The Ramsey Show - App - Do I Still Have Time To Save for Retirement? (Hour 2)

Episode Date: July 22, 2024

This is the Ramsey Show. Thrilled to have you with us. We're here to help you win in your life. We want you to win with your money. We want you to win in your work. We want you to win with your relationships. 888-825-5225 is the phone number. 888-825-5225. I'm Ken Coleman. Jade Warshaw is with you. We're going to take your questions about your money and your income today. That's kind of our focus, but you know, you call. We'll talk to you about whatever you want to talk about. Boy, it's been a weekend, hasn't it, in the news?

Ooh. Ooh. I mean, I feel like the last three weeks has just been one headline after the next. Yikers. I think it's going to be like, you know, like, where were you? I know. Where were you when the towers fell? Where were you?

Right. In the 2024 election. Yeah. Where were you when the announcement was made? Really? Okay. Never mind. No, no. Bang, Kim. i'll tell you i can see james rolling his eyes here uh i'm still a man of the people but if you must know i was in a i was in a spa treatment for my birthday i and true story has a show connection james's true story i got out of my my lovely wife got me a spa treatment i I enjoy massage. And so I come out of my massage. I walk

in the locker room and I open up and I grab my phone and I see texts from Rachel Cruz and Dr. John Delaney. Wow. Just stacked like six messages. I was late to the party. They broke the news for me. Wow. And I was trying to play catch up. So there you go. There you go. There you go. In case you don't know what we're talking about is uh president biden is there anybody on the planet that doesn't know about somebody somebody that's what we're talking about anyway the news got to me that way and i was i was a little groggy so it took me a second to process it uh but uh rachel cruz by the way is always rachel breaking news cruz is what i call her call her. She has got her finger on the pulse of what's going on in the world and has a great opinion about it all.

All right, to the phones we go. 888-825-5225. David joins us in Chicago. David, how can we help? Hey, guys. How are you? Good. How are you, sir?

I'm doing okay. I'm recently divorced and I've been left with a 401k from my employer that has 160,000 in it currently. I'm also currently contributing 15% to it and I get a 3% match. And I have a HISA with $100,000 in it. I have no debt, no loans, no car payments, nothing. I gross $100,000 a year. After taxes, I'm bringing in $4,300 a month, and I have $2,800 a month in expenses. So if everything's good with the kids, usually I'll probably be saving anywhere between $1,000 to $1,500 a month. I'm 46 years old. The goal was to have a retirement of $2 million, and I also need to buy a house I'm currently renting.

So at my age, I don't know how feasible this is anymore, but I'm just curious. Do I need to get a side hustle? Am I currently having an income problem now because of my age with what my goals are? I don't know what to do. I don't hear a lot of issues. Okay, let me run it back and make sure I didn't miss anything. You got $160,000 in your 401k where you're doing baby step four and you're contributing that. You got a 3% match. That's great. You got $100,000 stashed away. Part of that is a fully funded emergency fund, and part of it is earmarked, I guess, for whatever you want. You're making $100,000 a year. What you're actually taking home is $4,300 a month and you want to buy a house. Where's the problem? He wants to know if he can get to $2 million.

You got a $2 million. Yeah, I don't know if I'm going to be able to get to the $2 million retirement goal based on my age or not. The house I can take, I'm 46. Okay, 46. All right. Yeah, this is your calculator. She loves her investment calculator. So while she's pulling this up, David, do you anticipate getting a raise, making more money, or in your current situation, do you feel like you can, through reasonable activities, right, extra work, maybe some, again, getting promoted, pivoting maybe, do you feel like you could contribute way more than you are now? That's a great question because I'm currently in finance.

I am new to finance. I went back and got a master's degree and got a finance degree. So where I'm at right now, I just received a promotion that got me to $100,000. So I don't see anything on the horizon in the next year or two, but with the finance degree, I was thinking about going to get my certified management accountant, uh, certificate to try to increase the salary more.

