The Ramsey Show - App - Convince Me To Ditch My Credit Cards (Hour 1)

Episode Date: January 19, 2024

Live from the headquarters of Ramsey Solutions, this is The Ramsey Show. It's where we help you win in your life. Specifically, win with your money, win in your work, and win in your relationships. Phone number to jump in is 888-825-5225. That's 888-825-5225 that's 888-825-5225 i'm ken coleman george campbell joins me we're ramsey personalities co-hosts of the show good friends and i want to say as we start just a big congratulations it is launch week we'll talk more about george's brand new soon to be best-selling book breaking Breaking Free from Broke, The Ultimate Guide to More Money and Less Stress.

Fabulous book. Congratulations, pal. Thank you. Your first book launched this week. It's been very humbling and overwhelming in the best ways. Well, it's kind of like another type of baby, and you're a new dad. A lot. Yeah, it's a lot of similarities.

I had a baby about four and a half months ago. Both keep you up at night. That's true. I'm not sure which one was more difficult at this point, at least for me. That's true. Maybe the book at this point. My wife will have a different story. Thanks to Whitney.

That's right. All right, let's get to the phones. We'd love to talk with you. George is here to answer your money questions. I'll weigh in. I'm here to answer any questions around your work and making more money. George will weigh in on those as well. Let's go to Kelly in Indianapolis, Indiana.

Kelly, how can we help? Hi. I have been kind of following the Ramsey plan for just trying to follow it for maybe about a year or two, but I just have one last credit card I just can't quite seem to get rid of. I don't have a balance, but I'm just trying to convince myself to actually get rid of it. I love this. And Kelly, I break this down in the new book into eight different characters.

So can you tell me which one you fall into? Is it out of fear? Is it for the rewards? Is it the convenience? What is causing you to go, I can't cut this thing up? I feel like it's more like maybe the pressure of like, everyone said, like, you should always have one because you never know if you're going to get stuck in a situation where you're going to need it. Okay. So for you, I'm going to call you the

emergency shelter. That's the sixth personality in the book. I need my credit card in case of emergencies, right? Probably, yeah. Okay. Well, let me tell you, there's a way better emergency fund, and it's where you become the bank instead of Capital One, and that's called an emergency fund. Do you have $1,000 saved for Baby Step One?

I do. I'm actually in four and six. Wonderful. So how much money do you have in savings? I have just a little over like almost $11,000. Amazing. Now tell me, when was the last time you had an $11,000 emergency? Never. Exactly. So a lot of this is paranoia. There's fear we have to deal with. And the other piece of the equation is you have insurance that will transfer the risk. You have things called deductibles and out-of-pocket maximums. And so you're going to be protected and you don't need these credit card companies anymore. They were never your friend and it's just a rubber crutch. And it's only a matter of time before they come knocking saying hey kelly we'll come save you at 22 apr kelly is the eleven thousand dollars does that represent three months four months five months or six months of your expenses

uh more like closer to three yeah is there a number that let's say george and i were we're feeling uh like we could just cut a check here. Let's say we were having Dave's money here. We like to give Dave's money away. I like that. You and I have done it a lot in our role. That's true. We really have.

Let's say George and I could cut a check right now, okay? And it would add to the $11,000 in your emergency fund. And when we cut that check and you deposited it, you would go, I'm cutting this credit card up. I feel so much better. Is there a number that we would add to the 11,000? Be realistic here. What's the number that if we wrote a check to add to the 11,000, giving you a total of, in your emergency phone, where you'd go, okay, I don't need this stupid credit card. Just curious, what's that number? I guess maybe another $9,000 to make it $20,000.

All right. Now, George, you see what I'm doing there? Absolutely. I'll give it back to you. We just put some facts on the security gland, which is largely feelings, and we just said if you had $20,000, you would feel so secure, it would be a force field between you and life, and that would be more like six months of expenses, correct? Yeah, probably. So then I'm not saying you have to do that, Kelly, but I did a little experiment there because that's what George and I are trying

to get you to. I think 11 is enough for you to cut the credit card up. Well, that's what we think. That's why we teach what we teach. Should have credit up a lot. We should have cut it up when you did baby step one, a thousand dollars. That's what we teach. But why not then? Why not put the nine thousand in? If that makes you feel better and it removes the temptation, I say go for it. That's the thing, Kelly.

