How Do We Save and Pay Off Debt at the Same Time?
Summary
TLDRJames, a new father-to-be and children's pastor in San Diego, calls into the Dave Ramsey Show for financial advice. With a baby due in March and an $18,000 car loan, he's seeking guidance on financial priorities. The host advises him to pause his debt repayment (Baby Step 2) and focus on building savings due to the upcoming baby. James also discusses an inheritance and his mother's financial support for a house down payment. The conversation emphasizes the importance of financial preparedness during life's significant events, offering a tailored approach to the Baby Steps financial plan.
Takeaways
- 👋 James has recently joined the Dave Ramsey Show community and is seeking financial advice.
- 🏡 James moved from New York City to California during the pandemic and started a new job as a children's pastor.
- 👶 James and his wife are expecting a baby in March, which is a significant life event affecting their financial planning.
- 💰 James is currently on 'Baby Step Two' of the Ramsey plan, having a small amount of savings but also an $18,000 car loan.
- 🚗 The car loan is for a second-hand car, not new, but still incurred a significant debt.
- 📈 The advice given is to pause 'Baby Step Two' due to the upcoming baby and focus on building savings instead of paying extra on the debt.
- 👶 The emphasis is on accumulating savings to cover potential costs associated with the baby's arrival and to provide a financial cushion.
- 💳 James is advised to avoid using credit cards and to switch to a debit card system to control spending.
- 💼 James has an annual household income of $70,000, which will be a factor in determining how much he can save.
- 💵 James has received an inheritance of $19,000 and additional funds from his mother for a down payment on a house.
- 🏠 The inheritance money should be kept separate and used according to the stipulations provided by James's mother.
- 📊 By focusing on budgeting and saving, James is projected to have between $25,000 to $30,000 saved by the time the baby is born.
- 🚫 The advice is to stay current on the car loan but not to pay extra until after the baby is born and the family is stable.
- 🔄 After the baby's arrival and ensuring the safety of mother and child, James can then apply the extra savings towards paying off the car loan.
Q & A
What is the main topic of the conversation in the script?
-The main topic of the conversation is financial planning and prioritization, specifically for James, who is expecting a baby and has recently moved to California.
What advice is given to James regarding his financial situation and the upcoming baby?
-James is advised to pause his debt repayment (Baby Step 2) and focus on building up savings due to the baby's arrival. He is also encouraged to stay current on all debts but not to pay extra until the baby is born and the mother is safe.
What is the current status of James' financial steps according to the script?
-James is on Baby Step 2 of the financial plan, having a small amount of savings, but also has an $18,000 car loan.
Outlines
👋 Introduction and Financial Advice for New Family
James, a new member of the Dave Ramsey show audience, introduces himself as a recent convert to the show's teachings. He has recently moved to California, started a new job as a children's pastor, and is expecting a baby in March. He is currently on 'Baby Step Two' of the Ramsey financial plan but has an $18,000 car loan. The host advises James to pause his current financial step due to the upcoming baby and instead focus on building up his savings. The host also suggests that James should stay current on his debts but not pay extra until the baby is born and safe. James mentions having some credit card debt that will be paid off soon and an inheritance of $19,000, which his mother has specified for a down payment on a house.
💰 Financial Planning with Inheritance and Anticipated Savings
The host provides James with a financial strategy considering his upcoming baby and inheritance. James is advised to keep his inheritance money separate and use it to pay off his car loan after the baby is born, which would leave him with approximately $10,000 for his emergency fund ('Baby Step Three'). The host also suggests that James should continue to save towards his home ('Baby Step 3b') after establishing his emergency fund. The conversation emphasizes the importance of being financially prepared for major life events and the comfort that comes from having a substantial savings account. The host reassures James that he is in a good position and encourages him to stay current on his car loan and then use the inheritance to pay it off in full, thus reducing financial stress during this significant life transition.
Mindmap
Keywords
💡Dave Ramsey Show
💡Baby Step One
💡Car Loan
💡Plastic Surgery
💡Every Dollar
💡Inheritance
💡House Fund
💡Emergency Fund
💡Debit Card
💡Baby Steps
💡Financial Stress
Highlights
James joins the Dave Ramsey Show from San Diego.
James has been watching Dave Ramsey's shows since the COVID-19 pandemic began.
James recently moved from New York City to California and started a new job as a children's pastor.
James and his wife are expecting a baby in March.
They are currently on Baby Step Two of the Ramsey financial plan, with a $1,000 in savings.
James has an $18,000 car loan for a second-hand car.
The Ramsey team suggests pausing Baby Step Two to save for the baby's arrival.
James should stay current on all debts but not pay extra until the baby is born.
James is advised to use the Every Dollar budgeting app to manage his finances.
James's household income is $70,000.
He estimates having about $1,000 excess per month after paying bills.
James received an inheritance of $19,000 from his late uncle.
James's mother has been giving him additional money for a down payment.
The inheritance money should be kept separate and used as stipulated by James's mother.
James is expected to have $25,000 to $30,000 in savings by the time the baby is born.
After the baby's birth, James should use the savings to pay off the car loan.
The remaining savings will be used to start building an emergency fund for Baby Step Three.
James is encouraged to stay current on his car loan and pay it off after the baby's birth.
The Ramsey team emphasizes the importance of removing financial stress during significant life events.