So that'd be about nine months to study and take the exams or maybe do bookkeeping on the side of the side hustle or something like that. I can, I could do work from home and that would be the next step. Either that or I thought about, I mean, really anything, even if I had to drive an Uber or something. Your head's in the right place. So let me bring Jade in here because she's got her calculator because this was your question. What do I have to do to get to 2 million in retirement? She's got her calculator out. Take it away, Jade. Okay. So listen, you're 46 years old.

Let's say you work and you want to retire. Let's say you want the $2 million at least by 67, 65, right? You've got $160 in there now. If you're investing 15%, that's around $1,250 a month with your income. And average rate of return, 8% to 10%. And I only say 8% because of the haters. It's really 10 and up. Let's be honest about about that if you're in good growth stock mutual funds like even if you're in the s&p 500 like you're going to get ten percent okay annualized by the way for the

haters all right when i put that in you're going to be over two million my results say two million three hundred fifty nine thousand five hundred seventy nine and that would happen even with my employer's 401k because I'm not sure of all of what they got me in. And I didn't even include the free money match part. That's gravy. The 3%,

I didn't include that. Like I'm saying this is you and your money, your contribution. How's that feel? Yeah, they currently have me in a van, I'm in like one of those

Vanguard Target fund in 2050 or something like that. Okay. I'd probably change that. But she's got you at 2.3, David, so you're not too late. You're not too late at all. Not by a long shot. And that's at 67.

Run those numbers to 75. Maybe, let's see. I was planning on working past the age of 70 because i have a seven-year-old daughter let's say it's 72 that's when you have the least amount of let's say social security so let's say 72 a lot of people like to go till there because that's where they get the max three three million nine hundred and seventy nine thousand thirty four dollars oh my god that's good so what i need to do then is probably remove it out of a vanguard fund and move it into like more of a mutual fund yeah we talk about in spreading your investments

over four types growth growth and income aggressive growth and international and they're not target date funds um so i want to get you hooked up with a smart fester pro before you get off of here to help you select those funds and not just select them, but really you understanding what's going on with them. Because if I look, you know, if I look at my 401k, you should, your annualized rate of return should be around 10% all the time. Okay. Okay. That's not necessarily one year from the next year, but when you take this whole track of growth, this whole arc of the time that you're in the stock market, if you look and say, okay, all of that time combined, what was

my average annualized rate of return, you should be above 10%. So that's what we're looking for. And that's how we're plugging these numbers in. But I mean, even if I were just to play a little bit and just for kicks, put it at 8%, let's see what it puts you at. You're still at 2.5 million. So, you know, you can play with those interest rates and see what it puts you at. You're still at 2.5 million. So, you know, you can play with those interest rates and see where it lands you. But for anybody listening, if you're not really looking at an investment calculator, you need to be. And you need to be plugging these numbers in. We have a really great one at ramseysolutions.com. They can throw it in the show notes. But instead of kind of feeling that anxiety of the unknown, Ken, plugging these

numbers in and seeing for yourself, seeing what it would take, playing with the interest rates, playing with the monthly contribution that you're putting in. All of that stuff gives you so much peace because we're talking about real numbers, not just shadows. It's a great motivator. It really is. And hey, David, you got to be just fired up, my friend. You called in thinking you were behind the eight ball. And my friend, you are on your way to four million plus, says Jay. Nice job. This is The Ramsey Show. Welcome back to The Ramsey Show, where we help you win with your money,

win with your work, win in your relationships. I'm Ken Coleman. Jay Warshaw joins me. The phone number is 888-825-5225, 888-825-5225. Tallahassee, Florida is where we go next. Brandon, how can we help? Hi there. Thank you guys for doing what you guys do. Thank you. My question today is, so let me just give you a little background. Basically got married about two months ago and me and my wife had a plan for what we were going to do.

