Chapter 1, Part 2 MrRickLHS English English

Chapter 1, Part 2YouTube↗ IA↗(long shot)
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>> Ramsey: NOW, LET'S LOOK.

THERE ARE THREE BASIC REASONS

THAT WE SAVE MONEY FOR.

NUMBER 1 IS FOR AN EMERGENCY

NUMBER 2 IS FOR PURCHASES.

NUMBER 3 IS FOR WEALTH BUILDING.

WHEN THE EMERGENCY FUND IS

INVOLVED, WHAT WE'RE SAVING FOR

HERE IS UNEXPECTED EVENTS.

UNEXPECTED EVENTS DO OCCUR.

YOU CAN COUNT ON IT.

GRANDMA SAID IT.

GRANDMA SAID TO SAVE FOR A...

>> Ramsey: VISUAL AID.

IT'S GOING TO RAIN.

"MONEY" MAGAZINE SAYS 78% OF YOU

WILL HAVE A MAJOR NEGATIVE

FINANCIAL EVENT IN ANY GIVEN

10-YEAR PERIOD OF TIME.

THAT MEANS 8 OUT OF 10 OF YOU IN

HERE -- IF I COUNT 10

FAMILIES -- ARE GONNA HAVE

SOMETHING COME ALONG AND PUNCH

YOU TO THE TUNE OF $7,000,

$8,000, $5,000 -- SOMEWHERE IN

THAT RANGE -- AND HIT YOU WITH

AN UNEXPECTED EVENT -- AND YOU

HAVE TO BE READY.

EMERGENCIES ARE GOING TO HAPPEN.

THEY'RE UNEXPECTED.

"WELL, DAVE, YOU NEED TO BE

EMERGENCIES ARE GOING TO HAPPEN!

YOU CAN COUNT ON IT.

AND YOU'VE GOT TO BE READY FOR

THE EMERGENCIES.

THERE'S NO WAY AROUND IT.

>> EMERGENCY FUND -- WHY DO I

NEED THAT AS A TEENAGER?

UNEXPECTED EVENTS ARE ALWAYS

GOING TO HAPPEN, EVEN TO

REMEMBER THOSE RAINY DAYS DAD

WAS TELLING YOU ABOUT?

WELL, I CAN PROMISE YOU IT'S

THE QUESTION IS, WILL YOU HAVE

>> Ramsey: NOW, REMEMBER, BABY

STEP 1 IS $1,000 IN THE BANK.

WE'RE GONNA SET ASIDE $1,000

REALLY, REALLY QUICKLY.

THE HARDEST BABY STEP, THE

EASIEST BABY STEP.

AND THEN WHEN WE GO FULLY INTO

THE EMERGENCY FUND, WE'RE GONNA

CALL IT BABY STEP 3.

AND YOU NOTICE WE SKIPPED A

WE'LL COME BACK AND FILL THAT IN

LATER, BUT THESE TWO BOTH HAVE

TO DO WITH THE EMERGENCY FUND,

SO I WANT TO MAKE SURE THEY'RE

COVERED IN THIS LESSON.

BABY STEP 3 -- HAVE A FULLY

FUNDED EMERGENCY FUND OF 3 TO 6

MONTHS OF EXPENSES SET ASIDE.

NOW, I RECOMMEND YOU PUT THAT IN

A GOOD MONEY MARKET ACCOUNT.

A MONEY MARKET ACCOUNT YOU CAN

GET WITH A GOOD MUTUAL-FUND

IT DOESN'T PAY A LOT.

IT'S GONNA PAY KIND OF LIKE

WHATEVER CD RATES ARE, OVER

ABOUT 6 MONTHS, YOU CAN HAVE

THIS ON A MONEY MARKET ACCOUNT.

THE GOOD NEWS HERE IS THERE'S NO

PENALTY FOR TAKING THE MONEY OUT

IF YOU HAVE AN EMERGENCY.

