The Ramsey Show - App - Can We Afford This? (Hour 2)

Episode Date: March 18, 2024

🎵 Live from the headquarters of Ramsey Solutions, this is The Ramsey Show. It's where we help you win in your life, win with your money, win in your work, and win in your relationships. I'm Ken Coleman. George Campbell joins me this hour, and we're taking your questions. 888-825-5225 is the phone number. That's 888-825-5225 is the phone number. That's 888-825-5225. George is our money expert today. I'll weigh in on some of those things,

and then I'm your work expert today. So if you think about your income as your greatest wealth-building tool, which we've said for decades, then you need to be maximizing your professional growth. And so any questions around your professional growth, jumping into maybe a side hustle, should I try for a promotion in the middle of the baby steps,

anything work-related that obviously has an income angle to it, of course, I'd be happy to answer those questions as well. So any work-related questions along with the money questions, and George has got a great take on those as well. So let's get to it as we start this hour. Savannah is up in Houston, Texas. Savannah, how can we help? How are you guys today?

We're having a blast. What's going on with you? Good. I'm excited. It's the root-bear-float combo today. There it is. There it is. My husband and I are on baby step four and six, and we've had a lot of life happen to us the last couple months,

and so I'm trying to figure out if you guys would go on vacation or cancel the vacation and put it towards the stuff we've got going on. All right. Lay it out for us. What's going on? All right. So we have emergency surgery at the beginning of January, and we actually have all of that covered. I have to have surgery in May, and that's where kind of the contention is coming in. We have a, um, vacation booked at the end of April and we've already paid for it, but we can cancel it and get a full refund. And, um, so we were, I was at the grocery store the other day and then the car wouldn't start.

So then we had to tow to the mechanic and we just got that bill as well. So my husband looked at me and said that he thinks we should cancel the vacation, and since he's the free spirit spender, it got me thinking a little bit that maybe we should cancel it and get the full refund and use all that towards what we've got going on. How much would that be? It would be $3,900. That'd go a long way to helping, wouldn't it?

Yes. We have his medical bills covered. We'll have my surgery paid for by the time the date rolls around, but we don't have the $200 besides our emergency fund to cover for the car. So what's in the emergency fund? We have $20,000. Okay. So you're saying you would dip into the emergency fund $200 out of $20,000?

It would be $2,000 for the truck repair. Okay. So dip down to $18,000, you'd replenish that, and you'd be back. Yes. Oh, man. Where's the vacation? It's in Alabama, Gulf Shore. Okay.

And this is just the two of you, the kids? Who all is going on this vacation? Just the two of us. All right. Ah. I mean, I don't see this as a detrimental oh-my-gosh moment. You're not going into debt for the vacation. It's paid for.

And truthfully, my worry is that you guys never go on vacation because there's always going to be something in life. There's always going to be a car repair. There's going to be a, we got this medical bill. So I don't want you at this stage of life. If you're in baby step two, I'd say, absolutely. Let's cancel it. Let's get the refund. But you know, you're, you're dipping into the emergency fund for a good reason. You had an emergency. You weren't expecting this car to need a $2,000 repair. And you'll get right back from the vacation, you'll replenish the emergency fund, you'll be back at it. So from a risk perspective, I'm not worried for you guys.

I have no fear. And from a free, it sounds like he's been spooked by all these expenses coming up and he's kind of losing some mojo. Yes. And another problem is we may owe on taxes, but that's the only unknown expense that we have out there right now. When are you going to file your tax return? Our accountant is working on it. And so we should probably know within a couple of weeks. Okay. But then the 15th of next month is coming pretty quick. Yeah. Well, once you know that, I mean, if that changes it drastically, if you owe $10,000, this might be a different situation. But if it's something where you guys can cash flow all of this

and still enjoy the trip and come back and cash flow the rest of the surgeries and the car repair, and if you need to dip into the emergency for a legitimate emergency, don't feel bad. That's what it's there for. Mm-hmm. And then replenish it as soon as you can. And get back on the horse. But I don't know that I'd go ahead and just cancel the trip at this point.

That's what I was thinking, because I like experiences. So, I would love to still go, but if he's stressed, then he's not going to enjoy it. That was my bigger worry. I was like, if this guy's going to be on the vacation stressed the whole time, that is going to add a little wrench in the plan.