If you cut up the card today and an emergency happened, what would you do? You would dip into the emergency fund. I would probably use the money. Yeah. And that's what it's there for. And then once you use it, what are you going to do after you use it?

You're going to replenish it. But you know what didn't happen? You never went into debt. You were never at the mercy of the credit card companies who are supposed to be blessing you with your 2% cash back and this emergency shelter. And so I'm going to encourage you to do the brave thing. And what's amazing to me, Kelly, is as people have been reading the credit card chapter in my new book, they're telling me for years we couldn't cut it up. And you finally coaxed us into it

with all of the research and humor and every objection I've ever had. I address it in that chapter. So I'm going to send you a copy of the book and I want you to read that and then send me a DM when you cut it up with a picture. Can you do that for me? Sure. That's all I ask in return. So hang on the line. Austin is going to pick up and we'll make sure you get a copy of Breaking Free from Broke. It's chapter three specifically

and Ken... I want to do another little mindset trick if I might George. I want you to join me on this. You are like the David Blaine of the Ramsey show. But Kelly, you said something at the start of the call when George was asking you, what's holding you back from cutting this up? And what you told him was, what other people are going to say to me? Because other people in your life are saying, Kelly, you're a moron. They're not using that language, but that's how you feel.

But they're going, Kelly, it's silly to cut the credit card up in case something were to happen. And so you haven't cut it up because you're worried about what they'll say. But what if, what if something happens and when they hear about it, they're like, what? What did you do? You went, eh, I cut a check because I had it in the bank. Or you said, well, I kept that credit card thanks to you, and I put it on the credit card. I've got to pay it off quick because it's about 23% interest. Which of those two answers are your friends and family going to be impressed with the most?

You tell me. Probably the first one. So, Kelly, you're not going to be viewed as silly, Kelly. You're going to be viewed as smart, Kelly, by the very people you're worried about and being criticized by. True or false? True. There it is. And guess what? Those friends are normal, Ken.

Normal's broke. We know 4 out of 10 people have nothing in savings. 25% of people have to use the credit card to cover the bills. That's not Kelly. You've unsubscribed from normal. And fear is a terrible financial advisor. And so these credit cards, you know, using other people's money actually makes you feel less in control

because your body's keeping the score. It knows that you're not truly safe when you borrow someone else's money. When you don't use debt, you got less stress. And you become the bank, Kelly. That's what we want for you. We'll send you a copy of the book Breaking Free from Broke. Let me know what you think

of the credit card chapter and send me a photo or even better a video of you cutting up that last credit card. I love it. This brand new baby is coming your way, Kelly.

For the rest of you, you can get it right now wherever books are sold or at RamseySolutions.com. Don't move. We're just getting warmed up in frigid Franklin, Tennessee. This is The Ramsey Show.

Welcome back to The Ramsey Show. I'm Ken Coleman. I'm joined by George Camel. And we are here for you this hour, 888-825-5225. George is taking your money questions. I'll take any work-related questions because that has a lot to do with your income and your mental health and your emotional health. It affects pretty much everything. It pretty much does.

Considering how many hours of your life you spend working. That's right. So I want to help you out in those areas. If you're thinking about some kind of transition this year, you're just not happy there, you're trying to figure out, do I start a side hustle? Is this the year to do it? Can I do it while I'm in the baby steps? Any kind of work-related question, I'd love to help out on that, and George will as well. 888-825-5225. Let's go to Austin, Texas. Chris is there. Chris, how can we help? Hey, Ken. Thanks for having me on, man. You bet. What's up? I've got a question regarding, we're trying to kind of restructure our debt and everything.

So fortunately, my wife did really well this year, and her commission and bonus coming here in a couple months is going to be about $52,000. Whoa, way to go, wife. That's pretty phenomenal. You were pretty happy when you found out about that, weren't you? Oh, absolutely, absolutely. Absolutely. Absolutely. So one of the big things that we're knocking down is the remaining credit card debt, which we have about $11,000 just under. With that, that we're going to knock out. And then the next thing is we kind of want to restructure our vehicle loans. So I own my own business. I'm in distribution of beverage concentrate. So last year, about two years ago, it was pretty tough getting a rental car, a rental van. So I went ahead and purchased a truck, ended up paying $63,000 for that truck at $893 a month payment.

