A Budget Is Not a Straitjacket - It's a Guard Rail (Hour 1)


hey guys this is chris hogan i'm preempting dates podcast for a special announcement so listen up for the first time ever we're bringing our new event financial peace live to the DC area maria on february eleventh at this evening event at the o'neill and i will teach you the plan that has helped nearly six million people get out of debt safe and to build wealth we will guide you through night full of inspiration motivation and life change plus exclusive for days podcast listeners you can get ten percent off your seats at daveramsey dot com the promo code podcast ten at checkout that's daveramsey dot com promo code podcast tin live from the headquarters of ramsey solutions broadcasting from a dollar car rental studios that's the dave dave ramsey show where dad is dumb cash is king and the paid off home mortgage has taken the place of the w as the status symbol all of choice i'm dave ramsey your host you jump in we'll talk about your life your money it's a recall at triple eight eight two five five two two five that's triple lake eight to five five to five you guys jump in and we'll talk about your life and your money sam starts off this hour in indiana hi sam tom how are you better than i deserve what's up so my wife and i we just had a baby here a few months ago our the first one and after sitting down and looking at on money and not your show some i've gotten fairly nervous about you know where my financial mansell standing is and i guess my question is how do i make a budget and then be able to make myself and my wife you know make ourselves stick to it okay it's a good question the great news about having a baby and congratulations it makes you get serious about stuff like that and i'm starting to get your get your act together on some things that's very cool i'm glad i'm glad you're doing that okay so number one when you do a budget it is it is not a straight jacket it is you telling you what to do okay guy show it's guardrail it's don't run off the road and so you you the two of you sit down and say for groceries this month we want to spend x by the way side note whatever you think you're spending on groceries or spending more so the first month go ahead and beef that one up okay but okay okay we're gonna spend and ex on entertainment okay i'll just make up an fifty bucks okay we're just gonna put fifty dollars in the entertainment category and then what you do you know the two of you are in agreement that the reason were limiting our entertainment spending to fifty dollars is so that and the so that's a big deal we can get control of our money get out of debt create a great life for the new baby and so the for the new baby is and change your family tree is the goal not punishment for entertainment sure who are saying and so it makes it real easy it's like when you look at it and you you're forty dollars and to go this movie costs another thirty dollars and we don't have that we got ten dollars left in the budget we can't go the movie because we decided that it was more important to straighten our family out for the good of our child than it is for us to entertain our butts what's off and so you are limiting you and then so you and then of course you ride it out and you keep up with it and you track it throughout the month and ever the everydollar budget will do that for you guys get that everydollar app it's free and you can build in about ten minutes solid takes over and you'll be able to you know that both of you have it on your phone and you can look at it and keep up with it and you know go we don't have that so the answers you know you have to everyone has a limit on everything a budget is just admitting it because no one has infinite money right and so you know you just say okay at this point we're not gonna spend anymore because we believe in a bigger goal a more noble goal than simply buying more crap at the grocery store or or i need a shirt that's on sale or whatever it is right and so right but then the interesting thing is the things you do spend on you've given yourself south permission to do that so you don't feel weird or guilty about it right so like my daughter rachel cruze who teaches ramsey personality teaches on budgeting all the tom says a budget is permission to spend okay because you said we're gonna spend this much on clothes and so as long as you don't go over that adam mount then you know you feel like you're a hero and you bought clothes instead of like okay what did you spend storm in you know it's like an but we're on the same page we're working together so you need a good why you got a good why it was born the other day you have a wonderful why right and you need to be on the same page with your spouse house and a game plan and then have your have your guardrails laid out and then stick to them so very good start very good start hundred in our audience tyler is with this in alabama hi tyler how are you i'm good dave how are you better than i deserve what's up okay so i just got a quick question about well when you say take twenty five percent of your mortgage are you talking about your net income or utah income after your 401K or insurance of just really cute and thome pay not counting for a one k. or insurance but just after taxes okay and then also my wife and i agree that children within the next two or three years and was curious that if it would be smart you take a thirty year if she spent if she's expecting take a year off during that tom the baby and so it kind of gives us a little bit of leeway in case you know i would not buy a house on a thirty thirty year mortgage okay yeah i've heard you talk about that and i just wanted to make sure that you know either way just stick with the fifteen yeah and here's