The Ramsey Show - App - Ditch Your Debt and Get Back to Peace (Hour 2)

Episode Date: June 4, 2024

from the Ramsey Network this is the Ramsey show I'm Jade Warshaw joined by George Campbell we're going to be your hosts for this hour we're going to take your calls about your life and your money if you want to talk to us, give us a call. The number is 888-825-5225, and we will take your question. Actually, your call will be screened first for quality assurance. For all of our safety. That's right. And then it will trickle down to us, and we'll talk to you on air. So if you want to do that again, the number is 888-825-5225.

Let's go straight into the phone lines. We got Jackie, who's in Green Bay. What's up, Jackie? Are you there? Let's try again. Let's see if we can get her back. Jackie, what's up? Can you hear me?

Yes. I picked up the wrong line. I'm sorry. You bet. How can we help? Okay. So, sorry, I'm really nervous. That's okay.

Take your time. My call is, I'm really nervous. That's okay. Take your time. My call is kind of regarding my teenager. He's going to be 14 next week, and he's going to start working. And he's got a really great mindset, and he knows he wants to be that three, and he sees my husband and I start going through the process of Dave Ramsey and the steps and everything. So his plan right now is he's been telling me he wants to spend 10%, give 10%, and then save 80%.

So we kind of talked about opening up a bank account, and he says that he would rather open up his Greenlight or Cash App account and then work through investing and, like, investing into stocks and stuff. Because that's kind of what he sees his YouTube friends and stars doing that he idolizes. So I don't really know how to have this conversation with him, but I don't feel like that's the best place for a 14 year old's money to go. But I don't really have any other ideas for him cause he wants to build money

with, you know, and invest in what he's got kind of grow his wealth. So I guess I'm just looking for some advice on how to have this conversation with him and what ideas to give him. Well, he does have a great mindset. He just has poor execution on this. Yeah. It's great that he wants to build wealth at an early age, but he's seen a lot of people get a little starry-eyed over investing in what you could do. And is he wanting to invest in single stocks? What has he told you he's actually wanting to invest in?

He just says that he wants to invest in stocks. I know Cash App and his Greenlight account both have the options to invest. Greenlight, you have to do it through a parent, but you have to pay a monthly subscription to then invest in it, which just seems strange to me. Well, that's the part that I wanted to highlight is, I mean, at 14, he can't invest in stocks on his own. You have to be there to say yes to that. So at the basis, it's just you saying, no, we're not going to do that. There's a way to do this, and this is not the way. You almost have to treat it like anything else no we're not going to do that there's a way to do this and this is not the way you almost have to treat it like anything else that a kid might want to do that you know is

not good for them and it's just like no but you got to say no without like to george's point without um squashing their spirit because there's a part of this that's really great um and i think that you have to find a way to nourish the good part of it which is like yeah there is something to be said about investing you want to make good financial choices for the future. And I think this is the opportunity for you to teach that. I don't think that this should be viewed negatively. Let's view it as a time to say, yes, investing is so awesome. Here's the way to do that. And here's the steps we're going to take. And here's what that looks like. And you guys have the ability to step in and be the authority on that as opposed to the TikTok bros.

And the way I would do that is I would set up a custodial Roth IRA. If he's excited about that, it's something you would manage until he's an adult, 18 or 21, depending on what the law is in Wisconsin. And that at least allows a buffer for him to avoid making terrible mistakes, which I don't know if you've opened up an app. They're not exactly wonderful for good decisions. They are designed to take your money, not make you money. So you did. And so that's what I cover this in my book, Breaking Free from Broke in the Investment Traps chapter. Would he read my book if I sent it to you? Yeah, he would.

Okay. If you said this is a prerequisite for you investing, you're going to read this book and you're going to write me a little book report on what you learned about wealth and investing. A book report, George? That's what I'm, hey. You've done that before. Book report is where it's at. You got to make sure they retain the knowledge.

