The Ramsey Show - App - Can You Build Wealth on a Modest Salary? (Hour 1)

Episode Date: August 9, 2023

Live from the headquarters of Ramsey Solutions, broadcasting from the pods moving in storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Thank you for joining us, America. I'm Dave Ramsey. Ken Coleman, Ramsey personality, number one best-selling author of the book Paycheck to Purpose, host of The Ken Coleman Show, where he talks about jobs and careers and your life about that. He's with me today as a co-host, so we'll particularly dive into those

subjects if you want to. The phone number, 888-825-5225. You jump in. We'll talk about your life and your money. Joseph is in Indianapolis. Hi, Joseph. Welcome to the Ramsey Show. Hi, how are you? Better than I deserve.

What's up? Well, I had a pretty simple question. You know, I always hear, you know, two sides of the coin. I hear sometimes people say you should make the most money that you can and, you know, get a job that just pays the most. And I've heard other people say that it's not about what you make. It's about how you live your life, your lifestyle, and what you can save. And I guess my question is, is it still possible to live a wealthy or successful life

if, say, you're only bringing in maybe $35,000 annually? Well, it depends on how you define wealth. I will tell you that you can absolutely be successful. I'll ask you a question. Do you believe Mother Teresa was successful? Yes. Why was Mother Teresa successful in your mind? She did a lot of good, you know, and always tried to do her best.

Yeah, see, the reason I ask it that way is because that was her role. It doesn't mean it's your role. It doesn't mean we all have to go to Calcutta. But Mother Teresa chose to serve, to live in that way. That was her specific design, her role, her time in history. So let's answer the success question that way. Success to me is not just about work results. Success is what am I relationally? I have a relational purpose as a husband and a father, a son, a brother, a friend, a co-worker, an employee. I've got some relationship purpose in my life, but I also have professional purpose. So that's the success thing.

Now, building wealth, again, wealth to me is not just financial wealth, but you can, we've got teachers that are the average salary, not average, the median right now is about $61,000 in the United States. And we have a lot of millionaires who have been teachers and they've lived on less. They've chosen to define success differently. And as a result, they've put money away and they've saved, they've lived like no one else. And so now they live and give like no one else. So $35,000 does limit the speed and rate by which you can stack and save money. And I think you can make more. But theoretically, yes, you can be successful and build wealth.

Earl Nightingale said the definition of success is the progressive realization of a worthy goal or ideal. Now, so here's the problem with your question, the framing of your question. You said two sides of a coin.. You said two sides of a coin. It's not two sides of a coin. They're two possible outcomes, okay? Either I don't make a lot of money and I do something that I'm fulfilled in and I'm successful, but I struggle financially. Or I make a lot of money doing something I hate, and I don't struggle financially. Those aren't the only two possible outcomes. There's a third one. How about

I do something I love that really benefits mankind, and I make a huge pile of money. Why do you have to make less to be satisfied? Why do you have to make less for it to have meaning? You don't. That's a fatalistic approach to this whole concept. And so here's the point. If you make $35,000 a year and that's all you ever make and you never get a raise, well, you suck. You should get a raise. You should have some progressive realization. You should have some progressive realization. You should have progress. You should get better at what you're doing and make more money, at least in your chosen field. So the

idea that I have to, you know, somehow live at the bottom rungs of the socioeconomic ladder in order to be a worthy person or in order to be doing good works is simply not true. It's simply not true. So I choose none of the above. I choose do something very worthy and make a lot of money. I choose that one. That's the one I want to choose. But is that the only definition of success?

No. I mean, we've preestablished in the conversation. Mother Teresa is successful. She has a progressive realization of a worthy goal or ideal. Oh, by the way, she was the biggest and largest scale of her type. That's right. I mean, the number of hungry people, the number of people that were ministered to was massive. That's right.