Well, I agree, but I think I would sit down and talk with him. The way George just walked that out with you, you guys need to have the same conversation. Okay, let's look at our reality. Let's find out the tax bill. I think that's the last piece of information. And then at that point, I'd go, all right, now how much do we value this time away?

And can we truly appreciate it for what it is and that you guys aren't in a bad spot? You've just gone through a season of pop-ups. And you're about to go into another season where you're having the surgery. And so I think it's okay to go, you know what, it's been a heck of a year. We need to just go decompress and enjoy some time away together. And I think there's value in that as well. Okay, awesome. Well, thank you guys. I appreciate it. bet you know I get that I get the concern

there but man that time away is huge and a lot of people as they follow the baby steps they're out of that baby step 2-3 land it can be hard to enjoy life again because you've been sacrificing you've been living like no one else but you got to remember the purpose of that was on the other side to live like no one else yeah but you've got to remember the purpose of that was on the other side, to live like no one else. Yeah, I love that. This is part of it. Life's always going to happen.

I agree. Let's go to Nate now in Salt Lake City, Utah. Nate, how can we help? Hey, guys. Thank you for your time. You bet. What's going on? Hey, my wife and I, we are on Baby Step 2. We've got $20,000 in credit card debt, $50,000 in a home equity loan, and about $100,000 equity in the home. My question is, do we sell the home to pay off our debt? We got into this house super excited and put basically all our savings, all our money into fixing it up. And now we just, we had a kid and, uh, life's just getting a little hard right now. What do you guys make? We make 90,000 total.

Okay. And you've got 70,000 between the credit cards and the home equity loan? Correct. Yep. Okay. So how aggressively could you pay this off? Could you pay this off in two years? Could you pay $35 on these debts a year and knock it out in two? Not the way things are going right now. What does that mean? I work in sales.

Oh, so you've got some slow months? Yeah, slow months and just inconsistent. Like one month will be nothing, next month will be great. So I can't plan as much as I'd like to. Is she working outside of the home? She is, yes. Okay. And collectively you guys are making 90?

Correct. Okay. I wouldn't go ahead and just sell the house as a shortcut because shortcuts are what got you here. I think we need to look at some behavior change and some career change and try to get that income up. Because if you can knock this out in two or three years, it's not worth selling this house. And I hate that you guys are in the spot where you fell for this trap of the American dream at all costs, including debt to build a dream house that's now a burden instead of a blessing. And you now want to sell. And that breaks my heart. I think your sales job needs to get replaced

with a better sales job. I really do. I think that's your first step. I'd like to give you something that at least I think pave a path for you. Let's give you the get clear assessment in my book, From Paycheck to Purpose. Let's throw in the proximity principle as well.

All of those tools right now need to be employed to get you a better job where we've got consistent income. And then we start to make some real headway. Thanks for the call. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. We're thrilled that you are with us. The phone number to jump in is 888-825-5225. Today's question of the day comes from Brian in Nebraska. A show caller recently mentioned that he received money from his state's lottery fund that was earmarked for scholarships. The host congratulated him on getting those funds.

They did? While I understand that they were happy for him, can you help me understand why we celebrate people who get lottery funds but not those who get credit card points? It seems like the same type of system since both lotteries and credit cards prey on lower-income people. Very interesting. So if I'm reading this right, why are we celebrating people who get scholarship money from their state?

That's the question. And you're tying it to the fact that it came from the lottery. And then you're also saying that's the same as someone taking out a credit card and piling up purchases and points and using them that way. I don't think it's the same. It isn't. And the question behind the question is we're always going, hey, don't play the points. The credit card system is disgusting. You don't have to be a part of it. And he's saying, well, hey, you were cheering on a caller who went to school debt-free thanks to these scholarships funded by a gross system. So how is it any different?

It's very different. He didn't sign up for a credit card. He is a resident of a state. And that state has a program which has these funds available. Again, we're playing moral gymnastics here. Sounds like it. So we're going to celebrate anybody who gets a scholarship because they got a scholarship. And it means they don't have to go into debt. Yes. Now, if I had to play the lottery in order to get a scholarship, I think I would say, well, now it's a more of a, yeah. But again, I mean, listen, this is not moral either. This is just what we believe are sound financial principles, and morality is not the issue here.

