Your income doesn’t matter. Your age doesn’t matter. Your race doesn’t matter. Your geographical location doesn’t matter. There’s a thing that you and I are dealing with in your money and it’s called math, and none of those things I just mentioned give you a pass on math. Where people get themselves in trouble, including when I went broke many years ago because I was stupid, we get ourselves in trouble when we don’t bother and do the math before we do the transaction.
We’re the stupid woman from San Diego who leased her dog for fifty four hundred dollars, we make ninety thousand dollars a year and somehow in our brains figure out that our children deserve a $50,000 Honda SUV, and now we have to take the kids out of private school because we can’t pay the payments on the SUV and the private school. Because we didn’t do math. We’re 21 years old, we buy a $10,000 car, run up ten thousand dollars in credit card debt and have ten thousand dollars in medical bills, and make thirty thousand dollars a year.
When you make thirty thousand dollars a year, there’s nowhere in that plan that thirty thousand to ten thousand dollar car makes sense. There’s nowhere in that plan that running up a bunch of credit card debt gives you any room to breathe. You already can’t breathe. We have three kids, we make twenty-eight thousand dollars a year. “Should I go back to work?” the woman asks, with twenty eight thousand dollar income with three kids. Our health care is provided by Medicaid, which is welfare, because we qualify if I go back to work, we won’t qualify for that. Yet, if I go back to work, I have to pay for daycare and I’m not sure I’m going to even break even.
At least she was doing math up front and thinking about it before she made the decision. Of course, our answer to our equation is both she and her husband need to develop some kind of a long-term career path and a short-term series of part-time jobs and extra jobs, and small business ideas, that create an income that at least doubles their income. The bad news is they only make $28,000 a year. The good news is, with a little bit of work and ingenuity, they easily can double their household income. Then they don’t worry about being on the government dole. Then you have a long term game plan to get yourself out.
It’s not a matter of simply her going back to work, that’s a limited view of the situation. I actually didn’t answer her question properly when she called. What does all of this have in common every single one of these things have in common? Adults devise a plan and follow it. Children do what feels good. Stephen Covey, in the book the 7 Habits of Highly Effective People, says number one habit of highly effective people is they are proactive. One of the other habits is that you begin with the end in mind. When broke people say “I can afford this”, you know what they’re saying? I think I might be able to pay the payments. That’s what broke people mean when they say that.
If you don’t want to be broke people anymore, you get out of the land of payments. If you don’t want to be broke people anymore, you sit down and you say, “Hey, here’s what we make, here’s the size of our mess, what are we going to do to increase our income and decrease our out go to be able to address the mess faster?”. It really is sixth grade or fourth grade math. It really and truly is but you have to get in front of it instead of running behind it all the time. Getting in front of it is — you look at your situation before you make a decision, not after you’ve made the decision.
Buying a $44,000 SUV when you make $85,000 a year is stupid, whether you paid cash for it or not, it’s still stupid. But when you finance, that it’s double or triple stupid. But if they look good when you bought it and Mama’s going to be pissed at Dave Ramsey because her husband called the show and he said you’re stupid, and mama loves that car, I’ll just tell you how many times has that story been repeated in the last 25 years.
I’m a cuss word and some of your houses. That’s fine. Everybody’s got to have a gift. I’ve got it. I’m okay, but we have to begin with the end in mind. It’s called being a grown-up. You have to look at the situation and go, “There’s no possible way a sane individual is going to make that decision”. But the thing is that we’re not saying when we’re making half the decisions because we’re operating on about a four-year-old level, meaning we impulse our butts off.
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Going out to eat is expensive and you can’t afford it. If you’re 21 years old and you make 30,000 bucks a year, and you’re up $10,000 in credit card debt because you bebop in and out of restaurants, you bebop down to a vacation you can’t afford, you bebop down to the pet store and buy something you can’t afford you bebop through Target, some of you go to Walmart for entertainment, give me a break. You might be a redneck if Walmart is your entertainment.
No wonder you run up debt. No wonder you can’t breathe. No wonder because you got you got payments coming out your dadgum ears man and nobody goes in debt that make $30,000 a year, they’re 21 years old, they don’t go $10,000 in debt in one purchase. They don’t use their credit card and buy one thing for $10,000. No, it’s $1,050 things. Its death by a thousand cuts, and then you look up and go, “Oh my god what have we done? What have we done? How stupid are we?”
Now, I’m on your team. I’ve done it too, but I’m just telling you, a lot of stuff that’s happened is stuff that is unbelievably preventable. You just look at it and go, “No, we’re not going to run our dog. In fact, we’re not going to fence our dog. You know, it’s not happening, period. We’re not we’re not buying this car honey, I know you want a nice car honey, but you know what? We’re broke! Broke people don’t buy $45,000 Honda SUVs. We’re broke and you know how I know we’re broke? When we make a lot of money, but it’s all gone, have you not noticed we don’t have any money? We have no money. No, we’re not going out to eat. That’s why broke.
What money? You’re not in Congress, you can’t just print it in the basement. You have to live on less than you make. You have to have a plan and you have to be intentional. I meet people that make $30,000 a year that save money, I mean people make $130,000 a year couldn’t save money if they had to. It has to do with controlling the person in your mirror. It’s you deciding, “I’m going to be a grown-up. I’m going to be an adult. If you’re 52, or you’re 22, or you’re 12 — adults devise a plan and follow it. Children do what feels good.
Everybody’s all worried about it. I’m not worried about your feelings, I make a living hurting your feelings. I don’t give a crap about your feelings. Let me tell you what feels good, not having any dadgum payment. What feels good? Having a pile of money in the bank, that feels good. Being wealthy enough to be take your eyes off yourself, and not be so self-centered and actually be generous. Where there’s some room, some margin in your budget, you can give money to somebody else that’s hurting — that feels good.
We live on the junk food of Finance, and financially we’ve got an obese culture. It’s lost its mind. You guys you have to be weird, because normal is broke. Wall Street Journal says 70 percent of Americans are living paycheck to paycheck. That’s seven out of ten houses on your street. I don’t care what street you live on, that’s seven out of ten houses. See all those ten houses in your mind? Seven of those people are broke. Well, they look good, they’re acting rich, but they’re not rich. It’s what they call in Texas, “big hat no cattle”. Don’t live like that, it’s time to be weird. Those of you that want to weird, that want to win with money, you must do weird things, because normal is broke. If you do normal stuff you’re going to have normal results. It’s time to stop it.
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