And it's been fine because it's been overall savings, I mean, versus paying, you know, $1,500 a month renting vans back then. But we're thinking about, we're going to get rid of that truck no matter what we do because vans are available today. But we do have negative equity of about, I would say about $13,000 to $14,000 in that truck just because car manufacturers are getting competitive right now. And a new truck would sell for $3,000 less than the one I have with 44,000 miles on it. So my question to you two was, is we have a Ram 1500 and a Jeep Wrangler. The Ram is $893 a month and the Jeep Wrangler is $662. So the first thought that I had was to go ahead and pay the negative equity on the truck and purchase a new vehicle. And we would basically assume a new loan on that new vehicle.

So if we found a car for $25,000, we could go ahead and pay the negative equity of the truck of, let's say, $13,000. Are you talking about the Ram or are you talking about the van? Because I'm getting confused here. You said a van and then I thought you said a Ram truck and a Jeep. Yeah. So I have a Ram truck and a Jeep. The reason why I purchased the truck was because I used to rent vans. Okay. It took the place of a van. It took the place. Okay. I just want to make sure there weren't three vehicles in this conversation. So what you've been telling us is the Ram is the one that you've got the $13,000 to $14,000 negative equity on. Yes.

Okay. Go ahead. So what I was thinking is we have two options. So we can pay the negative equity by trading in the Ram towards a new vehicle for her. And we're setting ourselves a $25,000 budget. And then what we would go ahead and do is just pay that negative equity and then pay for that car cash and then keep the Jeep payment of $662 a month. Or the other option was to go ahead and pay off the Jeep, which has a remaining balance of $16,326, and then pay the negative equity in the truck and put a bit of

a decent down payment on that new vehicle and take out a new loan trying to get our monthly payment down to about $400 a month, $450 a month. Well, George, I only want to weigh in on one issue. Okay. I just want to weigh in on the Jeep. Sure. Those cars do not hold up well. And so whatever advice you're going to give him, I personally would pay off the Jeep and sell it. Or sell it if you've got... Do you have negative equity on the Jeep, or you've got a little equity in that? No, I have, I'd say about $18,000 equity in the Jeep. Dude, I'd sell the Jeep.

Those things, I'm not trying to knock Jeep, and I don't want to get any hate mail, but I'm just telling you I'd get rid of that. I'd sell that for sure. Anyway, George, go ahead. The one issue that, oh, there's not an issue with it. It's just that, so the Jeep was a long-term goal for us to be able to even purchase one. And we use it. We just had our first son about a year and a half ago. But prior to that, we use it about six times a year going camping and going off-roading. And so we made the commitment that this is the one vehicle that we're never going to sell. It's actually, you know, it doesn't even get the first car and everything. There you go.

Your reasoning for not selling it is because you use it six times a year? Yeah, that's not a strong case. Well, no, it's a daily driver, so we do use it to go to work and things like that. But it's a recreational vehicle in the sense that... For six times a year. Get you a little Honda Accord for the daily driver and go rent whatever the heck you want with your amazing income six times a year. That's right. So let's walk through the numbers. Let me figure out some options for you. You're getting $52,000 in the bonus. You're going to have to pay taxes out of that? No, that's going to be gross income.

So you're going to have to pay taxes. Sorry, not gross. Net. That's net. Okay. So let's say we are the only debts you have the two car loans and the credit cards? Yes. Okay. So we knock out the $11,000 credit cards. We move on to the $16,000 Wrangler. That leaves you with 25K, correct? Yes. Now we pay off the negative equity.

It's another 13K out of that, leaving you with 12. But now you can sell the Ram, and you'll get out scot-free. I don't think I would trade it in because the dealership's going to screw you on that. I agree 100%. So you're going to get way more private party and probably not be as underwater as you think if you do it that way. Yeah. And the dealership will convince you that you need a nicer car than the one you are currently looking for.

And they're going to say, well, if you're going to spend $25,000, you might as well spend $35,000, get something new. That is how dealerships work. And so I would encourage you to not purchase it from that dealership and instead search for a quality used vehicle that you can pay $12,000 for with the remainder in cash. Okay. And it's not going to be the prettiest vehicle, but what's your household income? So just a standard salary. We're looking at about $138,000 a year. That's good. Dude, think about this. Yeah, but he's getting good money for the Ram, George. Yeah, but when you think about it this way, you spend $12,000 on a cash car. Now you have no payments in the world making $138,000.

How quickly can you save up an upgrade in car and do it in cash versus trading in debt for more debt, but we're lessening the debt. I'm like, dude, you guys make good money. You could solve this thing with this bonus. What a blessing. Let's just be done with it instead of playing the debt game. Yeah, exactly. So that's what I would do if I was in your shoes, because you're calling me, telling me, hey, we make great money, but here we are with payments all over the place, and you guys have been able to justify every single one of these.