YOU CAN JUST WRITE A CHECK

AGAINST THAT MONEY MARKET

SO IT'S WHERE I'D PARK MY

PERSONAL EMERGENCY FUND OR WHERE

I'D PARK SHORT-TERM SAVINGS FOR

STUFF I'M SAVING FOR LESS THAN 5

SO IF I'M SAVING UP FOR OTHER

THINGS THAT WE'LL TALK ABOUT IN

A FEW MINUTES, I ALSO USE A

MONEY MARKET ACCOUNT FOR THAT.

NOW, WHAT YOU'VE GOT TO

REMEMBER -- THE MISTAKE PEOPLE

MAKE ABOUT THE EMERGENCY FUND IS

THEY THINK, "OOH, OOH, OOH, THIS

IS LIKE $5,000, $10,000,

3 TO 6 MONTHS OF EXPENSES IS A

YOU START TALKING ABOUT HAVING

$15,000 SITTING THERE IN A MONEY

MARKET ACCOUNT, PEOPLE ARE

SAYING, "WELL, THAT DOESN'T GIVE

ME MUCH OF A RATE OF RETURN.

I COULD DO A BBD.

I COULD DO A BIGGER, BETTER

DAVE, I'VE GOT SOMETHING I COULD

DO WITH THAT MONEY.

THAT'S A LOT OF MONEY."

AND THAT'S NOT WHAT IT'S FOR.

YOUR EMERGENCY FUND IS NOT AN

SAY, "NOT AN INVESTMENT."

>> NOT AN INVESTMENT!

>> Ramsey: YOUR EMERGENCY FUND

SAY, "INSURANCE."

>> Ramsey: NOW HERE'S THE DEAL

WITH INSURANCE.

INSURANCE DOESN'T MAKE YOU

MONEY, DOES IT?

>> Ramsey: INSURANCE COSTS YOU

MONEY, AND IT COSTS YOU MONEY TO

PROTECT YOUR ASSETS, TO PROTECT

YOUR INVESTMENTS.

AND SO BY INVESTING MONEY AT A

LOW RATE OF RETURN OR PARKING

MONEY, REALLY, IN A MONEY MARKET

AT A LOW RATE OF RETURN, YOU'RE

NOT MAKING MUCH MONEY ON YOUR

SO IT'S KIND OF COSTING YOU

MONEY, LIKE INSURANCE DOES, BUT

IT'S THERE TO PROTECT YOU.

SO YOU DON'T HAVE TO CASH OUT

YOUR 401(k) IF THE TRANSMISSION

YOU DON'T HAVE A PROBLEM IS YOU

GET LAID OFF AND HAVE TO PAY THE

HOUSE PAYMENT A LITTLE BIT.

YOU KNOW, YOU GOT ISSUES THAT

ARE GONNA HAPPEN.

WHEN LIFE COMES ALONG AND

THERE'S A $5,000, AN $8,000, OR

A $12,000 GOTCHA, THEN ALL OF A

SUDDEN, YOU'RE NOT TRYING TO

CASH OUT INVESTMENTS, 'CAUSE

YOU'VE GOT PROTECTION FOR THE

INVESTMENTS WITH THIS.

THE TRICK WITH THIS IS DON'T

DO NOT TOUCH IT.

THIS IS NOT A LEATHER-COUCH

THIS IS NOT A "I WANT TO GO TO

THE BAHAMAS" FISHING FUND.

THIS IS NOT A "OH, HONEY, I

FOUND A BASS BOAT" FUND.

THIS IS AN EMERGENCY FUND.

YOU DO NOT TOUCH IT.

AND ONCE YOU GET THAT IN PLACE,

IT WILL CAUSE YOU TO RELAX.

IT'LL GIVE YOU A SENSE OF PEACE,

A SENSE OF DESTINY WITH YOUR

IT IS A HUGE EMOTIONAL STEP IN

YOUR FINANCIAL PROCESS.

NEVER -- NEVER, NEVER MISS THIS.

THE WEIRD THING IS, WHEN YOU GET

AN EMERGENCY FUND, YOU'LL QUIT

HAVING EMERGENCIES.

HAVE YOU EVER NOTICED THAT WHEN

YOU'RE BROKE, YOUR LIFE LOOKS

LIKE A COUNTRY SONG?

YOU KNOW WHAT I'M TALKING ABOUT?

