To Win With Money, Submit to the PROVEN Plan! (Hour 1) - Transcripts

January 24, 2023

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George Kamel & Jade Warshaw answer your questions and discuss: Investing for retirement when you have no outlet through your employer, "Should I buy a house with my girlfriend?" Why the Baby Steps are a proven plan to win with money, Join Jade's FPU Class! When you should convert a 401(k) to a Roth, Why momentum matters more than interest rates when paying off debt. Support Our Sponsor: Zander Insurance NetSuite PODS Moving & Storage Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Transcript

Live from the headquarters of Ramsey Solutions broadcasting from the pods moving and storage studio it's the Ramsey Show where America hangs out to have a conversation about your life and your money. I'm George Campbell joined by Jade Warshaw this hour. The number to call is 888-825-5225. And if you enjoy the show, you like the show, you listen on a regular basis, I've got a quick ask of you, would you consider subscribing and following wherever you're listening, leaving a review wherever you're listening and sharing it with a friend. It takes you about three seconds, but it could change someone's life given the encouragement they need today. And word of mouth is how this show spreads and we want to make that happen this year. So let's get to the phones.

Jordan is kicking us off in Kansas City. Jordan, welcome to the show. Thank you. What's going on? Thank you. What's going on? Yeah, I was wondering about my job does not provide any kind of retirement plan and was wondering how do I prepare for retirement in the future

when I have a job that does not give me any kind of retirement? What kind of job is this?

I'm a full-time minister. Oh, cool. Oh, cool. Does your, your, the church that you're with,

they don't offer a 403 B or anything like that? They offer nothing, just, just my salary. And

that's it. You know, so I would probably get, first I would get connected with a smart investor pro because they're going to be able to really go through all the options with you off the top of my head. I'm thinking of you as self-employed. So my mind is immediately going to solo 401k SEP plan. And I would look into some of those things and see what, what you kind of gravitate towards. But at the end of the day, I'd want to work with a professional because they're going to understand the ins and outs of it, especially since you're working for a nonprofit. I feel like that's kind of the monkey wrench in this that makes it slightly different from any other

kind of independent contractor situation. Okay. Are you married? I am. Does your spouse have a retirement plan through the employer? She does not. She's a stay-at-home mom to our children. Okay. So there are a few options you can do, which would be a Roth IRA. And you can also do a spousal Roth and you can contribute, you know, I think it's up to 6,500 in 2023 in each of those. And so that's a great way to get started on this. That's going to be outside of your employer.

Anyone can open one of those. And the other thing you can look into, do you have a high deductible health plan? It's a low deductible health plan. Okay. So there wouldn't be an HSA component with that? There's not on the one we're on. Okay. And all of this may change in the future. Do you see yourself long-term? You're going to stay at this church? They're going to continue to not have any retirement options? That's the current plan.

Yeah. Okay. The other option beyond whatever, you know, if you aren't eligible for the SEP IRA or the solo 401k, you can just invest in a brokerage account. This is outside of retirement, which means you're not going to have any tax advantages, but that money can at least grow for you. And the good news is there's no contribution limits on that. Oh, that'd be great. And so you will, it's going to use after-tax dollars. And, you know, when you withdraw that money, you will be taxed on the gains. But if you hold it for over a year, it'll be long-term capital gains. And so there are options out there for you. I don't want you to not invest just because there's no retirement plan through your employer.

Exactly. And never know what the future holds. And it's always good to have something in the back burner that you can rely on in retirement. Absolutely. Absolutely. And what was the

professional group that you recommend? If you go to, if you go to RamseySolutions.com and click on Ramsey Recommends, they're called SmartVestor Pros. And these are investing professionals, financial advisors all across the country that our team has vetted. They've got the heart of a teacher and they're going to steer you in the Ramsey way. They're not going to sell you crappy

products. And that will help you at least explore your options for your role. Okay. Okay. That is the, there's someone I know that works in insurance and he was trying to get me into those index universal life, whole life, permanent lending. I always remember Dave Ramsey was, and he was trying to talk it out, though, you can have like $800,000 grateful by the time you retire.

