The Ramsey Show - App - Are We Headed for Another Great Recession? (Hour 2)

Episode Date: February 22, 2022

Dave Ramsey & George Kamel discuss: Should you roll an IRA into your company's 401(k)? Why the US is bound to hit the financial wall eventually, What to do when you get screwed by the car dealership, The insanity of pulling from your IRA to pay your mortgage.   Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6

I'm out. Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where dad is dog and cash is king. A paid off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host, George Campbell. Ramsey Personality is my co-host today. As we answer your questions about your relationships, your life, your mental health, your money, your work, your career, everything about you.

The phone number is 888-825-5225. John starts off this hour in Sunnyvale, California. Hey, John, how are you? Hi, Dave. Hi, George. Thank you so much for taking my call. Sure. What's up?

So I want to contribute to my Roth IRA through the backdoor Roth IRA method. But the problem is that I currently have funds in my traditional IRA. So if I attempt to do a backdoor Roth, I would trigger a pro rata rule. Correct. My job offers the opportunity of rolling in the traditional IRA funds to my work 401k, which would then zero out my traditional IRA, so then I can safely do a backdoor Roth. Would you recommend doing that? You can also safely do a backdoor Roth if you reduce the

traditional by converting some of it to Roth and pay the taxes. Right. And if the amount This must be a mammoth traditional IRA. How big is it? It's not Q2 mammoth. It's

at $61,000 right now. And that's triggering? The backdoor Roth is going to trigger a distribution on that? That's what I've done a backdoor Roth before. I know, but it doesn't always trigger a distribution on your traditional. Just if the traditional meets some of the mathematical guidelines, if it's large enough oh i don't think that's large enough i don't think that's large have you talked have you talked to your smart mr pro about this uh no i have not talked to my smart mr pro regarding this okay yeah i think you need to get a pro in your corner and talk that through

because typically if we if the if the roth ira is going to cause some kind of a distribution problem it's because the ratio and i can't i can't remember what the stupid rules called off the top of my head but there's a math rule that triggers this and it's not all of them if you have a tiny little let's say you had a six thousand dollar as an example uh traditional right it wouldn't trigger it at all. 100% would not. Okay. I just can't remember how to do the calculation or what the name of the stupid thing is off the top of my head.

So you're going to have to sit down with somebody who knows more than I know that does this every day. But I think you're okay. I don't think you're going to have to do this. And it could be that if you move $20,000 of this over into Roth and that creates a $3,000, $4,000 tax bill, that you're not going to have any problem. That's possible too. That's a good way to do it. But the trick is get with your smart investor pro and get somebody to get down in the weeds of your numbers that does this every day. And I think they can guide you through this. You could go the way you're suggesting, but it'd be my last option. Yeah, it's an interesting situation when you get into the pro rata stuff and really dive deep when it comes to moving around your IRAs and your employer's retirement plans. It can get messy.

So I like having that pro in my corner. I can just go, hey, man, I've got this. What would you do if you're in my shoes? That helps. So there is a lot in the news about debt these days. Oh, yeah. Never gets old, does it? You've been doing it 30 years. It's amazing. I keep hearing there's debt in the news. Who knew? Wow. Well, I found this article earlier today, Dave, and it was interesting because I found some conflicting news. So maybe you can help me sort this out.

Here's one from Fox Business, which was encouraging. More Americans optimistic about their finances in 2022 despite inflation. So, inflation's rising at the fastest pace in decades, it says, which means consumers are paying more for rent, utilities, groceries than ever before, plus federal student loan payments restart this year, potentially impacting the financial stability of millions of borrowers.

However, a new survey from Ally Bank shows that most Americans are optimistic about their finances despite all of this. More than half, 53% of respondents, said they're confident about their personal financial standing. 59% believe they'll be better off financially a year from now. And two-thirds, 65%, said they'll likely achieve their financial goals for 2022, even with record high inflation. So people out there are optimistic. And even with the fact that they've gone further in debt in 2021 than at any time in history, consumer debt went through the roof. Here's what we're seeing from Reuters here.