I was going to go, I graduate in December with my bachelor's and then I was going to go on to either PT school or PA school. Um, and then she's pregnant now, so we're going to have a kid soon. I'm excited for that, but that does kind of throw a wrench in that. Even before then, I was never really that set on going to PT school or PA school, just kind of what we were going to do. And now that she's pregnant, that kind of throws it out the window. So my question is, how do you figure out what you should do? How do you find a successful successful career i'm only 21

my wife is only 21 that's just kind of love it well i wish they taught you this in school but um this is what i teach and i think there's a a three-part if you want to call it equation or formula and let's just think of as three wires that everybody has the first wire is talent just what you do well. You know, Brandon, when you just started moving and shaking in the world, even as an elementary school kid, your teachers noticed that you were talented in certain areas. Certain things came easy to you. Your parents noticed it. Maybe there was a difference between you and your siblings on things. But everybody comes in this world hardwired with talent. So we just, these things

come easy to us. We do them well. That's the first wire. The second wire is passion. This is, we enjoy this task or this role. You know, some people, just to give you an example, they love organizing something, right? Some people love fixing stuff. And some people love talking, you know? I mean, we could just go through the entire world of work and there's just some work that everybody kind of has their own list of, this is stuff that I really enjoy doing. The third wire is all about motivation. What gets you fired up? What motivates you?

And this is results-oriented. So I call this wire mission. In other words, what do I want to accomplish? What results do I want to put in the world? Okay? So talent is what I do best. Passion is what I love to do most. And mission is the results that I care deeply about. Does that make sense? Those three things? Yeah. Yeah. So figuring out what you want to do, you got to figure out those things. And then you figure out, okay, once I

know what I'm good at, what I enjoy doing and what results motivate me, I begin to see where in the world of work do I fit. And so I'm going to give you a kind of clue because I think you have a sense. There's four types of work. If I took every job, every career path in the world, and I put them into four categories, one would be people work, another would be ideas, the other would be process, and then objects. So idea work, right so jade and i are in that we're kind of in people and ideas so our work falls in people and ideas we work with people we're coming up with ideas uh to help people right so we're not inventing something um but in the it relates

to an object but an inventor might be in the ideas and objects space, right? They invent a tool or they invent a machine that does something. And so you could see object work is physical, working with your hands, either creating something or fixing something. So you've got people, ideas, processes, processes, by the way, engineering type work, a lot of technical work, organization, things like that. So when you think of those four areas of work, people, ideas, processes, and objects, where do you think your talent falls? I think, so I've worked all the way through college, even in high school as a tennis coach.

So that's people. And, yeah, that's people. And then that's also, I think, I think that might also fall under the ideas category. Actually, I'd throw it into process because coaches teach, right? They teach you how to hit the serve. How many different elements are in a serve, would you say? No, the thousands, but you can break it down to four.

Okay, great. That's a process. So if you're going to teach me and Jade how to serve a tennis ball, that is a process. So that's people in process. So that's what you're talented in. And usually we're going to see some consistency that you enjoy people and process work, true or false? Yeah, I do.

Yeah. All right. And so if we look at what motivates you doing that work, people and process, what is the result that you most want to create as a coach, in your words? I think, for me, it's always been working with, like, specifically a lot of young men to build discipline in their lives. Because I know most of them aren't going to go play pro or to go play college even, but to kind of, you know, disciple them, if you will, in that area. I agree.

So, in the Get Clear Assessment, which I'm going to give you, by the way, and the book, Find the Work You're Wired to Do. So I'm going to give you this as our gift so you can work through this. But you're going to see that one of the six missional results in the assessment is the result of influence, Jade. And I think that anybody who's in people and process work, one of you are going to see a big theme of you're driven by influence. In fact, the result that you really get motivated for is influencing people. And it's not about hitting the serve.