And I'm like, no, David Ramsey says not. That's right. That's right. Yeah. Index universal life, whole life, permanent limber. That's right. This is a good friend, do you like this person? What was that? Do you like this person? They're okay. Okay. Well, just pray for them, Alex, but also stay far away from their financial

advice. Never trust an insurance salesperson for investment advice. I know that's right.

Exactly, exactly. They will steer you to give them commissions. It's not going to make you rich,

it'll just make them rich. Jordan has practiced the art of forgiveness for that friend.

Ooh. Yes. His pastoral duties. Wow. Well, hey, Jordan, thanks for the call. We're wishing you the best and thank you for your literal ministry. What an awesome, awesome field to be in. All right, let's go to Alex.

Alex is in Phoenix. Alex, welcome to the show. Yes. Hi, guys. How's it going? Going good. How are you? I'm doing well. Just another day at work. What's your question today? Your question today? Yes.

I'm 34 years old. I have a two-year-old daughter. Me and my fiancee are looking to get married probably next year with kind of our plan, but we want to buy a house because we've been renting for three years now and our rent just keeps going up every time they renew our lease. We're running out of space and we've both been working on all our baby steps. You know, she still has like about $2,000 with a credit card debt, but you know, I'm trying to follow you guys' principal. I take off all my debt. I'm debt-free. We have a $10,000 emergency fund. We have about another five, six grand savings besides that and our lease is up in December of this year and I've talked with Churchill Mortgage. They said that, you know, contact them after I had two years of tax returns and this will be my second year of come independent contractor on my own small title business. Cool.

I'm just, it's just me. There's no other employees.

All right. So I was just, my question is, am I in the right position to be looking to buy a house? Is it the right time for me? You know, should I wait longer? Should we save more money?

If it were me, if it were me, Alex, I would hold on because I know that rent is getting higher and I know that's tough, but out of your own mouth, you said, you know, I'm trying to follow the plan. I'm kind of trying to do this right and if you want to follow the plan, we would tell you to wait until you're married to buy that house together. Then you can combine your finances and from what it sounds like you said, your fiance, she's got 2k of credit cards and you have no debt. So at that point, once your money is combined, you guys could pay off her credit card debt and you could have, it sounds like $15,000 saved because you said you had 10k and then you had

another five. So you'd have $13,000 saved? Roughly, possibly a little bit more, but some of it's tied

in my business account. Okay, have you done the research around what it would take to purchase

a home in your area and what that down payment needs to be? You know, I haven't really talked to like a loan officer or anything like that. I spoke with one person at Churchill Mortgage and she said I wasn't ready that I needed a couple more years of tax returns and that was like two years ago.

I think I would get through this. I think I would get through this wedding, man. I'm saving up. You got big expense coming up. Wait until you're married. Do not buy a house together before you're married. Wait to see how that all shakes down. Then once you get a pile of money enough for a down payment, 10% minimum, then we can go ahead with the home purchase. I know you're so close. Give it another year or two. You guys will get there. You'll do it the right way.

Thanks for the call. This is The Ramsey Show. So this is the time of year when everyone starts setting goals, going to the gym, quitting smoking, losing weight. Good for you. But what's equally important is making sure your family is taken care of by having term life insurance. Look, I've heard all the excuses and I'm telling you it's not expensive. It's not complicated. And you need to do this right now. So stop whatever you're doing and go to Xander's website right now

and get your family protected. It's an absolute necessity. I'm George Campbell joined by Jade Warshaw this hour. This is The Ramsey Show. You jump in. We'll talk about your life and your money at 888-825-5225. Well, Jade, I've been inundated on social media. People have been sending me this video from a large, you know, someone in the financial space who's a creator. Yes. And she's been posting her version of the seven baby steps in a very passive aggressive way by crossing out all of ours and saying what she recommends doing instead. Yeah. You're kind.

Is that, is that spot

on? Is that a good summary of the video? That's spot on George. Yeah. Yeah. I'm with you. People have been sending this to me and I actually follow this person. So I was like, I saw it in their feed and I was like, what is happening? But it's interesting because it's got all the seven baby steps listed and you guys know seven baby steps. Let's just go over them real quick for the people who don't know. If you don't know, this is the Ramsey plan in a nutshell. This is the baby steps.