But not commensurate to the amount of money she made. Well, she didn't make any money. That's right. It took a vow of poverty. amount of money she made well she didn't make any money that's right she took a vow of poverty that's exactly right she didn't make any money and she came from a wealthy family that's exactly right and abandoned the inheritance in order to become a nun so you know so yes she's successful and oh absolutely never gonna diss someone that chooses to do that but there's this narrative that is running around in america today that ken and i are both fighting against all the time on the career side that says um well if i work for a non-profit and make half of what i'm worth that somehow i'm holier no it was just a dumb choice you're not holier or well you don't really mean that as a dumb choice. You don't mean that. If you choose to work for a non-profit because you care deeply about that work,

and you could take the same skill set and make double in the corporate world, but you choose to do it in that space because you love it, and you apply that to your life, and you change your lifestyle, that's not dumb, but that's also not saying that it's that what is dumb is the idea that the only way that you can do something that is of a higher calling and that has meaning is to make no money i agree that is just not true i 100 agree i'm living proof that that's not true that's right i've helped millions and millions of people and i made a lot of money right making a lot of money was not the main goal. Helping millions of people was.

That's correct. But that, you know, I'm just. But we're also citing, we have done Ramsey Solutions, at Dave's urging, the largest study ever of net worth millionaires, the fourth largest group are school teachers. Third. They're not dumb. Third largest, yeah.

Third, I apologize, third. But the point here is my point you didn't mean what i meant is the idea is dumb that you have to make less for it to have meaning yeah it's incomplete it's it's you're right it's not accurate it's accurate it's a false narrative and so that's what i want to push back against and if you make 35 000 if you make the same exact amount of money unless you're mother tracy and you a pile of poverty uh if you're if you're in a career field and you make exactly the same for 30 years that by definition means you are not progressing yeah there should be you're not getting better and that's not okay either yeah that's you need to be getting better you need to be better in your service to humanity better in

the level of meaning that you're getting from the work better in your excellence better in the scale of what you're doing if helping three stray dogs is a good thing then helping 3 000 of them is a better thing that's right okay so i mean whatever it is you're doing that you know you should be getting better at it you should be progressively yes the progressive realization of a worthy goal or ideal it's a really good definition so one of the best cool question cool question and a good discussion but uh don't let people sell you this idea that that the only thing that is is good it is unproductive and quite the contrary this is the ramsey show ken coleman ramsey personality is my co-host today.

Thank you for joining us, America. We're so glad you're here. Hey, listen, guys, there's a lot of things going on. Inflation, high interest rates, student loans are kicking back in. We just passed a trillion dollars in credit card debt for the first time in history. Wow. A lot of people doing a really crummy job with their money. You know what you don't do? No one does a crummy job on purpose. Doing a crummy job is when you

hit the default button and just coast. You know what on purpose is in money? It's learning to do a budget. The EveryDollar budgeting app will do that. You can sit down and start using that. Jade Walsh did a webinar today that was free on how to do a budget, including an irregular income. 10,000 people showed up for that webinar today. Thank you. Wow. So we'll do it again. Rachel Cruz is going to do one of these webinars, teaching you how to do a budget. And Rachel's been teaching every dollar for many years and uh the irregular income thing and unpredictable income and how to work the baby steps into your budget and all that how to work with your spouse on a budget rachel's going to

cover every bit of that tuesday august 15th that'll be this coming tuesday at 12 30 p.m you can sign up for free for the webinar. And Rachel's goal, of course, is to draw more people than Jade. So this is how this works around Ramsey. I'm just saying. So check it out. Everydollar.com slash budgeting. Everydollar.com slash budgeting.

And you're actually allowed to come to more than one of these if you want. Guess what? George will be doing one later. So, hey, everydollar.com slash budgeting, and you're actually allowed to come to more than one of these if you want. Guess what? George will be doing one later. So, hey, everydollar.com slash budgeting. Sign up for the free webinar this coming Tuesday, August 15th, with Rachel Cruz. Elizabeth is in Boston. Hi, Elizabeth. How are you?