The issue is what do we think is wise versus what do we think is ridiculously silly and harmful to your finances? So it felt like a gotcha question and there's no gotcha there, but thanks for submitting. Well, I mean, he's right in that both do prey on lower income people. I mean, lower income people disproportionately purchase the most lottery tickets. And so I agree. I'm not happy about any of this. I wish people didn't play the lottery. Do poor people disproportionately take out credit cards? No, many of them can't even, they won't even get accepted.

So that's not true either. Well, the spectrum of people who have credit cards is low to high income. Now, who's benefiting the most from these rewards programs? We know it's the higher income. Now, who's benefiting the most from these rewards programs? We know it's the higher income earners, which makes sense. But we also know the Fed did a study, Ken, 15 billion moves from the lower income, uneducated, high to low minority areas every single year. And that part hurts my head. So from a moral perspective, it is disgusting to see how much wealth is being moved through credit card rewards. But I agree, this is a state-funded program for the state that you live in, and

you're going to school debt-free. You're not playing the lottery to get there versus the credit card points, which is you have to be a part of the system in order to benefit from the system. All right. Good question, though. Thank you for the question. Good discussion, and one that I still want to grapple with and chew on for a while. Really? What are you grappling with? Well, I think there's more to dig into here, but I think this particular question has been answered. Yeah. I think it's an interesting thing to look into, where are all these things coming from, who's funding it, who's benefiting, who's not.

Yeah. How much of the actual lottery gate is going to education? Is it 100%? I get questions as well. I get that. But essentially, you're adding a tax for things that we would also, like a cigarette tax. No question. Tax those higher, use that to fund good things. That's right. It's a consumption tax. No question about it.

Let's go to David now, who joins us in Atlanta, Georgia. David, how can we help? Hey there, what's going on? I've got a question for you and I appreciate you taking my call. My wife and I are first-time homebuyers. We have no debt. Both cars are, well, my car is about as old as I am. We were thinking about putting an offer on a house. I'm just kind of curious if there's a rule of thumb around what kind of percentage around housing should we be following as a rule of thumb? No kids yet, but that's kind of next on our list, and I'm just trying to plan ahead. Great. So how much do you guys have allocated just for a down payment?

Yeah, we can put down 20%. We'll probably wind up to like 15, just to try to preserve a little bit of cash. So 15K down? 15% down. Oh, 15%. So what's the home value that you guys are looking at? What are the home prices? Yeah.

Looking at just north of five. Wow. What's your household income? About north of 150. Great. And what's your average monthly take-home pay? We bring in about 10 a150. Great. And what's your average monthly take-home pay? We bring in about $10 a month. Fantastic. So the parameter you're asking for, we do have one in this category, and that would be 25% of after-tax income. So after-tax income, but before other deductions like your

healthcare premiums, you're investing 15% of your 401k. So if you did the manual math just to take out taxes, that would give you the number, which I assume is maybe even a little more in your 401k. So if you did the manual math just to take out taxes, that would give you the number, which I assume is maybe even a little more than 10k. Got it. Okay. That makes sense. So you'd be looking at around 2,500 bucks for a payment on a 15-year fixed rate mortgage. So that tells me you might need more down. I'm doing the math for you right here. 75 down, that's 15% out of 500 on a 15-year fix with current rates. It's probably a $4,700 payment, 4,500 bucks, depending on HOA and taxes and all of that. And so you might want to wait and put down, let's say 150, which gets

you closer to 3,600 and so on and so forth. You put 200 down down, that would get you to $3,200. And so rates right now are crushing people when it comes to that monthly payment. And so one thing you could do is wait, save up more, and hope that the rates take a dip, and that would allow you to afford the same amount of house, but with a lower payment. That makes total sense. Awesome. That actually answers my whole question, so I appreciate it. All right. Thank you, David. But based on what you just told us, yes, right now you would be buying too much house and you might need to look at a townhome or a condo that's in the 300 range and then upgrade later. And that's what my wife and I did. Yeah. And it's important to point out,

just based on everything that I'm reading and seeing, I want to preach patience on the down payment, not patience on the rate. If people are going to, what I mean by that is if you're waiting around going, well, let's see if those rates drop back down a point, two points. I don't know that that's a wise game of patience. Don't sit on the sidelines. Whenever you're ready financially, go for it. So the patience would be wait until my income is at a place and my savings are in a place that I can get the house that I want. Patience there, yes. But just waiting game to see that the interest rates are going to get

back to where they are. I got to tell you, George, I don't see it. We don't know. Anytime. Well, the answer is we don't know. That's right. But I don't see it. It's not going to go back down to 2%. It may not in our lifetime. I'd be willing to say- Maybe our grandkids can one day. Yes, yes. I just think that those crazy rates, that people were getting the high twos and the threes. I mean, mine's in threes. It's just bananas. It's not happening. And that's where I go, well, following the Ramsey plan, you've got no debt when you're saving up for this down payment. So they're making $150,000. How much of that can they throw toward a down payment? A large portion. They could throw $50,000, $60,000 a year at this and have another $100,000 to $200,000 within a few years.