Baby step one, we're getting $1,000 saved for our starter emergency fund. Baby step two is we're paying off all of our debt except the mortgage using the debt snowball. Baby step three is we're saving three to six months of expenses in a fully funded emergency fund. Baby step four is we're putting aside 15% of our household income into retirement. Baby step five, save for your children's college fund. Baby step six, pay off your home early. And finally baby step seven, build wealth and give. Now, George, It's important to note that this is a proven plan over decades. I'm talking, well, the show's been on 30 years. So there you have it. Okay. It ain't broke.

It ain't broke. Don't fix it. So my girl here, she got beside herself. She got different. She started crossing out each one and saying, no, you don't have to save a thousand dollars. Just start saving. Just save any amount.

It ain't broke. It ain't broke. Don't fix it.

Don't fix it.

Perfect.

You know what? That's a smart goal right there. Not. A smart goal is about giving yourself very clear parameters. Being specific. Being specific, just save any amount. What is that? A dollar? Will a dollar do it? I don't think it will.

Paramedors. A thousand. Is that too much? I don't just start saving. To your heart's delight.

And you want to know what I love about our plan is it is for everybody. It works for everyone. It doesn't matter who you are. It doesn't matter your income. What your situation is. The plan works for you. Okay, let's look at the second one. We say that step two is to pay off debt all debt except the debt snowball. She says no Pay off only the high interest debt and you can do whatever method works for you George. Wow, whatever This is wacky wavy. I'm like one of those things outside. This is one of those way

Just live your truth, you know, oh, yeah, just live your truth. Don't put yourself on a box You just start paying off the debt willing listen, whatever method works for you The reason I need a plan is because my method ain't working, right? So I need someone to tell me what plan what method actually works

There's a reason that there's experts out here because you didn't know and that is okay It's okay for you not to know we're here to give you a specific plan. All right number three George

Oh, this is a gear grinder

Hurt me. She says you don't need three to six months You can do the three six of the three to six months of expenses you can do this while you're completing the other steps So basically she's taking a play at the fact that we say you need to work the baby steps in order

Do not invest until you have a fully funded emergency fund Yeah, she's saying it, you know, just start saving try to get that fully funded emergencies Go ahead and invest say for the kids college throw a little bit at them. Yeah do whatever you want

Yeah, if you want and and you don't need to have three to six months before you invest you can just

Perfect invest now that way George, you know that way if you have an emergency just pull from your 401k. That's right. Perfect

That's right. Horrible ideas. HVAC goes out. I wasn't quite there because I was investing Well now I got to rob my 401k or take out a HELOC Which is by the way what most Americans are doing if you listen to the show They back themselves into a corner because they don't have the fully funded emergency fund. That's right. And they start doing stupid with steroid

No, that's right a good teacher teaches to the class. They don't just teach to the this one little segment of people Yeah, I teach to the class. All right. Here's the next one number five save for your children's college fund She just crossed it out and wrote eliminate debt. What does what the heck does that even mean? Okay, what does that mean? Just what kind of we don't know just just go to school do it cash for you know Do any cash? I don't know

Okay, what kind of we don't know? I don't know. I don't care. She real quick

It doesn't even make sense Here's my thing on this. Okay, and then here's the kicker number six We say pay off your home early because we want you to build wealth We want you to enjoy the freedom that you've worked for then we say baby step seven build wealth and give she crossed them All out big red X through the center and rope just save and invest for the long term for goals that matter to you

Okay, pick anything out of the clouds. This feels like it's like you've been playing monopoly for too long

And you just flip the board because you give up. Oh, I flipped the board I was like Jesus when he walked in the tabernacle. Just flip those tables over. Whoo I'm mad George because this this is the thing you need a plan and you need to submit to a I don't care What plan I hope you follow the Ramsey plan But the key is you got to submit to the process say I picked this plan I picked it for a reason my way wasn't working. My your way has not been working. That's why you're still broke That's why you're listening to the Ramsey show. That's why you're following this girl online. Your plan did not work So submit to a process and follow it and I hear Dave say it all the time if you do it ish It's a wish it's a wish that was the best alley-oop of all it was. I was I just tossed it right over

I got real nervous I was like, if I get this wrong, Jade's never gonna forgive me.

I forgive you, Georgie.