I'm good. How are you? Thanks for taking my call, Dave. Sure. What's up? Yeah, so I am good. How are you? Thanks for taking my call, Dave. Sure. What's up? Yeah, so I am wondering, I found you last week, and I am on Baby Step 2, and I am wondering if I should be buying life insurance beforehand or if I should be waiting to, after Baby Step 2,

I do have a $25,000 company-funded life insurance policy. I don't know if that's good enough or if I should be buying one. That's, you know, more for the future. If you have a life insurance need, it is not a baby step. It's a necessity in your budget. Yep. So you just put it in there as soon as possible. Now, do you have children?

No, I am single and no children. Okay. How much debt do you have children? No, I am single and no children. Okay. How much debt do you have? I have $44,700 in debt. Okay. You don't have a lot of need for life insurance. Yep. Because no one is dependent upon your income.

$25,000 would take care of your final expenses, like, for instance, your parents would have a horrible tragedy on their hands and have to cover the burial and that kind of stuff. $25,000 would take care of that. It would clean up a few of these debts. They'd sell off your stuff. I think you're fine right now. I don't think you need to be a bunch of life insurance, even if you had $100,000 in the bank and no debt. Particularly then, I wouldn't go buy life insurance. But the big thing life insurance is for is if you're leaving someone behind

that is dependent financially on your income. Okay, yeah. So you would wait until you actually have a dependent? I wouldn't buy it at all. I wouldn't buy it at all in your situation. Okay, that makes sense. No matter what. I mean, again, you you get married you have two

little kids yeah if they're your husband then is dependent upon your income to take care of these feed these little kids yeah absolutely then we start talking about life insurance and we go to zanderinsurance.com and we uh we always talk about a good rule of thumb in a family situation like that is to have 10 to 12 times your income on you, 10 to 12 times your spouse's income on them, 15 to 20-year level term insurance. Never buy anything with term insurance is the way to go, and that covers you until you have so much money and no debt that you don't have a need for insurance called self-insured. Stacey and I had been married just a couple of years when she went to work for Dave.

And I remember sitting through Financial Peace University as a spouse, and I remember this lesson when you covered it. And I had not gotten life insurance at that point. And I want people to hear this isn't just life insurance. This is peace of mind. I slept better that night knowing that if anything happened to me, Stacey was going to be fine. And it's just that I want people to hear that it really is peace of mind to know that you're not leaving anything but grief uh behind that's a big step don't buy too much because then you can't sleep at night because you have to stay awake to make sure that she that was a crucial point in the teaching as well i did it to the book i did it to the 10 times

10 times to the 12 times somewhere in there but yeah you don't need 20 times right we're not trying to leave people multi-many. We don't want to leave them better off with you being gone. It's just a dangerous trend, right? There we go. Open phones at 888-825-5225. James is in Phoenix. Hi, James.

How are you? Hey, Dave. Ken, how are you guys doing today? Better than we deserve. What's up? Well, my question to you, Dave, is I have two cars that I owe a lot of money on, and I'm upside down, and I need to get rid of them so I can start paying off debt. I am drowning in debt. It's hard. Okay. Car number one is you owe what on? Car number one is $31,000, a little over

$31,000. Okay. And what's it worth? Probably about $18,000 to $20,000. little over 31,000 okay and what's it worth uh probably about 18 to 20 where'd you get that number uh i actually got it on the blue the dot com kelly blue book okay and is that a trade-in value uh honestly i didn't know i just got that's the number that they gave me i didn't really look into it You need to look into it because the difference in trade-in and private sale is five grand in this situation. Okay. It makes a lot of difference. Okay. So what is that car?

It's a Volkswagen T1. What year? 2019. Okay. Did you trade a negative equity car into that deal? We traded a car that was paid off that just had repeat. It was actually an older T1. No, I mean, you didn't trade a hole into this.