But I think we're done with justification. I think we're ready for freedom instead. Yeah. No, that's exactly where we want to get to. You can find a $12,000 truck. It ain't going to be fancy, but for what you guys are using it for, it's a work truck, right? Yeah, well, and I'm going back to renting a van when I do my route. Yeah, he's not going to need it. It's going to be his driver, just his regular driver. Then just get something reasonable for your daily driving. Another reason that we're trying to get out of the truck, too, is our son,

as he grew, it was a little easier when he had the baby to put him in the truck and everything, and my wife's actually pretty small, and she has an issue getting him up in the truck, and she doesn't like it. She just thinks it's big and it's large. I relate to that. Yeah, this is how Whitney treats George every time. She has a hard time getting George up into the van, so they went to a sedan. Sick of the booster seat. We joke, Chris. But I think we've got to start making decisions for what's best for our family 10 years from now instead of, hey, well, the kids and this.

We've just got to make future-thinking decisions, and they all need to require cash and no debt. Once you take that off the table, it's going to change the decisions you make. It's going to change your level of sacrifice. So you guys are, this is going to be all done so soon if you do it this way. But I would not trade debt for a little less debt. I don't like that game when you guys can get out of this scot-free. Yeah, and get a sedan, get something or a small SUV, whatever. You know, you got one kid, right, George?

Did I get that right? So you know what's going to happen? Kid's going to throw a peanut butter and jelly sandwich on the floor. You're right. All these young couples want to get the nicest car for their kids and toddlers. Let me tell you something. The amount of goldfish that are going to be in the floorboard and crammed between the seats, the Smarty Candies.

I could go on and on. Pretzels. You'll be on a Lord of the Rings quest to try to find all the crumbs in that car. Well said. Goodness gracious. By the way, they don't make the attachments on the vacuum cleaner that you need to truly get all those little goldfish. Getting all the nooks and crannies. Yeah, it's not going to happen. Really good stuff.

All right, don't move. We're going to take a quick break. Back with more of your calls. This is the Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. Thrilled that you are with us. The phone number is 888-825-5225. 888-825-5225.

Taking your money questions, life questions, work-related, your professional journey questions. We're here for you this hour. Let's go to Joseph now, who joins us in Cleveland, Ohio. Joseph, how can we help today? Hello. Thank you for taking my call. You bet. What's up, Joseph?

I just recently started going through Baby Steps. I'm on baby step two. And as I've been starting to share my goal of paying off all my debt with family and friends, they've, I've received a fair amount of pushback on why I shouldn't do that. And I wanted to see if you had any advice on how I could have respectful conversations with my family and friends while also being clear about my goals with them. Man, well, you're not the first one to experience this when broke people are giving you pushback about your financial plan. It means you're off to a good start. But, you know, I always love the quote, the best revenge is success here. And so I think you just stop talking to them about it. I mean, why do we have to have these arguments? Just go live your life, get out of debt. And when you've got peace and no payments and they're all looking at

you going, man, you got a little pep in your step. What's going on, Joseph? You go, I got no payments. And they go, I guess that plan actually worked, huh? What was that book? Oh, Total Money Makeover. Okay. That's how these things usually go. So what kind of pushback are they giving you? It's typically that I have a little bit of credit card debt and then the bigger one is my car payment okay so a lot of what i've received is well you should keep your car payments over times that you can build your credit and use the money that you can put towards that to do other things and you share share DNA with these people. Ouch.

Yeah, for some of them, yeah. George. But do you understand that, like... So not nice. But if you explain the credit score to them and you went, hey, let's talk about this credit score idea. What do credit scores do? They allow you to get more debt. And what does getting more debt do?

When you play the game perfectly, you get a higher score. And what does that do? It helps you getting more debt do? When you play the game perfectly, you get a higher score. And what does that do? It helps you get more debt. And so if your goal, Joseph, is to not accumulate debt, because we know the pain that it causes millions of Americans, everyone's broke, then I'm going to run the other direction. And if they don't understand that, that's okay. Not everyone has to totally get what you're doing here.

For sure. Do you agree with them when they say these things? No, because I can feel the excitement within me of the prospect of not having any debt and being able to save and do things. And just the idea of trying to, you know, quote unquote, wisely leverage debt or anything like that, just, it sounds awful to me, so no, I don't agree with them at all. Okay, so who is they? Do you mind? Tell us who they are.