It's not isolated to hitting the serve. It's about what can I teach them in tennis so that they learn something they use in life? Does this sound like it's resonating? Yeah. All right. So now let's pull back for just a minute. I don't think you're limited to coaching in life. Does this sound like it's resonating? Yeah. All right. So now let's pull back for just a minute. I don't think you're limited to coaching in sports. I want to bring Jade in here because she's a D1 athlete and she's got a lot to say on people that are high achievers. But my take is to

pull back before you get your results just on this call is to think about how could you be a coach in the world of work that's not necessarily coaching sports you know and so I think Jade management leadership yes I mean he's not limited to coaching high school tennis or college tennis is the point I'm trying to make yeah well I mean I think you framed it up I felt like I just sat through a master class the way you framed it up anything I felt like I just sat through a master class, the way you framed it up, anything with people and processes where you have that influence, that could be in a classroom, that could be in a boardroom, that could be on a court, that could be in a lot of different areas. So the doors, I feel like just flew wide open of opportunity there. Let's put you on the spot, Brandon. So you're 21. So what would you try tomorrow? Try,

not commit to for the next 10, 15, 20 years. What would you try tomorrow if there was zero pressure to succeed? You knew you were going to be good at it, and we could pay you what you needed. What would you try? I guess I've always wanted to open and run sports facilities, or I mean just facilities in general, but obviously sports is the realm I'm in all right so I'm going to give you that even owning it great so let me give you two strategies how much are you making right now and in what role are you what kind of work are you doing and

how much you're making I work part-time right now because I'm still in college I make about 30,000 as a part-time tennis coach oh wow for you. And when will you graduate and with what major? We'll graduate in December. So that the fall semester, I'll finish that with an exercise physiology degree. Okay, great. So here's why I think you were attracted to the PA or the PT. I think you've seen a lot of that given your involvement with athletics and coaching. And I think it's helping people. And I think you have a heart to help people. But I think the minute that the baby came in, you were like, this is not something I really wanted to do. I thought it was a good professional track. Now it's going to cost me money. And it's forced you to go, what is it that I want to do? So is that true? I want to

make sure I'm not putting words in your mouth. So here's what I would do if I were you. I think you have two tracks to run, and you could do this simultaneously. I don't think you go get a loan, obviously. We don't believe in borrowing money and just try to start a facility. So I would start with who in your area where you live operates these type of facilities. And I wonder if you don't reach out to them through some kind of connection. It could be first degree, second, third, fourth degree. Take them to lunch, take them to coffee. Say, I just want to pick your brain on how you got where you are and what you're doing. I would learn enough to go, what are your margins? How difficult is this to be successful? I mean, just go to school on somebody around this idea that you had.

And then the second track could be, you might get a job with somebody who needs a sharp young guy coming out of college, who's coached, who loves sports. And maybe you go to work for somebody like that and learn the ropes before you ever confirm that you actually want to own your own place. This way, we take all the risk out and you learn and you get a good idea of what you're thinking. That's what I'm going to advise you right now. And I would say the same strategy if you get another idea later today. But I want you to hang on the line. Christian, let's get him the new book, Find the Work You're Wired to Do. It comes with the Get Clear Assessment. You're going to get your results, and I think it's going to confirm a lot of what we've discussed. But when you get the clarity on who you are, then, Jade, that's when you're able to answer that intimidating question of,

what do I want to do and where can I do it? We've got to start with the who, and that clarity gives us confidence to move forward. Thanks for the call, Brandon. We'll be right back. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. Jade Warshaw is alongside.

The phone number is 888-825-5225. Okay, Jade, I want to get you to weigh in on something that is honestly a little bit shocking to me. I don't know why I'm shocked by it. I just think it's such a bad idea. I'll let you kind of weigh in on this, but we're going to get a lot of these calls. I think so. So we're going to get out in front of this. Yeah. So in my hands here.

What you got? I've got a headline. New 401k rule makes it easier to tap savings, 401k savings, for emergencies. Jade, say it isn't so. I'm like Michael Scott when he's just like, no. That's the way I feel. This is terrible. This new law will make it easier for Americans to use their 401k and other retirement funds as an emergency ATM.