EVERYTHING THAT CAN GO WRONG

MURPHY SHOWS UP.

YOU KNOW WHO MURPHY IS -- THE

GUY, "IF IT CAN GO WRONG, IT

I AM CONVINCED THAT WHEN YOU

HAVE AN EMERGENCY FUND, IT IS

MURPHY REPELLENT -- THAT MURPHY

COMES UP, KNOCKS ON THE DOOR.

SAID, "GOT AN EMERGENCY FUND --

HE GOES, "OKAY, I'LL GO SEE YOUR

YOU KNOW, YOU CAN CHASE A BLACK

CAT WHEN YOU'VE GOT AN EMERGENCY

"COME HERE, COME HERE."

IT IS AMAZING TO ME HOW THIS

WORKS, THAT SHARON AND I -- WE

GOT THAT EMERGENCY FUND IN

PLACE, AND WHAT WITH WE'VE BEEN

THROUGH -- GOING BROKE AND

LOSING EVERYTHING.

I MEAN, HONEY, WE GOT AN

EMERGENCY FUND FOR THE EMERGENCY

WE'RE LIKE CONSERVATIVE, RIGHT?

WE JUST DON'T WANT TO EVEN GO

NEAR THOSE KINDS OF PAIN EVER

THERE'S NO CHANCE.

SO WE GOT THIS HUGE -- AND ONCE

WE GOT THAT, WE DON'T EVEN USE

THE EMERGENCY FUND FOR

IF SOMETHING COMES UP, WE JUST

KIND OF WORK IT OUT.

BUT WE DON'T HAVE BIG

EMERGENCIES LIKE WE USED TO,

'CAUSE EVERYTHING WAS A CRISIS

WHEN WE HAD ABSOLUTELY NO

AND WHEN YOU PUT SOME PAD

BETWEEN YOU AND LIFE, LIFE WILL

LEAVE YOU ALONE A LITTLE BIT, IN

THE NEGATIVE WAYS, ANYWAY.

WELL, THAT'S A PERFECT EXAMPLE

OF MURPHY'S LAW.

ANYTHING THAT CAN GO WRONG WILL.

MURPHY'S LAW CAN HAPPEN TO YOUR

MONEY, AS WELL.

AN EMERGENCY FUND CAN TURN A

DISASTER INTO NOTHING MORE THAN

A MINOR INCONVENIENCE.

LET'S SAY YOU GET A FLAT TIRE OR

HIT A BALL AND IT SHATTERS THE

WINDSHIELD ON YOUR NEIGHBOR'S

CAR OR MAYBE YOU JUST LOCK

YOURSELF OUT OF YOUR OWN CAR.

THESE THINGS AREN'T CHEAP, AND

YOUR EMERGENCY FUND WILL COVER

THE EXPENSES WITH NO FREAK-OUT

EPISODE OR NO DISTRESSED PHONE

CALLS TO YOUR PARENTS.

HAVING AN EMERGENCY FUND'S KIND

OF LIKE HAVING MURPHY REPELLENT.

YOUR BAD LUCK TENDS TO DISAPPEAR

BECAUSE YOU'VE PLANNED FOR THE

HOW MUCH DO YOU NEED IN YOUR

EMERGENCY FUND?

ENOUGH TO COVER 3 TO 6 MONTHS OF

YOUR EXPENSES, WHICH MIGHT NOT

BE MORE THAN A CAR REPAIR, AN

INSURANCE BILL, OR A CELLPHONE

BILL MONEY -- THOSE KINDS OF

WHEN YOU HAVE MORE MONEY AND

MORE MONTHLY EXPENSES SUCH AS

RENT OR UTILITIES, YOU'LL WANT

TO ADD MORE TO YOUR EMERGENCY

FUND JUST IN CASE OLD MURPHY...

COMES KNOCKING.

THE EMERGENCY FUND IS YOUR FIRST

SAVINGS PRIORITY.

DO THAT $1,000.

THEN DO BABY STEP 2 WHEN WE

COVER THAT IN THE DEBT LESSON.

