back in the old days? Oh, we had a little$3 ,000 loan on the car. Not big. No, it was very, very small. We just realized after reading the book, oh, this makes sense. Let's do that. And just lived a cash lifestyle after that. That's right. Yes. Wow. And staying on a budget, living on a plan.

1:49:49Dave Ramsey:Absolutely. A couple of teacher salaries and doing great. Way to go, you guys. Thank you. Thank you. You're 43 years old and you're millionaires in Casper, Wyoming. Wow. Very nice. Very nice. How does it feel to not have a payment in the world? It's freeing. We can just do what we want. And we're very goal-oriented people. So we set goals and then we work towards that. And we're also very visual. And so a funny story is that Toby came to me in 2020 and he wanted to build a paper chain to represent our mortgage. And so each link on that paper chain was$1 ,000. And then so the kids got involved during budget time.

1:50:29And each budget month, they would get to tear off a paper chain. And then that chain hung in our kitchen all across through my dining room. For five years? For five years. Until it didn't. Until it didn't. And so it's just, it's very freeing.

1:50:43Dave Ramsey:Yeah. So at which point you look at him and said, I thought I taught fifth grade. Exactly. Yes. Unbelievable. Very cool. So, you know, this is interesting because very few people that I know that are teachers went into the teaching profession saying, oh, I'm going to be a millionaire. That's usually not like how that's not the way the wiring works. Right. But once you start seeing this, you said we're goal oriented and you can see how if you followed a system, like if you follow a lesson plan or, you know, if you follow whatever, any kind of a process that's proven that we could get there, then the hope kicks in, doesn't it?

1:51:19Dave Ramsey:Yes. Absolutely. We could see the eventual progress. And at that point, it's not even a question of whether or not we're going to accumulate wealth. It's how soon can we get there? This process works. Just follow it. So when you teach folks this strategy, what's the number one piece of advice? What do you tell folks who are maybe not in the same situation as you, but they're teachers and they're thinking, man, how am I supposed to do this? I think for us, the biggest thing was communication with each other. As I said before, we're very goal oriented. So we would discuss what is our next goal, what is our next big achievement that we want to reach, and then how are we going to get there.

1:51:56But for us, it was that communication between each other and agreeing on where we wanted to go. Wow.

1:52:02Dave Ramsey:We appreciate you coming all the way to Nashville to testify that this works. That's pretty cool. Wouldn't have missed it for the world. What's the first big thing you're going to do to enjoy some money now that you did this? Well, the kids don't know this yet, but we are going to take an upcoming vacation to Disney World. Yay! The mouse. Just announced it to them right now. I did. That's pretty cool. We should have had some Mickey ears here for them or something. Wow. That'll be fun. Wow, they're excited. That's cool. Very cool. Very cool. And how old are the kids and what are their names? Bring them up.

1:52:36Come on up, guys.

1:52:38Dave Ramsey:We have Riley, and she's 12. Riley's 12. And Mr. Kellen is 8. All right. 12 and 8. That's exciting. And this has happened over the last six years. So Callan doesn't, I mean, when it all started, he didn't know much. But Riley's been there for the whole ride. Yes. All the way to Disney. Yep. All the way from paper chains all over Mama's dining room to Disney. Yes. Exactly. And the day that I heard Mom and Dad were millionaires. Wow. Very, very cool. It's a big deal, guys. You know, when your kids are growing up while you're doing this and they see what Mom and Dad are doing, And they see goal-oriented.

1:53:14Dave Ramsey:They see communication between the two of you. They see a budget. They see we're sticking to this. We're sacrificing to win. And then they hear that you win. Those guys, you really did change your family tree because more is caught than taught, as Rachel says. And you can teach them all day long. But when they watch you and see this example and they live, their body takes this in. Yeah. And they can't unlearn it. Yeah. It even changes who they'll date in the future. Thank God. Yeah. Yeah. They truly do understand when it's budget time, and they understand what that means to make a budget and how to spend your money appropriately.

