The Ramsey Show - App - Compound Interest Can Save You Millions (Hour 2)

Episode Date: June 30, 2023

George Kamel & Ken Coleman answer your questions and discuss:  The best place to keep money saved when facing large medical expenses, "Should we move in with family to save money?",  When it's beneficial to downsize your home to meet other financial goals,  from the blog: Downsizing Your Home: 3 Money Benefits The power of compound interest,  from the blog: How Does Compound Interest Work? Why you shouldn't use high-yield savings to out earn the interest you're paying on debt, "Should I offer 50% to the credit card to settle past due debt?", from the blog: How to Deal With Debt Collectors When You Can't Pay Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Here's an EveryDollar deal just for our listeners: get a 14-day free trial PLUS $15 off your first year of premium. Click the link below and start budgeting today! www.everydollar.com/george Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Ramsey Solutions Privacy Policy

Девочка-пай Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm Ram AMC personality, George Campbell. Join this hour by Ken Coleman, host of The Ken Coleman Show. And we're here for you, America, to help you take the right next step with your work life and with your money life. The number to call is 888-825-5225. That's 888-825-5225. Alfonso kicks us off in D.C. Alfonso, welcome. Hello, gentlemen. Thank you so much for having me. Sure. How can we help? Well, first, I just want to give a quick shout out to the man who's not here. Great pleasure

to talk to you guys, but I am a bleeding heart liberal who thinks Dave Ramsey is a great American hero, and I just want to shout out that angle. We'd love to hear that. Hold on a second. Did you say you're a bleeding-heart liberal? I am a tax-to-rich liberal that thinks Dave Ramsey is the greatest American hero when it comes to finance. That is fantastic. I thought that's what you said. Okay, wow.

I got to tell you. I will pass that on. I'll just throw one more thing out there. I got a great business idea I want to connect with Dave about, but anyway. Yeah, well, that's not going to happen. But anyway. Hey, Ken has a lot of them, too, and Dave shuts those down. Yeah, you should hear my ideas.

Well, anyway, to my question, gentlemen, thank you so much for having me. My family really does appreciate both of you as well. Thank you. You've taught my children a lot about financial responsibility. We're very grateful for it. So my mother's 80 plus years old. Um, my dad owned a business and struggled towards the end. And, uh, thankfully there was a real estate property we were able to sell. And my mom has about $500,000, uh, in cash assets,

which is the majority of her assets. We have a high interest savings account because she's battling cancer and we just don't know what needs she's going to have. I have some family members putting pressure on me to invest that, thinking that the market's on an upswing and there's a view out there that's going to keep doing that. My view is with the health challenge, not knowing where that's going to go, it's safe to keep it in an online high interest savings account. Would love your advice, gentlemen. That is a great question. I'm so sorry to hear about your mom. That's tough. What has been the kind of prognosis, diagnosis? Do we know anything? Yeah. We don't know if it's in one year, five years, eight years, but it is terminal.

Okay. So to your question, 500 grand, is this all FDIC insured? Is it across two accounts or is there a joint folks on the account to keep it safe? It's across multiple accounts. It's all FDIC insured. Okay, great. And I'm sure the interest rate on that is about, what, 4% or so right now? It's actually 5.4 right now. Amazing. Okay. So the question of should I invest this money, we know that we may need this money in the next few years. Exactly. And therefore, I'm with you on this in that the family's going, hey, we should invest this. This is not a money-making scheme right now.

We're not trying to retire off of this money. We want to make sure that we have it liquid to help mom and cover any related costs that come our way. And as you know, the cost can be astronomical as you get to, you know, end of life care. And so I want to keep that money accessible to protect our family from the other wealth that we're trying to build. All right. So I think you're doing the right things, man. I'm so sorry you're dealing with this. How old are you? I am going to turn 40, late 40s, let's say. Okay, man. Well, I cannot imagine going through something like that. You sound like you're in good spirits and you're a great son for thinking about this

stuff and calling in with the question, but I would definitely not be investing this money right now. And if it turns out that you could have made another, you know, 3% if you had invested in the stock market, big whoop. I want to sleep well at night knowing that my mom is taken care of and we've got the funds to take care of her. So that's my take. Take it or leave it. Lindsay's up next in NYC. Lindsay, welcome to the show. Hi.