AND THEN STEP UP THERE AND

FINISH THIS EMERGENCY FUND --

FULLY FUNDED, 3 TO 6 MONTHS OF

THE SECOND THING WE TEACH YOU TO

SAVE MONEY FOR IS FOR PURCHASES.

INSTEAD OF BORROWING TO BUY

SOMETHING, PAY CASH BY USING THE

SINKING FUND APPROACH.

FOR INSTANCE, LET'S SAY YOU HAD

A $4,000 DINING ROOM SET AND YOU

WENT DOWN TO "ROOMS THERE THEY

AND THEY WOULD HAVE -- IF YOU

WENT TO THE LOCAL FURNITURE

STORE -- RIGHT? -- AND YOU WENT

THERE'S A $4,000 DINING ROOM

THEY WOULD HAVE 90 DAYS SAME

>> Ramsey: RIGHT?

AND YOU CAN GO IN THERE, AND YOU

CAN FINANCE IT.

WELL, HERE'S THE TRICK.

A BUDDY OF MINE IN THE FINANCE

BUSINESS TOLD ME THE OTHER DAY

THAT 88% OF THE "90 DAYS SAME AS

CASH" CONTRACTS -- THAT'S 9 OUT

OF 10 -- DO NOT PAY OFF IN 90

AND WHEN THEY DON'T PAY OFF IN

90 DAYS OR EVEN IF YOU PAY ALL

THE LITTLE PAYMENTS YOU'RE

SUPPOSED TO PAY THROUGH THERE

AND YOU DON'T PAY IT ON TIME,

THEY'LL STILL TAG YOU AND THEY

BACKCHARGE YOU THROUGH THE WHOLE

THING WITH THE INTEREST, AND

THEN YOU GET TO PAY PAYMENTS FOR

THE REST OF YOUR DAD-BLAME LIFE

AT 24% OR 38% INTEREST --

IS THE WAY THIS DEAL WORKS, AND

THEY KICK YOU IN THE TAIL.

SO THIS MEANS THAT YOU'RE GONNA

HAVE BORROWED AT 24% INTEREST.

YOU'D HAVE PAYMENTS OF $211 A

MONTH, AS AN EXAMPLE, FOR 24

AND SO YOU'D END UP PAYING

$5,064 FOR A $4,000 DINING ROOM

HERE'S AN IDEA.

HERE'S AN OLD-FASHIONED THOUGHT

THE WAY YOUR GRANDMOTHER WOULD

THINK OR YOUR GREAT-GRANDMOTHER

WOULD THINK ABOUT MONEY.

HERE'S AN IDEA.

HERE'S WHAT A SINKING FUND IS.

IT'S A COMMERCIAL REAL-ESTATE

IF YOU BUY A COMMERCIAL

REAL-ESTATE BUILDING AND IT'S

GOT A 20-YEAR ROOF ON IT, YOU

KNOW THAT IN 20 YEARS YOU GOT TO

BUY A ROOF, SO EVERY YEAR YOU

SET ASIDE OUT OF YOUR INCOME

1/20 OF THE ROOF, SO WHEN THE

ROOF, WHICH IS A BIG, HAIRY

DEAL ON A BIG BUILDING, COMES

UP, YOU'VE GOT THE MONEY TO PUT

THE ROOF ON IT.

IT'S NOT A SURPRISE.

THAT'S A SINKING FUND, AND

THAT'S ALL WE'RE DOING HERE.

WE'RE JUST GONNA SAVE MONEY AND

EARN A LITTLE BIT OF INTEREST ON

OUR MONEY, RATHER THAN PAYING

SOMEONE ELSE PAYMENTS AND BEING

STUCK IN A RUT.

AND SO WHAT IF YOU SAVED $211 A

YOU DID THIS FOR 18 MONTHS.

YOU COULD PAY CASH.

NOW, SOME OF YOU ARE QUICK WITH

A CALCULATOR OR QUICK WITH YOUR

MATH OR YOU'LL GO BACK LATER AND

RUN THE NUMBERS.

YOU'LL GO, "WAIT A MINUTE.

18 TIMES 211 IS NOT 4,000."

YOU'RE RIGHT. IT'S NOT.