Okay, I'm learning. So if you hang on the line after we're done, I'll send you that book. But I wrote it with the younger generation in mind to help them avoid some of these traps that we're seeing on social media that make it look so easy. Because here's the problem, Jackie. I'm out there on YouTube. I'm trying to do the dang thing,

trying to help people build wealth. But nobody likes my advice when I'm like, hey, if you invest consistently for 30 years, you'll become a multimillionaire. He probably wants to make money now. That's what he has the attention span of a gnat. He's been watching Cocoa Melon. Yeah, it's TikTok, social media. The hard part with that is, you know, obviously George, myself, and people who really know what they were talking about are on there, but then there's a bunch of folks who are there. Maybe they personally had a good experience, and so they teach it like it's Bible. And so really even helping him navigate that social media landscape and how to pick and choose who you're following and who you're listening to. It can't just be some guy in their basement. It's got to be someone who's got a track record, who's got reputable content behind them.

You know, even those moments are, I think, a really good teaching moment for this moving forward, not just the money, but the social media side of it all. And the big key with all of this is you need to teach him that investing equals long-term. Otherwise, it's betting. If you're trying to make money quickly in one, two years, or even a day if you're a day trader, that's dangerous. And there's a lot of people who have lost their butts on that. And there's all kinds of stories on the internet. They're much more quiet about it when they lose money. But when they gain it, they're making all kinds of videos. And those are the ones that he's seeing. Now they're experts, yeah.

Yeah. So tread with caution. And I think those are the people he sees for sure. Of course. That's who I want to follow. The guys who are like, bro, I'll teach you how to win. Standing in front of a private jet. There's usually vested interest here.

They have a course to sell you. They're making money off of you. They're trying to lead you into something where they're trying to get your money because they've convinced you that if you invest their way with them, which is different than Ramsey, I don't actually sell investments. And so I'm not here telling you, hey, bro, I'll make you 10x your return if you give me your money. I would never do that. That's a really good differential really for anybody listening is we're never going to, I mean, you guys just did a really great investing essentials, two night event, the live stream. And just did a really great investing essentials, um, two night event,

the live stream. And Dave, Dave Ramsey really did talk about this because a lot of people say, Dave, just tell us, tell us the codes. Like, just tell us what you're invested in. What's the ticker symbols. And we never do that because at the end of the day, we don't want you to just do anything because we told you to, we want you to understand what you're investing in. You understand it for yourself. You've chose for yourself. It's not just, well, if Dave said it or if George said it or, you know, John said it, I'm going to do it. That's really what we're trying to protect and guard against.

And so, yeah. And he's going to be just fine, even if he didn't start investing until he was out of high school and he's in college. With this mindset, he's going to be a multimillionaire if he can do it avoiding debt. And so that's definitely his mindset. Instilling the actual principles, the disciplines is more important than getting into the stock market at 14. So I hope that helps you, Jackie. I'll make sure to send you a copy of Breaking Free from Broke, specifically the

investment traps chapter and the wealth is patience chapter, which comes later, which is the right way to build wealth. And Jade, I talk about the three stooges of wealth building in the book. Let's hear it. It's fear, greed, and pride. Oh, yeah. Behind every bad financial move when it comes to wealth building are one of those three emotions. Fear, greed, and pride. You were scared, so you bought gold or put this money here out of fear. You were starry-eyed about how much money you could make and greed set in. You were prideful and thought you're going to be the smarter investor and choose the right stock on the right day at the right time. And you try to time the market and you get burned. That's a good word, George. So if you can avoid the three stooges, what's the opposite of fear? Well,

we need some confidence in our plan. We don't want to be scared. Power. Fear is a terrible financial advisor. Instead of pride, let's have some humility and work with a pro and realize we don't have all the answers. Instead of that, what's the last one? Pride. Pride. Well, pride and what's the last one? Pride. Pride. Well, pride and then fear and greed. Greed. So with greed, let's be more generous. Let's be more open-handed. Let's not try to get rich quick.

Let's try to raise all the ships. Pride comes before the fall. That's right. You don't want that financially. Jade getting biblical out here. Pride cometh beforeth the fall. A haughty spirit. That's right. A haughty spirit. That's right, a haughty spirit.