U.S. household debt increased by $1 trillion in 2021, the most since 2007. Higher borrowing was fueled in part by rising prices as consumers cope with the strongest inflation seen in nearly four decades, and households supported by increased savings and higher incomes seem to be handling the larger debt loads well so far. So far. So this brings me to my next point, Dave. I'm curious. So far, so fi. You've seen some things in your day. Not trying to age you here, but you've been through 2008. You've been through a real recession. And this is saying the debt has increased the most since 07, right before our last big recession. Do you feel like we're heading towards another one based on these numbers? Well, I don't know. I don't know the answer on that.

Economists and weather forecasters are the only people who can be wrong all the time and keep their jobs. It's a good job to have that but the uh the thing that is is that all that always does run parallel with this okay is if my income is high enough and i can keep spending even money i don't have by going further into debt then i can ignore inflation and i can ignore the fact that i'm going further in debt than i ever have in my life and i can ignore the fact that the united states of america is going further in debt than it has ever gone in, that the deficit has doubled in one decade. Doubled. The amount of debt we're in in the United States has doubled. The United States government has doubled the debt, and that pulls money out of the economy. So when the U.S. borrows money using bonds and parks it on the sidelines,

they borrow a trillion dollars here a trillion dollars there and they park that money over on the shelf it's no longer out here moving around doing things it's sitting over here so they're sidelining it they're shrinking the money supply by sucking the marrow out of the bones of the economy with the borrowing for the united states government that's what they're doing then add to that the consumer is of the bones of the economy with the borrowing for the United States government. That's what they're doing. Then add to that the consumers doing the same stupid thing, only the consumers stimulating the economy because they're buying things in the economy, and that's cycling.

That money's cycling. So when they spend money on a car, even if it's borrowed money, that car purchase goes into a car company, which goes into car company salaries, which goes back into the rest. That guy working at the car company on the Toyota line can go out and buy a steak, which, by the way, doubled too, because they must have universal wage at the cattle farm. So wages are impacting all of these prices left and right. So we're making more, spending more, and spending more due to inflation as well.

And so what we've got here is we've got a recipe for a comeuppance. That's a good way to say it. Sounds like Winnie the Pooh. Yeah. Comeuppance. A comeuppance is coming. It's a heffalump. It's a comeuppance is coming.

The heffalumps are coming. We've got record low interest rates. That's what's happening because, you know, what you doing is, think about this just on an individual level. Think about your friend who's borrowing himself into oblivion. He's going to get a car payment. He's going on vacation on a credit card. And you can just watch him. He's heading to the wall.

He's going to hit the wall. He's going to hit the financial wall. And you can't stop him because he feels good because he's making more money than he's ever made in his life because he just got out of college. And he got a big job. But he's spending more. He's spending because he's making more money than he ever made in his life because he just got out of college. And he got a big job. But he's spending more. He's spending like he's in Congress. And a comeuppance is coming. You know that on an individual basis.

And that's what this says on a macro basis. Wow. So it doesn't matter how you feel about finances. What are you going to do about it? Are you going to rely on the economy to decide to dictate your financial goals? Not me. Please, no. In an uncertain world,

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Do your taxes on Ramsey Smart Tax for free. There's a lot of Ramsey in all of that. We like to include that. Just make sure you know where it's coming from. For sure. Pete is with us. Pete's in Chicago. Oops.

That's not good. I can't get rid of it. Can you? Thank you. All right. Geez. Pete is in Chicago rid of it. Can you? Thank you. All right. Jeez, what a day. Pete is in Chicago, I think. Pete, are you there?

No? Still? Okay. One more time. We got him. We got him. Dave has not been talking talk radio but for 30 years, and he can't push the right freaking button. It makes me feel better. Pete, how are you?

About your same age, Dave, and I'm electronically challenged also. Well, thanks. You and I are a pair, brother. We'll try to get through this together. George will help us. I'm IT today. All right. What's going on?

Here's my question, but I imagine it's too late to do much. I was coming back through Iowa right before Thanksgiving, and my Duramax pickup truck broke down, went into a dealership. They put a part on it that was wrong. I end up spending a night in a hotel. I end up having to have someone come get me. I don't get it back until New Year's Eve. And as this whole thing went on, they said, we got to compensate you somehow. We got to compensate. I'm working with customer service for this company. And they want to give me a hundred bucks. And I'm talking to them on my way to go get the pickup truck.