Right. Are you beginning to see the appetite for getting back into the housing market with the American people starting to go, okay, well, it seemed shocking a year ago. Now I'm starting to reconcile with it. I think there is a little bit of that. And as people are sort of forced to move, whether it's for work or family, they're buying houses still. And we know four and a half million people bought a home last year. So it's happening. But I think a lot of people are in one or two spots. Number one, they're tied to that low interest mortgage and they can't let go of it because if they move, they have to then go get a six or seven or 8% mortgage. The other camp, which is what you're talking about, people can't afford a mortgage payment when it's at 8% versus a 3%. That can double the payment pretty

quickly. So people are just sort of staying put and hopefully being patient, saving up that down payment, building a financial foundation. And so I know it's tough out there for future, you know, want to be homeowners, but please don't buy a home before you're ready. Because you'll be calling us back saying, should we sell the home? We bought too much house. That's right. And remember, renting is not a sin. It's not wasting money. If it's giving you freedom and flexibility to get in a position where you can buy a house and not be house poor. Pastor Ken Preachin. There it is. There it is. We'll take an offering on this commercial break. This is The Ramsey Show.

Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me this hour. The phone number is 888-825-5225. Hey, it's that time of year again. You're either thinking about it, scrambling, or maybe got indigestion, thinking about your taxes. I tend to get indigestion. I just don't like paying taxes. That's your move. You've done it yet? You filed your tax return? Oh, yeah. How'd it go?

I haven't gotten the numbers yet. Oh, boy. It's in the process. So technically, I've not filed, if that's what you're saying. That's what I was no my guy david he's listening he listens to us by the way uh day behind oh nice he's a he's one of our uh tax pros wonderful i say our not our ramsay but tax pros thank you i'm gonna get we go together and uh right right right right right it's a group effort uh yeah but uh yeah he's working on it right now david let's go buddy let's i i need some money let's see if this tax tip will impress your friend david all right you ready for this one? Let's go. You've got two choices for claiming tax deductions,

and understanding the difference can save you some big bucks. So you can either take what's called the standard deduction, or you can itemize your deductions. Now, both options can lower your tax bill, but which one is best? Well, it depends. So let's take a closer look. Taking the standard deduction, it's the easy option. It's the one that makes sense for the most people mathematically.

And so it subtracts a set amount from your taxable income based on your filing status. So let's say you're single, you make 65 grand. The standard deduction would knock off close to 14 grand. So you would just pay taxes on about 51,000 of that income. So it's like an automatic tax freebie on the front end. Now, itemizing your deductions, of course, takes more work because you need to subtract all of your deductible expenses from that income one by one. Medical expenses, charitable gifts, state sales taxes, all the receipts. And if that adds up to more than that standard deduction, it's worth it to itemize. So it's a simple math equation, but itemizing takes work and it can make sense for some people. So if you want help with this, you want help making sense of it, you want to file with confidence, go to ramseysolutions.com slash tax.

We've got tons of resources there for you, including tax guides. We'll help you choose whether you should go with a pro or file on your own. And we just want to take a little bit of the indigestion out of the tax season this year. Yeah, yeah, and we do. So it is a great, great resource. Again, ramsaysolutions.com slash tax, ramsaysolutions.com slash tax. All right, taking your money questions and your work-related questions. How about some more money in your pocket? All right, we'll help with those calls as well. You're thinking about launching something this year? You're thinking about leaving, going somewhere? We'll take any of those questions as

well. Let's go to Troy now in Peoria, Illinois. Troy, how can we help? Hey, how are you doing today? Good. How are you, Troy? So I am a senior in high school, and the reason I'm calling is I'm facing a pretty hard decision about college here. So if I stay in state here in Illinois, they have a dumb rule where you have to live on campus for the first year, and just doing some rough calculation, that over eight semesters is probably going to cost $50,000 to $80,000. I don't know the total yet because we haven't gotten the password back,