18 TIMES 211 IS ACTUALLY ONLY

BUT YOU KNOW WHAT I'VE

DID YOU KNOW THAT 90 DAYS IS NOT

THE SAME AS CASH?

[ AUDIENCE CHUCKLES ]

THAT IF YOU HAVE 38

UNCLE BENJAMIN FRANKLINS THAT

YOU COULD PROBABLY WALK INTO A

FURNITURE STORE AND GET A DEAL,

DO YOU THINK I COULD BUY OR DO

YOU THINK YOU COULD BUY A $4,000

DINING ROOM SET FOR 3,800 BUCKS

YOU'LL GET SPECIAL ATTENTION IF

YOU JUST WALK AROUND AND DO THIS

...BECAUSE THE KID -- YOU GO UP

TO RING IT UP, AND THE KID WILL

GO LIKE, "WHOA, DUDE, THIS ONE'S

GOT LIKE REAL MONEY."

AND SO IT'S A COOL PROCESS.

YOU CAN GET DEALS LIKE THIS, AND

WE'RE GONNA TALK ABOUT THAT IN

THE BARGAIN LESSON, SO DON'T

SO 90 DAYS IS NOT THE SAME AS

NOW, DO ALL FURNITURE STORES

ALWAYS DISCOUNT WHEN YOU DO

WELL, ABSOLUTELY NOT.

DO I LEAVE WITH MY MONEY IF THEY

BECAUSE I'M GONNA SAVE UP AND

AND, YOU KNOW, WHEN YOU START

PAYING FOR FURNITURE THAT WAY,

YOU'RE GOING, "I'M NOT SURE I

LIKE THE FURNITURE."

"I KIND OF LIKE THIS.

I'M JUST GONNA GO HOME."

YOU KNOW WHAT I'M SAYING?

[ CHEERS AND APPLAUSE ]

OR LET'S THINK ABOUT A CAR, FOR

LET'S KIND OF LOOK AT THAT,

'CAUSE EVERYBODY'S SAYING, "OH,

YOU ALWAYS GOT TO HAVE A CAR

THAT'S THE THING THAT GOES

AROUND ALL THE TIME."

WE'LL TALK ABOUT THAT IN DETAIL

IN THE DEBT LESSON.

BUT WHAT IF YOU HAD A $4,600

YOU COULD SAVE FOR A $4,600 CAR,

AND YOU COULD DO THAT BY PUTTING

$464, WHICH, BY THE WAY, IS THE

AVERAGE CAR PAYMENT IN

NORTH AMERICA TODAY, ACCORDING

TO "USA TODAY."

IF YOU PUT $464 JUST IN THE

COOKIE JAR FOR 10 MONTHS -- NOT

EVEN A WHOLE YEAR -- AND THEN

YOU COULD BUY A CAR.

"WELL, NOW, DAVE, $4,600 WON'T

BUY MUCH OF A CAR."

IT'LL BUY A CAR WITHOUT

PAYMENTS, AND IT WILL DO IT IN

AND DID YOU KNOW I CAN DRIVE ON

A STATE HIGHWAY ABOUT 20 MILES

OR I CAN DRIVE ON A STATE

HIGHWAY ABOUT THAT WAY ABOUT 20

MILES AND YOU COULD, TOO, AND I

CAN BUY ME A 10-YEAR-OLD

HONDA ACCORD THAT IS A VERY,

VERY NICE AUTOMOBILE FOR 4,600

I COULD DO THE SAME THING WITH A

NICE FORD TAURUS AND PROBABLY

BUY IT FOR EVEN LESS THAN THAT.

AND THAT'S A GREAT CAR TO GET ME

BACK AND FORTH TO WORK FOR 10

MORE MONTHS WHILE I DO IT

AGAIN...AND DO IT FOR 10 MORE

AND NOW I'M DRIVING A $15,000

CAR, 30 MONTHS IN, PAID FOR.

THIS IS CALLED SAVING UP AND

PAYING FOR THINGS.

IT'S A NOVEL IDEA.

IT'S KIND OF SWEEPING THE

IT'S DIFFERENT, YOU KNOW?

THINK IT THROUGH.

THINK IT THROUGH.

IT'LL COME TO YOU.

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