And I said, something's got to be settled before I pick it up or you'll do a darn thing for me. They put parts on that I didn't need. It's because the computer told them to. Any ideas what I can do, dave i'm not very happy uh without your authorization i mean that did you not have you didn't have a discussion with them while the repair was going on well yeah the computer said this is the part it needs so i said what do i have a choice and, no, now it was this part. The computer said it needed and the computer was totally wrong. They called the engineers and

the engineers didn't know what was wrong with it. The technician found the part on his own and I could get a $6,800 repair bill before I could pay for it before I can drive it out of there whoa yeah i had called uh ford and dodge i emailed them and asked if they wanted to trade me pickup trucks i'd give them this one we could do a commercial that uh brand x had a pickup they didn't know how to fit man this is a bad situation so you got so the service department not only did not i mean you had no idea this bill was this high no i knew the first thousand dollar part and then the parts that it took to finally fix it they claimed was three thousand dollars which the service department i can't really complain them because they did what the company computer told them to do you know they

plugged it in the computer as they do nowadays and they the computer was telling them what part to put on but then their own technician their own technician also figured out that it that was not what was wrong with it there was other stuff He found out eventually it was other stuff when the engineers at the head company couldn't figure it out. They threw their arms up. Okay, so why are they trying to charge you for parts that did not need to require the repair then? They should just take those back off. I had to pay the bill before I could drive it out of there. Oh, so you've already paid the bill?

Yeah, I went to get it New Year's Eve. Yeah. Okay. They had it five weeks. Yeah. I guess what I'm doing is I'm having a discussion with Dodge, and I'm having a discussion with the general manager of the dealership by phone. It wasn't a Dodge truck.

Huh? It wasn't a Dodge. Well, I don't want to say. Okay. I don't care. What is it? It was a Chevy. Okay.

I'm sorry. You said Duramax. So talk to Chevy. Yeah. I mean, General Motors has good regional people to deal with complete screw-ups like this. I worked with Lady and Customer Service the whole time. We talked every week yeah this is beyond her though this is over her pay grade because they're going to need to write you a check

so somebody's going to write me a check for about half of this bill and refund but it was not needed because i can get i can put the tech on the uh on the stand in court and the tech will tell me what it took to fix the car and that they've overcharged me $3,000 worth of parts that weren't needed to fix the car, and then they're going to lose the case. And by the way, General Motors, nor does this dealer, want to be in court over overcharging the consumer for this. They just messed up. Now what they need to do is make it right.

Dealership, I got no problem with them. I think they went above and beyond for me. I got a problem with you. They think they went above and beyond for me. I got a problem with you. They charge you $6,800 for repair. This should have cost $3,000. But the computer told them what to do. I don't give a crap what you told them to do it. The end result is they screwed you.

It's their responsibility. And they knew it was happening. And I'm talking to a supervisor. Computers don't run this place. People run the place. We tell the computers what to do that's how my life works so no i think the general manager and you need to have a conversation you and chevy regional not customer service need to have a conversation and somebody

needs to talk about okay the computer program the diagnostics are screwed up and based on your computer program being screwed up at the uh manufacturing level manufacturer's level chevy's level um then you need to you know you guys did a wrong repair and you overcharged me and you need to refund me for that and i don't care if chevy writes the check or the dealership writes the check i suspect it'll be chevy because they'll probably cover for the dealer because the dealer was doing what Chevy told them to do. So that's, I guess, is how it'll go down. But I got to tell you, man, truthfully, I'll be shocked if you don't get some resolution if you lean in on it and just make it a very simple thing.