Oh, Americans can now withdraw up to $1,000 from their 401k without any penalties if the money is needed to cover a financial emergency. Now, before you could take hardship withdrawals, but this kind of takes it a step further. Acceptable reasons could be medical care, funeral expense, auto repairs, but here's the difference. Or any other necessary emergency personal expense. Who determines that?

You don't have to show proof of it. So with the hardship withdrawal, you kind of had to do the paperwork, blah, blah, blah. With this, you don't really, it's just up for grabs you have access to this i think you have it every year um it might i think it's every year that you have this available to you but obviously if you only have fifteen hundred dollars you know in your 401k or something you can't go below a thousand dollars in your 401k so you would only be able to get 500 but this is what it says savers are allowed to make one one thousand dollar distribution per year for the said emergency that we're talking about okay yeah but here's the kicker the funds must

be repaid within three years savers will still need to pay income tax on that withdrawal if they don't pay it back and they will not be able to make an additional hardship withdrawal. Oh, this is awful. So, I mean, I get it. Like, I get why they're doing this. It's that classic, you know, I'm not trying to be ugly, but it's that classic American way, right problem, wrong solution, right? It's like, yes, you know, this change comes as a growing number of Americans tap their 401ks because they're having a hard time dealing with inflation and the fact that prices have gone absolutely bonkers. And so, yeah, right problem. Americans are struggling. Wrong solution. Right. We always it's like, OK, we'll get a credit card. OK, we'll borrow from your 401k.

It's like the worst possible advice that you could give somebody but luckily here at Ramsey Solutions we're about solutions so we can give you some better solutions but this really draws the picture around for me Ken why we teach what we teach okay so obviously we teach a set of baby steps seven of them but the first four are the ones that I really want to call up right now to discuss because these are the ones that people struggle with, right? We always say, okay, baby step one, you save $1,000. And so many people can want to just jump on our back, $1,000, that's not enough. And I'm like, clearly it is constantly changing, but it's somewhere around the point that 36% of Americans have $0 saved and 56% of Americans could not cover $1,000 emergency in cash. Like they'd have to go to a credit card. So having $1,000 saved in your money, your cash,

that's baby step one. Then everybody knows baby step two, yeah, you're paying off the debt. But what really gets people is we say, don't start investing until baby step four, after you've paid off your debt, after you've done baby step three, save three to six months of expenses. And that really gets people right here in the heart. Why would you say that? Don't you understand compound interest? Yes, I do. But this is really a behavioral and a risk problem that we're solving for. That's exactly right. And to your point, you make a great point. The government is limiting you to a thousand dollar distribution from your own 401k, but you're paying taxes on that. Yeah. And interest. And yeah, that's you robbing yourself. So you're not even getting the $1,000. No. If we use the Ramsey method, you're saving the $1,000.

It's your money, and it is there in its totality. Yes. When you need it. Yes. And so I think you make a really great point. So the federal government and Ramsey Solutions are on the same page about the number. Yeah, 100%. Except you're not getting $1,000 of value when you borrow from yourself.

You're not. Oh my gosh. And a few people do the math on the opportunity cost there. But if you're constantly, and I'm not saying like this is something you do every month because you can't, but if you're a person who creates the habit of saying, you know, if something goes wrong, I can just hop into my 401k and pull out, you know, I can do a 401k loan. I can take this thousand dollar distribution. That is a horrible habit to create. It's kind of like, you know, if you have cookies on the top shelf, all it takes is one time to go in that jar. And once you get a taste, good luck to you. Like good luck because you've realized how to get to the cookies. It's really not that hard. Now you also know how they taste. It solved the problem for you. You've created this cycle. But Ken, let's talk about why we say baby steps one, then two, then three, then four.