but recently I got accepted into the University of Hawaii, and it's my absolute dream school, but I'm not dumb enough to spend $200,000 on an undergrad. So I've been in contact with the National Guard of Hawaii, and just through them paying for some of it, that total over four years would be $30,000 to $65,000. But the only problem with that is I plan to get my doctorate in physical therapy, and that's going to run me $100,000. But with the military, it's a six-year contract, so I'll be stuck with the cost of living in Hawaii

unless they can transfer me back to Illinois. But I run a business here in high school, and I just love working for myself, so I also plan to open up my own physical therapy clinic after I get out of grad school because I love the financial freedom it can bring me. But that's going to put me another $150,000 in debt minimum. But I've met with a couple private clinic owners, and they all said if I do it right, I should have no problem hitting a million dollars in profit

after the first three years open. But the only problem with that is if I fail opening my own clinic, I'm stuck with all that debt while making somewhere between $70,000 to $90,000 a year. But to me, it just feels like I need to get out of Illinois to put myself in the sink for some moment. Like, I know nobody. All right, Troy.

Troy, I'm having a hard time keeping up with you, buddy. You got the facts down. So what's your question? I just don't know if going to Hawaii is a financially responsible decision when the cost of living is so high. And if I want to open up my own business, that's going to be an extreme amount of money if I could come back to the States. I just don't know. I want to stay out of debt is my main thing. I get that.

Okay, so let's just boil this down. You want to stay out of debt. We're thrilled for that. And we want to walk you through some steps to take, okay? So the thing that you want to do is you want to be a physical therapist and eventually work for yourself. Yes. Okay. So what is the path to getting those degrees without going into debt?

And it seems like you know the answer to that. It seems like you're going to have to be really patient, right? It seems like you know the answer to that. It seems like you're going to have to be really patient, right? It seems like you're going to have to go, okay, what are my options to just go get a four-year degree? What's the cheapest way to get a four-year degree that I can cash flow? Then I've got to go graduate level. Am I still correct? Yes. Okay then. And so when you're asking a question like this, the only thing that people don't like about the answer to this is that it can be done, but it takes time. And so you've got to look at that and go, am I willing to wait as long as it takes? Now wait doesn't mean I'm

sitting around doing nothing, but wait means I'm going to go maybe to community college for the first two years. And then I get my two years done there. And then that allows me to save up money, make some money, and I cash flow the other two years of my undergrad. And then I'm going to have to go work and I'm going to have to make money and save up to get in the graduate level program. This is what you have to decide. And so if you really truly do not want to go into debt for school,

then you must make that decision and then say, I'm willing to walk the path that matches up with that decision. And you're just throwing all these, well, but, and but, and this, and this, and this, and this. And it's like, on one hand, you don't want debt, but on the other hand, you feel like, well, it's kind of, you know, I kind of can do it, and I can go to the National Guard, and blah, blah, blah. No, you just need to decide what's the path that you must walk in order to be debt-free.

100%. But what? Well, my big thing is that I've had a lot of my friends or family members that, you know, don't make past 30. And if I'm working all the time trying to save up the money to go to college, like, what happens if, you know, I tragically get in a car accident or something and I don't get to experience those things I would want to do if my life was to be cut short? Okay. So you're saying— That's a good question.

All right. So you're saying, all right, so what I'm hearing you say is waiting to your late 20s to be able to be in the physical therapy world and enjoy the benefits that come with that, the thing you're worried about is what if you die before that? Yeah. You can't live life like that. Nobody knows when their time's up. Nobody. Yeah. You can't live life like that. Nobody knows when their time's up. Nobody. But you don't make a bunch of really crazy decisions. Let's play this off.

Let's say we do the thing that you want to do and you get into all this debt. What's the total amount of debt you would be in after that long list of things you told us? What would be the total amount of debt? It's between $300,000 to $400,000. All right, George. Walking through $300,000 to $400,000, I'm going to pass the baton over here. $300,000 to $400,000, but he's alive. He didn't die early. Yep.

And you're making how much? Low end. As a private clinic owner, I'm probably making $200,000 a year. But you have a lot of expenses. You now took on debt to start this clinic, and so most of that money goes right back out to the lenders. Yep. So it's more like you make $50,000.