I am thankful you guys took my call. Thanks. Sure. What's going on? Yeah. So my husband and I have been married for a few years and, um, we found out recently that the only way that we're going to, uh, probably be able to like have a kid is through IBS, which is incredibly expensive. And we've been saving up money for a house cause you

know, New York city is so expensive. Um, and so we got a little bit saved but it feels like the expenses here are so much it's so hard to get ahead and so that IVF treatment if it does work you know multiple rounds lots of money so we are like okay that takes out our whole saving for the house specifically so we were like talking with my parents about it and my grandmother passed away recently and they used to have a, uh, they have a, an apartment in their home, um, that she used to stay in. Um, and so that, that apartment is free. And they said, well, we would love for you to come and live with us, um, for free. But they live in the middle of nowhere.

Um, like absolute, like no jobs basically except unless you want to work at like um you know the gas station it's like a dollar general situation that's the big company out there okay exactly and so we both work remote and we work in tech um but what if one of us you know gets laid off because of all these layoffs that happen? And so I'm kind of thinking about, okay, if we did, then we're not in New York City. We don't have that ability to kind of get another job quickly. So there's like give and take. We'd have free rent.

We'd have everything there. But would it really get us ahead? Lindsay, what do you do in tech, you and your husband? Yeah, so I am in operations. And so I make like one third a year and then my husband is in sales and he makes about 60 before like this. Okay. So here's the deal. I am in no way saying that you need to move to, you know, the middle of nowhere. But what changed for me was the fact that you're both remote and in tech. And I will tell you that because I focus on work issues all the time, I give a lot of work news updates on The Ken Coleman Show,

and I will tell you that we're seeing over the last year when there have been some of the larger big tech companies that have laid people off that those tech workers are getting new jobs within a month. The tech industry is still hot, hot, hot. And so I don't think that's something you need to be afraid of. And I don't think you need to be in New York City to get a tech job, especially if you're remote. So that does not mean that I think you need to move to the middle of nowhere. However, if your housing cost is the number one strap that's cash strapping you guys to be able to cash flow IVF, I'm absolutely moving to a different place, a different locale where we can do our jobs.

It's not the middle of nowhere, but it greatly reduces our living expenses to allow us to cash flow IVF Stacey and I went through the infertility journey and I just want to tell you it's brutal and and I do understand what your husband is feeling I cannot tell you that I know what you're feeling but my wife could tell you she understands what you're feeling and this is an all-in proposition you need to be healthy which means means mentally, to go through this. And it's still not a guarantee. So if it's me, I'm packing up and I'm moving to a different place, making an adventure. We can always relocate back to New York City.

Yeah. I think this could be a fun little adventure. And if it means you can get that IVF treatment cash flowed and then get into a house, I think we've got to focus on one or the other right now. Because that's a lot going on. Yeah, it needs to be the IVF right now. I would focus on the IVF. Once we get that figured out, then home ownership would be the next thing down the road and you guys will get there. And it sounds like you're willing to do whatever it takes. And for that, you have my utmost respect. This is The Ramsey Show. Welcome back to The Ramsey Show.

I'm George Campbell, joined by Ken Coleman this hour. It's a free call at 888-825-5225. Caleb joins us up next in Atlanta. Caleb, welcome to the show. Hey, guys. Thanks for taking my call. Ken, I want to say go Dawgs. Go Dawgs.

Yeah. My wife and I were on Baby Step 4, 5, and 6 a couple years ago. We had a paid off house mid 2021. We were both in different jobs making a little bit more money. Fast forward to now, we got a

little bit bigger for our britches. Two years ago, we bought a little bit of a our britches. And two years ago, we bought a little bit of a bigger house, put a lot of equity into it up front, rolling the paid off house into it. But we did take a mortgage back on. And since then, we've both had job changes that we're both making a little bit less money than we were. We've also got a child in daycare now that we didn't have prior, and we've also just had our second baby as well. And we're finding it tougher each month for us to balance our budget. We've had to kind of go into the savings a little bit to kind of float things out. And so we're kind of at a point where we're kind of at one of two choices.