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Camel to my right taking calls all afternoon triple eight eight two five five two two five this is a caller driven show which means you call in we answer your questions live every aspect of this show is live uh and in person so I think that's very cool. Get involved by calling the number. We got Ryan, who is on the line from Cleveland, Ohio. What's up, Ryan? Hey, how are you guys doing today? We're doing good. How can we help?

Question. My wife and I have been working through the baby steps, and we both work remotely from home. But recently, my company provided me with a company vehicle that I use to travel. I do have to go out to locations. Okay. And then we have two personal vehicles. One of them is paid for.

And then the other one is my largest debt left in my snowball. And I just was wondering if it would be wise, since we don't drive as much, to get rid of, to sell that vehicle to pay off a huge, you know, to get rid of approximately half my debt and then just use our own personal vehicle and then my company vehicle as needed if it comes up. Yeah. So there's three cars. One's paid off, one has a note and one's the company vehicle. Correct. So the one that has a note, and one's the company vehicle. Correct. So the one that has the note, what do you owe on it and what's it worth? Owe $23,000 and it's worth approximately $28,000.

Nice. So we get a little something-something on that action. Which means, and since you don't need another car to purchase, you could use that $5,000 in profits to throw at your debts. Absolutely. So not only do you free up a payment and get rid of half your debt, you also start to knock out even more debt instantly. Yeah, why not do that deal? I'm doing that all day. What other debt do you have? We have approximately $2,500 left on a credit card, $3,600 on a student loan, and $14,000 on a personal loan. Okay, so with the 5k, obviously the credit cards are done and a good portion of the student loan is done. Any other cash laying around? A small amount of savings. How much? We've been working through $15,000. $15,000?

A small amount? That's all your debt, Stu. I don't know where you come from. That's a lot of money from my neighborhood. I'm very conservative. Help us understand. Well, you said you're working through the baby steps.

You're working through Ryan's steps right now because you know the baby steps would say, let's use $14,000 of that $15,000 and knock out this debt, which looks oddly like that personal loan,

which means, oddly enough, you could be debt-free in like a month if you do all this. I could. I'm just nervous making big moves and trading my savings. How conservative are you considering the fact you went $40,000 into debt? Yeah, we've got to put a pulse on that. You can't be fiscally conservative while going into debt. I understand.

You're right. You're absolutely right. I say to people all the time, Ryan, that it has to be balanced reasoning. You can't say, well, I'm very conservative and I avoid risk on, you know, when it's time to hold on to the savings. Because where was that reasoning when it was time to go into debt? And so that's kind of where that's that's where we have to question and go, OK, what are we really saying here?

What we're really saying here is we just like the feeling of being able to say i have fifteen thousand dollars in the bank it's kind of like right you know it's that's really what it is and once you realize that and go okay suddenly the logic that i had kind of falls apart when we look at this thing as a whole now you know now you just have to ask yourself simply do i want to be debt free or not? And how quickly do I truly want this to happen? Let me show you how quickly you'll get back to peace. So how much money do you guys make a year?

190. You make 190 grand. And what are your total debt payments add up to every month right now? Right now they add up to approximately $1,300. Okay. So lay this out with me. Uh, right now they add up to approximately $1,300 per month. Okay. So lay this out with me. Let's say you're completely debt-free in a month because you followed all the advice we just gave you. You make $190,000 plus you freed up another $1,300 a month, which means you freed up $15,000 a year plus all of the margin from your income, which doesn't have to go to debt payments. How quickly could you get $15,000 back in

that savings account? Three months. Three months. So if you play this whole thing out, in about three months, you're back to where you are, except you're completely debt-free with this savings. No, you're right. Sometimes you just got to hear it from somebody else. That's right.