First off, you have to think about risk, right? As long as you have debt in your life, there's risk. Something goes wrong. You don't make a payment. You lose your job. Everything is up on the table. And if you have debt and you don't have an emergency fund where's the first place you're going more debt yeah we see this with credit cards all the time people use credit cards to make it through or if you say you know what i'm going to try to do it all at once i'm going to

put a little bit of money to pay off my debt i'm gonna put a little bit of money to go to my 401k because after all i get a match i don't want to miss that if something happens if there's an emergency where's the first place you're going right to the 401k yeah so we're creating this kind of one step forward two steps back one step forward two steps back as opposed to just saying okay I'm gonna walk in a straight line and I'm gonna keep going forward even if in the moment it feels like i'm going a little bit slower you're not you're making more headway and so there's there's thoughts behind this guys um not to mention when you just wait till baby step four you can invest 15 because all of your income is open to you it's not just getting the three percent match right all of your money is there and you're going to be able to make up any time that you may have lost lost

in air quotes uh doing baby step two so this is a proven plan and so your options really are go with the folks on the radio who are telling you about the proven plan or don't do the proven plan and i don't know what the irs let them give us guidance i promise you uh you know because it's in this article. Here's what's interesting. Here's what we know historically about this. In the past, people who are making these types of withdrawals from your 401k owed the income tax on the money. Couldn't even pay it.

And then you could also be hit with a 10% early withdrawal fee. And they're under the age of 59 and a half. So this is another trap that looks like it's there as a safety line, right? Like I'm going to throw out the, what do you call the things when you're in the pool? Safety net, buoy. Thank you. You know, somebody throw that out here, and we're going to give you a line to pull you back in. And in this case, you actually are creating a bigger emergency for yourself in the midst of an emergency.

Like that's the whole point. And so, you know, let's talk about this. We only have just a couple minutes left because I think, Jade, it's still very hard for some people. And this is out of respect and dignity that I say this, but based on the income that they make and the current cost of everything in this world, inflation is still high. Amassing, and I use that word on purpose, $1,000 feels like it is amassing $1,000. I want to give it to you here. It feels impossible for some people. Let's talk to people right now who go, baby step one, get $1,000 a bank. Jade, I am broke. I'm barely making it what would you say

to them to go okay here's hustling gritty i know it's hard work yeah but practically speaking some of the best ways to get a thousand dollars in the bank in america today i think the quickest way you're going to do that is to start selling stuff if you're talking about i need money today that's what facebook give me an example. We're selling clothes. I'm selling clothes. I'm selling anything that someone will buy. Whether that's instead of giving stuff to the Goodwill, see if you can sell it on these OfferUp sites and Mercari sites and all these sites.

I'm picking up as much extra work as I can. I don't care. Anybody can work a phone service, customer service job. Do it at night. They're looking for night shifts. There's these babysitting, babysitting, dogs, anything. It's temporary. Most people, when they really put their foot on the gas, they can get that thousand dollars saved in 30 days. If it takes you 45 days, I'm fine with that as long as you're going hard in the paint.

I love that. That's what I'm talking about. Basketball reference right there for you non-sports fans. She's talking about throwing elbows, leaning Basketball reference right there for you non-sports fans. She's talking about throwing elbows, leaning the shoulder into this debt. We're going to do what it takes to get the money. Don't move. We'll be right back.

This is The Ramsey Show. Welcome back to The Ramsey Show. I'm Ken Coleman. Jade Warshaw is alongside. The phone number is 888-825-5225. 888-825-5225. Okay, so this is fun. During the break, we got an update from James, the fearless leader, our producer.

And apparently you and Dave had a fun call a couple days ago on the show. And not only was it fun, I guess we have an even more fun update. So tell us what's going on. Yeah, well, first off, when y'all call in, I remember. So Jawan called in. He was from Springfield, Missouri, I believe. Springfield, Illinois. Springfield, Illinois.

Okay, they're close. They're close. Listen, I'm going off memory here. I'm going off memory. That's great. It doesn't matter. So Jawan calls in. He was living with his girlfriend. I'm going off memory. That's great. It doesn't matter. So Juwan calls in.

