How to Take Control of Your Money! _ Ep. 1 _ The Best of The Ramsey Show

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Transcript

00:05Hey guys, I'm George Camel, co-host of The Ramsey Show, and I'm here to introduce a limited series

00:10that we've created called The Best of The Ramsey Show, where we've put together episodes featuring

00:15some of the top clips from the show. You're going to hear how to take control of your money,

00:19some of the most shocking calls, calls about relationship problems, real estate, investing,

00:24Dave Ramsey rants, our takes on current events, and more. And in this first episode,

00:29we walk through the seven baby steps to winning with money, unpack why credit cards are not your

00:34friend, explain the debt snowball method, do some myth busting around building wealth,

00:38and dive into why you need an emergency fund. So sit back, relax, grab some popcorn,

00:45maybe some rice and beans, and enjoy. So George, 30 years ago when I started teaching this stuff,

00:50I was first teaching people how to get out of debt, live on a budget, be generous,

00:56live on less than you make. So you have a plan, you avoid debt, you save money for emergencies,

01:01and later for investing. And all of those principles work, but people kept saying,

01:05which one do I do first? And so I started laying out, well, you should do this first and that

01:10first,

01:10you should have an emergency fund before you start your 401k. And then I figured out it's easier to

01:17have an emergency fund if you don't have any payments. And so you need to get out of debt first,

01:21because of course I learned my lesson the hard way going bankrupt and getting out of debt and

01:27learning how important it was to be debt free as a process, as a part of building wealth.

01:32So all of that started to formulate after a few years of teaching in various settings and what

01:40became Financial Peace University. It used to be called life after debt. And it started becoming

01:45what we now call the baby steps. And the interesting thing is that now the baby steps have gone into

01:51the total money makeover book, which has sold almost 10 million copies. And they have become

01:57the proven plan, the shortest distance between where you are now and wealth, where you are. If

02:05you'll live like no one else later, you can live and give like no one else. What is the shortest

02:10distance? And we need a path to run on because the way you eat an elephant, it's overwhelming.

02:18Do I do my 401k with the match or my kid's college? Or do I have an emergency fund? Or

02:26do I pay on this

02:2618% credit card debt? Or, or, or, or, or, and nothing gets done. You get paralysis of the analysis,

02:34you get

02:34frozen. Absolutely. And this step, these baby steps have worked for me. They've worked for millions. And

02:39it's really simple. If you do it, they work. And it all starts with baby step one, having this foundation,

02:44saving $1,000 for a starter emergency fund. This is just a small buffer between you and life before

02:50we start tackling the debt. Exactly. And if you have $1,000 already, great. Just set that aside.

02:56That's your baby step one. Any money you have, that's not retirement, anything you can sell that

03:01is not retirement, you're going to liquidate it. If it's not retirement, you got some stock over here

03:06that grandpa left you. You got a gold bar under your bed. I don't know what it is, but you

03:11got any money

03:12that's above $1,000. Maybe you got $10,000 in savings account. That's $9,000 you've got

03:16that you don't need past baby step one. We're going to put it all on baby step two. And baby

03:22step

03:22two is the famous one. That's the debt snowball where you list your debts smallest to largest.

03:26You pay minimum payments on everything, but the little one, and you attack the little one

03:30with a vengeance side note, baby step one should not take you more than 30 days maximum. You need to

03:37work extra, sell some stuff, have a garage sale, put the kids on Craigslist, whatever you got to do here.

03:42Let's get it done. And we're going to get busted into this, get $1,000 quick. Baby step two,

03:48you should be debt free, but your house, now you may have to sell a stupid boat. You may have

03:53to

03:53take an extra job, but most people that have followed the total money makeover baby steps

03:57in Financial Peace University are debt free inside of two years. Yeah. And that's with doing it with

04:04some gazelle intensity, like you talk about in Financial Peace University. And once you pay off all

04:08that debt, now you've freed up all those payments, right? You have that income back in your life.

04:11I like to have no payments, but a house payment. Wow. We're breathing easy. And then we can move

04:16on to baby step three, where we save three to six months of expenses in a fully funded emergency

04:22fund. This is the final buffer where we say we're never going back into debt because we

04:26are the bank now. Yep. Grandma's rainy day fund. Why? It's going to rain. Dave, you need

04:31to be positive. I'm positive. It's going to rain. You need to be ready when crap happens.

04:36There's a pandemic coming around every corner. There's something coming. And if you have $20,000

04:40cash in the bank, three to six months of expenses, whatever it is, and you have no payments, you

04:46are the third pig. And the three little pigs, the one that's in the brick house when the

04:50big bad wolf comes. You're ready for life. You're ready to go. Now you're ready to build

04:56wealth. But you just now have gotten up to ground zero. You've just now gotten up to even. When

05:01you have that emergency fund and you're debt free, now you're ready to build wealth. And

05:09into good growth stock mutual funds in retirement plans. Start where there's a match. Beyond the

05:15match, always do Roth. And if you've exhausted Roth and match and still are not to 15%, then

05:22go on to a traditional 401k or IRA. But do Roths before traditional and do match before Roths.