Yeah, good. This is such a solvable problem. It makes you excited for you. Most people that call in, their car's underwater. They don't have any money in savings. And so you have a lot of great things going for you. We were just doing a savings. It's kind of a security. It's almost like, you know how the last segment, you said the three stooges of the bad investing. It's almost like some of that kind of exists with savings too. It's like you get hung up on fear and security. Like I would love for you to do a word play on that, George. That seems right up your alley. It's like a little blankie. It's like a little security blankie. That's also, it's one of those heated blankets that's plugged in. It all takes a

little bit of rain and all of a sudden that becomes an electric blanket. Oh, I thought this was good. I was about to say, because I love a heated blanket. Get me out of those. I don't want to get electrocuted. All right. Today's question of the day comes from Tom in Nevada. He says, I received a monetary gift from assembling and his wife 20 years ago, which was under the amount He says, all I could to help them as they did me, but that is far from the case. Paying them back would not destroy my financial situation, but it would make a much greater impact on my situation than theirs. What advice can you give me in regard to this? Where's Judge Judy when you need her? I know. Okay, so let me recap here. A sibling gave you the gift, and now they're like, I want my monies back, and you're saying, what he's really saying is they're loaded. They don't actually need this money.

Our relationship has changed, aka things went south. We're not on good terms. And this is a weapon that he's now using against me. Uh-huh. And just for the listeners, so if it's under the amount that's required by anyone to pay taxes, that means it's probably below $16,000. Like that's the limit on gifts and taxing. Yeah, it doesn't go toward your inheritance gift tax amount.

So this could be kind of a substantial amount. This could be like $10,000. This could be $5,000. Or it could be like $500. We don't really know. She doesn't say how much it is, but... I mean, it sounds like this relationship was over anyways. Yeah. He has no real recourse legally. I mean, this was a gift and there's no way he can go back and say he owes me this money legally. He wants to come after you. If I'm in your shoes, I'm going to say thanks for the gift. It was a gift.

I'm not able to pay this back. And I hope you have a great life. Yeah. It sounds like he doesn't want to talk to you anymore. You don't have to. She doesn't have to lose a wink of sleep this is the second question of the day in a very short period of time that um at least i've read where a family member has given another family member a gift and then then decided for multiple reasons to say it's not a gift anymore

and that's just well they use it to hold it over your head later in life then it's not a gift no and let's okay so if you're on the receiving end let's talk about it from this um point of view george if you're on the receiving end of someone who wants to give you a gift you do need to not get all starry-eyed and get all like yes or i needed this money or great you really do need to kind of think about if you want to accept the gift, because you don't have to. There's a part of that that you can go, you know, is this the type of person who might hold it over my head later? Is this the type of person who might want something in return, even though they say it's a gift? Is this the type of person who might, you know, make me feel some type of way or make it seem like seem like i owe them so there is a bit of vetting that

the receivee should do on the front end before they become the receiver yeah i love the quote choose guilt over resentment and right now i think what's going to happen is one of two things either he gives the money back and then tom here is resentful yeah that he had to give this money back already ruined the relationship or he doesn't and instead he feels a little bit guilty about it like that uh versus resentful which is a little more that's a poison you drink yeah i can get over some guilt and truthfully this relationship has been over i don't know what changed over the years we don't know the story there yeah but it doesn't sound like in any case the relationship will be solved and magical and healthy again.

Yeah. If the money is given back. I don't think Thanksgiving dinner is going to be any better. Yeah. I just need people to stop trying to control other people. You can't control people. And a lot of times we use money as the tool where we think we're going to. Weaponizing a gift, a financial gift is one of the most disgusting things a human being can do.

Yeah. Yeah. This is bad, bad. I'm sorry, Tom. Yeah. I'm grieving the loss of the relationship more than this money situation. That's a bummer with a sibling. Yeah. This is The Ramsey Show. This show is sponsored by BetterHelp. All right. So I was born and raised in Texas, and I love the myth of the lone cowboy. You know, the guy who doesn't need anyone or anything. It's a fun story, and it's a lie. In our self-obsessed society, we're obsessed about

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so it can fit with your schedule. To get started, just fill out a short online survey to get matched with a licensed therapist. And if it's not the right fit, you can switch therapists at any time for no extra cost. This month, start to build your support system with BetterHelp. Visit betterhelp.com slash Ramsey Radio to get 10% off your first month. That's betterhelp, H-E-L-P dot com slash Ramsey Radio. What's going on, everybody? You're listening to The Ramsey Show. Hey, we're glad you're here. I'm Jade Warshaw. Next to me is George Camel, and we are taking your calls. If you've been listening to the show and you like what you hear, make sure you are liking.