He was living with his girlfriend. I believe she was pregnant, but they already had two kids. It was like one of those situations where like, Juwan, Juwan, you got to get married. Dude, marry this girl. Show her that you care. Put a ring on it. And don't you know this guy emailed in. He was like, hey, you want to know what?

I'm getting married. What did he say, James? He said, hey, want to know what i'm getting married what did he say james he said hey the advice worked i'm getting married tomorrow tomorrow now did he agree with the advice right away or was he a little standoff he did matter of fact uh i believe dave was like uh-oh he's crab walking like he's acting like he's saying one thing but he's doing another and so both of us were like man is he gonna do it i don't I don't know if he's going to do it or not. And so he decided. He made a decision. Good friend. He followed the advice. Way to go. So there you go. Fun update.

He's not going to regret it. Hey, by the way, if you've ever called into the show and you did the advice, let us know. Let us know. We do love the where are they now. Where are they now? That's always kind of fun. Yeah, that's good. Hey, real quick, some of you are going, all right, election year, what's the Fed going

to do? And you're thinking about buying or selling a house. Uh-huh. And we don't think you need to be on the sidelines. We think you need to be doing what you need to do, but doing it with the right person. That's why I want to tell you very quickly about our Ramsey Trusted program to help you get the right pro, the right agent that you can trust to keep you on track with what we teach and get the best offer on your house or

find the right house. So these are the top agents in your area who we trust, and then you get to review them, interview them, and decide if you want to work with them. Ramsey Trusted agents are where you need to be going if you're thinking about buying or selling a house. Ramsey Trusted Real Estate Agent is sitting there waiting for you to find them for free, all at ramseysolutions.com slash agent. Again, that's ramseysolutions.com slash agent. All right, Stephanie is up next in Vancouver, and she's on line four. There she is. Stephanie, how can we help? Hi, guys. So back to your earlier thing, I follow Baby Step 1. A thousand bucks is definitely enough to get you going. All right. Hey, real quick, tell people, give us the 20 seconds how you amassed your $1,000 so they can learn from you. Basically, we cut things in our budget as hard as we could.

Things like what? We did sell some stuff. Things like unnecessary subscriptions. We started doing a budget. That's a good point right there. And you found some money. We started doing one. My husband and I hadn't put our money together,

so we were kind of wasting the money in a way because it wasn't like we were aiming at the same target it was like trying to shoot a cannon at two things at once yeah it was just not working good for you stephanie teach the lesson very good very good yeah no that was pretty good and and like i said it's hit everything um we've had like little minor ones come up that we've used to reach for a credit card for and now we use our own money. I love that. Good for you. And by the way, Stephanie, mentally, if you have to dip into that, it's also a lot easier

knowing I did it once before I can fill it back up, isn't it? Well, yeah. And honestly, I was on maternity when we first started, and I'd gotten to $750, and then I didn't get a payment from a government and I had to use it. And I was just like, wow, look, that's actual money and not debt. That's right. Good for you. Well, thank you for the testimony on that. So Stephanie, how can we help you today? What's going on? Okay. So we're going up on, um, we, we started at 110,000 and we are at like 55 now uh 55 56 uh we started with about 12 debts and now we're down to about five uh we're working right now on a line of credit um when that one's

gone it's with the bank and it has a much lower interest rate than some of our other debts so what we're thinking is instead of just um paying the minimum payment on the debts just taking the line of credit and wiping one out so that we're paying a lower payment to have more margin. Now, I mean, I know that that's transferring debt, but it also is increasing our margin and it's not opening a new line of credit. My husband and I have had some debate on this, including if we were to do that, should we do the car first because it has a bigger payment or anything like that and I looked on the Ramsey information and I didn't find anything specifically with open lines of credit let me jump in let me jump in to make sure I understand you before you go further because I don't want to lose where you're at so you're saying you've got five debts left and one of them is a line of

