Financial Strategies: Debt Management and Wealth Building Tips

Financial success stems from discipline, saving, and strategic investment while avoiding debt pitfalls.

### Navigating Debt and Financial Freedom: Insights from Financial Experts
* 💰 " "Don't give them the deed to your butt," emphasizes the importance of **maintaining control over your finances** and not letting **debt dictate your life**.
* 💍  A newly married couple faces **$165,000 in debt**, primarily student loans, and contemplates whether to contribute to a 401K match, which could yield a **significant company contribution**.
* 📉  The advice given is to focus on **eliminating debt first**, as attempting to juggle multiple financial goals may hinder progress; prioritizing debt repayment can lead to a **better financial future**.
* 💵  The discussion highlights the importance of employer matches in retirement plans, arguing that missing out on this opportunity could result in a "**permanent solution to a temporary problem**."
* 🏡  New homebuyers are encouraged to follow specific rules, such as being **debt-free**, making a **down payment of at least 20%**, and opting for a **15-year fixed mortgage** to avoid private mortgage insurance.
* 📈  The couple shares their journey to a **net worth of $1.3 million**, attributing their success to **disciplined saving, investing, and avoiding debt** through consistent financial practices.
* 🚗  The conversation also addresses the average car payment, advocating for **cash purchases of reliable vehicles** instead of accruing debt, and emphasizes the importance of **living within one’s means**.
* 💡  Ultimately, the key to financial success lies in a **disciplined approach**: having a **written plan**, living **below one’s means**, saving, investing **wisely**, and being **generous with wealth and resources**.

they own your butt, and you gave them the deed. Don't give them the deed to your butt. Welcome, fellow Financial mutants. The team is putting together some reacts from our friends right down the street, Brian. I am so excited about this because we love seeing what other Financial commentators have to say. Let's Dive Right In. My wife and I just got married about a month ago, and together we have about $165,000 worth of debt. I'm about to be eligible for benefits at my job, and we're trying to figure out if I should go ahead and do the 401K match. If I contribute 6%, then the company contributes 10% on top of that. And what kind of debt is the 165? Uh, it's mostly student debt. Um, we got about $10,000 of a car loan and pretty much all the rest of it is student loans. Together we bring in about 95k before taxes. Well, the answer to your question is no, you do not ENT da. Okay, even though the generous

Even though it is ridiculously wonderful and generous because it's just a temporary comeback, if you don't focus on this debt exclusively and you try to do three things at once, you're not going to get there. So, I hate it 'cause I'm a math nerd, and I know what that match will do for you, but it's a temporary thing 'cause what I like about pausing the 401k match is it gets you a little bit angry, like, Oh my God, needs to know about the wealth multiplier. Good, let that fuel you to get rid of your debt faster, to get back to the match faster. Agree to disagree, agree to disagree, and that's okay. It's okay to disagree, but I do not think that would be the guidance that I would give. There's a reason in the financial order of operations step two is that employer match because if somebody can guarantee you, as the example showed, that was a greater than 100% rate of return, the interest rate on the debt was not greater than student loans. There's no way

student loan debt is having anything that's even close to that. I mean, truthfully, the employer match is going to be 10 to 20 times more than what was provided on that. So, take of the free money. I mean, that is going to be a huge head start on your financial life. And this is what I really struggle with. He kept saying, Dave kept saying, It's a temporary problem, it's a temporary problem, it's a temporary problem. We would agree with that. The problem is that when you forego that match, you are now implementing a permanent solution to a temporary problem because you cannot go back in time. You cannot go back and get that match. You cannot go back and let that wealth multiplier start working for you. So, don't apply a permanent solution to a temporary problem. I do think it's possible for you to do more than one thing at once and to do that thing well. Here's a couple rules we use. Rule number one is to be debt-free, which you are. Rule number two is when you make your down

payment. You need to retain enough to call your emergency fund, which is 3 to six months of household expenses. The third thing is never take out more than a 15-year fixed rate, where the payment is more than a fourth of your... Is this for a primary or rental? That's the max you can qualify for. Almost twice that much, but that doesn't mean you need to be that stupid. Don't do that. Keep it conservative so you can get the house paid off in less than 15 years. That's the goal. Then the last thing is, if you can figure it out, make a down payment of 20% or more with a conventional Fanny May loan. You avoid PMI, private mortgage insurance. Those are wonderful ideals, but in the world in which we live today, a wish list that's hard to put, especially for first-time home buyers just now coming out. I got to be debt-free, meaning I've paid off all the other debts that I have. And then I've got to put 20% down, and I have to do a...