Do we sell our house and downsize and try to just get into a house that we can pay off up front and be debt-free? It might mean moving further out from our work and having a little bit more of a commute, or do we kind of focus on trying to bring the income back up to maybe closer to where it was? I'm leaning towards more income. George, what do you think? That's definitely the first move I'd make. Selling the house is always the last ditch effort. If we can't get out of this hole and it feels hopeless, you have that option. But it's never my first option. I go, hey, for sure, go sell the house. That's a lot of time. It's a lot of money. And the question is, can you guys get the income up to where this house becomes 25% of your take-home pay? And how long would that take? It's possible. My wife was laid off last year,

and so the job she found after getting laid off pays her about $10,000 less. I'm kind of in a new role of doing sales for the first time, so my income is way down. So it's possible over time, if I stick with sales and the pipeline gets built up, the income will kind of get back closer to where it was a year or two ago. I just don't know how long that's going to take for us to get there. Now, why did you move into a sales role? Wanted to try something different. It's something I'd always kind of been interested in. And at the time felt like maybe if we were in a place, it's worth giving it a try.

It was with people I know and trusted and just wanted to try something different. How long have you been in that role? About three months. And so far, how's it feeling? Depends on the day. Yeah, but tell me more. I like aspects of it. I love not being in an office. I love being out and about meeting people, making relationships. I'm very relational,

love solving people's problems and serving them. Emotionally, I have struggled with the up and down kind of nature of sales, both from yes and no, being told yes and no by a customer, but also the financial, you know, kind of uncertainty of it too. No question. What are you selling? I'll sell residential and commercial paint sales. Okay. If I were you, I would be looking at better sales job opportunities, something that has a little bit higher margin. I don't claim to know the commercial and residential paint sales industry, but my guess is it's not a huge amount of margin and you'd have to sell a whole lot to make a whole lot more. Is that true or false? That's fairly true. I work for one of the larger

companies in the city, and we only have 2% of the market. It's a very saturated market, and it's very competitive. Yeah. It's worth kicking the tires on sales opportunities where you've got a product or a service that is just a much more lucrative industry. You're not in a very lucrative industry for sales. And so that's going to be discouraging. And so I think that's, I want to give it back to George on the money side of things. I still don't think you need to sell your house. But I do think that both of you need to go, wait a second, just because I got laid off, we're talking about your wife, just because you tried this new sales idea and it's not great, doesn't mean that we're stuck. We're not stuck. I mean, we live in a job economy right now in America where it is very normal for

people to move on. And I would be considering other sales jobs where you've got a much, much better opportunity. When I talk about opportunity, I mean a ladder to grow. And the margin's higher so you can make more money right out of the gate. I'd be looking for that. For your wife, same deal. Whatever she was doing in the past, just because she got laid off doesn't mean she's a failure. And now you guys do have jobs, so we're not scrambling.

So it takes the pressure off, and now we look for something that's better. Because if you guys just increase your income, and even if you both got to work second jobs for right now, that's another thing that I always pull out of the old tool belt to say, that's going to create more financial margin for a season, even though it may take more of your time. So I think you got to look at everything right now as it relates to increasing income before we decide to sell the house. Sure. Caleb, what is your mortgage compared to your take-home pay?

Our gross, well, our gross overall, my wife makes 70 since I'm new to the sales. I have a very low base, obviously, and it's heavy commission. But, you know, a couple of years ago before we both counted this, we were combined household income of about 160. Our house payment each month is about 950. Yeah, the house payment doesn't seem like it's killing you, which makes me go, let's not, you know, if it's any broke, don't fix it. And so making the house payment of $950, I want to see you guys bringing home $4,000 a month take home, which feels very reasonable. Yeah. And so you've got daycare, there's other expenses. I understand that can put people in a pinch, but the house doesn't seem like the issue here. It's how do we continue with these baby steps, get this baby step three emergency fund done, have the margin to invest 15% and realize daycare is not forever.

It's going to be a few years. And how do we kind of float this next five years or however long it is until we have a little more margin to do the other things we want to do, like pay off the house early and save for college? That makes sense. And that was why I wanted some guidance. We've been on the fence and it, while paying, selling, downsizing the house would maybe immediately solve some of the money problems. It's a major decision to make. And so we kind of want to exhaust all of our options before we go that far. Yeah, I'm with you. I mean, if you said my mortgage is $3,000 a month and we take home $4,000, I'd be like, this thing's got to go today.