credit that's open and are you wanting to transfer the other four onto that line of credit? Is that what you're saying? That line of credit is $10,000. We have $2,900 left on it. All of our other debts are around $12,000 or $13,000. So what we're hoping to do is kind of use it as a vehicle to get the payment much lower to be able to smash them out faster. So transferring your current debt by basically putting it into the line of credit like she's asking. And we know it's still debt, but what we're hoping is that we can get more margin and more traction with it. You're doing that because of the percentage rate or because you think it'll free up the other payments? And it will. It will

because the MasterCard, we have two MasterCards and a Visa. The two MasterCards are both at about $12,500 and the Visa is about $13,300. The Visa is negligible because it's the same interest rate pretty much as the line of credit. I hear how you're thinking. I hear how you're thinking. You're doing a lot of math. And let me validate this because I understand what you're doing right now on a heart level. Like when you've been working the baby steps, you do get to this point where you're like, okay, what can I do to work some magic here? And you start moving eggs around and you're like, I could do this. I could do that. And you start kind of the, you start finding ways

that you think will work better, but really they're kind of veering you off course. And here's what I would say. Here's why I wouldn't do this. You're there's part of what you're saying that makes sense. And I'll validate that. Yeah. Like if you have a high interest rate, why wouldn't I move it to somewhere where there's a lowest interest rate? If I can make all this form into one payment, that's going to be lower than these other payments over here and free up some more money. Why wouldn't I do that? I hear what you're saying. However, the negative side of this, and it's a big negative. One of the beautiful things about the debt snowball is you have all of these debts and you can list them smallest to largest and you can check them off your list and something

that dopamine when you check one off the list is enough to keep you going to the next one i would much rather have five debts of ten thousand dollars each than one debt of fifty five thousand i would much rather have three debts that's five fifteen and twenty than one debt of $55,000. I would much rather have three debts, that's $5,000, $15,000, and $20,000, than one debt that's $45,000. Do you see what I'm saying? Like, I don't want you to group these together because then you're not going to get the satisfaction of paying them off one by one because that is a grand motivator in this whole thing.

Well, and the line of credit, it does max out at $10,000. So, I mean, we would still be paying off like the remainder of the balance on each like on each thing but it would just be like quite a bit less yes but at that point the difference is so negligible like at that point money wise it's so negligible i you're grown you can do what you're you're going to do what you want to do but if you're asking my advice i truly think that you should keep these as are because if you run out the interest, by the way, anybody, if you run out the interest on the debt snowball, it's going to be negligible. What matters is finishing it. That's what truly, truly matters. So. And my husband and I both thought that too. We were like, well, you know, it will make it like a little bit faster, but the difference is only going to be, you know, a couple hundred bucks either way. Yeah. And then

you're dealing with a $10,000 chunk again, whereas right now it's at 2,900, right? Yeah. So, you know, a couple hundred bucks either way. Yeah. And then you're dealing with a $10,000 chunk again, whereas right now it's at $2,900, right? Yeah. So, you know, that way mentally, you're kind of restarting like, okay, I thought this thing was almost gone. Now I've kind of like refilled it and I've got a big, another big chunk of debt to pay off. And I mean, I don't even want to know what the difference in interest rate is because we've seen the math on that. So I wouldn't do it. Say again? She says it's gross. Is that what she says? It's gross?

Yeah, it's gross. The interest rate for the line of credit is like 11 and the interest rate for the credit card is like 27. Yeah, I mean, I know these credit card rates, but I will tell you that's going to light the fuel to get it done. And I mean, that's what I would do. All I could tell you is what I would do. And I stand by that. Yeah, well, and so we have been consistent on that. I mean, we get this call a lot.

It's not the first time we've heard that. And again, we teach discipline and momentum is what is at the core of what we are teaching. It's discipline for momentum. So do what you're going to do. People do what you called us. And Jade laid it out by the book. So do what you're going to do. People do. But you called us, and Jade laid it out by the book. So really good stuff there, Jade. All right.

Wow. Another hour in the books. Thank you for listening. This is The Ramsey Show. Thank you.