Make sure you're subscribing. And more importantly, and I'll say equally importantly, make sure you're sharing it with somebody who you think can benefit from what you're hearing on a daily basis. Because the truth is, this is life changing content. Once you get your money in order, it's a big deal, George. I always say there's three things that are probably the best choices that I've made. Number one, choosing to follow Jesus Christ. That goes without saying. That's number one.

Number two, marrying the right person. Sam Warshaw, shout out. Best choice I ever made. And number three, choosing a financial path that allows me to pay off debt, allowed our family to be on good financial footing. Those are top three for me. Like money follows you everywhere. Like you can't avoid it.

So I really place it up high. And so the content that you're hearing on shows like The Ramsey Show, if you listen to George Camel on YouTube, if you listen to Smart Money Happy Hour, The Dr. John Deloney Show, Ken Coleman, all of that content, man, it is so, so important. So if it has changed your life in any way, pass it on, pay it forward, share the show. It's completely free and you can choose to change somebody else's life by doing so. So off my soapbox, if you want to give us a call, the number is 888-825-5225 and we'll chop it up with you. We got Kayla, Las Vegas, my favorite

city. What's going on, Kayla? How's it going? Going well. What's going on in Las Vegas? Thanks for taking my call. Yeah, very hot. And we're struggling out here. Oh, man. Tell us about it. Yeah. So just kind of long story short, essentially, we're in a really like drowning in debt. We've got about 50 grand in credit card debt, which we were like getting ourselves out of. And then eventually it just turned into couldn't get ourselves out anymore. And then living off credit card, trying to put food on the table for our babies.

And then about 60K in student loans. We're in a hole with our two of our Jeeps. We owe, we're just, one is a $900 payment, one's a $400 payment. What's the full amount of the first Jeep? 40K on that, and we would be, it's worth about 31. Yikes, okay. So we just, we were in a bad car position, and that was what they were willing to swap us out for, and essentially just really bad, bad situation. situation on the stay-at-home mom.

My husband's a teacher. I'm going back to work in August to be a teacher. But we wanted to move out of state and we were almost to the point of wanting to just sell our house and take all our equity and put it in to pay off all the debt. Well, let's look at it. Yeah. So Jeep number one is 40K, but it's worth 31K. What about Jeep number two? Jeep number two, I think we have about, it was 45,

and I've had that for a long time. We have, oh, about 17 on it. Okay, oh, 17. What's it worth? And then what was that, sorry? What's it worth? I think that one's only worth about maybe $50,000. Okay, so that's not as bad upside down.

Yeah. Then you said, so it's credit cards, student loans, two Jeeps. Then what do you, tell us about your mortgage. So our mortgage, that was the other problem. We moved about two years ago into this house, and we thought we were going to be at one interest rate, and then right before we closed, interest rates went up and we're at a $3,200 mortgage. What's your take-home pay?

My husband makes $90K. He makes about $5,500, $400 a month. Oh, boy. That's where the problem is, a big problem. And so then last summer, we literally were to a point like we were going to buy Costco groceries and then next day we'd have to go return our food because we had to pay bills. And so we turned to like a debt relief program. And I feel like ever since then, it's gotten even double worse because now our credit is so bad and we can't do anything. It's like we don't see a light at the end of the tunnel. It's, it's, yeah, you're in a hard spot right now. There's always light

though. And there's always hope. So I don't want you to think that all hope is gone because it's not. It's just going to take some time and some, a little bit of pain possibly and some discomfort to get out of this, but I promise it'll be worth it. So looking at all of this, tell us about your income. So with $5,400 a month he makes right now, when I go back in August, I was staying at home because what we would pay in child care would have, yeah, I mean, it wouldn't have made sense. But now with the pay raise we'll be getting as teachers, I'll be making about $70,000. And then we'll be spending about half my check towards child care.

So I'll be taking home a little extra. How much do you think? Probably about $2,000. Okay, so that brings us up to $7,400, which helps this mortgage look a little better. It helps give us a margin to pay off the debt. Because right now, what are your total credit card payments? Oh, well, we put a lot of them in a program. And then now, ever since we've worked, yeah.