But it didn't feel like that was the problem. And also, it's kind of a shortcut. And I'm not against you selling things to get out of debt. I think that can be great. But a lot of times, we got to look at the root issue, which is our behavior. It's our income that's coming in. We got to really focus on those pieces before we go to the kind of get out of jail free cards. I'm a simple math guy because you know I'm not very bright, George. That's not true. That's really true. And so I sit there and I go, all right, what's the amount of money that if I could just snap my fingers and it appeared in our bank account every month,

it would allow us to finish out that emergency fund or whatever baby step you're on, or it would give us that margin. What's that number? All right. And so let's just say it's 600 bucks a month. I'm just randomly saying that. But that's the way I try to break these scary, complex decisions down to something simple. Okay. If we had, if we could put $600 a month into our emergency fund or whatever, we could speed through it and then blah, blah, blah. So then I'd go, all right, now I can understand. I can solve for $600 a month. Yeah. And reverse engineer it from there. And that's what I like to do with the baby steps. When people call in and they go, hey, it's going to take me six years to get out of debt. I go,

that sucks, doesn't it? They go, yeah. I go, well, how do we speed that up? What if you did it in two years? How much would you have to put towards the debt every month? That's what I like to do. In order to do it. And they go, well, I need to make an extra thousand bucks a month. Right. Now we got a solvable problem. How do we make an extra thousand bucks a month from cutting expenses to making more side jobs, all those things?

We can create that margin to where we can breathe now. We've got some hope. We see the light at the end of the tunnel. And we turn to hopeless situation with just some basic facts, figures, and a little bit of grit and sacrifice, we can get out of this thing once and for all. Yep. You guys can do it. That's what we do on the show here. Caleb, you got it. Get after it, baby. That's just good advice right there. That solves most problems. Get after it. There we go. That's old school advice from Ken Coleman. It's like Larry the Cable Guy's cousin. Get after it. Get after it. Get her done.

Hey, it works. You know, maybe not the best advice, not the most tactical, but I feel inspired, Ken. Thank you. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Ken Coleman. This hour, the number to call is 888-825-5225. Ken, I want to talk about a concept with you that is inspiring to many people, and that is compound interest. Yeah, it's something that you talk about a lot on your show. I do. I wake up, I think about it, and it's the last thing I think about before I go to bed. Now, Albert Einstein, I don't know if he actually said this quote, but if you Google it, they say he said it.

He said that compound interest is the eighth wonder of the world. Wow. And when I hosted the high school curriculum, Ken, the students get so excited when they see the charts, the graphs of what compound interest can do. Well, how can you not? Well, it's a wealth-building superpower that people don't fully understand. So I just wanted to unpack it for people, not because I'm a giant nerd, which I am, but also because I think it will inspire a lot of people to go, I got to get out of debt and start investing. What have I been doing? I got to up my investing to 15% instead of this measly 3%. This is amazing. So what is compound interest? Well, it is the interest you earn from the

original amount, AKA the principle of an an investment plus any interest you've already made through that investment. So your interest earns interest. And so that is the kind of compounding growth effect that happens. And I can walk through this with a really fun example, Ken. You want to do that? Yeah. But before we do that, since you were dropping big names and quotes. Huge names, huge quotes. I'll see your Einstein quote and raise it with a Ben Franklin. Hit me with that. I think Ben got it.

Money makes money, and the money that money makes, makes money. Did Ben Franklin really say that? It's what it says right here in this RamseySolutions.com article. That feels like a Tupac Shakur lyric. What is with your cynicism towards famous people's quotes? I just feel like we attribute a lot of random quotes to these old guys. I'm like, we don't know that they said that. I don't know that this is helping the viewer or the listener. I apologize, dear listener, dear viewer. I just can't picture our forefathers.

Because here we are trying to teach you something and we quote famous people and then George immediately puts doubt on it. I apologize, friends. I apologize. Here's the thing. You're confusing our listener and viewer, George. I'm picturing the forefathers going, hey, let's sit around and come up with fun tweets that one day people will quote us by no no see there's where everything falls apart now i understand ben franklin didn't think in tweets there wasn't such a thing as twitter ben franklin read he read some more books and stuff and he talked to other smart people got it all right thank you for that go ahead and show me this very exciting here's a quick example if you invest ten thousand dollars and you get a 10% annual return, which by the way,

people go, what do you get a 10% return? If you look at the S&P 500, which essentially is the benchmark index for the stock market, it's the top 500 companies. If you look at that, the average return has been 10 to 12% since its inception. So this is not an outrageous claim that you could get a 10% average annual return. Not every year. Some years it may be down 22%. Some years it's up 20%. Who knows? But that $10,000 at a 10% return, and if you just leave that 10,000 alone for 40 years, here's what happens. At year one, you're at 10,000. Year 10, you're almost at 26. By year one, you're at $10,000. Year 10, you're almost at $26,000. By year 20, you're at $67,000. 30 years in, you're at $175,000. And then 40 years in, you're at $452,000. Is that not amazing?