05:31It's mathematically in your favor to do that. Up to the 15%. Don't do 20%. Don't do 11%. Do 15%.

05:40While you are doing Baby Steps 4, you're also going to be doing 5 and 6 simultaneously.

05:44Absolutely. So Baby Step 5 is where we're saving for our children's college fund. And this is going

05:49to look different for everyone. There's no set number here because it really depends on your

05:53situation. Did you have the baby last week or is the baby 18? That makes a difference on how much

05:58you need for college, right? What you got to do for college. It's like, is this an oh crap moment

06:02or,

06:03hey, we're going to be diligent and safe? Did we wait almost until too late? Now they have to go

06:07to

06:07college debt free. They cannot participate in this epic student loan system failure that

06:13is called America right now. It is horrible out there. Do not let your kids go in debt.

06:18You do not have to go to debt. Go to community college for free for two years. Go to in

06:24-state

06:24school. Work six jobs. Get scholarships. Our student loan problem is a parenting problem. Mom and

06:31dad let kids sign up for crap they couldn't afford. Bad mama. Bad daddy.

06:37They got to have the conversations. That's where it starts. And there's a reason you say Baby Step 4,

06:41invest for yourself before the kids. Because there's a 100% chance you're going to retire.

06:45There's a 50-50 chance or less these days that your kid's going to go to college.

06:49And graduate. Yeah.

06:50Yeah, this is less than 50% chance they're going to graduate. So this is important. So while you're

06:57doing 15%, you do whatever you need to do for your kid's college, whatever you decide to do for

07:01your kid's college. Beyond that, if you can find any money, you do that on Baby Step 6 and that's

07:05pay off your house. Start chunking on the house. Now, when you're in 1 through 3, you are so intense

07:11your friends are freaking out. Your grandmother thinks you need counseling. You are gazelle intense

07:16like a gazelle running from a cheetah. When you're in 4 through 7, you're not intense anymore.

07:22You are now intentional. You're just doing it on purpose. But you're no longer on beans and rice.

07:27Your own beans and rice, rice and beans. Scorched earth on 1 through 3 until you get those

07:31three things done. Now, get that house paid off. The average person following this stuff

07:36is paying off their home in about 7 or 8 years. Now, that tells us that the whole program is

07:43taking about 10 years. And the average Baby Steps millionaire, the average everyday millionaire

07:47that we've studied, we're finding them become a millionaire from the time they start with

07:51intensity followed by intentionality, become a millionaire in about 10 and a half years.

07:57Yeah.

07:5811.2 years, 10.6 years are the two numbers we keep running into. So this is completely possible.

08:04Today's question comes from Diane in Arizona.

08:07My husband and I are in Baby Step 2 and are working hard to pay off our debt. The one

08:12issue

08:13we struggle with is not using credit cards. We use them to pay our utilities, groceries, and

08:18other monthly bills, but we never carry a balance. By doing this, we're able to travel for vacations

08:24for free using our points. What's wrong with doing this if we're not going into more debt?

08:30The age-old question, Dave. The age-old question. We've been exploring this topic on the fine

08:35print because it's one of the biggest objections we get here at Ramsey. People are going, well,

08:40Dave, I pay off my card every month. I get some free stuff. What's the harm? Right?

08:44Right. So we should clue in Bank of America and Chase what portion of their marketing is

08:51working the best, and it is this crap. The vacations. The points.

08:57This is the one. This is the one that's got people believing in stupidity still after all

09:02this time.

09:03Yeah. And here's what happens, and you can listen to the true cost of credit card rewards.

09:07This is the second fine print episode that we released, and we dug into this with an ex-Capital

09:12one insider. Okay. What did they say? She said they run 10,000 experiments a year on people

09:19to figure out what's going to get them to spend more, to use the points, and one of the biggest

09:23ways they do it is through the points because you know how the points work. They don't say

09:27it's $500. They say you're going to get 128,000 points that you can use to redeem flights that

09:32cost $74,000, and the points change every day, and there's blackout dates, and there's restrictions,

09:38and on top of that, the whole 2% cash back. That one is one of my favorites because you

09:43know what 2% of $1,000 is?

09:47$20.

09:49$20 to spend $1,000, and that's not a great deal.

09:53So let me get this straight. If you spend $10,000, you get $200.

10:01Ding, ding, ding.

10:02That'll make you rich.

10:03Yeah.

10:03Spend $10,000, get $200. That's a formula for wealth building right there.