The repair should have been around $3,000 based on what the tech finally found out. The tech and the service bay were misled by a faulty computer diagnosed by by a faulty computer diagnosis that's your all's fault it's not mine i'm the consumer and you need to make this right and somebody needs to write me a check back i shouldn't be charged for these parts that were not needed for the repair that's not right and if you guys don't make it right then we can make it right by talking about it on the internet and put it in you know going to court it's all going to be messy it's going to be a lot messier than six thousand dollars for you and then i'm going to have to sue you for like a million because i'm

pissed and you know all this i don't want to do all that and it's just not worth it it's just you guys just because it's chevy and you guys do the right thing because i gotta tell you what generally speaking our work working with people that have had problems over the years, Ford, Chevy, Toyota, Nissan, they do a good job of doing the right thing at the corporate level on this type of situation. They really, we don't run into them just messing people over. They just don't. Number one, they build a good product. And number two, this doesn't happen that much and so they just they have they've been making customers happy a long time yeah and you're

gonna have to stand up for yourself financially advocate for yourself be a little bit bad cop i don't care they're not your friends i don't care how nice they were this is three thousand dollars that they stole and i don't even care whose fault it is it wasn't mine it's one of you guys over here one of you people messing with my truck i don't even care whose fault it is. It wasn't mine. It's one of you guys over here. One of you people messing with my truck. I don't know who it was. Some of y'all screwed up. And then you overcharged me.

Just send Dave over there. And held me hostage. Yeah. I'm going to have to hire a new service where Dave Ramsey fights it. That'll be fun. That'll be expensive. Yeah, you're right.

We can't afford that. I'll do it. Also be nasty and bloody and ugly. No, I'm not doing that. Okay. That was a good effort. This is The Ramsey Show. Thank you. George Campbell Ramsey personality is my co-host today here on the Ramsey Show. I'm Dave Ramsey.

In the lobby of Ramsey Solutions, on the Dead Free Stage, Austin and Laura are with us. Hey, guys. How are you? Fantastic, Dave. Welcome. Where do you guys live? About an hour south of Kansas City, Missouri. Okay. What town?

Butler. All right. Welcome. Good to have you guys. And all the way down here to Nashville to do a debt-free scream. How much have you paid off? Paid off $146,885. Way to go. And how long did that take? Four years and nine months. Love it. And your range of income during

that time we started off around 92 000 got up to about 101 and it ended around 95 000 okay cool what do y'all do for a living i'm a district operations specialist with syngenta i work in sales and marketing and i'm also a ramsey solutions financial coach oh wow very cool thanks coach. Oh, wow. Very cool. Thanks. What kind of debt was the $147,000? Our mortgage. Looking at weird people. Way to go, you guys. That's pretty incredible. How old are you? I'm 31. I'm 32. And a paid-for house. Wow. What's this

house worth? Between $250,000 and $300,000. It's a house, shop, and a little bit of land. Man, look at you guys. It's all yours. It's all ours. No payments in the world not a one and you're 32 years old oh my gosh this is we're seeing a trend here dave and it's a good trend it is young people paying off their homes you them yeah young people paying off their home this is incredible so four years nine months you guys really went for this thing what what caused this journey to

start four years and nine months ago for you? Yeah, so it actually started a little bit before that. I actually got on Dave's plan about eight or nine years ago, kind of had a wake-up moment. Got on his plan and was able to pay off my existing debt, save up $12,000 and pay for an engagement ring, forever got married. And so I had a really good start going into the marriage yeah and I wasn't really familiar with Dave or the financial piece or anything until Austin came into my life but was fortunate to get a good job didn't have a whole lot of expenses had a company vehicle and things so was a little bit shocking to me at first whenever three months before we got married, he made me start keeping

track of all expenses and teaching me budgeting and whatnot. He just sprung it on you, huh? Yeah. That's strong words. He didn't tell you ahead of time that's part of the deal. He waits until we're about to get married and he goes, this is the deal. Well, and I joke that there's actually five gospels for Austin. There's Matthew, Mark, Luke, John, and Dave.

My theme for life is if Dave says it, I i do it plain and simple oh wow wow that's dangerous right there jump off a cliff that's power i don't know if i can handle but we actually then did take financial peace university right after getting married and we've led a couple courses so thank you i learned the the process pretty quickly after we got married he brought me along now you're teaching now you're teaching it for real right exactly well i feel like we're kind of the poster child for the house buying process because it went through fpr after we got married we bought the house a year later we had a really nice down payment we went on the 15-year mortgage we planned to pay it off early we set everything up to do exactly like you recommend. So we were very excited in that making that plan take place.