But it's so true, but it's so true. I was there too. I mean, 10 years ago when I started this Ramsey plan, I started it because my plan wasn't working. This plan of, well, I'll just take out the student loans and I'll get this amazing job at the end. And I'll open the credit card and I'll always pay it off until I can't because I don't have money for emergencies and I had to turn to it as a crutch. And I did it for the cashback and the rewards and the airline miles, but here I am paying 22% interest on $4,000. And I don't feel like it was worth the reward of the 2%. It never is. And so there's a reason this plan works. It's simple. It's straightforward. It's not a choose your own adventure.

It's not a Chinese buffet.

Just do the plan and it works of the 2%. It never is, it never is. Everyone thinks they're the exception, George. Everyone goes, yeah, but in my situation, yeah, but because of my job, yeah, but I only make, yeah, but the way I grew up,

yeah, but my favorite is, well, Dave's plan is only for broke people. Well. Okay, that's very confusing because I keep meeting people who say, I'm a baby steps millionaire. I followed the steps and all of a sudden I'm a net worth millionaire. Yes. So that doesn't sound broke to me.

Bro, the facts don't lie. The facts don't lie. Yeah, if you see this, guys, at the end of the day, what we're trying to say here is submit to a plan. And if I could just add one other thing in here, George, this is kind of beside this, but can I just say, if you're out there, if you're trying to make your way, making your way downtown... Walking fast, faces past. Okay, we got that. If you're making your way out here, if you are a entrepreneur, your influencer, you do not have to pull anybody else down to shine, all right? You don't have to put that saltiness out there, you don't have to tear anybody else's thing down. Just do your thing and you will shine. You've got something for the marketplace. There's plenty of shares for everybody. You do not have to be out here,

and you don't have to be ugly. Walking fast, faces pass.

Okay. Well Jay, the truth is people come at us for clicks, because when you put Dave's name on it, all of a sudden you get 10X the views and 10X the clicks.

So it's kind of a cheap trick. It's a cheap trick, but people think they're making themselves look shiny, but I'm like, it's really just dull in your shine because it's making you look a little salty is all I'm saying. You're looking salty.

You're looking crispy. As I like to say, wow. Well, Jade, you're doing something really cool. You want to walk people through these steps week by week by leading your own virtual Financial Peace University class? Yes George! You put your money where your mouth is.

This is happening. Yeah, I'm putting my money. This is happening. Yes, this is happening. Thank you, George. Because I almost forgot about the main thing. You got too riled up. I got riled up. One is it happening, give me the details. Financial Peace University, guys, it is going to be coordinated by me. It's going to be the class that you've probably all heard of with George in the class and John Deloni in the class and Rachel teaching and Dave teaching. And I am actually hosting that class.

I'm coordinating that class. So that means I'm gonna be in there in the virtual room with you taking your questions, helping you through it. This is starting March 1st. Click that QR code, it's right there on the screen. You can sign up today. Guys, and we're going at mega speed. We're doing two a week. Give me two hours a week of your time. We are going to change your life. I promise you that. We are going to change.

Nine weeks straight. You got two riled up. I got riled up. Okay, what is it happening? Give me the details. Nine weeks straight. And if you're listening. No, not nine weeks, George. Five. Oh, this is the accelerated decision. This is accelerated. Cheerful around.

We're doing it in five. If you're listening, the link, fpu.com slash, get this number, 115-9611. We'll also put that in the show notes. If you're watching, you can scan the QR code. Join this class. It might be the most epic record breaking class, most debt paid off, most dollars saved. And with Jade hosting, I'm going to join just to see what happens in there. Let's go.

And I'll be on my social. This is accelerated.

Cheerful around.

We're doing it in five. Also, let's go. And I'll be on my social too. I'll be on my social. We'll be answering questions.

Let's do it. I'm so pumped for this. All right. Go sign up. FPU. This is your year, folks.

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That's NetSuite.com slash Ramsey. I'm George Camel. This is The Ramsey Show. I'm joined this hour by Jade Warshaw. We're taking your calls at 888-825-5225. Jason is up next in Oklahoma City. Jason, welcome to the show. Hi. Hey. How are you all?