10:08We did an analogy.

10:09Did you people go to grade school?

10:12Listen, Diane, here's the thing. We did this analogy in the podcast about Chuck E. Cheese

10:17because this is what it reminded me of, Dave. You go to Chuck E. Cheese, and Dad gives you

10:20a $10 bill, and you get these coins.

10:22It's the claw on Toy Story.

10:23Yes. So you get your coins, and you're so excited to spend those coins that you spent

10:27$10 on, and you go, and you get all the tickets, and you get 400 tickets, and you go to

10:32the

10:32table at the end of the day, and you go, wow, I can get any prize. And they go, no,

10:36you get

10:36Sticky Hands and a Pack of Gum. And you go, wow, I spent $10 for Sticky Hands and a Pack

10:41of Gum.

10:42That cost a quarter.

10:44Yeah, and you go, I got screwed.

10:46Yeah, I think.

10:47So here's the thing. I don't have big buildings, Dave. The credit card companies do. They're sponsoring

10:52every stadium in America, and they're doing it with billions of dollars that they're making

10:55off of the backs of these people who are overspending.

10:59Of people like you!

10:59Yes.

11:00Yeah. So here's the thing. To start with, you're not going on vacation for free. That

11:08is an absolute, asinine, stupid statement. It is not true. You might have got your airline

11:13ticket for free, but everything else on the vacation was not free. So you're spending money,

11:17and you're going on vacation when you should have been working, because you're in debt. You're

11:21not supposed to be going on vacation when you're in debt. We follow everything you say.

11:25No, you don't. You don't go on vacation when you're in debt, and you don't go out to eat

11:29when you're in debt. You work, and you work, and you work, and you clean your dadgum debt

11:35up. And that is, that's the Ramsey plan. Now you can say, you can go do your plan if you

11:41want, but don't say you're doing my plan when you're going on vacation, because it's just

11:44not true. And here's the thing. The arrogance that is required, the intellectual arrogance that

11:56is required for you to think that you are taking on billion-dollar companies who have algorithms

12:04that know what bottled water you drink, and you are somehow beating them, and you're fleecing them,

12:11you're getting an airline ticket, and it doesn't cost you anything. You really are pretty arrogant

12:17to think that you're actually winning at this game. I mean, honestly, do you understand that

12:24when Citibank, when you call them, your zip code is pulled off your NSX code, and the person

12:30answering the call, if it's a friendly call, is a person of the same accent as you. If you call

12:37from the South, you'll get a syrupy Southern Bell accent. And if you call from the wicked

12:43Northeast, you'll get a wicked Northeastern accent. You're going to, these people screw

12:49with you on levels you have no idea, and you think you're beating them. Yeah. Absolutely

12:55incredible. So here's the thing. We did study, we did a study of millionaires. We studied

13:0010,000 of them. 10,167. Not a single one told us, we became millionaires with our free vacation

13:09points because we ran all our utilities, our groceries, and everything else through a credit

13:13card, and then we went on vacation for free, and it didn't cost us anything, and that's how

13:17we built our wealth. Not one said that. Isn't that odd, Diane? So here's the thing. People that ask

13:25this question are people that think they're beating the system. Let me tell you how you

13:30beat the system. You don't play. Don't play in the system. Yeah. You know what it's like?

13:36It's like being a mouse in the maze, and you get to the cheese, and you think, I won. I

13:40got

13:40the cheese. And you zoom out, and you go, no, I'm just a part of a giant social experiment

13:44that exists to take my money. That's what it is. So you can play that game, and that's

13:49fine. You can get your vacations, but I'm not in the business of trying to gain points.

13:54I'm trying to gain wealth. I want to complete the baby steps. I want to pay off my house. I

13:58want to give outrageously, and that doesn't happen by paying off my card every month and

14:03reaping the benefits of 2% cash back. You know the Chuck E. Cheese thing's funny as

14:06crap. Oh, it's great. The team did a great job with the edits. We got the coin sound and

14:10everything. You got to go listen to it. Those tickets come out of there, ski ball or whatever.

14:13They're just coming out of there like crazy. You've got this long line of tickets, and your

14:17little kid, they think they're getting the big prize, and you get nothing. You never get

14:20the big prize. You get nothing. You spent $10 to $20 to get a prize that cost less than

14:25$0.50. And the same thing's happening when you go to book these flights, and you go, well,

14:29we can go to Boise. Yeah. I don't think Martinique was on the list, was it? No. You're not going

14:36to the Bahamas first class. I'm sorry. So Belize and Bermuda are not on the list? No. No.