15-year mortgage at today's interest rates. What that means is I think that most Americans, most young Americans, home ownership would be completely off the table for them. Yeah, I would love to know how old that video is because I think pre-inflation run-up. Okay, those are ideals, but I think that now if you waited to save up 20%, the housing market's running from run away from the other thing that I think is that you're going to find with po inflation. Houses are so much more expensive. You need the 30-year mortgage so you get a little bit more house when you're in the messy middle where you got kids running around everywhere. You need to be able to get the best version of your of where you can raise your family that fits into your financial life responsibly. Don't make it where you have to squeeze it down so small that the only thing you can actually afford is a tiny house, and then you're miserable because somebody didn't give you all the

financial tools or release all the financial tools that might have helped you live your best financial life. So, if you go to moneyguy.com/resources, we actually have a home-buying checklist where you can look at our three rules. Rule number one, that when you buy a house, you want to make sure you're in it for at least 5 to 7 years. Rule number two, if it is your first house, the very first home that you're buying, you don't have to come up with 20% down. It's okay if you do 3 and 1/12%. It's okay if you do 5%. So long as you don't breach rule number three, and that's that your total housing cost cannot exceed 25% of your gross income. I think if you will follow those rules, you're going to have a much higher likelihood of being able to get into a home and being on the other side of home ownership in this market. What's your net worth now? Our household net worth between my wife and

I is about 1.3 million. Nice. Did you launch a course? Did you go zero money down in real estate? W2 employee. I'm not an entrepreneur guy who like leveraged an Airbnb thing, starting a laundromat business. I just used my salary, my greatest wealth-building tool, my income. How did you do it in 11 years? How do you get that net worth? The first part was realizing that debt was a thief, and so getting out of debt using that debt snowball method was huge 'cause that got me to a baseline where you have a positive net worth when you don't have any debt, right? And you've got a little bit of money in the bank. So I get the emergency fund, I pay off the debt, I begin investing into our Roth 401k here at Ramsey, got married to Whitney, bless her, she's smarter than me and better looking. She had no debt, so we starting off from Marriage, yeah, with both with a pile of money in the bank and savings, no debt, and Whitney has had a job here at Ramy.

For the last, you know, eight years, I've been here over 10 years. So over that time, you know, we had, we each now have six figures in our investments. We actually do an annual wealth survey of all of our Money Guy clients, and we asked them this question: How did you become a millionaire? How did you reach financial success? And you might be surprised to find out the vast majority were not entrepreneurs. They were not virtuosos who have some unique skill and talent. They weren't corporate executives that wouldn't like climb the executive ladder. They were just like George. They were savers and investors who consistently saved through time. It's not an incredibly complicated formula. The superpower is to live on less than you make. If you can understand that discipline and deferred gratification, it's the first thing to build margin in your life. Let that margin of the money actually start working for you, and give it enough time. You too will have the three ingredients to wealth and be extremely successful.

tried. The baby had a $2,200 emergency and ended up $5,000 in the whole. Still doing the baby steps, but I went with a $2,500 emergency fund and have been fine ever since. The $1,000 emergency fund put me in a worse position. Definitely time you update it. That's funny. Do you want to know a kind of funny moment in my career? I was writing my first book, Love Your Life, Not Theirs, and I was pushing so hard to change the baby steps. Wow, to update the one. Yes, I really was pushing to do it. A month, a month of one month of expenses being baby step one. And of course, me and Dave, as you can imagine, went back, which now I'm like, Oh, I get it. He kept saying $1,000 was never enough. Never enough. I've heard Dave say this thing too. $1,000 was never supposed to be the stopping point. It was always supposed to be the starting point to get you moving on the path. But I think a lot

of people find themselves in that same position. Hey, I had this emergency fund, and then an emergency happened, and I'm right back to where I started. So, there is some tension there; there's a little bit of rub there. We don't want you making desperate decisions where you have to go into debt or other horrible solutions to this emergency that you're facing. So, that's why we actually, on our step one of the financial order of operations, we did the highest deductible. That way, you could actually figure out—don't just go out what feels good or some random number. If Dave is willing to admit a thousand is not enough, then what should you do? How about we actually put to paper what are your biggest risks, and we actually just cover that deductible? Your best life and not down into a final ditch. Or if I start pitching you a savings on TikTok and I said, Hey, here's your savings account. The first three years you put money in, nothing happens. We keep it all. After that, it makes 1.2% about insurance your money.