Weird. Doing great, my friend. How can we help? All right. Well, my wife just left a job, and she is looking to roll over her 401K and was given what I feel some very bad advice about rolling it into a 401K Roth or an IRA Roth. And that's my question is, which step would be the best one to take? Who gave her the advice?

A financial advisor from her new job.

Who gave her...

How much was in the 401K?

About $200,000. And where are you guys at in the baby steps? So do you have any consumer debt? Do you have a fully-funded emergency fund?

We do have a fully-funded emergency fund at her choice. I thought I wanted to throw it at the debt. We have $19,300 left to pay off on student loans. We were at $72,000 when we got married in October.

Cool. So there is a time and place for doing that conversion, because you're saying she has a traditional 401K. She wants to roll it into a Roth IRA, which means she's going to pay taxes on that money to convert it. Correct. And you're saying this is a bad idea, and I would agree with you until you're at baby step seven, with a paid-for house, now we have the margin to do that to convert it. So you can do it later. So I'll just push this conversion off until you guys have a paid-for home. And also, I wouldn't be doing any investing until those student loans are paid off.

Are you guys currently contributing? And also, I wouldn't be doing any... I am not.

I believe she is, but I don't know that for sure. Okay. Well, you can do your plan, and you can still become debt-free. We're happy for you. The baby steps would tell you that we're pausing all investing until we've got this consumer debt paid off, because it's going to speed up the process. The goal is to make this short-term sacrifice as short as possible so that we can live like no one else later. Yes. And you guys are on the way to do that. You think you'll pay it off this year? Yes.

How much money do you guys have in the bank?

How much money? She has $18,000 in an emergency fund. That was the only way I could convince her to go after this like this, so that was a

compromise that I made. What do you mean she? I'm confused. Do you guys not have...

Do you have separate bank accounts? No, no, no, no. We have a joint bank account, however, I don't feel good about pulling $18,000 out without permission and vice versa.

Does that make sense? So it's your... You all savings account. Yes.

But she's not on board with using the money to pay off the debt.

I see. Right.

She wants to keep the emergency fund in place. I see. She's willing to go back to baby step two to pay off this debt. She doesn't want to sacrifice the $18k, that's your baby step three, in order to go backwards and do this thing in order.

Correct. She's not on board with this Ramsey stuff at all. Yeah. No, no. Okay. That would be the first step because right now you guys are running on two separate tracks

and it could be a recipe for disaster.

Yeah. What's your plan long term for that? Because if you guys don't get on the same track, you can't sustain that. If I'm you and you've had this conversation many times and it's just not going anywhere, you might want to consider talking to a professional, maybe getting involved, talking to a pastor at your local church, maybe picking up a couple counseling sessions to get you guys on the

same page because you can't go far like that. Correct. Have you guys been through Financial Peace University together?

Correct. We have not. We're actually starting it here in our local town in February.

Oh, awesome.

Did you already buy it? I have not. You're doing one at our church, I believe, and I signed up for it and we're supposed

to go through it then. That's great.

Wonderful.

So your wife is on board with that part? Yes. Oh, good.

Okay, good. That's great. That's great. That's great. I'll do you one better. I'll gift it to you and you can still sign up for that class, but you won't have to pay for it. Okay. Because I'm that invested in this relationship and wanting you guys to get on the same page. Awesome. So hang on the line. Austin will pick up and we will get you Financial Peace University for one year. You can join your local class and you can join a Jade's virtual class.

Class come up in March. Class come up in March.

You sure could. George, you're so generous.

I can't, you know, when it's Dave's stuff, I don't mind.

You're like... Doesn't cost me anything, but it does feel good to be generous and help someone along

their financial journey.

Yeah, that's just what they needed too. So thank you for the call, Jason. Appreciate it. All right, let's go to Orlando, Florida. Elizabeth joins us there.

Elizabeth, welcome to the show. Hi.

Can you all hear me okay?

Yeah, you sound great. Great. Thank you. I think I should move out. I am currently living in Orlando, Florida, of course. The housing market is kind of crazy and I'm not sure whether or not now would be a good time to move out. I'm currently living with my parents, single mom of three after a divorce and that's why I'm living with my parents currently, but I'm ready to regain that independence. Currently on baby step number two, the debt snowball and I paid off about $40,000 in the last few years and have, yes, just student loans left. Of course, it's going to be a big cost having to pay for it now, but I kind of, we need that independence, like I said. I'm just not sure it makes financial sense. What's your income?