14:42No. San Diego's not on the list. Nashville's not on the list. No. It's blackout. Blackout

14:47dates. What's blackout mean? They don't go? Oh, no. They just won't take you. That's

14:52what it means. I think you can do a lot better by using a debit card and using cash and

14:57saving

14:57up for your own dang vacations. Yeah. You know where I go on vacation? Anywhere you

15:01want. There you go. That's how that works. And you know when I use those credit cards, that

15:07always works. That's how it happens. Haven't had a credit card in, my gosh, it's George.

15:12It's coming up on 30 years. Wow. We should have a party. We should. We can't use points

15:18to pay for the party, though. In Belize. In Belize. I'm in. How about Cabo? Let's go

15:23to Cabo. I'm in. We're heading there. Man, I'm telling you. Brian is with us. Brian's

15:28in Pittsburgh. How are you, Brian? Dave, I'm good. Thanks for taking a minute to talk

15:33with me. My pleasure, sir. How can we help? So I want to tell you, about six weeks ago,

15:40I ran into a friend of mine that retired, and he was telling me how great it was. And

15:45asked me, how much longer do you have? I said, 12 years. And he started telling me, get ready,

15:51debt-free. That's the only way to go. I hear him. Don't pay a lot of attention to it. My

15:56son

15:56tells me a week after that, hey, I'm listening to this Ramsey show. Never heard of it before. I said,

16:01what is he, new Howard Stern? I don't know. Never heard of it. Yes, he is. Howard's got much

16:08better hair than I've got. Yeah. So he tells me this a couple more times. I'm on a trip for

16:15work.

16:15I got a lot of windshield time. I turn it on. I listen to six podcasts back to back to

16:20back,

16:21and I'm going to tell you, I'm hooked. I get it. I am bought in. Wow. So I heard you

16:25say, hey,

16:25you got to know everything that's going out, everything that's coming in, and what's your

16:30debt? So I did that. I spent about 30 hours on that last week. And let me tell you, it's

16:35scary.

16:37It's emotional. It was tough. And so I've got some debt. And my question for you is,

16:46I have about $12,000 and change that we have invested in the stock market, single stocks.

16:52And is it smarter to leave that there as a savings? I know there's a risk there. And

16:57or is it better to pull every penny out of that and put it towards the debt that we have?

17:02And that

17:02might would take care of, I don't know, 20, 25% of it. But my goal, I mean, I want

17:10to be debt-free.

17:11I got 12 more years to retire, and I want to be debt-free when we get there. And I

17:14wanted to do it.

17:15And then my wife's bought in on it now. Okay. So you got about $50,000 worth of debt and

17:19$12,000

17:19in stock? $66,247 to be exact. All right. Good deal. What's your household income?

17:27About $180,000, $190,000 annually. Okay. All right. So you've been listening and you know some of the

17:34lingo now and some of the process and the baby steps and all of that, right? And so baby step

17:39two is

17:40where you are paying off all debt except a house using the debt snowball, listing your

17:44debt smallest to largest, paying minimum payments on everything but the little one, attack the

17:49little one. We stop all investing temporarily, and we use all money that we can get our hands

17:57on that is not in a retirement account to throw at baby step two. And that's a standard baby step

18:03two answer, which would lead us to cashing out your stock and paying off a fourth of your debt.

18:09Okay. Not saving like your, when you talk about emergency funds, let me leave that there.

18:14I mean, we got no cash saving. How much cash do you have in savings?

18:18Uh, I don't know, 11, 12 grand, something like that. Okay. We always, baby step one is $1,000

18:24saved. Anything above that goes on baby step two until baby step two is done. And so I'm going

18:30to use that money as well, down to $1,000, which is going to scare the P. Wadden out of

18:34you,

18:34by the way. That scares the hell out of me. I know, I know. And that's, it should, but you're

18:39not going to live there for very long because now we've paid off, uh, $23,000 of your $66,000,

18:48uh, if I did my math right just now. And you have enough income to clear the rest of it

18:54very,

18:54very quickly. And as soon as it's cleared, then the first order of business is baby step

19:00three. And that's build your emergency fund back up to a full three to six months of expenses,

19:07which it's not now. It's kind of, it's kind of anemic right now. It's weak.

19:12Right.

19:12The two together would make a decent emergency fund if you didn't have any debt, but that's

19:17what we teach. And here's the reason. Uh, it's not to induce fear, but the fear will

19:22also help be one of your motivators. That Oh crap moment you just had that thing where

19:27your stomach just kind of jumped up in your throat, just at the mere suggestion of doing

19:30this. And we hadn't even done it, but just the idea you go, you know, we all do that.

19:35We all have a physical reaction to that. Um, that is going to drive you to stick with the

19:40plan. Now to suggest that you keep a $1,000 emergency fund for five years or something would

19:45be ludicrous. And I don't suggest that, but we're talking about just a mere months here.

19:49Again, what was your household income? Uh, one 81 90. Okay. So how fast do you pay off

19:56$50,000? Six months, 40, or no, I'm sorry. $40,000. Like what? I mean, less than six months,

20:03right?