That's fantastic. And remember, you only put in 10. And so the total growth on that was $442,000 of money that you didn't put in. It was just your interest earning interest. So how does that happen? Well, let's talk through an example of this and the power of starting early. Because a lot of people, they aren't maybe, they're not there yet, Ken. Either they have debt, they don't have the emergency fund, they're in their 40s or 50s or 60s, they feel like it's too late, they feel like they don't have the knowledge base. I like that.

Let's take someone my age, George. I'm 48. Oh, boy. All right. I wasn't going to go that old, Ken. I was going to go, well, the example here, you can change the numbers on the example, but let's say this guy, Ben, who starts at 21, bright kid. His parents went through FPU. He did this stuff and he invests 2,400 bucks a year. You got that? Just 2,400. 2,400 a year. That's not a lot. That's $200 a month. Yeah. And he stops contributing at age 30. So from 21 to 30, $2,400 a year. The total amount he contributed was $21,600.

Now his buddy Joey, a little older, he started investing at age 30 and he invests $2,400 a year as well. And he contributes until he is 67. So instead of nine years, he contributes for 37 years. And the total amount he contributes, $88,800. Now, in your mind, Ken, without doing math, you're going, well, Joey's got to have more money. Joey's ahead. He invested for a lot longer period of time. You would be what's known as wrong. Because at age 67, Ben's investment, remember his $21,000 he put in, has grown to $2.1 million.

Joey's investment has grown to $1.2 million. So that nine-year difference, that nine-year gap from when Ben started to when Joey started, was a difference of close to $1 million. Is that not wild? It's crazy. Now, some people hear that and they go, well, wait a second, is it too late for me? No. Because what about the guy who started at 30?

The best time to plant a tree was 20 years ago. The next best time is today. And so regardless of where you're at, you got to start. And if you're 50, well still, let's say it's 70 years old, you still have 20 years of compound growth to take advantage of. And if you're young and you follow this plan, you go, hey, what if I could graduate debt-free? What if I could get out of all my debt, cut up the cards, have an emergency fund, begin investing 15% with a normal income, you're going to be a multimillionaire if you just start when you're out of college. And so regardless of your age, the key here is to get started as soon as you can. And the right time to start investing, Ken, is once you're out of consumer debt with a fully funded emergency

fund. Now, a lot of people get mad at us for this because they go, oh my gosh, you're going to make me throw away the company match. Part of the reason you don't have the margin to invest 15% is because you're carrying all this debt, you're broke living paycheck to paycheck, and you're trying to get this 3% match. What if for a season you paused, you went down to zero on the match, zero on your investing, so that you had more margin to throw the debt. Now we're at a debt faster and we're back to 15% once we come back to investing. So it's a powerful, powerful principle to take advantage of compound interest, compound growth, capital appreciation, whatever nerdy word you want to throw on it. And the key is you don't have to be a genius investor. I mean, our millionaire study found that most of them were mediocre investors that just invested consistently over a long period of time

in a 401k and a Roth IRA in growth stock mutual funds. And they didn't even pick the best ones. They just went, all right, this is not a super volatile investment. It's not a single stock. It's not crypto. I'm just going to invest in my retirement plan. And they became millionaires by doing that. And the average age was 49.

So you're right on track, Ken. Look at that. They started at 49? No, they became millionaires. Average age for millionaires in our study of over 10,000 of them. I see. So some were younger, some were older. Gotcha. But it just goes to show you, if you just follow a proven plan, you don't have to make a bajillion dollars or be a doctor or a lawyer. You can build wealth on your terms without having to strike it rich or get an inheritance or do all of these build wealth on your terms without having to strike it rich or get an inheritance or do all these crazy things so that's encouraging to me ken i hope it encourages you yeah absolutely i feel very encouraged we've come a long way i mean moments ago i was being harangued for my ben franklin quote commentary no not at all you you you i i

is harangued a proper usage there i don't know i just i was giving you a hard time big words when i hang out with you to impress you i was giving you a hard time for your cynicism towards historical quotes i didn't question that albert einstein said that all right you did and then you questioned that ben franklin said it i listen i'm a man of the people i have to look out for our for our audience well also they're confused by you you're a history nerd and so i can't go toe-to with you when it comes to historical figures. Why we got to call each other names. I don't understand.