Yeah. So we, but I mean, one of them, we're being, I don't even know if I'm allowed to say the word, but sued for it. Yeah, so we just don't know what to do. Do we pull them all out of the program? Well, they're not all in the program, just half of them are. What is this program doing? Do they tell you, hey, don't make any payments, let it trash your credit, we'll negotiate? Exactly.

Oh, gosh. Exactly. And that's why we got sued, because we weren't responding, and we thought it was being handled, and then it was apparently not being handled. Yeah, these companies are scummy. They're just as bad as the credit card companies, if not worse. Yeah. And we're just scared. We have a four-year-old and two-year-old, and we know we're taking blame, but we just

don't know who to turn to, essentially. We're kind of silently struggling right now. Okay, so for me, the big glaring problem, this mortgage is really eating your lunch. 60% of your take-home pay is going to the mortgage. 25% of your take-home pay is going toward these, just the car loan payments, which is 85% of your take-home pay, which leaves 15%. And you still got to pay your student loans, the credit cards, put food on the table, cover insurance, utilities. So are you guys continually going into debt to cover the gap?

Yeah. Yeah. Well, yes and no. We don't use any credit cards right now. My mom helps us. She helps us a couple hundred bucks a month where she can. And then other than that, we've really just tried to cut out almost everything. And we've been trying to sell stuff around the house and that kind of thing. What do you owe on the house and what's it worth?

So we purchased price was like $616, actually, I think. And we owe about $460. And I think we just looked into selling and they said we could probably list it for around $630. Okay, that's good. So possible, yeah. So after fees, you might net like $140 out of that. Yes. Which would clear all of your debt almost

or at least give you enough to get rid of the cars, get different beater cars, get rid of the credit cards and student loans. Have you priced out what it might be for you guys to rent a two-bedroom apartment? Well, we have not because we have five dogs and most places don't allow it. Five dogs? Goodness gracious.

Okay. What would it cost to rent a house? Probably about, I think they said we could get about $3,000 a month to rent it. That's not changing much for you guys. No. I mean, that a month to rent it. That's not changing much for you guys. No. I mean, that's a $200 difference. Could we buy another house with that credit? Or is that not possible?

You can't afford to buy a house. You have to have a down payment to buy a house. And you need to have three to six months of expenses to buy a house. Your debt-to-income ratio is out of whack. And so you're not going to be able to just go over. You need to put pause on home ownership, and we need to clean up all this debt. And I'm going to say something highly controversial and highly, you might just be like, Jade, forget you. Don't let these dogs keep you from doing what you need to do for your family. If you need to rehome these dogs to a wonderful

family who'd be psyched to have them and can take care of them. And you can them but do not let these dogs keep you from getting in the living situation if these dogs are eating and you can't eat because you got to return your groceries to costco we got our priorities out of whack five dogs is a lot of dogs for somebody who can't who's struggling to afford groceries yeah and i hate to say that because we love our pets. But in this case... Can you give a dog to every one of your family members for the next year until you clean it up and see what's next? Yeah. So we have about $10,000 in savings. Should we put those towards all credit cards?

That helps. Well, it's almost the amount you're underwater on in the car, which could get you out of the car. So I might just save up until I can buy a beater car, use that money, savings plus that newest savings amount, and get out of this car. So I might just save up until I can buy a beater car, use that money, savings plus that newest savings amount and get out of this car situation. That's good.

Free up payments. Yeah, that'll give you a little breathing room there. But not much. That right there is excellent, but it doesn't take the place of the living situation, which is A1.

I think we still got to get rid of this house. Yeah, unfortunately. So sorry, Kayla. This is tough. No matter what's next, it's not going to be fun, but I want to get you to peace as fast as possible. This is tough. No matter what's next, it's not going to be fun, but I want to get you to peace as fast as possible.

This is The Ramsey Show. You're listening to The Ramsey Show, and I'm Jade Warshaw. Next to me is George Campbell. Taking your calls, 888-255-225. If you want to get on the line. George, the housing market, the way things have been has got people feeling some type of way. It do be like that. And I feel like we've moved.