the thing if you're worried about that just by less us house rod you can create a smaller payment by buying south yes so if you're if you're that worried about that and of course the other thing is you build up your up your emergency fund a little bit healthier may be beyond the normal three to six months because we've got some time that she's going to be off on FM l. a. when when we do start our family and we don't wanna get in a pinch and so especially like when the baby's actually on the way and it's no longer theory then at that that point you really could just say we're going to be this emergency funding get ready for that because we have this fifteen year mortgage instead of all let's take out thirty ian promising will pay a like a fifteen and then we forget to ever do that which is what people do i man thanks for the call so why is it so hard guideline here's the numbers the federal trade commission i'm sorry federal reserve did a study on installment loans including mortgages and ninety seven point five percent of them are not systematically prepaid aide so if you take out a thirty year mortgage promising and to pay like a fifteen year two and a half percent chance of that happening on average in other words you're simply not going to do it that's just BS your BSN yourself so don't do that don't kid yourself and make yourself believe you're going to do that now do debts get prepaid i said systematically prepaid which would mean you every month paid a fifteen year your payment on a thirty year mortgage that is systematically no one does it two and a half percent of the loans fall in that category category ninety seven and a half percent do not so don't set yourself up to where you have to be in the top two and a half percent to succeed that's crazy set yourself up to where when you do what you said you're gonna do you win and and it's a whole different thing don't don't try to swim upstream to that degree you'll lose i'll lose i teach us for a living set myself up or have to do that this is the dave ramsey show christians have an affordable incredible way to meet their overwhelming healthcare costs it's christian healthcare ministries stories the original health cost sharing ministry a better business bureau accredited organization chr members share to pay each other's medical bills it's not insurance it's christians chins financially and spiritually supporting each other it's what c. h. m. has done for over thirty five years learn more at c. h. ministries dot org that's c. h. ministries dot org org christian healthcare ministries is a proud sponsor of dave ramsey live events trauma might you listen to the show so much to answer the question where i do some of you are really developing this idea that you'd love to be able to help your friends your neighbors your family with the same stuff if that's that's you you need to check out being a financial peace university coordinator it's a great way to change everything everything okay millions of americans have decided that twenty twenty year they're gonna take control and you don't have to do it alone you can be gazelle intense you can join financial peace university coordinator and you can even coordinate a class in your area you can join a class get a financial peace university membership for ninety ninety nine dollars that's thirty dollars off the proven plan to find a class near you text join to thirty three seven eight nine you can also click leader at thirty three seven eight nine for an FPU coordinator and you can join and and you know go through the class yourself and lead it at the same time you do not you do not have to have been through it to lead it that's the thing so good stuff all right mike mike is with us mike is in new jersey hey mike how are you dave thanks for taking my call how are you better than i deserve what's up hey dave so my wife and i are thirty years old we just cleared all our debt this past year about thirty six thousand dollars and miscellaneous credit cards and cars and we have our forefathers did emergency fund of three to six months and now i'm realizing thing not even after doing our fifteen percent of my wife and i for four one ks we still have roughly two thousand six hundred five hundred extra a month which which is a blessing you own a house so yes we do sir okay then that would go towards baby steps five six yes and where are are you in kind of hung up is i done the math and i can kind of throw everything extra to the house and have a kind of paid off between six to eight years i do i split between maxing out the IRA's and putting you know let's say a thousand dollars extra to the mortgage the data that we have from doing the largest study on millionaires overdone says that the typical millionaire one of the key elements to them reaching that level of wealth is getting paid off home and it's always been our baby step seven for thirty years that we've been teaching it to get career step six pay off the house early seven is your debt free and you max everything out and and it's always worked to have people putting fifteen percent of their income come into retirement and everything else towards the house and as soon as the house has gone all you've got left to do then invest be outrageously generous and have a blast yeah that's the route you need to go and just lets it sounds like you've got a couple of grand a month to throw your baby step six right now and that's exactly what i would be doing amen thank you all right sherman is with us in new york i sherman how are you great dave how're you doing better than i deserve what's up i just had a question about my paint whether or not i should pay off my student loan early with the extra cash that i have i wouldn't put it towards well it's got a low percent it's three