So that $18,000 is wrong then. Okay, good. Good. Okay. So you didn't have like a $5,000 hole you were in on the other car. It was paid off. So it was a positive in the trade yes sir okay all right so uh yeah from 2019 that jet that volkswagen did not go down that far okay so it's probably a twenty five thousand dollar car twenty four thousand dollar car something like that so you need seven grand to get out of that who do you owe that money to who's the bank uh credit union first credit union okay what about the next car next car is a jeep renegade 2019 and i owe 30 a little over 30 000 on it and what's it supposedly worth i have not checked it

yet okay all right so 2019 was a bad year for you on cars pretty much yeah okay who's that loan with? Same company, first. Good, good. And this is a credit union in your town? Yes, sir. Good. Phoenix, Arizona.

Good. Okay. So let's pretend you're $7,500 upside down on each of them. That's $15,000 in a hole you're in, correct? Yes, sir. And you have $60,000 worth of debt, and $15,000 of it's not secured because there's not enough car value to cover it, right? Yes. So you need to go in person to the credit union,

sit down with a credit union manager, and show them what you've got. And here's what you say to him or her you have a 45 you have 45 000 worth of collateral so effectively you have a 15 000 unsecured loan mr credit union manager you following me here yes sir does you owe 60 The assets aren't worth but about $45,000, give or take. Okay. So what I would like to propose to you is that we sell both of these cars and reduce the loan here by as much as the cars bring. 100% of what the cars bring is going to come into you.

And I'm going to sign a note for the difference. So when we're finished, you'll still have an unsecured note, but you'll have someone who's much better able to pay it because it's a much smaller loan. Mm-hmm. You understand the logic that you're pitching to this credit union manager? I'm writing it down now, yeah. They already have an unsecured note.

We're just admitting it. That's all we're trying to get them to do. And it reduces your debt from $60,000 down to $15,000, give or take, in this scenario. And then you're going to have to get you a couple thousand dollar garage sale cars to drive for a little while, which is going to be a big old emotional punch in the nose from

a $30,000 car to a $1,000 car. You're going to feel like a poor person. Well, you are. So, we're trying to not be poor anymore. That's the idea. So we're trying to reset that. This is The Ramsey Show. Ken Coleman, Ramsey personality, is my co-host today.

I'm Dave Ramsey, your host. Tristan is with us in Albany, New York. Hi, Tristan. Welcome to The Ramsey Show. Hello. So excited to speak with you. You too. What's up?

So I was calling because I want to know or maybe get any advice on how to use the money that I have saved to make me more money rather than just letting it sit in a savings account and do nothing. Good question. How much money have you saved, Tristan? So I have money kind of, I've been trying in the last couple months to put it in different places. So if I just looked at all of the money that I have that is free to be put wherever I please, it's $68,000. Good for you. Okay. And what do you make? I don't make much, actually. I'm still in graduate school.

What do you study? I study mathematics. What are you going to do? Well, that's another question. So I'm kind of at a crossroads with my career and what I want to do with my studies. Mathematics. You're going to get a PhD in math? Yes, sir. Yeah, a PhD in math, but I'm debating on whether I'm going to continue that or just finish with a master's or not. So that's kind of where I'm at a crossroads. But I've been saving a lot of money.

Where's the money coming from? So as a part of a graduate student, I get like a salary basically. It's $23,000 for this year, but I do summer work for the Air Force, which was $17,000. And before, as an undergrad, I have worked the whole time. So I have been working and saving, and that's where the money has been coming from. All right, so quick question before we dive into the money piece, and I can talk to you about the work piece after that, but when you say I'm considering not finishing, what's that timeline look like?

How much do you have left where you're deciding between the doctorate versus the master's? How far along are you? Yes. So if I finish my master's, it'll be one more year, and then I can start my career. If it's my doctorate, it's not really a set time. It could take three to five more years. In this case, is the difference in the doctorate and the master's not just a dissertation? It's basically a dissertation.