1:53:49Dave Ramsey:Yeah. And where money comes from. Then you get to go to Disney. Yeah. Hey. I like it. Well done. No notes. Very cool. Excellent. Very cool. Life is good. Life is good. Well, way to go, y 'all. I'm very proud of you. Thank you. You did everything the right way. You've executed, executed, executed, and now you've reminded some 30 million people with this debt-free scream right now that this can be done. And teachers can do it, too. For those of you that are doubters out there and Debbie Downers, you're looking at two of them that at 43 became Baby Steps millionaires. $700 ,000 in investments, a$400 ,000 paid-for house.

1:54:26Dave Ramsey:The last step was baby step six, paying off the house five years and nine months, making$120 up to$160. All right, Toby, Jamie, Riley, and Kellen, Disney bound, count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! We're debt-free! We're debt-free! We're debt-free! We're debt-free! Wow! Ha, ha, ha, ha! Wow! That's how it's done. Wow. That's impressive. It is impressive. It never gets old. I mean, you can't argue. Two teachers. All the things he said they cash flowed. They just locked in. Locked in. See, when I've got guys like that that I'm talking to, that's why I'm not going to talk to you if you want to argue.

1:55:18Dave Ramsey:This works. It works. Don't argue. Just do it. Just do it. Just do it. When are you going to start? When are you going to start? now. Yeah, I'm talking to you. Just do it.

1:56:13Hey, George Camel here. So you're thinking about buying or selling your home. It's exciting, but there's a lot to think about, and all those decisions can feel overwhelming. Well, here's the good news. You don't have to tackle the process alone. Ramsey's Real Estate Homebase is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start to finish guides, a podcast, and even an in-depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps toward your home goals, go to RamseySolutions.com slash real estate.

1:56:45That's RamseySolutions.com slash real estate.

1:56:55Dave Ramsey:Our scripture of the day, Ecclesiastes 7-8, The end of something is better than its beginning. Patience is better than arrogance. Bill Bradley said, Ambition is the path to success. Persistence is the vehicle you arrive in. Okay. There we go. Amy is in Louisville, Kentucky. Hi, Amy. How are you? I'm doing good, Dave. I've got a couple questions for you. My income is$2 ,100 a month. I'm on disability. My savings is$6 ,000. And on my debt side, I have credit cards for$650. My monthly bills are$688. My yearly property taxes and insurance are$1 ,700. Now, here's where the twist comes in. I got a construction loan to build a tiny home on my property for$112 ,000.

1:57:52as a reconstruction got 30 ,000 of that fees are 4 ,700 which is a total of 34 ,000 so i have around 78 ,000 left this is a 6.75 interest but he has bailed on me and i can't find any assets under his name so i'm not even sure if i'm going to be able to recoup that i'm sorry who bailed on you The contractor that was supposed to build my tiny home.

1:58:22Dave Ramsey:For$120 ,000? Well, it was$112 ,000, but they've only gotten$29 ,165 so far. Have they done any work? Nothing. They have applied for permits incorrectly. Why did you give them money before they did work? The bank did. I have a mortgage for this. I know, but you have to approve it. Yeah, and the bank said this was standard practice. So now I'm on the hook for$34 ,000 with nothing to show for it. Did the permits not get approved? No. Why? Incomplete or inconsistent. They keep getting rejected, rejected, rejected, and now all communications have stopped. So the permits were denied because they were filed incorrectly, not because you can't build the tiny house?

1:59:14Yes, yes, correct.

1:59:18Dave Ramsey:Why does a tiny house cost$112 ,000? That's what I've been wondering. Well, I mean, why didn't you wonder that before you signed up for it? Because of, like, pouring concrete, putting it on a foundation. Where I live, it has to be done a certain way. It has to be, like, stick-built. I thought tiny houses were more like$60 ,000. They are. But then when you put them inside a city limit, they have to be up on a foundation, and then the plumbing and the electric and the sewer and all that good stuff. Which is not another 60.