percent when you might get on your savings one percent yeah one that's true you kind of answered your own question i guess so so i also then use my i had like ninety thousand in cash savings wow wait i go where did you get that in savings save it to him how old are you i'm forty three okay and how much is your student loan debt it's nine thousand is what's left oh okay so you got you still got eighty one thousand bucks left that's true i just like i see the numbers grow in that although although grow faster now that you don't have a student loan bag bogging down that's true well with that your most powerful wealth-building tool is is your income you have proven that because even though you suck as an investor and put the money at one percent you still have accumulated almost one hundred hundred grand well done so you've proven that your income is your wealth building too so let's get that much more of your income back by getting rid of the student loans staying staying completely debt free getting for staying debt free and then you you need to allocate a portion of this over an emergency fund and the rest of it you need to start investing investing do you own a home i do i have a i own a home i have two two ten left on the mortgage okay what are you waiting for to i make one forty five man you're doing great you're doing great so probably heard me talk to you probably heard me talk through these baby steps right yeah yeah so that's exactly clue what i would do is just apply that to your situation and so that that would be debt free today how much of the ninety is your emergency fund set that aside atta crummy right of return and the rest of it i'm going to start moving that money let's say we put i don't know we put eighty one thousand left after the student loan and we put thirty thousand thirty one that leaves us fifty k. to to do something else with your emergency fund may be i'm just making this up and so you what are you gonna do with the fifty k. while we're gonna walk through baby steps four or five six you have kids it down in single guy okay cool and so you're you're going straight to baby step six start paying off his house early and so what i want you to do if i were in your shoes because paid off houses one of the keys he's to becoming a millionaire so what i want you to start getting as big a high out of watching that mortgage drop as you did this savings things account increase okay because it's more conducive to you becoming wealthy then putting money in the savings account at one percent understand understand got it yeah yeah because think about it if you make one hundred and forty grand you're single guy who's very disciplined what you are you have done a great job okay game because you don't have to talk anybody into this but you and you're good at talking you into it you don't have to drag some you don't have to drag a spouse along right okay so you make one hundred forty five thousand dollars and let's visit you four years from today and you don't even have a mortgage yeah that'd be great you know how much you could save then dan yeah lord it's gonna be seventeen thousand dollars a month yeah it's very true and you know oh how quick that turns into several million dollars really quick really quick so let let's walk these baby steps out there for a reason they're not that they are easy zeno understand but the implications of them are profound so just because they're easy to grasp doesn't mean they're not sophisticated so let's let's walk them out don't man 'cause you're gonna pan you aren't doing so good and you've got all the ingredients for a guy to just go into a rocket ship as far as wealth-building goes without having to do some high risk get rich quick crap crap okay so you really have done great good job good job good job open phones at triple eight eight two five five two two five have you jump in we'll talk about your life and your money k. is in california aka how are you hi great so glad to talk talk to you you too my husband yeah thanks we are in babysit seven good and i think i just turned fifty at the end of twenty nine thousand nine and i'm wondering if i should invest more than fifteen percent aren't to take advantage of the catch up contributions yes okay all you're doing is investing in anytime we load load a 401K or a roth IRA or anything ordinance keeping the government's hands off of money i've been baby step seven for years i'm max out everything i can max out in retirement plans it's my 401K's max my roth IRA zor our back door roths and i do those and anything i can do to keep the stinking government's hands off my money okay yeah definitely do that figure it out like maybe maybe a seventeen or twenty percent the percentage doesn't matter in your own baby step seven want fifteen percents only applies to baby steps four through six baby step seven is become very wealthy by maxing out everything and be outrageously it just really generous which is more fun than piling up savings by the white but you ought to do both this is the dave ramsey show business business leaders i'm not gonna lie finding the right people to make an impact at your company for years to come is hard work but i can tell you from personal experience you can can find them when you use linked in jobs linked in jobs finds the right people for the right jobs it's no wonder a higher is made every eight seconds it's only linked in get started today with linked in jobs and get fifty dollars off your first job post visit lincoln dot com slash ramsey that's linked in dot com slash ramsey terms and conditions apply in the lobby of ramsey solutions on the debt free stage asia is with us hij- our you heidi welcome welcome where do you live i live in los angeles but i'm originally from hawaii all the way to nashville