The name calling. I don't get it. I'm a history nerd. I can count on one finger how many biographies I've read. And I think it was a Spark Notes from the Steve Jobs one. Oh, I love a good biography. Well, let's switch gears, Ken. Yes, let's do.

I got to clear something up here. If you listen to the show for 10 seconds, you'll find out we are not a fan of debt. And some people just don't understand that. They think that you need debt and credit cards to build your credit because you need a good credit score to buy a house. And that is wrong. And I say that with great authority because I bought a house and I got a mortgage without a credit score.

So the truth is, if you're living a debt-free lifestyle, eventually you won't have any credit score. It's a natural byproduct of getting out of debt and closing your accounts. So when you're ready to buy a house, you got to find a good lender like our friends at Churchill Mortgage who can do what's called manual underwriting instead of automated underwriting. So this is a no-score loan where they personally review your financial history to approve you for a mortgage. It's very old-timey. I like it. And that way you can avoid the credit score game altogether. And this may sound crazy to people, but the best plan for your future is to avoid debt,

save a big down payment, and get a real estate agent who will help you find a house you can actually afford. And we recommend agents who are Ramsey trusted, meaning they're top performers with years of experience helping people like you buy homes the right way. So none of this is impossible. You can buy a house without a credit score. You can find a house that'll be a blessing, not a financial burden. And you can find a trustworthy real estate agent who will help you do all of that by going to ramseysolutions.com slash agent. That's ramseysolutions.com slash agent. Welcome back to the Ramsey Show. I'm George Campbell, joined by my good friend Ken Coleman. Our question of the day is sponsored by Neighborly, your hub for home services.

If you own rental properties, Neighborly's local real property management offices can manage them and help optimize your ROI and peace of mind. Go to Neighborly.com to schedule a consultation with real property management pros near you. Today's question comes from Mitchell in Florida. He writes, I'm looking for advice on paying off my car loan. I took out a three-year loan last year for $25,000 and have a monthly payment of $715.01 at a 1.9% interest rate. It was a brand new 2022 Mazda 3. When I got the car loan, I was trying to help improve my credit also, which stands at 720.

I have $47,000 available in cash that's sitting in a 4.5% high-yield savings account. My question is, do I use the $47,000 to pay it off or keep using my paychecks and letting the $47,000 keep making me money from the interest. I feel like that is a softball to you, George. So I just tossed it to you. Swing away, my friend. Well, you know, I'm a big fan of t-ball, Ken, and this one's right there. Softball was the analogy, but that's okay. Because it's that easy. It's right there on the t. Oh, it's on the t. It's on the t.

Okay. You need all the help you can get. I acknowledge. Thank you. Yeah. Okay. So this is actually a tough question to answer, Ken, not because of the numbers. Because the truth is, he's got $25,000 on a loan. He has $47,000 in cash. A third grader is doing the math going, oh, he should just go pay the car loan off. He has the money to do it. The rub here is he thinks that's a money-making scheme to make 4% on his money in the bank, make an interest instead of paying off the 2% low interest debt. And this is a problem a lot of Americans are facing right now because they go, well, I would be an idiot to pay off the low interest debt. And I'm going, you'd be an idiot to hang on to debt like a pet,

thinking that it's some kind of money-making scheme. And so if you pay off that car loan, guess what you have freed up? $715. Guess what you can do with that money? You can now invest that money and make possibly way more than 4.5% in the stock market, in your retirement accounts. Well, that's guaranteed. So I would, of course, you're going to need a car, but if you paid off that car loan, depending on what the car is worth, you know, you sell that thing or keep it depending on your income, that'll put you in a great financial spot. So you're also concerned about your credit score. If you've listened to this show, you know, I don't give two rips about the credit score. I don't want you to have a bad score, but when you get out of debt, you just all of a sudden don't have one six or 12 months later. And I would just live without a credit score, pay cash for your car. If you need to get a house, do manual underwriting. You can rent cars and

hotels and do all that stuff without a credit score. And I've done it. I've lived it. Ken Coleman has too. And I wish you the best in this debt payoff journey. But I would not keep playing this game to try to make a little bit of money right now. It's not worth it. No, I love that advice. I just look at it as a $700 raise. There we go. That's where I go. $715 and one penny to be precise. The one penny is what really kicks it over. That's the raise. And that's a game changer. What you decide to do with that, to your point, investing, it's going to end up paying off way higher. Yeah. I mean, when you don't have any debt and then you can really sock away money in savings and investments, that's the real money-making scheme there, Ken. Not giving your money to lenders and trying to play some arbitrage game. Not doing that.