My income is 57.

Okay, how much do you have left in student loans?

About 56. Okay. You know, I like the idea of you getting your own footing and getting out on your own. I want to make sure that you're in a good place to be able to do that and you have got a little bit of money, you know, able to do that. Have you priced it out to see like what rent is going to cost, what this is going to look

like, how it's going to affect your debt snowball, that sort of thing? I have and I do have that emergency savings and I'm also saving up for the first, last insecurity. So, I at least have that ready to go before I move out. I'm also planning to move out with a relative, with my older sister. Oh, so you'll have a roommate.

That would be a split cost exactly.

So how much did you say you saved for the, for this move? I would say about not completely yet. I'm getting one more month and I should have about 4,500.

4,500? Specifically.

And how much is it going to cost you per month?

No more than 1,500 is what we decided for my portion of the rent. That feels like a lot comparatively to your take-home pay because are you bringing home

what 3,500 a month? That feels like a lot comparatively.

It's about 4,200 a month. Yeah. 1,500 is a huge chunk of that. Is there anywhere that's more affordable? Yes. Because you're talking about this rent is three grand. Are you guys splitting it evenly? Or is there rooms for the kids?

We're not. We're not.

It's 60-40 because I have my kids. Okay. That's just a lot even splitting it. It just hurts my brain to think of you trying to cover all the bills, all three kids. What are you doing for childcare?

Well, I work remotely, fortunately. So I'm able to keep one of my children home, he's young enough to be able to stay at home with me. The other two are in elementary school. Okay.

Do you have any opportunity? Okay. Okay.

Do you have any opportunity to increase your income? I'm constantly searching for it and would like to have some kind of side something going on. I haven't really found anything just yet, but that is definitely on my radar.

Okay. I'm a little nervous about this.

It's a big percentage of your take-home pay. I want to see you pay off this debt and it's going to slow you down in a big way. So I'm wondering, what's the off-ramp look like for you to move out? Is it a month from now, or could you push it to six months from now and you save up

aggressively and try to knock some more of this debt out? I mean, I'm fine with that and I'm actually, I was hesitant because we were thinking maybe there should be a good time. My sister's kind of ready to go, you know, to make her move back out there as well. And so I don't want to hold her back, but at the same time, I also, and she also says, you know, don't do anything you're not comfortable with.

And I really am starting to feel kind of uncomfortable. Were there any, I mean, if you can keep researching, are there other places that are a little bit,

you know, financially remote? Can you live a little further out?

Yeah. A couple of hundred dollars here is going to make a big difference for you. Yes.

Yes.

I mean, I actually said, let's try looking for maybe nothing more than 23, um, 2300 even. You want to try to get it down to where it's no more than 25% of your, your income so that you're not strapped.

And so that you can work this debt snowball to get it down to where it's no more than this is a tight situation. I would walk cautiously. I would also create a fake budget and see, can I actually live off of this before we make this move? Thank you for the call, Elizabeth.

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Visit pods.com slash Ramsey that's pods.com slash Ramsey. Coming back to the Ramsey show. If you're a new listener, you just caught us in the radio, someone told you to check out this podcast, you're maybe stumbled upon it thanks to the YouTube algorithm gods and you're going to what the heck is this stuff they're talking about with these baby steps? Well, we want to help you dive deeper. And so our team created a really easy to use tool at Ramsey solutions.com. Just click on the get started button, answer a few quick questions and then we will help you figure out the next best step for your financial journey based on where you are at today. We're going to give you the right tools and resources to help you do that Ramsey solutions.com slash get started. All right, let's go to the phones. Jason joins us up next and he is in Columbia, South Carolina. Jason, welcome to the show.

Hi, thanks for taking my call.

Appreciate it. Absolutely.

What's going on? Um, uh, my question is I was trying to put my baby steps in order and I was listing all my debt and um, so I was putting my wife and mine together in there and my question was when I got to the interest rates, you guys say interest rate doesn't matter, but it seemed like that'd be because I have, I have balances that are similar, like a $4,000 one in a $6,000 credit card. And so based off of your methods, I let you off the $4,000 one first, but it has like 13% interest on it and the $6,000 one has like 24% interest on it. So it seems like if I was to ignore the 6,000 and pay the 4,000 one, I'd be getting a lot of interest racked up on the $6,000.