And don't get me wrong. It's crazy out there. It's truly bananas no matter where you are in the country. And I think it's taken people to a new level of desperation that we're seeing. It's like, I got to get a's like, I gotta get a house. I gotta get a house. And some crazy trends are popping back up that we really haven't seen the likes of since 07, 08.

The types of things that brought us into, that busted the bubble, you know what I'm saying? Back in the great recession. And- Well, and we say the word house poor a lot on the show. And what that means is too much of your income is being taken up by your housing expense and so if you make five grand a month take home and your mortgage is thirty five hundred dollars you're gonna have a really hard time eating building wealth paying off debt getting an emergency fund going on vacation and that's why we

tell people hey 25 is the limit. Now, what that means is sacrifices must be made. We can't live in this area. We have to get a condo instead of a single family home. We have to get a roommate or two. But these are the sacrifices that you have to make in order to still accomplish your financial goals. And that 25% is all in. I mean, that's everything. Taxes, insurance, HOA. Like we're talking about everything that could be comprised in there because sometimes people try to separate it out. And I'm like, no, it's everything in there. Yeah.

And this applies for renting too. Yeah. If you rent, like this guy called in yesterday, he's rents $2,100. He brings home four grand. And he was wondering why he couldn't figure out, he didn't have any margin. I went, over half your income is going to pay rent.

Yeah. So get a, he's a young single guy. get a roommate anyways roommate let's talk about the scariest latest trend in the mortgage zero down payment mortgages return the return of the zero down payment mortgage amid high housing costs george i wanted to jump out of my skin when I saw this. Here it is. United Wholesale Mortgage. It's UWM. It's like a billionaire. There's a billionaire at the helm of this company. And so he's launched a new 0% down mortgage program. And I'm going to read this as it is, but just know, I don't think that this is good, but they make it sound good. This program allows qualified buyers to finance 97% of their home's value with a first mortgage. The remaining 3%, up to $15,000, is covered by a secondary mortgage.

So you start out with two mortgages that carry no interest, but, and this is a big old booty, must be repaid in full when the home is sold. Or the mortgage is paid off. Or the mortgage is paid off. Or the mortgage is paid off. Or you refinance. Or you refinance. That's a lot. That's some handcuffs, right?

This is a tiny prison that you are paying to live in. That's what's happening here. So here's an example. Purchasing a home at 300 grand would entail a $9,000 no interest loan for your down payment. To qualify for the maximum 15 grand, your house would be 500,000. So the maximum you could get is 15,000, which means the maximum home price would be 500 grand. But if you, can we just talk about

the big elephant in the room, which is you want to get a half a million dollar mortgage. If you, do you really think you should be getting a half a million dollar mortgage if you can't put up any cash for a down payment? Most people doing these are broke, which means they have no savings. They have no emergency fund. One emergency pops up, they're going further into debt on credit cards and trying to keep up with a massive mortgage. Yeah, massive. And I'm just, you know, this is steps away. I don't even think it's steps away.

I think it is a catfish of a subprime mortgage. The only difference here is that you do have to have a 700 credit score or higher. So there's that. And there's a threshold if you earn up to 80% of the area's median income that you could qualify with a lower score of 620. 620 or higher. Yeah. And I love the quote from the CEO here, this billionaire.

He's like, it's going to change the game this purchase season. No other wholesale lender in the country offers this. This is the equivalent of saying, hey, what a blessing it is to get a 0% car loan that you overpaid for. It's someone who makes 40 grand buy a $60,000 car. That's the equivalent here. And I believe I read somewhere that, I believe it, you can look it up for yourself, but I believe I read that with the zero down, the mortgage rate is slightly higher as well.