Why would that take three to five years? Write your dissertation. Because even after you're done with coursework, you have to learn a lot more material outside of what is taught in classes. You have to learn enough to get a dissertation done. Yes, sir. The difference is do I want to be a professional student or do I enough to get a dissertation done yes sir yeah the difference is do i want to be a professional student or do i want to get my phd exactly so get your phd get go do the dissertation it does not take three to five years it takes 12 months get it done

but what happens is people drag their butt around that's why i was asking about that and don't i you know you're you're that close depending on what you want to do with your life, if you want to teach at the university level, you're going to need the PhD. Right, right. But I don't think you're sure. If you're going to be a financial analyst on Wall Street, nobody gives a crap between the two. Yeah, that's where I think I've had this dream of getting a doctorate because

it's an accomplishment and it's something that i can say that i did and worked hard for well dr tristan i mean come on buddy i mean yeah but but you need to have a reason you need to have a reason to do it because you're running out of steam i can hear it so um yeah you know and the only reason to do it is if ken coleman says okay, in this career field, you're going to need a PhD. But in that career field, you're not. Then I wouldn't screw with it. I really wouldn't. And my guess is, Tristan, tell me if I'm wrong.

My guess is the fields that require the PhD aren't the dinner bell for you. You're not excited about them. Is that true or false? That's true. That's true. That's true. I think I realized how much work it is in the tradeoff for the amount of pay. And I just said, what am I doing, kind of. That's what you always measure with academics.

Other than the benefit of just having you know completed something the accomplishment of it the dr in front of your name all that stuff but the the the real benefit of academics the primary benefit is what how's it change your income situation so whatever the academic thing is so yeah it's from paycheck to purpose as ken's book we will send you a copy so when we finish talking we'll put you on hold. And Austin, the gang in the booth will pick that up and get that for you. Now, for savings, there's three things philosophically you can do with savings. Number one, you can have a pile of money set aside to cover for emergencies.

And you should. A good rule of thumb is three to six months of expenses as an emergency fund. Number two, the thing we use savings for is to buy things. We save up and buy a house. We save up and buy a couch. We save up and buy a car and so on. And these are all real things that are coming at you. So you need some savings to move towards those things.

The third reason we save is not really saving. It's called investing, which is really what you're calling about is how do I make this money work a little harder for me? How do I make it make some money? So some portion of the $68,000 needs to be invested, and that's where you would start looking at retirement. Are you out of debt? So yes, that's one of the things that I have not, I have not worried too much about staying in school because I have worked and I have gotten scholarships and I have gone to colleges where I have graduated debt-free. I've never taken out a loan. Good. And you can start with some Roth IRAs and some good growth stock mutual funds.

Let that money grow completely tax-free for your retirement year. Some portion of that needs to be there. And those mutual funds, you know, if they average what the stock market has averaged over the last 80 years, will be 10 to 12% rate of return. You're probably getting spit or maybe you're getting 4% on some kind of high yield item or whatever, but you're still losing your butt. So a portion of it needs to be invested in that type of thing. A portion of it needs to be set aside for making the transition into your new career, you know, getting an apartment at the new city, deposits, the move, those kinds of things. A portion of it is used for emergencies only, and you need to set that aside.

And so I would divvy the 68 up among those three categories or buckets and sit down with a Smart Investor Pro. You can find somebody that we recommend to help you. We call them SmartVestor Pros at RamseySolutions.com. They'll help you get that Roth IRA up and moving. But more important than the question you called about by far is the question Ken is posing to you, and that is, what are you going to do with your life, man? Yeah. And you've got to decide here. there's a couple things to look at.

Look at, what do I do very well? You've chosen mathematics. You've been a good student. There's something that intrigued you about numbers. I'd start digging into what comes naturally to me, what I enjoy doing. Then you begin to look at, what does work do? At the end of the day, work does two things. It solves a problem or it meets a desire.