20:05Well, my goal was two years. I wanted to do it before I'm 50. So that's, that sucks.

20:10That's way too long.

20:11That sucks. You make $180,000 a year. I need 40,000 of one 80. This is six months.

20:19How much is this? I want $5,000 a month on this debt. I want you to smack the crap

20:26out

20:26of it. All right. And then you're, so you're done by Christmas, dude. Now Chris, by Christmas,

20:34you're starting to rebuild this emergency fund from $1,000 up. And then as soon as you've got

20:39that three to six months of expenses, then you restart your 401k. Oh, by the way, you put

20:44money in the 401k right now. I took your advice and I backed it down to the, uh, minimum that

20:51the company matches. Okay. That wasn't my advice. My advice was stop it. Oh, stop it

20:57altogether. Well, I misunderstood. I thought you, you were saying, you know, don't let the

21:00free money go to the company matches. No, no, no. Now when you're in the hole, man,

21:04you're just getting started on all this. You're trying. So what I'm, what I'm doing

21:07is I'm not making fun of you and I'm not picking at you, but I'm giving you the, the, the

21:11detail

21:12that you haven't gotten in the last couple of weeks of exposure yet. And so what I need

21:17to do is I'm going to send you the, the, the, the game plan with all the nuanced detail,

21:21the baby steps on steroids. It's a bestselling book called the total money makeover. I'm

21:28going to mail you one and you read that thing and your wife read that thing and you'll see

21:32what I'm talking about. 180 minus 40, you can make it on. Okay. Or 90 minus 40, 90 in the

21:39next six months minus 40 and you're done by Christmas. You can make it on. And I just put

21:4411 and 12 on the debt. So I know I put 23 out of there. So it's 43 left. And

21:51so, yeah,

21:52you're there. You're going to be there. And that's, that's what I would do if I woke up

21:56in your shoes. The, uh, the great news is you've, you've found a new thing here and

22:01you're fired up about it, but it's about to get real. So imagine your, imagine this,

22:06this is, this is the feeling you had, Brian, when you put, you spent 30 hours and you put

22:11that debt down and you got emotional. That's you on the plains of Africa and you're a gazelle

22:20and you just stuck your head up and you just saw that lion in the grass. And now you got

22:25to take off running, man. And that's what the next six, seven months is going to be.

22:28It's going to be a all out gut wrenching sprint. Cause they all intensity. That's

22:33right. Cause they're coming for you, man. They're coming. You got to run. And I want

22:37to, I want to mention this. I don't want this to fly by Dave. I know this makes me

22:40sound sappy. It takes a special level of courage for a grown man making this kind

22:47of money, which means he's got some kind of, he's got some, some ego, some strength.

22:51His son came in and said, dad, I think you should look at this. And most dads in

22:55this situation go, shut up. And he listened. He just listened that the approach on the

23:01call was humble. It was a humble call. And I want everybody out there. If your son

23:06comes and says, Hey, can we just talk to that? Take that talk, take that, that

23:09breakfast, take that conversation, man. Um, that took a lot of courage for a son to do

23:13and I'm proud of him, but I'm proud of that dad for listening, man. That's cool.

23:16Yeah. It doesn't happen very often. It's cool.

23:20Man, I like Brian. He's comfortable in his own skin, strong, but making good decisions.

23:25So yeah, you're going to, you're going to go do this, Brian. And, and then you're going

23:28to call us back, do your debt free scream. We're going to hear a great story from you.

23:31It's going to be awesome.

23:31You know what I love about Brian is I guarantee you as a leader and as a leader, he approached

23:35this with the appropriate skepticism and then he did the math. And then as a good leader,

23:39he went, Oh crap. You know what I mean? That's a good leader, man. Not that everything's

23:44perfect. Not that I got to come up with some stupid excuse, but I can see the data and I

23:47can go, whoops, we need to change the course quick. Right. Yeah. I don't think I did that

23:51one right. I love it, man. I love it. That's this, there's a formula here for everybody listening.

23:56Yeah. That, that, you know, involves life change. You know, Bible says, be not conformed

24:02to this world. Yeah. This world's broke. Yep. I mean, normal is looking good and no money.

24:08Yep. Normal is you're driving a car with a big butt payment on it. Normal is you got a student

24:13loan that's been around so long. You think it's a pet normal is, you know, you've discovered

24:17master card and discovered bondage and American distress. This is normal. Normal sucks. Dave Ramsey

24:26doesn't know what he's doing. I mean, everybody uses debt. That's wealthy. No, you must live

24:35in your mother's basement and write that financial blog because the actual data of wealthy people

24:42is, is that by and large, they don't use debt to get there. By and large, they do get their

24:45homes paid off. The vast majority of America's millionaires, 93% of them did not inherit their

24:51money, according to an airtight piece of research that the Ramsey research team did. And out of

24:58those 93% of America's millionaires, we studied over 10,000 of them, the largest study ever done.