guarantee it. No one would put money in that. That's a whole life policy. Nobody ought to put money in a whole life policy. I love it. I love what they said. The only thing I have a little bit, he said no one should put. I don't want to be so aggressive to say that it never, ever, ever, ever under any circumstances makes sense, but the amount of circumstances it makes sense in is so, so, so minuscule because of exactly what he just said. I loved it. Let me tell you, no one within the whole life industry is going to put Dave Ramsey in charge of their brochure because that, that is, I mean, that, that's quite something. That's exactly right. We love term life insurance. If you need to insure against your premature death, the best way to do that at the lowest cost possible is term life insurance. You're going to put the biggest bang for the buck and make sure that you and your loved ones are protected. That's what insurance is. Therefore, let Insurance be

insurance and let wealth-building tools like investment accounts be wealth-building tools like investment accounts. The average car payment in America today is approaching $700. It's over now. 10 months of that is $7,000, which will buy a fine vehicle W to drive for a few months until you could save up another $7,000 10 months later and buy a $144,000 v y'all. With me here, you can stay away from car payments by paying cash for a reliable used car. I don't disagree. I do think that it's hard to get reliable transportation for $7,000. I grew up in a household where my father was a mechanic, my brother was a mechanic. They are the type of people that could drive anything. They make anything work, you know, that type of beater car that you can get for cheap. For me, I needed to get to my job. That was going to be the first wealth builder that I was going to have, so I needed reliable transportation. That's why we do 238 where you 20% down don't finance.

longer than 3 years, and it cannot exceed 8% of your income. 'Cause this is important that you're buying. You're thinking Corolla, not Land Cruiser. We're trying to get you to your job so you can get wealth from saving and investing. And I'm not going to put you in something that you're scared to put your family in for safety or liability. Not even that. I'm nervous about this idea of sending good money after bad money. Because just because you go buy a $7,000 car doesn't mean that it's necessarily going to be reliable. It might mean that one month down the road, then you have a $1,000 repair. And then this happens, and this happens. I would much rather you being a reasonable car using 238 so that you're not just turning this automobile into a money pit that keeps sucking. I will tell you Dave is right though. Too many people are driving around in their potential wealth. If you are, if you're spending 700 to $1,000 a

month on your monthly car payment. What could that become if you just let that be an investment instead? So, I don't completely agree with everything Dave said there, but you do need to make sure you don't drive around in a car that you can't afford. That's actually stealing your future wealth. I'm going to put it on a credit card and act like nothing changed. These companies are screwing you, and you're signing up for the trip, and you're getting hammered at 18 to 28%, and you wonder why you make $100,000 a year and have no money. It's out of control, you guys. They have lulled you to sleep. They've made you believe you have to have one of these stupid things to exist. Don't leave home without it. You can make it without these stupid things. Get you a debit card, pay cash for it, get control of your life, get some autonomy from these banks. They own your butt, and you gave them the deed. Don't give them the deed to your butt. They own you.

don't disagree with Dave. It's just that I'm willing to say I can flip the script. Yeah, and the fact that I actually own the banks and the fact that when I use a credit card, I never ever carry a balance 'cause credit card use is okay, but credit card debt, no way. There's a... that's the thing that I think if you know that you're disciplined. Dave goes the T-total way because he just assumes everyone falls into the trap he fell into where you're going to just not be able to save yourself from your lack of discipline or ability to pay off the debt. If you know yourself, if you know that you can actually watch out, microphone, if you know you can actually pay off the debt every month, it's okay to use that as a tool. That's what... that's where I'm a little different. But he is right that a lot of people are faking their life and getting into debt and being the servant of all the debt that they have, ow, and have to pay off. Yeah, I completely agree.

