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Chapter 1: What is the main topic discussed in this episode?
Live from the headquarters of Ramsey Solutions, broadcasting from the pods moving in storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. George Campbell Ramsey personality is my co-host today. Open phones at 888-825-5225. Annie in Spokane, Washington starts this hour. Hi, Annie. Welcome to the Ramsey Show.
Hi, thank you so much for taking my call. Sure, what's up? Yeah, so my husband and I have a slight disagreement, and the question is, should we pay our mortgage off and empty our savings account or keep a loan for about $150,000 and then do a few home improvements, and that would be a new foundation, windows, and HVAC system.
Okay, so how much is in savings?
Right now we have $608,000 in savings.
Okay. And the balance on your mortgage is what?
$600,000. Okay.
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Chapter 2: How should I decide whether to pay off my mortgage or invest?
You said $608,000? Correct.
It would be about a month and a half to two months worth of emergency fund if we pay off our mortgage.
You have an emergency fund in addition to the $608,000?
No.
The $8,000 is a month and a half. I got you. Okay.
Correct. Yeah.
And your household income is what?
At $203,000, approximately about $203,000, and then also we do have, we're just signing a 10-year lease for some farm ground, and that will bring in $30,000 a year for 10 years.
Okay, so you have a quarter million dollar income, and... All right, we do not tell people to pay off debt and leave less than three months of expenses.
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Chapter 3: What strategies can help in budgeting for home renovations?
So let's fast forward from today a couple of months, and now you've got $630,000, okay? Mm-hmm. That day I would pay off my mortgage.
Okay. Okay.
And then I'm going to use this fabulous income and the extra $6,000 a month to build up some little buckets of money to do these renovations that we want to do.
Okay, yep. My husband, he said that's what you'd say, but...
Well, I'm fairly predictable. I've said it over and over and over.
I say the same thing all the time.
So, I mean, you can.
Yeah.
So here's the thing. The other thing you can do, it'll help you with this, Annie, to process.
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Chapter 4: How does income impact financial decision-making?
It helps me when you actually put numbers to it and then you put how many months it's going to take me to do this. So I'm going to go ahead and get like a bid. on the heat and air. I'm going to get a bid on the foundation. I'm going to get a bid on what was the other thing? Windows. Windows. Okay.
And then I'm going to say, okay, the first one of these we're going to do is I'll make it up windows. Okay. And the bid is $30,000. Okay. Without a house payment and a quarter of a million dollar income, then how quick do I have $30,000 in addition to my emergency fund? Oh, just a couple of months. I mean,
Chapter 5: What are the benefits of having an emergency fund?
Got it, yeah.
And then how quick do I have, you know, the, I'll make it up, $20,000 for the heat and air if that's the second one. I don't care which one's first. I'm making this up, okay? But my point is prioritize and put actual dollars to it and then back into how many months. And what you're going to discover is probably by this time next year, you've got a fully renovated paid-for house.
Yeah.
perfect yeah so we're really not discussing oh we're never going to get around to this no lay it out yeah game plan it develop a detailed strategy and then that if i'm in your shoes because you're the one not wanting to pay it off you're the one wanting to do the renovations first and that's okay but if i'm you then having that game plan going it's going to be here in a minute anyway i can deal with that yeah it helps me to release it yeah
Yeah, we're talking about a month or two before you guys have $625,000 in that account, and now we can clear the mortgage payment, which frees up the mortgage payment on top of still having an emergency fund there. So it's not enough time to even argue about it.
Yeah, you're going to be there. And, you know, I would. You guys make a lot of money, and I would do the renovations, assuming you're not overbuilding the neighborhood with all that. But I'm guessing that you're probably going to spend well less than $100,000 on those three items. And it sounds like the house is probably north of a million in value.
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Chapter 6: How do you prioritize financial goals effectively?
And so it's not a big deal. And you make plenty of money to do all this. So really good job. Very, very good job. These are the good things to argue about. These are good arguments. It's like, oh, we have $600,000 in savings. Do we pay off the house? What an argument most people would like to have.
Listeners are shaking their fists right now going, really? This is what we're calling in about? $600,000 in the bank? Amazing job.
It's truly first-world problems. But, yeah, I mean, but the point is you guys are – neither one of you are really wrong.
Chapter 7: What lessons can be learned from real-life millionaire stories?
It's just a matter of laying out a strategy to do this. And, George, I did this many years ago. We were just coming out of being broke. We were starting to get a little money finally. We weren't nearly to the point that Annie is at this stage. But we had a little bit of money coming in, and Sharon had this – we had little kids, and we had this god-awful two-tone blue Astro van.
Do you remember those?
Oh, yeah.
Nasty-looking little vehicle. And it was nasty inside because it had three dogs and three kids in it. I've seen some things. You talk about stuff. I mean, nuclear waste was in the floorboards. And this thing was bad.
Chapter 8: How can I avoid impulsive financial decisions?
And Sharon gets this idea. Now we're starting to get a little margin. She's like, I need a Suburban. I need a new car. And I'm like, yeah, well, I mean, you know, Santa Claus needs reindeer, too. But, you know, we're not going to happen. Yeah, I'm doing stuff down at the office. I got I got an investment I need to make down here to get some more money coming in by doing this thing.
And, you know, we got twenty thousand bucks and we can either buy her a suburban or we can go use that twenty thousand down here at the office and make some more money. And, you know, and we went at it as if. If she got the Suburban, I would never do the investment, or if I did the investment, she would never get the Suburban.
And what we learned was what we just taught Annie, which is, oh, shut up. Both are going to happen. Both are going to happen fairly quickly. Just decide which one's first. Flip a coin. Being the wise husband that I am, she got the Suburban first. And then I did the investment second. But it really, I mean, we had a big old fight about it because it was all or nothing. And it's not all or nothing.
Usually it's just, it's not no, it's not now. No is not really what we're saying. We're saying not now. We're not really saying, no, we're not going to do the heat and air and the windows and the foundation. It's not now. That's the thing.
It's kind of like how children are when they go, well, if it's not going to happen now, I'm going to throw a giant fit because it's never going to happen.
And that's not what, it's just which one's first. Do we pay off the house or do we do the renovations? It's not an either or. We're going to do both. Let's just decide the order and which one makes the most sense mathematically and emotionally and relationally and all that, right? So there you go.
I tried to Google a photo. Just this picture Dave and Sharon Ramsey driving around. No, that's not it. This two-tone. That's not. Are we getting closer? That one's nicer.
We're getting closer. That one's nicer. There it is. You still didn't get it.
That's going to be a new segment.
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