25:04And the vast majority of them paid off their homes early and had money in their 401ks and

25:11in their Roth IRAs and mutual funds. And that's how they get their first one to five million.

25:16Now, if you want a billion instead of for the first five million, if you want to jump, try

25:22to straight, jump straight to a billion, well, you might borrow money out your eyeballs. That's

25:28possible, but I'm not here trying to create billionaires. I'm here trying to create millionaires.

25:34Because I want families to be able to retire with dignity, be able to change their family

25:38tree and be able to live well. I don't need you to go broke six times in the process getting

25:43there. We're not trying to write a success manual on going broke over and over again by

25:47taking all this risk. I went broke once and I did all of, I did that apparently for all

25:51of you. So you don't have to, because you can learn from my stupidity. You don't have to

25:55follow it. So this idea that sophisticated people all borrow money is absolute statistical

26:03hogwash. It's simply not true. They do not. Now, do sometimes billionaires? Yes, sometimes

26:12they do. Does somebody worth $30 million? Maybe. But you got 30 cents. 30 cents. And you're losing

26:20some of your cents all the time. And so don't talk to me about how sophisticated people borrow

26:26money. You're freaking broke. They do not. Now, that's what I used to think, because that's

26:35what my broke finance professor taught me. If your finance professor is broke, that's like

26:42having a shop teacher with missing fingers. You should think about where you're getting

26:47your advice. So, be careful when someone says, oh, well, such and such, like Ramsey, is not

26:55sophisticated. The stuff we teach is unbelievably profound and sophisticated. It just doesn't

27:02line up with your get-rich-quick little immature self, and you don't like it, some of you. Oh,

27:07well. You don't have to follow it. This is America. You have the right to be wrong.

27:13You're allowed to go do whatever you want to do. So she's brilliant. She's done a great

27:18job. They've handled their money beautifully, and they're well on their way to substantial

27:22wealth. And we meet everyday millionaires, baby steps millionaires, who follow these baby

27:27steps by the tens of thousands every day I meet more. And is it because I didn't make up

27:35any of this? I didn't invent any of this. It used to be called common sense. It's just now

27:42marketable because it's so freaking rare. It's like having a superpower. I've made millions

27:49and millions of dollars selling common sense because there's not any out there. And so it

27:55turns out it's like a rare commodity. It's like finding a big old diamond out in the middle

28:00of your backyard. Look at that. Oh my God, that's ingenious. Live on less than you make. Oh,

28:06who would have thought of that? You know, but that's really, that's where we live. Instead,

28:10we've got, Oh, I'm going to Bitcoin my way in and I'm going to play the lottery and I'm going

28:16to

28:16borrow and do nothing down real estate and buy 73 houses with no money and think that isn't going

28:21to bite me in the butt later. Of course, it's going to bite you in the butt later. It's going

28:26to take

28:26you to your knees. It did me and it will you. Please don't do that stuff. It's going to bring

28:32pain to

28:32your family and then you have to do it all over again. It's much easier just to do it slower

28:36and

28:37do it right. It's also faster to do it slower and do it right. It's easier to do a job

28:44right the first

28:45time and wealth building is no different. So walk these baby steps and in 10 to 12 years,

28:52you'll probably be a millionaire. Most of you, but to the extent you don't, then you have to wander

28:57off and find your own way because you're going to reinvent common sense. That's just silliness.

29:03And that is not an indicator that the stuff that the Ramsey personalities and Dave Ramsey teach

29:08is simplistic or out of touch, or he's such a boomer. Oh my God, you're such a child.

29:16You're just such a baby child. Listen, little baby child. Here's the deal. The boomers got this

29:22stuff figured out. That's how I lived this long and got this stinking much money. Jennifer is in

29:28Houston. Hi, Jennifer. Welcome to the Ramsey show. Hi, thank you so much for having me.

29:34My pleasure. I have a quick question. We are on baby step four, six, and seven. We completed baby step

29:41three. Then my husband and I have a difference of what that looks like. So would we save three to

29:45six months worth closer to three or six? And does that, if we like, say if I lose my job

29:52today, right,

29:52I'm not going to go get my nails and hair done. So like down to the bare minimum or what

29:57actual

29:58six month spending looks like. Uh, probably between these two at your stage. Uh, and you can pick the

30:08three or the six month. That's not the issue, but then is it absolute bare bones or does it

30:14mean no, uh, uh, no, no, no, no hair, no nails, all that kind of stuff. So, um, uh, uh,

30:21what's

30:21your household income? Uh, about one 60. Yeah. And, um, how old are your two cars? Uh, how old,

30:31uh, I just bought a car for cash of 2014 Lexus and he has a, uh, 14 exhibition. Okay. You

30:39got two

30:39good cars. Yeah. You're not, you're not dying on cars. So here's the thing that I discovered. And

30:47the reason I'm asking these things when you're broke and you're just getting started, you remember

30:51those years back in the day, everything's a freaking emergency because you're broke.