All right. Frank is up next in Mobile, Alabama. Frank, welcome to the show. Well, thank you for taking my call. Sure. How can we help? Well, I had a medical issue two years ago. Lost my job. Been hanging on, hanging on. My little emergency fund while I was working my snowball debt was depleted, like, almost immediately. Anyway, I haven't been able to pay my credit card

through my little local credit union here. And they're negotiating and they're offered about 50, 51% of what I owe. Should I take that or do you think there's more room for negotiation? I would take it. Do you have the money to pay it? I can scrape that together. I would scrape it together and be done with it and call it a blessing and move on with my life. Yeah.

Right now is not the time to try to haggle. I mean, you owed this money. They're willing to give you some grace and mercy here and say, hey, we'll take half of it if you got it. And for that reason, I'm going to take it. Thank you. I was just kind of looking for some guidance. I've been listening to guys for years. Will that get you debt free?

I actually still got the house. But other than that, yeah, the wife's got some little card stuff. Let's cut up the cards and pay these things off. What does she have on her cards? I think like four grand. Is it in collections or is it just sitting on the balance? No, we've been able to hang on to those current. So we're going to start knocking them out now that this one's out of the way.

And I do have a little bit of income coming in finally. Are you working full-time right now? Because you said you were unable to for a little while. I'm disabled, medically disabled permanently. It just went through. Wow. And your wife? After 15 months.

Now, is that going to give you more margin with disability payments? It'll let us keep current with hers so we can pay them off and be debt-free. Is she working? She's unable to work due to a medical condition my goodness is she getting any disability right out from under us yeah that's tough um why is she why it sounds like you said the wife has cards do you guys have separate finances are you guys uh on the same page and in the same bank account? Well, we have a joint, but I cannot seem to finagle her head around, get rid of them. She's like their little security blanket.

Oh. Well, it's not a security blanket. It's a weighted blanket, isn't it? That's what I've been trying to show her with this one. I don't know how you're sleeping at night under that security blanket, quote unquote. When you're on disability, you can't work, and you have all these payments you've got to make. It's been around. At 23% interest, probably. Does she feel what you feel?

The way you started the call is, it kind of sounded like a country song, Frank. Like, I'm just hanging on, hanging on hanging on hanging on and that's exhausting right it it is and does she feel that way no she just thinks you know everything's fine and that's what i thought she's just diddy bopping along we're taking uh steps to how old are you in a right direction we're both in our 50s okay and uh you're unofficially retired because you're unable to work so what does the next 10 years look like for you guys? Have you talked about that? I'm going to remain debt-free, and if we can't get together on this... You can't remain debt-free unless she decides to become debt-free,

because it's we. Y'all are married. It may not be we. You're a team. It may have to not be that, and I don't want that, but it may have to be. Well, I think you're going to have a team. It may have to not be that. I don't want that, but it may have to be. Well, I think you're going to have a hard conversation and go, listen, this is really hard on me. I'm scared.

We're not safe. You think we're safe with the security blanket of a credit card? I want to be completely debt-free. We don't have a lot of income coming in. All we have is this disability to get us by for the next who knows how many years. And I want to get to safety. I want to get to financial peace. And I'm willing to do whatever it takes.

Are you in? And I want you to have a little bit of urgency in your voice when you say it. Okay. Because I want you guys to have some dignity in retirement and not just go, well, we're just hanging on. We've been hanging on like Eeyore's your spirit animal over here. I want better for you guys. And it sounds like you guys lost hope a little while back. And we want to put a little pep in your step, give you some mojo back and go, you can have a great life, but it's going to take a little bit of short-term sacrifice. So if there's anything you guys can even do from home,

I don't know what that looks like with your medical conditions and disabilities, but I don't want you just relying on the government giving you scraps off the table trying to just get by. You're worth more than that, Frank. That's all I got to say, Ken. I couldn't agree more. Frank, it's time to make some real changes in your life. And this is a heart to heart conversation. You guys aren't on the same page, and that's a real problem. That puts this hour of the Ramsey show in the books. My thanks to Ken Coleman, my co-host, and all the folks in the booth keeping the show float. There's about 4,000 of them in there that make us look good. And you, America, thank you so much for listening. We'll be back before you know it. Hey, it's Ken.

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