But if you do it our way, with more peace, more patience, a little more hard work, a little more sacrifice, you could do this all debt-free and then be making $200,000 and you do it our way with more peace, more patience, a little more hard work, a little more sacrifice, you could do this all debt free and then be making 200 grand and you keep it. You see the difference? Yeah. And so I love your, you know, you have this attitude that I think is brilliant. You're really smart. You're doing the homework, but you're also going so far ahead that you're going to get paralyzed by it.

And the truth is life is a zigzag, man. My career has been a ahead that you're going to get paralyzed by it. And the truth is life is a zigzag, man. My career has been a zigzag. Ken's has been a zigzag. So you can do all the planning you want, but the important part is taking the right next step and taking debt off the table. You do those two things and follow the advice Ken gave you, you're going to be fine. And it's going to look different than you ever imagined. Yeah. You know, everybody wants to do whatever it takes, but no one wants to wait as long as it takes. And the waiting is brutal. It's excruciating, but it always pays off. Yeah. Hey, hang on the line. I'm going to send you a copy of my book, Breaking Free from Broke. There's a whole chapter on student loans in college, and much of it is the wisdom

Ken imparted on you. So we'll give you that as our gift. There it is, Breaking Free from Broke. Get it wherever books are sold. George Campbell needs a new pair of shoes. This is The Ramsey Show. Welcome back to The Ramsey Show, America. We're so excited that you're with us. We're here to talk to you about you, specifically your money, your work, and your relationships. 888-825-5225 is the phone number. I'm Ken Coleman. George Campbell is with me this hour. 888-825-5225. A lot of money questions today, George.

But if anybody's out there, you've got some work-related questions like, hey, how do I get promoted, or should I make a switch, or should I get this degree, should I not get the degree? Anything related to that professional journey. Well, as we know, it makes more money. Come on. As people have money problems, a lot of it stems from needing more income. Always. Bigger shovel means you get through

the baby steps faster. Yep. And so it's a huge part of it. So give us a call if you want to talk about ways you can do that. How do you build wealth, right? And I'd love to take on some of those questions because it is possible. All right, let's go to Portsmouth, Virginia, my old stomping grounds in the Hampton Roads area, George, is what they call that. Derek is there. Derek, how can we help? Hi, yes, hi. Thanks for taking my call. Sure, what's going on? So my question is just real brief. I'll get to it. So should I take money out of my 401k to pay off one of my debts? How old are you? So I am 30 years old.

30 years old. Okay. how much debt do you have? So we are a little less now because my wife and I are going through FPU, and we're in baby step two. Okay. But we're roughly at $64,500. $64,000. What kind of debt is that? What makes up the $64,000? So we have two credit cards, which are at a zero interest rate right now. We have Dave's favorite, SoFi. We have a car loan, and we recently replaced our roof, so we had their ball a little bit of money for that what's the household income

so just single one income me my wife is their home I so I bring in, um, 90, uh, from my primary job and I bring in 16 from my side household. Great. Okay. So we've got a solid six figure income. Um, and back to your question, I'll answer it quickly and then we'll explain, but do not withdraw money from your 401k to pay off this debt. Okay.

You're going to pay a 10% penalty and also pay income taxes on the amount you withdraw, which means you're essentially borrowing money at 30% interest, 40% interest, which is a bad idea. And you're also unplugging the future growth of that money. So instead, what I'd rather see you do is use this fabulous income you have to start tackling these debts using the debt snowball method. Regardless of the interest rate, even if it's 0%, attack it smallest to largest balance. And the other thing you might consider is selling one or both of these cars. Are you underwater on these cars?

Do you owe more on it than it's worth? So my car, my daily driver is a 04 Nissan Altima, so that's not worth very much. The one I have the loan on, it's kind of a complicated situation. I made a stupid mistake when I was younger and I co-signed for a vehicle for someone and naturally I mean they reneged on the payment and they went

somewhere, I think somewhere in Georgia. So you got stuck with the loan? Yes, sir. So you got stuck with the loan? Yes, sir. Did you roll that negative equity into another loan? I haven't. I probably could roll it into another loan. So you just have two car loans

and one of the cars you don't even have? Just one car loan, yes. But it's on the one I don't have. Got it. Okay, so we can't go sell this car to get out of debt faster. All right. Well, the good news is you make six figures. The bad news is every single ounce beyond your food, utility, shelter, transportation, insurance bills needs to go to paying off this debt aggressively. So the question becomes, how quickly can we pay off the debt?