And so when you begin to go, all right, Dave, what problems do I want to solve with this talent of numbers? And I'm just making this up with him. But we begin to see the clues like that and we say, all right, I get fired up about solving this problem or meeting this desire. Let me tell you what we can tell from what he told us. He's not thrilled about teaching numbers. That's just not something he's really fired up about that phd leads him a couple of pathways i did not hear him spending his life in academia i did not either i didn't hear that in his voice but i could be wrong i could be wrong i agree so i was a math nerd but um you know highly money motivated math nerd and so immediately that

meant i didn't get a degree in math right i got a degree in finance instead exactly and because i was money motivated i'm looking how i can make some money um but you love instructing you love oh i do i do and i love and i love math um yeah it's a it's a gifting area so look at dave this is a combo so Dave's gifted at communication but he's also gifted with finance and numbers it's just unbelievable but what he loves to do is teach guide coach that's who he is you ought to see this guy try to teach people to water ski he's he's as passionate about that as he is teaching you how to win with your money that's the combo what is he good at what does he love to do when those two come together there's a

whole lot of world at work where you can go out there and make a contribution and make plenty of money doing it. Hey, he probably needs to take that assessment. He does. Hang on. We'll get you the Get Clear Assessment. The Get Clear Assessment. And yeah, that'll help too. We'll get you that and his book both. This is, Ramsey Personality, is my co-host. Thank you for being with us, America. Open phones at 888-825-5225. Lucas is in Midland, Michigan. Hi, Lucas. How are you? Good, Dave. Good, Ken. How are you guys doing today? Good. Better than we deserve. What's up?

Perfect. Well, first off, thank you for taking my call. It is much appreciated. Sure. Sure. Before I get to my question, I'll just give you guys a little bit of a backstory with numbers. We are currently a family of three with one on the way coming April of 2024. I am 29 and my wife is 31. Currently we're making a take-home pay $13,500 per month, which does not include my wife's quarterly RSU stock options that comes out to about $20,000 a year or $5,000 a quarter. Greater than 60% of my, of our income comes from my wife. And I just dropped down part-time as an ICU

nurse because I'm going to nurse practitioner school coming up end of August. The VA is paying 100% for it, so I won't take on any more debt, and they'll actually pay me a stipend of about $950 per month. We're newly debt-free, just entered Baby Step 3 August 1st after paying about $121,000 off worth of debt. We will have our fully funded emergency fund our six months by December 1st, and then we'll be transitioning obviously into Baby Step 4, 5, and 6. My wife's the bread maker, and over the last year and a half, two years years there's been a couple of rounds of layoffs and with my wife being the bread maker me going back to school and then working part-time it just has me a little bit nervous as we work our way towards paying off our mortgage early during school for the first year and a half our cash margin will be seven thousand dollars and that

is after retirement and funding two 5 five 29s for, um, our kids. Um, once I graduate school though, I'll, our margin will be about $8,300 cash. We currently have a home mortgage at 460,000. What's your question? So my question is, would it be okay for us to go ahead and bump our emergency fund to nine to 12 months. And then, um, once we, why my biggest concern is my wife losing her job. How many times has she lost her job? Never.

Okay. You're a worry ward. I am very much a planner. Um, no, you're a worry ward. Probably so. Probably, probably so to a fault, you know, worrywart. Probably so.

Probably so to a fault. You know, with us being newly out of debt, you know, I think that has a lot to play in it. Hey, listen, if you give me a probability that she's got a 50% or better chance of losing her job, we'll talk about getting ready for that storm. But right now, this is just, you're just a planner. That's all this is. And you're great great you're very intentional you know your numbers you're amazing you guys have done a great job i'm picking at you i was having some fun with you but congratulations i'm proud of you you've done a wonderful job if you want to save that you can do whatever you want to do you're a

grown-up i wouldn't if I were in your shoes I don't think it represents uh anything except you are just overly conservative and you're you just worry you just fret about things and the the change with the new baby coming there's gonna be four kids in the house the change with you stepping back in income while you're stepping up into this new role by the way i think your your field of study is brilliant i would go that way i love it it's got a great upside you're gonna make you're gonna make really good money you can help a lot of people uh you can add value to a lot of people's lives so everything in this situation is positive and it's just there's a lot of stuff coming at you and the only way you knew