And it went even better than we hoped. It went even better than we anticipated by following your exact plan and process. And that was kind of our guiding shift through the whole time as we made that purchase happen and got ready to pay it off early. Yeah. And, I mean, along the way, every single extra dollar that we got went towards paying the house off. We were focused in on that's our goal. We're going to get it done. We're going to get it done early, just as quick as we possibly can.

And now you make $100,000 a year and you don't have any payments. Exactly. So now you can do anything you want to do. Yeah, and I mean, we had things that could have set us back. Our basement flooded within the first year of living there, but we had the emergency fund. We were able to take care of everything and then get right back on track on paying off the house. We had transmissions go out. We actually bought vehicles with cash while we're doing this. We cash flowed two kids' birds. So we were doing a lot all at the same time when this all happened.

And whenever I kind of factored everything in, whenever we bought the house, I had been self-employed for the vast majority of the time. So I had variable income I was dealing with. So I said, okay, we're going to make the payment based on your income, what we know we can do. Everything I can make, we're going to throw out an extra. And so there was months where we didn't have the $1,000 a month extra we really wanted to put on.

And there was months that we had some nice bonus or some nice checks, so we could put another $2,000 on on it and just the ebb and flow really made us just focus and say no to a lot of things but know that this is where we want to end up being and we're going to do whatever it takes to get there wow there's a lot of intentionality rolling around in here how much money do you guys put down on the down payment we have about 40 percent down wow just like the last debt-free screen i'm just seeing a trend here dave and you said they planned a big down payment with a 15 year fixed

and they're sitting here you know 28 or 30 years old there takes 32 right and they're this is the last yeah the last two in a row and but it's um so so you guys listening i mean this what this means is you can do this and you guys are are just, like you said, poster children. And the thing is this. If you find a system that is proven, work the system. And that's, you know, we can joke and call it the gospel. Dave, that's a little bit blasphemous. That's pretty blasphemous right there.

We may all get struck by lightning. But we can joke and say Dave's rules. We can joke and call it George's rules. We can call it whatever we want to call it. None of that really matters. All that matters is it's a proven. You to have a system and you got to work the system and it's a proven system so you don't need to fix a system that's broke that's not broken so you guys are incredible i'm so proud of you she's kind of got a funny story so whenever it came time where we were actually going to pay off our house austin came into the house and he says, I got something really

crazy that I want to just run by you. And so this last year, we've had a lot of things happen in our life that kind of threw us off course and honestly questioned if we're going to be able to get paid off in time or not based upon where we were going. And I was driving down the road one day from our farm and God just kind of put it on my mind. He goes, you need to think about this debt payoff. We were on track to get it paid off in about seven, eight years. And all of a sudden, I realized how much our loan balance was. And we had extra money sitting in savings. We had money we had actually started investing for some land in the future.

And we had some money that we had just been budgeting to pay off on the mortgage from our normal jobs. And I factored all those numbers together, and it came to within $100 of the exact amount of our loan balance. So I came home. I said, honey, you want to pay off the mortgage tomorrow? And I think my eyebrows raised, and I was like, you're crazy. There's no way. We don't have the money to do this. And then just sitting down and doing the math is like actually it is there we can do this

we can we just have to change the name on the account from the land account to the mortgage reduction exactly yep wow wow you guys are amazing that's it and now you're free and now you can just pile up cash like crazy and go do the land and go do whatever you want to do exactly that's our plan yeah so good good job guys well done well done well we've got a copy of baby steps millionaires for you uh you probably already have a copy but we'll get you another one because it's definitely the next chapter in your story for sure you're on the way to do that very young very sharp very well done extremely well done copy a total money makeover for you to give away i'm sure you'll run into somebody to do that and you guys are incredible.