So I'm just kind of curious as to why interest rate doesn't matter.

Well, the reason that we teach that is because a lot of times when you're getting out of debt, it's not just about the math part of it. It's the behavioral part. That's also a huge part of the equation that many times gets left out, right? So we have found, uh, over the years that the debt snowball method is actually the most proven way to pay off debt, which is listing them from smallest to largest. Harvard even did a study about it that showed that when you get those small wins, because if you really think about it, a lot of times the debt that has the lowest interest usually is some of the biggest debt that we have, right? So anyway, it's great to listen from lowest to smallest by balance, and then you're getting those small wins quickly and the more that you get wins, the more that you actually believe that you can do it and you stay motivated. And through the long haul, we actually see more people paying off debt through completion. So that's the way that we, that's the reason that we opt for the debt snowball over another method, which what you're saying would be the debt avalanche method. Does that kind of make sense?

Makes sense? And we found Jason that all this personal finance stuff, it's really behavior. It's 80% behavior. It's only 20% head knowledge. And when you knock out that smallest debt, it actually gives you this little thing called hope that motivates you to get the next debt. And by the way, it freed up a payment for you to apply to that next debt on top of all the margin. And all of a sudden you see some light at the end of the tunnel. And so that is the purpose of the debt snowball. It's to create momentum. And so you're right on paper, if you can do the avalanche method and do it perfectly, then go for it. But the truth is, if you had that kind of discipline, then we wouldn't have been in debt in the first place.

Jason-

Right, I understand, yeah. And I've never had this discipline. I've been- Me either, brother.

That's why I just submitted either, brother. That's why I just submitted to this other guy's plan. Cause I was like, well, he's got money and I don't. So let's see if his plan works. I know, that's right. I did the same thing, man. I had 4,000 in credit card debt. I had 36,000 in student loans, and they were all split up into a bunch of loans. And instead of doing debt consolidation and trying to be fancy and move the debt around and pay off the highest interest first, I just went, I'm just gonna start attacking these from smallest to largest, regardless of the interest rate. And man, in 18 to 24 months, that's the average time it takes for people to get completely debt free.

How much debt do you have?

Total, including vehicles, about, right about $50,000.

And what's your household income?

About $100,000. Okay, cool. That's about normal for people to have half of their income tied up in debt. And that means you can pay this thing off. If you're making 100K, how quickly do you think you'll pay off this 50, doing the baby steps with the gazelle intensity? Right.

I mean, two years from now, I mean, two years from now,

your life is gonna look totally different.

Yeah, we're talking 18 months, right?

Right. We can do this thing, but it starts with going, all right, I'm just gonna go all in on this instead of argue with myself of why I'm gonna do it a different way or tweak it. I'm telling you, go all in for, just try it for six months and see the progress you're making.

And it gets addictive.

All right, I appreciate it. Yeah, man, thanks so much for the call. It's a good conversation and it's, you're not the first to ask that question. And truthfully, for a lot of people, there's not a great answer because it's hard to argue with math, right? It is. But it's also hard to argue with hundreds of thousands, millions of people who have done this stuff and you're like, oh, but they're debt free and I'm not. So,

there's no pudding. There it is. And my thing is like, when I think about high interest debt versus low interest debt, I mean, usually the stuff with the smallest interest is your biggest debt. You know, if you're thinking about student loans, that's like the single percentage stuff. Usually your car, a mortgage. If you list that stuff first by interest rate, you're gonna, it's gonna take you forever. you're gonna lose motivation. If I listed my first debt by interest rate,

I would have had to pay off $90,000 in one shot.

And it take you, instead of a $200 little store card that I had. It doesn't, you know, you gotta go by motivation.