30:57Right. And you're driving junk cars and that, you know, you haven't done all the maintenance

31:02on the house. So even more stuff's breaking. And so it's like you're in the fact that you're

31:07broke is inviting more strain on the emergency fund later on when you've got more money and

31:14the air conditioner is getting serviced regularly on the house. And as soon as there's one little

31:18thing on the roof, you fix it immediately. It doesn't leak and create a bigger mess. And

31:23it's, uh, and you're driving decent cars. So they're not breaking down and you don't wait until

31:27there's a flat tire. You happen to notice when they're going, getting a little bear and you go

31:32change them out early where, when you're broke, you have to drive them until they blow, you know?

31:35And so what happens is you get more margin in all these areas of your life. So the weird thing

31:40is,

31:41is the more money you get, the less need of an emergency fund you have because there's fewer

31:46emergencies. Is that logical? Yeah, absolutely. And we have a two 15 year olds and a four year old.

31:52And then the only other factor would be that, um, I'm wondering if we should pile it up a little

31:57more. I hate my job. I've been looking at Ken Coleman's stuff. Um, and my performance has not

32:01been where it should be just because I'm, I'm just making myself get up and go to work every day.

32:06Um, should we add a little more to it? No, that's not an emergency. Okay. That's a transition.

32:12If you want to set some money to the side for job transition, you can do that. Feel free. Okay.

32:17Feel free. Set you a 10 or 15, 20 grand over there for job transition, but let's not confuse

32:22that with the emergency fund. The emergency funds for emergencies. This is not an emergency.

32:27This is a problem we need to fix. Right. Christmas is not an emergency. It's always in December.

32:34It's predictable. It's predictable that two years from today, you're not going to be working

32:38at that place. God, I hope not. Jennifer, listen, can I, can I, you didn't even ask this. Can I

32:48push

32:48on you for a second? Please do. Please don't sacrifice your dignity and your respectability

32:55and your work ethic and say things like my job performance is slipping just because I don't feel

33:01like going anymore. If you're still employed there and still taking their money, show up and give a

33:06thousand percent. And then when you're looking for jobs, give a thousand percent on your job

33:10transition, but you will, it will keep you from walking six inches lower, right? With your head

33:17held up. You will walk with your head held high, your chin held up. You will clean out your desk

33:21when you get that new job with a smile on your face. Yeah. Don't, you're not a person that mails

33:27it in. No, that's not who you are. Yeah. So, but yeah, go ahead and make the transition and set

33:32some money aside for that. And if you want to, um, what's happening is, is that transition is

33:38scaring you and that's, what's making you want to put the emergency fund on up. And so put 25,000

33:45over there right quick in the next few months to make this transition. That's not, that's a transition

33:51fund. It's not an emergency fund. And then you, then you won't be worried about your emergency fund

33:55anymore because your emergency fund probably just fine. I love that idea, Dave. So that's you would,

34:00a transition, a new baby coming. You need to get a new car. None of those are emergencies. Those

34:05are just, we need to have a sinking fund that we create and save up for that. Yeah. You know

34:09what

34:09the problem is? And it's not her situation, but it's just all of us in America. We were just taught

34:15to have a savings account. That's it. That's exactly right. One. And you know what a savings account is?

34:19It's a put and take account. You put money in there, you take it out, put money in there,

34:24take it out and buy a bass boat, put money in there, fix air conditioner, put money in there,

34:27put stitches in the kid's head, put money in there. It's a put and take, put and take, put

34:32and take. And so it's all this stuff is combined in this one general account that, that you always

34:39watch it. And it just never seems to do what it's supposed to do because no one knows what it's

34:45really supposed to do. And it's never enough. Or look at all that money I got, right? Yeah. And

34:49when you separate out your savings and you say every savings dollar has to have a job,

34:54a mission, an assignment. Okay. This is, this one's job is transition. This one's job is

35:00Christmas. This one's job is car replacement. And this one's job is emergencies and don't

35:06confuse them. I love buying a bass boat is not an emergency. There is no situation ever

35:12on planet earth in which you can describe a bass boat purchase as an emergency. It's not

35:17on the list. I can emotionally get there, but intellectually we're all laughing right

35:21now. Right. And so, you know, that that's, I was forced to buy a new car. No, you aren't.