Thank you so much for everything you're doing. And you're just an incredible example. And you brought the kiddos. What are their names and ages? Yes. We have Haley, who is three, and Reagan is one. All right. This is the family tree that was changed by mom and dad's courage to decide to address the issue that nobody likes to talk about in america money

debt and now here they stand completely debt-free house and everything you're incredible austin and laura haley and reagan 147 000 paid off house and everything four years and nine months making 92 to 101 to 95 count it down let's hear a debt-free scream three two one look at that those kiddos man that's awesome beautiful family absolutely awesome so fun this it never gets old. It does not get old. What I love is there was a decision before the decision. They pre-decided that we're not going to do things this way.

We're going to save up a giant down payment. We're going to pay it off early. They decided all of that before they ever went about paying off the home. Yeah, it wasn't like they woke up in trouble and then had to go get themselves out of trouble and then got out of debt. Every step was intentional. Every bit of it from day one. Amazing. Wow.

The power of this stuff, especially when you start early and especially when you pre-make the decision. That's a good way of saying that, George. Very well done. This is The Ramsey Show. Thank you. George Campbell Ramsey personality is my co-host today. Thank you for joining us, America. We're glad you're here. Michael is with us.

Michael's in Knoxville. Hey, Michael, how are you? Good, Dave. How are you? Better than I deserve. What's up? Great. Well, thank you both for taking my call today.

Sure. My wife and I are hoping to keep it going from the previous debt-free screen. My wife and I are considering paying our mortgage off, but we're thinking about approaching that from a different direction. Basically, I would like to take money out of my traditional IRA to do that. And I know the typical answer to that is no, but our situation is maybe a little different. Currently, my wife and I are both about 40 years old. Our house is worth about $575,000. We have a $253,000 mortgage on it, and the payment is about $1,600 a month. Now, combined, we have about $575,000 in traditional IRAs.

About $425,000 of that is mine, and about $150,000 of that is hers. Okay. So why would you want to pay 35% or 40% interest on the money to pay off your house? Well, mostly because it's there. You want to pay 35% to 40% interest to pay off your house? It would be about, at our current tax rate with the penalty, we would be looking at about $80,000. What's your income? What's your household income?

$150,000. Why do you want to pay a 10% penalty plus your tax rate to use your own money? That's ridiculous. No. You really want to be out of debt bad. No, I'm not going to tell you to do that. Well, most of the calls, my wife has to stay at home mom.

So it's been a single income for the last 10 years or so. You make $150,000. You can't afford your mortgage payment making $150,000? I mean, you make $150,000. It's not that we can't. It's not that we can't. No, I'm not recommending. Listen, it is the same thing as going to the bank,

and the bank says, let's pretend you're in a 25% tax bracket. Then you have a 35% interest rate, and you go to the bank, and you borrow money at 35% interest to pay off your house. That's effectively what you're doing when you cash this out, and you pay the 10% penalty plus your tax rate on your own money to give this up. You're giving up money you don't have to give up. And no, I would not do that. Michael, what have you been investing

out of your income towards retirement how much what percentage all if i'm working well it probably averages something i've never heard of no what are you putting right now what percentage of your income are you putting into retirement today uh today we're on four five six so it So it's right at 15%. Okay. All right. Then just keep working 4, 5, 6 is the answer. I just didn't know if you were investing 20, 30, 40% and not focus on the house. And so that was my question to have that much money at 40 IRAs. He's doing great on that side. Yeah, you're doing great. I would keep working 4, 5, and 6 is exactly what I would do. And you're going to whittle the house down,

and it's not going to take you as long as it feels like emotionally right now that it's going to take. You're going to get there, and you don't need to give up one-third of your dollars in order to pay off your mortgage early. That is a bad trade. I want you to pay off your mortgage as bad as anybody in the United States except you, you know?

And Georgia's right after me. I mean, we're cheering you on. We want you to pay off your mortgage. Set a goal. Three, four, five years. We don't want you to borrow money at 35% interest to pay off your mortgage. And when you pay a 10% penalty plus a 25% tax rate, 35% of your money goes to the government in order to pull it out early. That's the same thing.

And I would not do that. No. No. I would not do that. No. No. No. No. No. No. No. No. No. Was he unclear? I don't want to be unclear. I don't want to be unclear.