Not where else are we going to rob the money from? And so if you can pay $32,000 a year, it's gone in two years, right? Right. Yes. So now it becomes, okay, we make $106,000. How do I free up $32,000 a year in order to do that? Well, that looks oddly like $2,600 a month. How do we find that? Well, it may take more income. It may take cutting expenses. And that's where the budget comes into play. And I assume you and your wife are not on a

strict monthly budget right now. So we are, yes, sir. We're on, well, we were using the free version of every dollar. Right now, we just got upgraded to premium. Oh, wonderful. I was going to gift it to you. And I'll, in fact, I will just to keep it going. So hang on the line. We will gift you a year of every dollar premium. That is the key. I wish there was some secret sauce, Ken. I wish there was a shortcut. But robbing your 401k at 30%, 40% with these penalties and taxes while unplugging the growth is not a shortcut that we want you to take. Because it doesn't address what got you into the situation in the first place. Behavior.

And that's why we say that. And so we'd rather you walk through the pain of learning, you know, through pain. Like, oh, this was dumb. And, by the way, we've all done it, and we've had to pay it and pay it off, and then we learned from that. So appreciate the call. All right, let's go to Bria in Raleigh, North Carolina. Bria, how can we help? Hey, guys. Thanks for taking my call. Sure. What's up? So I kind of have a three-part question. I'm going to be out of debt at the end of this month, and I'm going to start saving up to buy a house. So I just want to know like where I should keep the funds for that,

if it's like in a high-yield savings account or in mutual funds, and then how you guys feel about like first-time home buyer like programs that they offer. Okay, so let's hit it in three parts. You're debt-free in April and you're saying you're going to save up for a house after that, but you skipped a crucial step, which is the emergency fund. Well, yes. So I'll be debt-free by the end of March, and then by the end of April, I'll have my three-month emergency fund. So then after that, I'll start saving up. Wow. You're going to save up three months of expenses in one month? With all the overtime and stuff that I've been working, yeah. Way to go. Good for you. That's great. What's your income? Base, it's 80, but with all the overtime and

stuff that I'm making or I'm doing, it'd be closer to like 105. Oh, incredible. Okay. So let's say you're making that 105. And yes, if you're going to plan on buying this house within the next few years, I would park that money in a high-yield savings account. Okay. And I would advise against these first-time homebuyer programs. They have so many strings attached, so much red tape, so much fine print, all of these restrictions, and you're way better off going with a conventional mortgage with actually some money down.

Most of these programs exist to let people who really should not get into a house feel like they can get into a house. And they do it with almost nothing down, zero equity, they're broke, and it causes pain down the road. Now, that's not you. But I also think putting 20% down would be a great goal for you. Even 10% would be okay for a first-time home buyer. And then finding a house that's really affordable is a squishy word, especially in your area, in Raleigh, housing market's pretty crazy. But if you can find a condo or townhome versus a single-family home in the nicest neighborhood, it's going to put you in a better spot long-term. Wow. So I'm a little intrigued by that statement.

Hit me. You'd rather get the condo? Well, for a first-time homebuyer, are you single, Bria? I think you got it. Yeah, okay. Okay, she's still there. So you're single. What kind of home are you looking for as a first-time homebuyer? What's the price point?

Honestly, I'm kind of flexible. I don't need a big house. I've just been renting since I got out of college, and I would like to start building equity. But I just kind of, like a townhome is fine, a single-story house. I don't need like a five-bedroom house. Sure. Is the housing market pretty strong in Raleigh? Yeah.

And surrounding areas as well? Yeah. Anyway, I don't disagree with you, George, but based on what she just said, I wonder, you know, be a little bit more patient and maybe get a smaller home. But are you telling me you're paying attention to this more than me? Well, it's a single person. A lot of people think I need a single family. We have townhomes, you know, my first two homes,

and it helped us build that equity and get in the game faster. All right. I like it. Okay, good. All right. So both will work is what I'm hearing you say. Yes. Thanks. Good hour, my friend, good. All right. So both will work is what I'm hearing you say. Yes. So good stuff.

Thanks. Good hour, my friend. And thanks to James Childs, our fearless leader. This is The Ramsey Show. Take care.