to do a debt free scream important but we're honored to have you how much of you paid it off i paid off two hundred thousand dollars in twenty three months radical i'm tired of an income i started off awsat about seventy thousand and finished off at two fifty a little raise what do you do for a living i'm a content creator so i have a youtube channel that's lifestyle based been heavily involved into my debt free journey for the past two years okay so you're you're pulling that off a youtube you got some serious stuff going on youtube event instagram yes well done so well done influence her obviously wow excellent numbers i'm proud of you and so you jacked all of that up during this twenty four four months while you were getting after twenty three months while you're getting after two hundred thousand dollars in debt so what kind of debt was this would you do i went to school will and went went to school he went to it was a small credit card small car loan than the rest was undergrad and grad school so i entered an eighty thousand dollars of that with school so what's your grad in i have my undergrad in marketing and my master's in broadcast journalism and you're using your degree good for you and making bank with it yeah well done very well done so what happened twenty three months ago what was the milestone was the wakeup call well dave we have two dogs and one of my dogs had to go into emergency surgery and i couldn't couldn't afford it and while i was in the emergency room i was watching have watching people having to put down their pets or gets take out credit card dat to save the lives of their family members fortunately my boyfriend was able to afford the surgery and everything was fine but after that i just i couldn't sacrifice my family like that again so told my girlfriend jan and she was like you know what you need to download total money makeover and i went to do that and i had already downloaded it already read it already highlighted it and dow was probably once i graduated grad school i didn't apply at all so so once i realized that draw shooting yeah when you didn't even you don't even retain that you got your data in one year out the other by that was the last time ah after i read the book a second time i paid off my credit card debt immediately okay that started the journey so a youtuber did you plug into our youtube stuff too yeah yeah i mean every everything long drives was the podcast reread the book told the debt-free screams was definitely something that pushed me a lot because because i was very close to giving up a couple of times 'cause just doing it having that amount of data and pushing that hard is really frustrating at at times but i had originally given myself five years to do it then that got cut down to two so well pitcher income shot way up enough it wasn't really that you just necessary i mean you were diligent but it wasn't like you worked that much harder your stuff just caught fire are are you on social media right now i mean you know i absolutely you're working i mean i think what happened was when i started talking about my debt free journey and how much student loan i had the very first video i did i just happened i've logged it and people resonated resonated with it and after i started reading the comments sections about you're the only person in my life that has that talks about this or has the same amount of data you know all that stuff i thought it was very important for me to continue on that so since then for the past two years every month i've posted my monthly budget videos and i share my income i share my expenses says i share you know how much i paid off every year for the past two years so there's a lot of people who have been very dedicated and watching me get to this point l. and their own little reality show there there's a lot of tears but yeah we we did it together definitely but there's something freeing about being that open about just putting yourself out there one hundred percent hold you accountable because you know you gotta do disappoint everyone okay you can't drop the ball but it's also freeing because there's so much shame and condemnation around having screwed up with money we ever tennessee to hide don't we one hundred percent i mean i tell i say this all the time the moment i owned up to it and share it it i felt a weight lift off of me like it was it was immediate and just also the process of paying off debt i've always considered myself to be a fairly confident person but once i got like a handle it's all on my finances it's like nothing can compare to the confidence she got when she get your finances in order yeah people the key is i mean budgeting interesting i've never touched a veg before my life and just holding yourself accountable and knowing where your money is going i mean you don't realize how quickly a couple lunches out our dinners out can add up really screw up your budget but for me i mean obviously i had to increase my income and i did it in a way that it since i was very open there's a lot of people who wanted to help me and be a part of my journey that helps me increase my income is also the word for you yeah absolutely your channel over over so very grateful for that chaumet subscribers on on youtube think about i have about four hundred thirty thousand from an instagram instagram instagram i think almost seventy good for you well don solid platform yeah hopefully just continues to grow you've done a great job with it and it takes each work to do all that it's not just a it's not an accident to get to that size and make this kind of income off of it very well done proud of you thank you dave very proud of you who are your biggest cheerleaders i mean just honestly the community i was a part of the people who tune into my