Motivation is what keeps you going. And I like, you know, when you see that interest rack up, it makes you angry. And so I'm okay with that because anger is the fuel you need to get to debt freedom. It always starts with anger. If you're not angry and you're comfortable with your situation and you're happy sitting in your pile of debt, then you're not gonna change. But when you start looking at how much you're giving to lenders every month, through your payments and through interest instead of building wealth for your family, now you wanna punch through a wall. You wanna run through the wall at the Kool-Aid ban once you see those numbers. And so I want you to be angry, because that tells me you're ready to actually change once and for all and change your family tree and change your legacy. So that is another reason. On top of freeing up payments faster and feeling the progress, I want you to have a little bit of pain. we have gotten way too comfortable as a society. Americans have been sitting in their debt in comfort in la la land wondering why they can't build wealth blaming the economy in the white house and inflation and it's the egg prices now.

Oh god. And are we gonna talk about that? Your payments are the reason you're broke. It's not the egg prices. So stop complaining about the egg prices and start looking in the mirror and saying that's the real problem. Not eggs being three dollars more than they were six months ago. I know that's right. So anyway you got me all riled up. George

are we gonna talk about that? At the end of the day your payments. George I'm not adding anything to

that. I'm just gonna sit here and imagine you running through a wall. Well speaking of building wealth you know anytime the price of eggs is making the headlines you know you're dealing with a wacky economy. It's strange times out there. Man. But even news about layoffs and on again off again recession and the crazy high interest rates are no reason to give up on your money goals and we are here to give you a plan for your money. So I want all of you to join us for our building wealth live tour as we show you how to build wealth and actually keep it. So we're gonna be in Indianapolis on February 16th. It'll be Dave, myself, Rachel, and Jade. Then in Austin, Texas you can go hang out with Dave, Ken Coleman, Dr. John Deloni, and Jade. And if you are near or can get to Salt Lake City I'll be there with Rachel Cruz, Dave Ramsey, and Christina Ellis on April the 24th and we'll round it out in May on May 2nd in Anaheim, California with Dave, Ken, Dr. John, and Christina. So we're switching it up.

It's a mixed bag and all of those events are going to be so fun and tickets start at just 49 bucks or you can get a four pack of tickets starting at 175. And all of our fall building wealth events they sold out and so do not wait to get your tickets. You got to get them now before they sell out at ramsysolutions.com slash events. That's the place to go to reserve your seats for building wealth live ramsysolutions.com slash events. And this is your first time on the building wealth tour, right Jade?

It is. I'm so excited. I feel like I'm finally going to get to meet you guys and like we're

going to chop it up and it's going to be a great time. I'm so excited. Yes. The personalities, we all hang out after the event and take photos for fun and you know they'll sign your books. I don't have any books to sign so I sign all kinds of random stuff. Ooh. I've signed t-shirts. I've signed, you know, hats. Okay. Whatever you want. It's just fun. It's fun to meet people and hear their story and little snippets.

Obviously, we don't have 28 minutes with each person. True. But even just that quick like, hey, we're on baby step seven. We paid off our, hey, we're baby steps millionaires. Yes. Hey, we just paid off another debt. We love celebrating those wins with you all and the crowds have been absolutely

electric. Okay. Whatever it is. Yeah, I'm excited for that. Just being able to celebrate where

people are on their journey. I think that's everything, right? Well, and like live events, like we're back. We're doing them now. And a lot of people, y'all haven't been doing anything fun for a while. And so there's something magical about just going somewhere with a fun crowd of people who are on the same journey as you. And you go, oh, we're not crazy. There's a bunch. There's thousands of other people who want to be weird, too. That's right. And that is so encouraging. It's one of the reasons financial peace university is so powerful because you're around real people who are on that same journey.

So looking forward to that. Ramsey solutions.com slash events. Can't wait to see you all on the road this spring. All right. That puts this hour of the Ramsey show in the books. My thanks to Jade Warshaw, my co-host, all the guys in the booth. We've got Austin, Ben, James, Zach, and Andrew and you America. Thanks for tuning in today. We're going to be back real soon right here on the Ramsey show. Hey, George Camel here. If you love the show and you want a deeper dive on your money journey, we've got a weekly newsletter that gives you helpful articles and tips on following the Ramsey way. Just go to Ramsey solutions.com today to sign up for the

newsletter. Again, that's Ramsey solutions.com to sign up for our weekly newsletter. Hey, it's James, producer of the Ramsey show. This episode is over, but check the episode notes for links to products and services you heard about during this episode. Thanks for listening.

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