The Ramsey Show - App - Do NOT Go Into Debt for a Depreciating Asset (Hour 2)

Episode Date: January 26, 2022

Debt, Saving, Investing, Retirement, Education, Home Buying As heard on this episode: Sign Up for a FREE trial of Ramsey+ TODAY: https://bit.ly/3rZTUAx Tools to get you started:  Debt Calculator: https://bit.ly/2Q64HME Insurance Coverage Checkup: https://bit.ly/3sXwUn5 Complete Guide to Budgeting: https://bit.ly/3utmVXi Check out more Ramsey Network podcasts: https://bit.ly/3fHhbVE

I'm Live from the headquarters of Ramsey Solutions, this is The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm George Campbell, Ramsey personality, and it's an open, free call today for you. Give us a call, 888-825-5225. Maybe you need some confirmation about a life decision you're facing. Maybe you had a windfall of money. That's always a fun one. We can talk about that.

Maybe you're sick of making payments to lenders, and you wish you had that money back in your life to help you accomplish your dreams, not the bank's. We can talk about that, too. It's your show. Bree kicks us off this hour from Bend, Oregon. Bree. We can talk about that too. It's your show. Bree kicks us off this hour from Bend, Oregon. Bree, welcome to The Ramsey Show. Hi, George. Thanks so much for taking my call. I'm a big fan. Oh, thank you. That's very kind. And I do need confirmation on a big life decision.

Oh, perfect. I prophesied it. How can I help? Yes. So we are, just to clarify, we're in a very, very small town just outside of Bend. So it's kind of a special situation. I'll try to get to the point as quickly as possible. Basically, it's a small town of like 160 people that's surrounded completely by farmland. So you can't develop anymore around this small town. So we have an option to buy a larger home, meets our needs more. It's a great place for us.

However, that the price is going up in the market, my husband's struggling because he feels like we could build exactly what we would want for the same price if we had a place to do it. However, so in theory, he might be right, but in reality, there's no place at this time for a lifestyle to be built

because there's no option. And so I guess my question is, do we take this opportunity because there's no option. And so I guess my question is, do we take this opportunity? Because there's things about the house he doesn't absolutely love. And me, I'm trying to really work on contentment and be okay with the things. And if we don't love it, we can fix it over time. But it's a newer house and it's a great house. It's just that in his mindset, struggling, you know, to say, you know, for that same price, we could do exactly what we want and pick everything out. And so I guess I don't want to miss an opportunity with the market going up and everything.

It's just a big decision, and I need advice, I guess. Yeah. So let me get this straight. He wants to build kind of the dream home. And you're saying, hey, there's a great house over here, and we can make it that. We can fix it up over time. But he's saying, no, that's a waste. Let's just build our dream home, and you're saying, hey, there's a great house over here, and we can make it that. We can fix it up over time. But he's saying, no, that's a waste. Let's just build our dream home. Well, he would love to if we could. And so I guess in my reality, it could be, if things were ever to be able to be developed, it could be five, 10 years before an actual lot even was an option. So I mean, he's right. And I'd love to build too, but- So his plan is a pipe dream, it sounds like. It's not even feasible unless you guys moved to a different town.

Correct. And we can't move with our jobs. Okay. Well, it sounds like there's not really options here. There's only one. Yeah. So we'll just stay where we're at and be in a small house that doesn't really meet our lifestyle needs, I guess. And so therein lies the predicament. This sounds more like you need to get him on the same page and not move into this house, and he's just walking around resentful going, oh, I hate this place. Right, right.

That sounds like the fear. I think it will be over time. I think it's just he's more frugal, and so I understand where he's coming from. It's like we have this opportunity, and I don't want to miss it if we can jump on it. Well, I wouldn't worry about the market. I mean, yes, home value will appreciate over time, but don't let that dictate what you're doing right now. Let your finances,

your budget dictate. So where are you guys at financially? Are you out of debt? Do you have an emergency fund? Are you investing? We are, well, we are investing. We're pretty much out of debt, except right now with this limbo phase, we can pay it all off. We just wanted to let the dust settle if we do the house thing and then pay it off as soon as we move in once the dust settles. Oh, boy. Okay, Bree. I was really on your team here, and now we've got to take a time out. We've got to clean up this debt.