Yeah, I have one of, like, probably my best friend has given me a lot of pushback, and I've kind of floated the idea of paying off debt to some family members that I'm close with that I trust and do respect, but on this, we seem to have disagreement. Yeah. Is there another topic in life that you don't like to talk to anybody about, or there's very few people you'll talk to about, like politics or something like that? I'm just curious. Any other something you go, I just, I don't want to get into that with people. Is there something like that for you? I can't think of anything specific off the top of my mind.

This needs to be one of those things. Okay. I think you need to take George's advice. I think he's absolutely right. I think you need to stop talking to your best friend about this stuff. Treat it like some weird conversation, and you just go, I want nothing to do with that. And I'm going to create some boundaries. I changed the subject. I just think, and same thing with these

other family members. If you disagree with them, then don't bring it up. Okay. I can just tell you without embarrassing any of my, there was a couple of my family members that I can't talk to about certain public figures. That's all I'm going to say. I leave the room. I don't even want to touch it, George. Because it's just... It's a landmine. What's the point? Well, but we're not going to agree.

So we're past the point of fighting. I'm not worried about a fight. But it's just a waste of time and emotional energy. 100%. I'm not going to agree. Therefore, I don't want to have the conversation. And I think, George, this is one of those topics. Agreed. It's why I don't talk to agree. Therefore, I don't want to have the conversation. And I think, George, this is one of those topics. Agreed. It's why I don't talk to you about sports, Ken.

We're not going to get anywhere. You're not going to teach me what a play action pass is. Because you'll never be able to understand it. That, again, is another waste of energy. But I hope you get that, Joseph. So, hey, you keep your eye on the prize. Follow the baby steps because you believe in it and you believe that it's going to make a better life for you. And by the way, it's your life. And so all focus on that and just no more talking to everybody. Unless someone pays my bills, they don't get a vote. Yeah. And so I'm just going to go, thanks, mom and dad, friend, uncle, broke cousins. I'm good. I'm going

to try this plan and if i fail successfully by getting out of debt and it's terrible i can always get more of it yeah but no one's ever come to me and said that so that's a tough one when people don't get what you're doing when you're a salmon swimming upstream all the other salmon are going dude what are you we're going this way man this is the path and you're like no that's a cliff my friends and there's a giant bear right there about ready to eat you. Bears love salmon. Yes, they do. Capital One is the bear in that metaphor.

They're all heading toward the Capital One cliff. Yep. Those commercials are so winsome. They just make it seem so nice. Well, you got Jennifer Garner smiling at you. She's the sweetest person on the planet, you know? Good move getting away from Alec Baldwin. You know what I mean?

100%. Yeah. Let's go to Sydney in Atlanta, Georgia. Sydney, how can we help? Hey, thank you for taking my call. You bet, Sydney. What's going on? So I just need help with pretty much everything.

I'm 24. I bought my first house when I was 20 for $97,000. It was just an older couple that wanted to sell it because they couldn't take care of it anymore. So I have a mortgage. I have a boyfriend that lives with me. We have a daughter. She's a year old. We have a car payment. We don't have any credit card debt, um, but we do have like a couple of small loans. Um, we just can't seem to catch up. We can't seem to save anything.

Um, and I'm just tired of chasing and chasing and never being able to make any progress. Hmm. What's your income? So I stay at home with our daughter because where we live, our daycare system around here is just not trustworthy, and it would take like half of my paycheck to pay for daycare anyway. So I stay home with her, and my boyfriend brings about $50,000. But I do have a business myself, but that only made a whole whopping like $6,000 last year. Okay, so you guys are making $56,000.

And what are your payments add up to? Because so far you've got some personal loans, the car loan, and the mortgage. If you added those up. I have a car that's paid off, but it's always in the shop. So that's our only hesitation was selling his car. His car has $14,000 left on it. The house has $88,000 left on it. And then I have a part of my business, I have a sewing machine that's on a loan.

What's the sewing machine worth? It was originally like $1,500. It's got like $1,000 left on it, but I'm planning on paying that off soon. Okay. As well as the computer. How much do you guys have in savings? We barely have a thousand in savings. Okay.