1:59:54Dave Ramsey:Okay. I don't know exactly what to tell you. Obviously, you've informed the bank not to let any more draws happen, right? Absolutely, yes. Okay. But you have a$31 ,000 loan with a possibility of going to 112, and you're hunting for a new contractor that can execute this deal. but what you're saying isn't it is not standard practice to issue checks to a builder draws to a builder on a construction loan except as work is completed that's not standard practice and so no we don't issue$31 ,000 to pull a permit on a tiny home that's asinine and so you know I don't know who's over there at the bank that doesn't know what they're doing, but I probably am going to just shut the whole thing down, and I'm not going to deal with that bank anymore because I think they're incompetent, and I think you've bought into some kind of idea here with this tiny home construction that this is somehow going to be the best thing for you, and the numbers you're giving us, They don't pass the smell test, okay?

2:01:18Dave Ramsey:Because the purpose of a tiny home is this is a small square footage thing. They're typically not stick built. They're typically rolled in on a trailer and sat there, and you're pouring a slab the size of a deck. This is not an expensive process. And, yeah, you've got to hook into sewer, and you've probably got some tap fees, and you've got to run a water line to it. but none of this is rocket science and none of this should cost you know uh fifty thousand dollars not even close so i don't know this whole thing sounds like it just smells and so when i run into something that i get into like you've gotten into here where the whole thing stinks i just start pulling back and pulling back and resetting what i'm going to do and how i'm going to do it and um and that may be that you do a tiny house but you do it the proper way rather than the way you were trying to do it um and just because it's in a city limit doesn't mean it costs fifty thousand dollars to build a slab that's just not true in louisville kentucky it's not that it's not that onerous you're not in california where they've got regulations out there but um this is louisville and so they got regulations but not like that so um now i i i think you've um gonna have to gather a whole lot more information to decide what your next steps are and um you know if you have a contract with someone that has taken 31 000 from you um and they've done that fraudulently, then I guess you need to see an attorney for that.

2:02:55Dave Ramsey:But if you've discovered the person has no assets, then you're probably going to have a hard time getting any of that money back because you can sue somebody and win that has no assets and you get nothing. It's not worth the trouble. But I would look into the legal side of it as well. Christina is in San Jose, California. Hi, Christina. How are you? Hi, Christina. Hi, Christina. Thank you for taking my call. Sure. You're a little bit muffled. Can you speak directly into your phone, please? I'm speaking directly into my phone. Okay. Thank you. How can we help? Well, my husband, I'm 62 years old, and my husband wants to get a Sealock loan.

2:03:38Dave Ramsey:For what? So we've been on hold since 2004. Say that again. So we have owned our home since 2004, and he wants to upgrade the bathroom, the master bath, and the hallway bath. What's it going to cost? Roughly around$60 ,000 to$80 ,000. To do? Oh, wow. Okay. That feels steep. Yes. Because he wants to enlarge the shower, put new tile. And you obviously don't have the money to do that? No, we don't have the money. Okay. What's the size of your—do you have any money in savings? We do have money in savings. We have probably around$300 ,000 in savings. Is that retirement savings? no it's not retirement well why don't you just use some of your $300 ,000 to build your bathrooms that's what I told him otherwise what's the point of it I know he wants to get a healer so I mean that's why I'm calling because I don't want to create more debt no you already have debt?

2:05:10you already have some? you said you don't want to create more you have some already? No, we don't have any debt. Okay.

2:05:16Dave Ramsey:The house is paid for. And you said you're how old? No, I'm 62 years old. The house is now paid for. Oh. It's worth a million dollars. And we still owe about$300 ,000 on this home. Well, I mean, in California, you'll have to sign for the HELOC. And if you refuse to sign for it, it won't happen. Yeah. Oh, yes. Thank you so much. Yeah. So just tell him no. Wow. Just tell him I'm not going to sign for the HELOC. You gave her the ultimate legal loophole. Good job, Dave. I've never heard someone cheer like that after. But by the way, you know, you also have$300 ,000 sitting in savings. You also have a husband that you've got to deal with.

2:06:02Dave Ramsey:I mean, this is not, I don't know if I'm cheering about anything here. I know. I'm just looking at the fact that what you have in savings is what you owe on the house. But good luck convincing him to pay the house off. Yeah. I don't know what your household income is. I'd consider paying off the house and building your nest egg and building your bathrooms with cash. And by the way, when you end up building them with cash, they probably won't be 60 to 80. You'll probably do it differently. That puts us out of the Ramsey Show and 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.

2:06:48We'll see you next week.