to kind of buffer that emotionally was pile up some extra cash if you want to you're not it's not going to cause you to to never be wealthy it's not dumb it's just I I'm just calling you out on it's not necessary Lucas what I would have you do Lucas I want you to take that planner in you Dave's right you got a lot of worry a lot of of fear in this, but let's take the planning, and let's say, all right, what would happen, what would we do, what would my wife do if she got laid off? Now that I like, it's like the idea of going on the plane, and they always tell you, if we were to have a landing, a water landing, this is what we would do. And I think it's always smart for you guys to just

walk through not from a place of worry but from a place of preparation well the idea is if she were to get laid off i'm just thinking about the jokes i know i know but what would she do what would you two do i mean she would go get another job exactly you wouldn't even have to touch the emergency fund knowing how disciplined the two of you are you guys have proven it so think about that and don't be worried be prepared there's a difference well he's trying to get prepared that's what he's thinking oh i get it but i'd like that energy going towards all right would it be the end of the world what would she do the thing is if you if you'll go to ken to ken's point if you

project out what reality looks like not what uh atom bomb dropping on your house looks like in reality looks like she probably is off a month or two gets another job um and gets a big severance package and so you end up coming out ahead that's that's your high probability if something went down like this but um but yeah if if you guys want to do this it's not the end of the world is it financially is it good financial planning is it necessary are you being no you're just overplaying your hand that's all you're doing so uh you can do it you're grown up you're smart people you make a lot of money there's nothing wrong with what you're talking about but you asked so we'll always tell you the truth because we love you all right kaylee is with us in grand rapids hi kaylee welcome to the ramsey show hi thanks for having me sure what's

up um i am calling because uh my husband and i we are in baby steps uh four five and six right now good um we are looking to in the future um move from our current house to another one and wanted some advice on that. We don't need to move right now, but we would like to move to a lake. We know you like lakes, so you might also appreciate this. We came across a house that we would potentially pay around 700,000 so this went from future theory to we're doing it now well sort of um we're not sure and that's why we're that's why i'm calling um so i can give you kind of our stats what would your house bring the house we live in right now? Yes, ma'am. We think we could sell it for at least $400.

And what do you owe on it? $160. Okay. So you got $140,000, $100,000 worth of equity, give or take. Okay. And the other house you're talking about purchasing on the lake is how much? $700. Woo!

Okay. And what do you guys make a year around 270 good good okay well you you probably know our rule of thumb if you don't it is that if you buy a home with a 15 year fixed rate mortgage and the payment is no more than a fourth of your take-home pay and your take-home pay being after taxes not after everything that they deduct at work okay but after taxes if your take-home pay and your house payment on a 15-year fix is no more than a fourth then you're okay and you reach over and do that i think you're okay see when we do the math it doesn't seem when we do the math to us a 30 years i mean i know i know what you wouldn't buy a 30 year if you got to do a 30 year don't don't move well and that's i think right now we're like well with with the payment come out

$650,000 payment or $650,000 debt what's the payment come out so our math it looks like it'll be around for a 30 it'd be around 30 honey we're not doing a 30 what was the 15 4700 yeah and your take-home pay is what 20 it's 12 after no not on 270 it's not 12 you don't bring home 144 out of 270 so you're talking about after 401ks and other stuff yeah i'm not talking about that i'm talking about okay i said after taxes only okay okay and we didn't do that math yeah so i think that's where we went wrong because from our, I've done the math. Yeah. Yeah.

And so one-fourth of your take-home pay after taxes, not after 401K and health insurance. Those are two different things. Okay. And not after I pay some bill at the credit union or I pay child support or whatever out of my check. That's not what we're talking about. We're just talking about after taxes. That's the position you want to be in. And you do a 15-year, Kaylee, or don't buy this house.

You're making a mistake. Don't be playing footsie with 30-year mortgages. You'll end up with one. Don't do it. Don't do it. Is that unclear? I think you got it. This is The Ramsey Show.

Hey, it's Ken. If you like what you heard in this episode and want to know more about getting started on the Ramsey baby steps, go to RamseySolutions.com and click on the Get Started button. We'll help you figure out the best next step for you based on your specific situation. Again, that's ramseysolutions.com and click get started.