Whew. Well, I feel your pain. Luckily, you guys have a small mortgage, and so we're going to ignore that right now. If you added up the car loan and the personal loans on the sewing machine computer, are we talking $15,000, $16,000? No. Like I said, the sewing machine's only $1,100 left, and the computer's like $500. Okay. Cool. So it's about $15.5 is what I'm adding up to. Yeah. So here's what we're going to do.

We're going to lay these out smallest to largest. We're not going to get overwhelmed by the big picture, and we need to get this income up. If that means your boyfriend is doing side hustles for the next six months to clean up this mess, great. If it means selling the car and getting something cheaper to get around in right now, great. But this is a solvable problem.

You make 56, we're trying to pay off $15. How quickly can we do it? How do we get that margin? We've got to make more. We have to spend less. And if that means you going back to work for a little bit, even if daycare, you're going to net an extra $500, that's going to help. Find a grandmother in the area that wants to make a little money,

wants to get out of the house that you can trust, and she watches the child in your home. Go make more money. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. George Campbell joins me. We're here for you, America. Phone number is 888-825-5225. 85-2-2-5. This is big news, George. I've got to mention this because I just got the email a couple days ago. We've got a brand new event entitled Total Money Makeover. Pretty good idea.

Total Money Makeover Weekend, May 10th and 11th, named after the best-selling book that's ever come out of Ramsey Solutions, Dave's unbelievable classic total money makeover. And so in one weekend, you're going to crash course on everything we teach about money, brand-new content from all of us Ramsey personalities. And this is a great, great event because no matter what baby step you're on, it's going to fire you up. You're going to have a lot of Q&A time with all the personalities,

and that's always really, really fun. We just get to hang with you. Early bird tickets start at just $99, but this is only for a limited time. Get your tickets now at ramseysolutions.com slash events. That's ramseysolutions.com slash events. Always fun. I'm pumped for this. When we have it here on our campus.

Rumor has it you could witness Smart Money Happy Hour Live with Rachel Cruz and I on Friday night. And a special guest. Ken Coleman? I think it's time. Is this the event? Are you manifesting this? It's a soft pitch, but you have talked about having me on, and I thought to myself,

I don't know if your regular audience wants the special guest that much. I think it's time. But I think at a live event, you, me, Rachel, cocktails, and content and comedy. If that's what gets butts in seats for the Total Money Makeover weekend, I'm in. I don't know that it will.

But I know that it'll be fun. That is a great deal for an entire weekend event right here at the headquarters. It'll be fun. I'm putting it out there. I won't lobby you. Thank you.

All right, very good. Kayla's up in Atlanta, Georgia. Kayla, how can we help? Hi, thanks for taking my call. You bet. Kayla's up in Atlanta, Georgia. Kayla, how can we help? Hi, thanks for taking my call. You bet. What's up today, Kayla? So I'm a college student getting a biology degree, and initially I was going to go to dental school,

but I'm not really too interested in getting, you know, just a ton of student debt now. Yeah, good for you. So I've always wanted to be an entrepreneur. So I prayed on it and I just decided that I wanted to start a clothing line. So I took a business course and she was basically, you know, just telling how to secure business funding and stuff like that. And I know, you know, how you all feel about, you know, business loans, but I created a business plan and, but I didn't know that they asked for collateral and stuff like that.

Right. So my parents aren't too interested in putting their house up for collateral. So now I'm just like, I don't know what to do now because I really want to be financially free. I'm glad you called. So you haven't taken any loans out, correct? No. Okay. So Kayla, business funding is just fancy for a loan.

And now you know that. And so can I just encourage you that you don't need a loan, nor do you need a ton of capital to launch a business in America today. Now, the clothing business, I would tell you that's a pretty high risk, very competitive world. Would you agree with that statement? Yes. So if you were to go get a bunch of loans with a great business plan, all the collateral, all the things that you don't want to do, and you're right, by the way, you would still have a tremendous amount of risk. And so how do we remove the risk? By a small test. Now, do you plan to design the clothing?

Yes. What are you thinking? In your business plan, did you highlight two or three different articles of clothing? Yes. What were you thinking? Like just matching fits. I already talked to like a manufacturer to find out, you know, how much it would be to get them. Okay. What did you find out? They were about $30 a piece, like for the matching top and the matching bottom. So $60 for this matching outfit. Is this casual wear? Is it, what is it?