Transcripts
[Music]
james
is with us in san diego hi james welcome
to the dave ramsey show
hey guys how are you guys doing great
how can we help
hey thank you for taking the call yeah
i'm relatively new
to uh to the family i started binge
watching
all of your shows since covet happened
um so i'm trying to identify
kind of where i would stand and
everything um
we have a baby coming in in march
yeah welcome welcome to the family by
the way
thank you thank you we got married
january last year
and uh recently in the middle of covet
moved from new york city to california
started a new
job as a children's pastor here um
and pretty much i'm just trying to
identify what priorities should be
obviously i know we need to save for the
baby um we're on
baby step one currently well actually
baby step two
because we have a thousand but we do
have
um a loan a car loan we bought a second
um second-hand car when we got here um
so it wasn't new but it was definitely i
still took out an 18 000
loan for it um and i guess i'm just
trying to figure out okay what priority
should i be
focusing on between now and
i guess next year really yeah and the
baby
well a rule of thumb james is the fact
that you guys are expecting a baby
things shift a little bit here so we
usually always say you're gazelle
intense you're paying off your debt
that's where you guys would be
but because the baby is coming we're
actually gonna pause baby step two and
just pile up money
because you guys just have that thousand
dollar in savings and so just anything
you'd be paying at the
at the debt you want to stay current on
all of your debt but not paying extra on
it
and pile up some savings and then once
baby comes and mom and baby are safe
and good to go then you can apply all
that money besides the thousand dollars
onto your debt so how much debt do you
guys have you have the eighteen thousand
dollar car loan
just the eighteen yeah that's right okay
yeah we do have
a little bit on some cards from this
month but it will be paid off
um tomorrow when i get paid okay so
we're going to tell you and then um
tonight tonight we're going to teach you
to have a thing called plastic surgery
where you chop up the cards and get on a
debit card system where you quit
you quit spending money you don't have
and yeah jump onto
uh every dollar or jump into ramsey plus
and start the free trial
and get the every dollar budgeting app
and it'll help you put together your
budget where you can
make your money behave monthly that way
and so what is your household income
right now
uh we're on 70 000 okay so if you were
to just guess because you haven't done
your budget i can tell
which is fine you're just just joining
the family but uh
if you were to guess how much money a
month
can you pile up if you don't pay any
extra on debt
and your only goal was to build your
savings
um well actually i've done a brief
budget i think at currently we have
about a thousand dollars excess
a month um from every
yep paying off all the bills the
necessary bills and then they're
alone and when's the baby come james
march march okay
yeah and i had one more thing my mom so
i i
also came into an inheritance this year
um my late uncle passed and
i was in his will so he got 19 000 from
that i
obviously tied the tides off of that and
then but my mom's been giving me money
uh two times
like five thousand dollars every couple
months to go towards that down payment
but she
said specifically she wanted that for
that do i just leave that there until
we're at a place to use that or
that's fine just set it over a separate
savings account and just pretend like
it's not there
because she's you know she stipulated
how that gets to be used so we have to
honor that
um not what i normally would do don't
care for that idea but it's okay you're
there
now so so you have 19 000 and i'm gonna
tell you that when you really start
leaning in on your budget and you and
your wife are working on it really
really tight
and you get you get more intense and
more focused you're gonna do more than a
thousand
let's pretend for example purposes for
five months
between now and march you did two
thousand
well that would be ten thousand dollars
you already have nineteen
so that would put you at twenty nine
thousand dollars in savings when baby
comes
i actually have twenty six currently in
the
in the housing one no i'm talking about
the housing
the housing's separate yeah wait is the
inheritance for the house
the inheritance i put into the housing
one no
um no your inheritance is getting ready
to pay your car off after baby comes
okay so okay at the moment it's older
than the same one but i i yeah
i would have only your mom's money in
the house fund
gotcha because that's the money that she
has dictated the give
what the gift is for the inheritance
money is yours to do with as you please
yeah and so what we're gonna have is
we're gonna have your inheritance money
house money separate from mom your
inheritance money plus whatever you can
save between now and baby so you're
gonna have 25 to 30
000 in that account when the baby comes
that's gonna feel pretty good isn't it
yeah yeah a lot of comfort with a new
baby a new job in a new land called
california
and a new marriage and all this stuff so
there's a lot of money here to give you
comfort
for a short period of time anyway now
baby comes home mama comes home
we write a check and pay off the car
that's going to leave you somewhere in
the neighborhood of ten thousand dollars
yes sir for your baby step three
emergency fund and so then you can start
to save
in addition to that towards your home if
you want to we call that baby step 3b
and that's how we would execute the baby
step plans
in your situation so but rachel's
exactly right
excuse me what we've got to do is you
push pause
on your baby steps you do not do the
baby steps when the baby's on the way or
when you've got
some other thing that's on the horizon
that's a big deal like you know you're
going to lose your job in two months
they've announced it
yep you know you push pause and you pile
up cash
to get ready for that then when you get
the other side of the situation
like baby comes or you get the new job
or whatever then you clean out the
account all the way down to a thousand
in your case you're not gonna need to
clean it all the way out because you're
gonna have
more and you're probably gonna have
almost have your baby step three
completed
it's very cool you're in a really good
position yeah and i think some people
who are new to the program
because i know like he said like during
quarantine a lot of people just
binge watch youtube and stuff but even
though the money is in the account even
just from the inheritance
and he has enough money to pay off the
car today you still press pause
because of the big life event so even
though it's there still press pause
it'll be fine stay current on the car
and then again in a few months in march
they can pay it off yeah
and just just because the last thing you
want to do is have
eight thousand dollars in your account
and baby comes
and you have a nine thousand dollar
issue yeah
and then you gotta worry about money and
baby that's right that's right our
money and mommy and so we don't we just
don't need that this is supposed to be a
blessed time an exciting time a
fun time and when you take money stress
off the table it allows that to occur
that way the joy can flow
i'm not worried about anything else so
fun first babies are so fun
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