I imagine they screw you with fees. They're winning here. There's a reason he's a billionaire. He's not doing this to be generous. That is so true. But, you know, I have to say, Americans, we have a short memory we really do we we come upon hard times when it was 2007 2008 it was like i've learned my lesson you know and everybody kind of learned their lesson and then we acted stupid just a few short years later and then covet happened

and it's like i'm drawing a line in the sand and And then, you know, COVID money started coming and we started acting stupid again. And now here we are again. And it's like, you know, we get desperate. And Dave says all the time, after you get desperate, pretty soon you're getting stupid. And we're seeing zero down mortgages and we're seeing a comeback of things

like 40 year mortgages. And I read George that 15 year, in the last two to three weeks, we've seen a 15% increase in adjustable rate mortgages as a way for people to get in and be like, I'm going to lock in this rate for five years. And then at the right time, it's like you're on the one hand, you're making a very short sided choice because you're saying, I'm going to get an adjustable rate mortgage and I'll

refinance later. But then you're also trying to predict the future by saying that you'll have the ability to refinance at a lower rate and the market will be exactly what you want it to be. And all of this- Basically, people justify their way into these terrible situations and get starry eyed about what the future will be on paper. And here's the real risks. The main risk is that you start with no equity since you're not putting any money down. You're 100% financing this, which means you're probably going to be underwater on your home if the market changes at all. 100%. It's a scary place to be. Another issue, if you need to sell quickly due to unforeseen circumstances, which happens, in that case, you still need to repay the second mortgage. You owe it all in full at once. Even if you're underwater and don't have

the money. Which means you're coming out of pocket or you're coming out into more debt to do it. Oh, that's scary. And if you want to refinance, well, you need to have the funds because you've got to cover that 15 grand you borrowed. Yeah, you can't even refinance. So let's say you jump into this mortgage and let's say rates do go down. Let's say in the next, I mean, we can't predict this, but let's say by January we go into a new year, new election cycle, you know, election cycles over and let's say interest rates go down, but you've already gotten nice and cushy in this zero down mortgage. And you can't even refinance because you have to come $10,000 out of pocket to do it or $13,000 out of pocket to do it. And you can't. Now you're stuck. Like these are the things that, it just, it bothers me. It makes my heart heart hurt it makes me turn into a little curmudgeon

you know i'm just like why you are america i was already there this is not helping anything so please do not fall for these mortgage traps if you listen to the show i pray that you are smarter uh than falling for traps like this yeah back when Back when this stuff was popular. That prey on people. Back when this stuff was popular, George, you know, 07, 08, back when arms were popular, back when most of those, I read a stat that said one out of eight ended in foreclosure

because people who couldn't afford something were just trying to hustle and get in line to afford something they couldn't afford. Meanwhile, what's the harm in renting? Can we talk about that? Like, what's the harm in renting? Can we talk about that? Like, what's the harm in you just going, listen, I can't afford it. Well, I'm not building equity, Jade. I'm throwing money away every month.

Are you? Or are you just buying time to where you can afford something and actually have it with peace? George, I tell the story. I'll tell it again because somebody probably hasn't heard it. You know, my husband and I, we rented for 11 years. 11. And for one of those years, the year that goes down in infamy, we had roommates. As a married couple. As a married couple. And I don't take it back. It gave us time to pay off our debt. It gave us time to save up our three to six months. It gave us time to save up a down payment. We saved up a little bit of extra money because the house that we moved into needed some work, needed a lot of work um and we were able to do a little bit of it to move in but it's worth the time to do things right baby you

can do it take your time do it right do you know that song you know i wish i said i could it's a lyric tip as you i think it's chic but anyway uh take your time and do it right that's all i'm saying that's good yeah and it's hard to go. I got to wait to buy a house. I know home ownership is an amazing goal. It's an amazing dream to have. But this this American dream that we're going to own a home one day, it's become a nightmare for so many families that fall for traps like this. It is. And you can hear almost every call. They go, our mortgage is 50, 60 percent of our take home pay and we can't breathe. And now we're considering selling our house.

Oh, that's even worse. Don't let that be you. That's even worse. You know, you think about how emotionally invested you are when you buy a house. Then you have to turn around and sell it. That's why. Wait until you're debt-free. Wait until you have the emergency fund.

Wait until you have a solid down payment so this house is a blessing, not a burden. Hope this helps somebody make the right decision. This is The Ramsey Show. I'll see you next time.