Yes, it's casual wear. And no, together they're both equal up to $30. Oh, okay. So your hard costs on both top and bottom are $30. And what have you found out in the market as you were putting this business plan together that this type of combo, this outfit, what's the wholesale or retail price? About $115. $1000. That's what your competitors are doing for something similar? Yes. Okay. Well, it's a pretty good margin, but still, you get into manufacturing, and I don't know if you've read the story. If you haven't, you should pull anything you can online. There's a lot of it out there on Sarah Blakely's story. She lives in the

Atlanta area, and Sarah is the founder of Spanx. Have you heard of her? Yes. You need to read her story. There's a lot of hustle and effort on this, and my point here is you need to start smaller than right out of the gate with your dream item. I love the ideal item of the top and the bottom and it's casual wear and it's comfy and we retail for $115, but there's a lot that goes into that and you're going to have minimums that you're going to be required to upfront with the manufacturer because the manufacturing company is going to get paid upfront or at least a portion upfront, right? I'm not a super expert on this, but I know the basics. And so I'm just walking you through this. So there will be some upfront capital and

it needs to be cash. So to the extent that you can get out of college, start working, save up a bunch of cash to get to a point where you go, okay, I can at least invest this amount of cash and I'm going to go with one or two items. I'm going to go online and I'm going to try some things. That's the long term. What can you do in the short term with maybe some jewelry or a t-shirt or a sweatshirt or something that you can test out online? I want to bring George in here because he really understands this world. I weirdly do. And it's embarrassing. I'm holding back. So i wanted to bring you in at this point and now walk her through what would be a uh let's call it a low risk economical test well the way i think about this kayla is you can't just get out there and be like i have clothes for a hundred dollars why

why should they buy yours over the brand that they know and so you need to create some unique value proposition here and i would start by creating an audience. Do you have a big Instagram following? TikTok following? Somewhat, somewhat, yes. So I would focus on that. And it doesn't have to be clothing you made. If you have good style, I assume you're very stylish. And your friends compliment you on your outfit, right?

I think she sounds like she's very stylish. So I would start doing outfit of the day. Here's how I pick these outfits. Here's the idea behind it here's my wardrobe here's some deals I found on clothes that I love and you start to become sort of a fashion influencer now all of a sudden you build up a following of 40,000 people brands want to work with you you're getting money from that now you can launch your own line that's how all the people I've seen actually do it successfully.

And that's not going to happen tomorrow, right? This is a six-month, two-year, five-year plan. But there's also no debt baked into that, Kayla. You know, start small is what we're getting at. Start small, grow slow. This is not going to be your day job coming out of college. And I'm not saying that to shatter your dreams. I'm saying that to support your dreams. Your day job will support this side hustle until you can get the boat close to the dock

to where that side hustle now makes more than your day job or close, and you can now pursue it full time. Are you tracking with us? Are we making sense? Yes. I mean, at the end of this month, I'm going to be getting my refund check. It's about $9,000. I was wondering if I should use some of that to invest into the business or whatever, but it's just that my refund check does also cover my rent. I was wondering if I should ask my parents if they can support me a little bit on the rent while I use some of the money to... Do you have any debt? No.

And do you have an emergency fund, fully funded? No. That's where that goes. I think that refund just became your emergency fund. Once you have no debt and an emergency fund of three to six months of expenses, now we can begin investing for the future in retirement and a Roth IRA and for this business. Kaylee, listen, I know you're grasping what we're saying, but you went right back to, I need to ask mom and dad for help to pay my rent so I can eat. Listen, you don't need to use the

9,000 right now. That 9,000 as a safety net in the form of an emergency fund for a graduating college student is phenomenal. You're ahead of the game, no debt. Now go get a really good paying job, two or three paying jobs, and start doing what George is talking about where we test the idea of can I figure out how to sell clothing for a profit? Post pictures of it and say, would you buy this or would you buy this? Yeah. And start to test this out. That's exactly right.

We just took a call this week. This couple took out $200,000 in small business loans. What? The business failed. Now they're getting regular jobs, and they're freaking out. And I don't want that for our friend Taylor. Yeah, it's like a penalty for trying something. That's not how it needs to be in America.

It just adds emotional and financial pain on top of the failure of the business. Yeah, if you do it right, it's the American dream, not the American nightmare. But no debt, folks. All right, good hour. Thank you, George Campbell. Thank you, James Childs and all the guys in the booth that keep us on the air. Thank you, George Camel, thank you, James Childs, and all the guys in the booth to keep us on the air. Thank you, America, for listening. This is The Ramsey Show. We'll see you next time.