channel just like like i said i i couldn't disappoint them and a lot of us were going through the same sayings and just being able to go through the comments section and people had advice to me people had suggestions and just the stories they told i that was definitely the biggest push because you know social media can be a very scary place then i think called trolls out there yeah it's very hurtful and the ones that have really hurt the most saying that my accomplishment is meaningless because of what i do for we're living or how much income i have and those are the things that hurt me the most but yeah i mean just everyone since i've been so open about it everyone knows everyone uh-huh has been everyone has been very supportive yeah very good very cool good for you we've got a copy of chris hogan's book for you everyday millionaires that's that's the next chapter in your story you're going to be a millionaire so cool thank you thank you so go how old are you i just turned thirty three today oh happy birthday thank you very good well your accomplishment is not meaningless lots of people make more money and are dumb and do a horrible job with of it and so you have you started from seventy and scratched and clawed and hustled and grind your way up and you're making good money but you've done a really really good application with the money you've done smart stuff with it not everybody does that lots of people get money and goof up with it and you've you've been very diligent very responsible responsible i'm proud of you great job all right it's asia in los and from los angeles two hundred thousand dollars paid off in twenty three months making the seventy two to fifty countdown let's hear a debt free scream three two one apollo well done exactly how it works right they're very very well done man that's fabulous good for her i'll tell you what you can do anything if you set your mind to it and it's amazing amazing to me the number of times the people's careers blossom about the time they decide to get smart with money aboul says is when you're faithful with the little things then the keyword there then you will be given more manage totta i present a case study in the last few minutes when you're faithful with the little things then then it gives them more to manage this is the dave ramsey show the so grown and incredible youtube following their with four hundred seventy thousand subscribers on her site that's pretty neat and one hundred seventy thousand that she said on on instagram and you know we cheat i've got this huge platform to launch this from from where you know our youtube channels in the top one percent of all youtube and so there's you know for instance our channel is there is about one and a half million roughly and our instagram about two million but the she has done a great job growing that that's very very well done so we'll promote her hair she didn't and and and tractor story all the way through this didn't meet her until today that's very neat very neat her last name is d. a. n. g. if you wanna look her up is that okay just give your they were a little promotion because you'll enjoy that i'm sure i haven't seen it yet but i'll go look at it too when i get a minute so good stuff all right fun fun fun fun fun obvious with us obvious in new jersey z. a. avi how are you better than i deserve thank you so much for taking my call my pleasure sir how can i help so this is my first time watching your show live i was recommended a couple of videos of you in my feed and after watching your channel i personally totally disagree with you everything credit card related i'm personally eighteen years old full-time student college i've managed to mass net worth of about twenty five thousand dollars excluding birthday okay money money my parents have saved me just working best thing and using credit cards responsibly i personally do credit cards as a great pool that if used responsibly probably save you money because when you pay with cash i was watching some rain garden mischievous second okay i'm supposed to care what do you what do you mean you're eighteen years old you have twenty five thousand dollars what do i care what you think about money because i'm going to be the next generation well then you're over here you're gonna be telling people that you're going to be broke be broke issue or am i gonna be broke because you're violating basic you're violating the law of gravity vity when it comes to money and you're gonna have trouble now i'm not when you listen to you gotta do what you wanna do what you wanna do when you go be somebody then we'll argue about it right now you're an eighteen year old kid i'm not gonna argue with you thanks for the call open phones at triple eight eight two five five two two five lori is is with us in georgia hi laurie how are you hi mr ramsey okay i'm fifty nine years old a two years ago was divorced after thirty five year marriage award thank you yes it was not by my choice voice would get pension was split that we had two hundred forty six thousand thousand the facts the part i was given at the same the same month of the divorce i suffered a stroke so i'm on disability right now my total income from alimony disability is eleven hundred and seventy five a month my hundred dollars a month yes hundred and fifty thousand out of the pension okay i'm living with my parents right now due to the medical stuff but i need a i want to proceed with a place to live you've my question and i do not have any debt my question is would you recommend my age going ahead and buying a small house maybe ninety two hundred thousand apartment apartment or coming up on house dondo wrestling putting the rest in a account i mean i know in four years the alimony is it gonna stop so you know is that yes