35:26They didn't have a gun. You chose to buy a new car. And so these are the things, but that's

35:32the reason is it. And it helped me a ton. Uh, because my nature is not a, I'm not naturally

35:38a saver. It helped me a ton to say these things have a goal because I am goal oriented. And

35:44once

35:44I have something with a goal, then ding, ding, ding, ding, I can do it.

35:47I love, I'm writing that down. Every savings dollar has a job too. Different than your light

35:53bill or your food or what every, every dollar you are saving has a job as well.

35:58What we figured out a few years ago is there's 73,000 things coming at you that want your money.

36:06And then when you get some money because you went to work or because you get a lump sum

36:11or because you sold your rental property or whatever it is, you get some money and you go,

36:15I don't know which of these 73,000 do I do? How do I do this? And people become overwhelmed

36:20and they do nothing. And then they ended up doing something stupid with the money instead

36:24of actually being intentional and having a plan. So 20 some odd years ago, almost 30 years

36:31ago, coaching families, we determined that you needed a very specific clear path. And we developed

36:40that over many years in actual practice. It was not theoretical, meaning tens of thousands of families

36:49that we walked with to develop these highly tuned baby steps. And baby step one comes before baby step

37:01two. It's not an accident that two is after one and that three is after two and that five is

37:10after four

37:10and that six is after five and that four is before five. These are not accidents. This is a highly

37:19developed, highly processed series of concepts that are have proven to tens of millions of families in

37:30America now to be the shortest distance between where you are in wealth. Now you can go make up your

37:37own freaking plan, but your plan got you where you are. And so you need to decide, you know, you

37:44don't need

37:44to call Rachel and Anthony and Christie and Deloney and me and Coleman and ask us if baby step three

37:53should be

37:55after baby step two. It is. That's why we called it three. And you don't need to change it. It,

38:03you know,

38:04it's a pretty, and it doesn't really change. There's, it is the shortest method to get there. Shut up and

38:12do

38:12it. Okay. Tell me this. Do you feel like you've heard more of this happening in the last five years,

38:19hour, the last hour, the last few years versus over the last 20? Cause I feel like more than ever

38:26today, the culture, it's a, it's, it's a little bit infested with, yeah, but this is my way.

38:31I'm a snowflake. I'm a snowflake. I'm unique. You're unique, but the law of gravity applies to

38:36all snowflakes. I know, but I'm just saying it, did you see it culturally? Like, do you think that

38:41that, like, do you, do you see this resistance or have you always seen it? It's always, it's always been

38:46that. It's a natural, cause it's your unique, I mean, people say, yes, it's my unique situation.

38:50Because what happens is, is the very confusion of the 73,000 things you can do with money. Yeah. Yeah.

38:54You have to bring it back to the table continually until you actually believe that there is logic

39:02and data and decades and tens of millions of lives that have done it the right way and gotten the

39:11positive result until you submit yourself to the plan. You know, it's like hiring a personal trainer

39:18and he says, well, you probably need to eat less. Yeah, but I'm not going to do that. I just

39:22want to

39:22do the workout, you know? Well, no, you got to eat less fat boy. You know, that's what I'm looking

39:28in

39:28the mirror. I got a keg. He's got a six pack. Why am I arguing with the six pack boy

39:34about nutrition

39:35when I'm fat? Why am I arguing with him? He told me what to do. He, I hired him. I

39:41paid him to tell

39:42me what to do. And then I've got a better plan. And then I look at my belly and go,

39:46well, how's

39:47that a better plan? You know, this is what ought to go through people's head. Yeah. It's true. It's

39:53true. Or the trainer says, do more lunges. I'm like, I'm not, I don't want to do those. I'm not

39:57doing

39:57I don't like leg day. I don't like leg day. I don't think I want to do that. Yeah. I

40:04think

40:05I'm just going to pick out, I'm going to do my version of your plan that works because

40:09my version has got me where I am. It's the dumbest thing ever. Well, it's not the dumbest

40:13thing ever. It's because I know why, because it feels good in the moment to do what you feel

40:18like is safe to do and stepping outside of what you feel like is safe and doing a plan that

40:23makes you uncomfortable because you're having to change. That's why, you know? Oh yeah.

40:27It's comfort zone crap. Yeah, it is. It's exactly what it is. But you have to decide,

40:32you know, you have to decide, did your comfort zone get you to where you are? Yes. Do you

40:37like where you are? No. Then get out of your dad's comfort zone. You look great though.

40:42I've lost 37 pounds because I looked in the mirror and I went fat boy, you got to do something

40:46different. That's shame talk. I did. I did look at myself and say that. It caused me to lose

40:54weight though. I mean, you just, you know, your self-awareness is part of the process,

40:58right? Oh my gosh. This is the Ramsey Show. Hey, if you enjoyed this, click here to watch

41:05the next episode with some of the most shocking calls from the show.

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