If you have a $100,000 income and you're still paycheck to paycheck because of all this debt you're servicing, you may not be a credit card person. And if you can't exercise that discipline, then maybe you should get rid of them. You should not use credit cards; you should only use debit cards and only pay cash. But if that does not describe you, I think that there's a balance where you can be a responsible credit card user, but only for the right type of person. Some people do need to total and stay away from it. So, if what he described is you, be true to yourself and make the right decision. If you do these five things, you will win with money 100% of the time. That sounds like a guarantee to have a written plan, a budget. No one accidentally wins. Second thing is you've got to get out of debt. Your most powerful wealth-building tool is your income, and when you spend your whole freaking life giving your money to banks who fill up the skyline and have

furniture nicer than yours that makes you stupid. Number three: live on less than you make. I like that. Deci, my life is not good enough the way it is, and so I am going to control the controllables. I am going to change some things, and then you're going to save some money. You know how rich people sounds like the three ingredients. The well, if you get, and you'll invest, and you live on less than you make, and you have a plan, then you can do the last one. It's the most fun you'll ever have with money. You can be outrageously generous. All right, I love it. I don't hate it. I don't hate those things. I mean, Dave, there's a reason that we say that Dave and them are friends in the fact they're down the street from us. They have helped more people get out of debt, 'cause I mean, if you, if, and look, the majority of Americans do struggle with basic discipline. They can't live on less than they make, and they get run up all this.

debt to the banks. He's exactly right on that. I think where we kind of deviate a little bit is that we, once you get beyond the basics, meaning that you don't struggle paying off the debt. Now you're getting into a point where you want to be a financial mutant. You want to optimize. That's where I think our system, the financial W of operations, kind of helps you add to what Dave is talking about, which we kind of, we want to take you beyond the common sense of just paying off your debt every month. I love the things he said. If you can just be disciplined, live on less than you make, have a budget, have a plan, put that plan in place, save and invest for the future, and then be generous with your wealth as well as your time and your resources, that is a recipe for a successful financial life. I love it. I think this was good. I loved kind of showing, comparing, contrasting. As you can see, the good information's out there, but I think there's always a better way to do money.

and we're going to be your source. Check out moneyguy.com. Money guy team out. [Music]

Financial Advisors React to Money Advice from Dave Ramsey

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The Money Guy Show

A couple with $165,000 in debt, primarily from student loans and a car loan, is unsure about contributing to a 401K match.

The financial advisor advises against prioritizing the 401K match while in debt, emphasizing the importance of focusing on debt repayment first.

The discussion highlights the potential long-term benefits of the employer's match and the importance of not applying a permanent solution to a temporary problem.

The Challenges of Home Ownership and Building Wealth

Today's interest rates make home ownership difficult for young Americans, with rising housing costs and the need for a 30-year mortgage.

A home-buying checklist with three rules is suggested: stay in the home for 5-7 years, consider lower down payments for the first home, and keep housing costs under 25% of gross income.

The speaker shares their journey to a $1.

3 million net worth in 11 years, emphasizing the importance of getting out of debt, building an emergency fund, and investing in a Roth 401k.

The Key to Financial Success: Saving and Investing

The majority of millionaires are not entrepreneurs or corporate executives, but rather savers and investors who consistently live on less than they make.

The $1,000 emergency fund is often insufficient, and it's important to update it based on individual needs.

The financial order of operations suggests covering the highest deductible to manage risks effectively and avoid desperate financial decisions.

The Debate on Whole Life Insurance and Car Payments

Whole life insurance is criticized for being a poor investment, with term life insurance recommended as a better option for protecting against premature death.

The rising average car payment in America is approaching $700, leading to the suggestion of paying cash for a reliable used car to avoid debt.

The speaker advocates for a 20% down payment, financing for no longer than three years, and keeping car expenses within 8% of income to avoid turning a vehicle into a financial burden.

The Impact of Debt and Financial Discipline

Driving an unaffordable car and relying on credit cards can hinder future wealth.

Many people fall into the trap of high-interest debt, leading to financial struggles despite a good income.

While some may benefit from responsible credit card use, others should avoid them altogether and focus on budgeting and getting out of debt to build wealth.

Living on less than you make and controlling your finances can lead to saving money and getting out of debt.

Being disciplined, having a budget, and creating a financial plan are essential for financial stability.

Once basic financial struggles are overcome, optimizing wealth and being generous with resources can lead to a successful financial life.