Please don't do that. Because I've got a feeling he's going to go do it anyway. I don't think we talked about that. He still hasn't grasped the idea of how mathematically stupid this is. Those convinced against their will. That's what they say. Vinay is with us in Tampa. Alright. Is it Vinay? with us in Tampa. All right.

Is it Vinay? Did I say that correctly? Yes, Dave. How are you? Better than I deserve. What's up? All right. So I recently started working on the baby steps, and I'm almost at the baby step two,

but I'm trying to pay off my personal loans and credit cards. But here's the thing. So more than half of my income goes into paying off the minimum payments and then the personal expenses and rent and stuff, you know. So I'm trying to pay off my debt as soon as possible, but it's like the minimum payments are eating up my income. So I don't know. I'm all confused now. What's your income? About $6,500 a month. Okay.

And how much debt do you have? $40,000, around $40,000. On what? On personal loans and credit card debt. Okay, no car payment? No, I don't have a car with me. It got to a reservation with me, so I don't have it anymore. And your take-home pay is $6,500?

Yes. So you're taking home $78,000 a year and you've got $40,000 in debt. There should be some margin here to attack this debt. So the question is, where's all the money going? I'm making the minimum payments. That's what's eating up my income.

I'm trying to cut down my personal expenses expenses but it's just not happening but your minimum payments aren't three thousand dollars a month are they they are they are yeah you must have short terms on this debt yes exactly you got like a debt that's a one year or a two year debt or did you get into payday lending or something? Or what did you get into here? Yeah, 2.5 years. I was unemployed for a while, and I had to take some personal loans. Yeah.

Yeah, you got a short term. I'm employed now. Okay. Yeah. All right. So the good news is if you pay the minimum payments, you're going to be done in two and a half years with a lot of them. Mm-hmm.

So anything extra you can put on there is going to accelerate that. So you should be out of debt in under two years. Okay. By just paying a little extra beyond your minimum payments. Does that sound right? Yeah, it makes sense. But when I try to calculate the debt and my income, I see that it's half of my entire income for a year.

So I'm trying to get that done in a year, but it's not happening. So I just have to make those minimum payments for two years and get that done. No, I'm saying it's somewhere between there. It's not the minimum payments. It's more than the minimum payments. But your minimum payments are so high that they're not, that they are because they're on a short term. And that's jamming it up.

And that's forcing the payment size up in order to pay it off in two and a half years on a regular amortization. So, yeah, you're going to pay the minimum payments plus a little. And that's going to get you out in under two and a half years. But you're probably not going to make it in one year. You could, but you're really going to have to tighten up expenses even further than you figured out a way to do yet. So make sure you're doing a written budget on every dollar and make sure you've really analyzed how much you're eating out, really analyzed how much you're spending on any kind of luxury item of any kind. And the other thing you can do is look at picking up a side hustle. Yeah, there's only two ways to create margin. You're either going to have to get more income or shave down your expenses.

And I would do both if I was in your shoes. So I'm looking at every side job I can take. If you can do overtime, do that. You're going to have to sacrifice if you want to see this stuff gone. And on the budget side, like Dave's saying, I'm going through every single line item and I'm doing an audit. Can I shave this down? Am I paying too much for this? I'm going to work on all my insurance rates, Make sure I'm not overpaying on premiums.

I'm going to cut down eating out. And once you do that, you're going to give yourself a raise and find $500 magically in the couch cushions of your budget. The other thing you can make sure of is that make sure you have stopped retirement temporarily. Make sure you're not getting a tax refund. If you are, that means that you are having too much withheld and you need to adjust your withholding so you're bringing home even more. You just keep fine-tuning all of these little things, and I think you're going to get there.

I think you're going to get there faster than you feel like you're going to get there. But I appreciate the call, man. Thank you for joining us. George Camel, good hour. Good stuff. Thank you. Well done. Good hour to the booth people, the booth folk doing great work in there, getting her done. This hour to the booth people, the booth folk doing great work in there, getting her done.

This is The Ramsey Show. Hey, folks. Ken Coleman here. Did you know The Ramsey Show is one of the most popular podcasts in the world? Get your daily dose of advice on life and money. Check out all of our shows from The Ramsey Network wherever you listen to podcasts.