why yes i would pay cash for a conservative is very wise uh-huh pay cash for a conservative place because that's stabilisers your life housing is your largest expense and having that as an unknown variable variable is scariest crud and mathematically unwise so you are very wise to gravitate that way very smart on your part i completely inquiry with you and the from there you know what i would do is like you said started investing the rest of it how did you say the oregon fifty nine fifty nine this year what is the the stroke leave you incapacitated it affected the part of my brain that is executive functioning so i have some short term memory loss you know had to write down everything i'm saying to you because i knew i might blank out jonestown i that's the problem but i'm working on is is is it permanent or is it healing they say it's permanent but you know some of them don't know our god for sure so i guess what i'm trying brian what i'm driving towards is what is the propensity or probability that at some point you create income or are you going to be on social security disability and alimony alimony stops in years so the i'm trying to build some selling been a a sewing business i'm good at that so that's my future i know it's gonna take a while but that's what i'm hoping to do i feel like that's something i can do well especially if you can control the timeframe during that you don't have to engage someone over a long time time frame like you can get away with this conversation with me on a short term because it's short term but if this went on for thirty minutes starts to strain the the the the processes that you're using so i i think you're very wise and i think you're very brave i i would do exactly what you're talking about i would invest that had about one hundred of it in a house and leaves you about one hundred fifty to invest in that'll create you some income you'll have social security disability when alimony runs out in addition listen to that and then hopefully you can continue to come up with some some kind of even if it's small side career thing and do some shelling pulling like you're talking about and and create some extra income to go with this a really good question and i'm sorry you're facing this man you've had a bad decade here wow ouch at hurt open phones at triple eight eight two five five two two five you can jump in we'll talk about your life and your money cardis is on instagram dave i've got three credit cards with crazy high interest cannot transfer all three of these two zero card sure freaking out over the interest how long it'll take to pay them good glad you're freaking out but here's the thing the interest rate is not your problem zero interest does not make the debt go away what makes it go away is you cutting your budget down to nothing an increasing your income and throwing the difference the debt the interest rate is really not your problem problem as much as it is getting on a really really tight budget getting your income and your expenses down throwing the difference at your debt list your debts all of them not counting your home smallest to largest pay minimum payments on everything but the little one and attack the little one with a vengeance and that'll change everything for that'll get you moving but yeah it's it's good to be aware if you're in the middle of something stupid instead of actually defending stupidity which is ridiculous so you know if you're being stupid and you're not aware that that that'll get you okay but but if you're being stupid and you're aware then you can turn it around i've been stupid plenty of times in my life there's a lot of dumb things i have done and i was only able to turn around when i became aware so i don't want you to be stressed or freaked out or have high anxiety but i like that you're emotionally upset for your good because it's cleaning thing this mess up becomes a priority when you're emotionally upset so you've done a really you know it's a good thing you you you know you've had the wakeup call and you answered the call you're like i the only live like this anymore i'm going to clean this mess up i'm gonna change this and so that's exactly what i would do so i man thanks for following us on instagram curtis we appreciate lead it puts this hour that ramsey show in the books our thanks to james childs our producer kelly daniel our associate producer and phone screener i'm dave ramsey your host we'll be back back with you before you know hey it's blake thompson senior executive producer for the show listen or watch anywhere with the dave ramsey show apple on your smartphone catch the full show or watch the highlights and checkout dave's upcoming guests FBI store and download it today money isn't the only thing we talk about around hair get life-changing advice on your career from my good friend and career expert ken coleman all my ken coleman show according to a recent gallup poll nearly seventy percent of americans are disengaged at work if you dread going into work every monday morning and you're just just trying to make it to the weekend the ken coleman show is for you everyone has a sweet spot your sweet spot is at the intersection of your greatest talent in greatest passion we will help you discover what it is you were born to do and then we'll help you create a plan to make your dream job a reality you matter and you have of what it takes join the conversation on the ken coleman show hear more from the ramsey network including the ken coleman show wherever you listen to podcasts hey it's james producer of the dave ramsey show this episode is over but check the episode notes for links to products and services you've heard about during this episode thanks for listening

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