And we probably should just do it now and then move in. It's just, yeah. You definitely should. How much debt do you have? What's the total amount? Like $5,000. Okay. What's your household income?

$130, $130-ish. So this thing's paid off within 30 days. It's gone. Yes, absolutely. But you're hanging on because, well, we just don't know what life's going to look like. Well, it's just one of those, like, you know, like moving babies, I just kind of scared me just knowing that we have opportunity, but it is a big priority for us and we'll take care of it. And we do invest in, so it's just one of those, you need to do it quickly. And we will.

Do you have a fully funded emergency fund of three to six months? Yes. So you have that and you're investing. So you just kind of leapfrogged baby step two and went, let's do three, four, and we'll come back around to two. Well, and that's the thing. It's just that in this moment, we were just in this very, so it is a, I promise that we'll pay it off. Well, once that's paid off, that'll free your income up a little bit because you're not going to have those payments, which is going to allow you to save up more. So have you guys looked at what the down payment is going to look like for this house? Yes. And we're ready for that. We can definitely afford it and do the less than 25%. Awesome. So 15, are you doing a 15 year fixed?

Yes. Okay. And it's a payments less than 25% of your take home pay. That's awesome. And how much down payment are you looking to put down? About $40,000. Awesome. You guys are crushing it. Thank you. We're trying. Well, and once you do that, remind your husband that you're going to have lots of margin to be able to fix up this house.

And you can do it over time. And the more angry he is at this, the more it's going to be, all right, well, let's get a side job. Let's make some sacrifices. Let's dig in to make these renovations happen faster so that he can love it. I mean, is it cosmetic or is it just every, it's everything? Some is and some isn't, but some of it, I feel like, again, it comes back to being contentment, you know, and just being like, this is a really big deal in the scheme of things, you know? Yeah. Well, it sounds like he had a picture in his mind of what this house was going to be. And because it's not that, he just cannot grapple with the reality. Yeah, definitely. So he needs to compromise a little bit. My thing for 20, yeah, my thing for 22 is contentment. And so I'm really trying to be like, you know, this is a great opportunity, even though it's maybe not perfect. But most houses even I feel like sometimes even if you build a brand new house, there are going to be things you find that you wish you would have done differently.

Oh, absolutely. And I'll tell them I we built our house that is now paid off. And it's not our dream house. It's not perfect. The construction process was a nightmare. Things went wrong. We had to stay on them. It was a legit side job of just keeping up with this house, walking in there going, oh gosh, they didn't put the towel rack where they said they would. Oh gosh, they chose

the wrong grout color. I mean, there's a thousand things that, you know, I love new construction, but it can be a big headache. And so there's a lot of perks of just moving into a house that you know exactly what you're getting and you know exactly what to fix. So I think some of this contentment needs to rub off on him. So you guys work on that. Have you been through FPU together? Have you gone through Financial Peace University as a couple? Separately, we kind of – well, not the official path, but we followed it our own years ago.

Well, that's going to be my gift to you. Jenna's going to pick up. I'm going to gift you a year subscription to Ramsey Plus. And what I encourage you guys to do is get plugged into the EveryDollarPlus budgeting app, get plugged into the Financial Peace University videos, and get on the same page about your vision for the future. That's what I think needs to happen right now because, truthfully, you're in separate places. He wants one thing. You're okay with this thing, with contentment. I want you guys to dream together and get excited about what that future holds. And if that means

it's house renovations right now, then you go full Chip and Joanna and you have a blast, right? That's what this looks like. But right now, it's as much a marital problem as it is a financial one. So get this thing right. Get them on the same page. Jenna will pick up and it is our gift to you to get plugged into Ramsey Plus for the year so that you can guys make that progress and do it together as one team. This is The Ramsey Show. For a lot of you, last year was another year of just trying to survive. But you don't have to live like that. You can have confidence in your money and your future. So if you're tired of being stressed out all the time, you can decide to make a change. You can follow a plan that works. For almost 30 years, Financial Peace University has

helped millions of people take control of their money you'll learn our proven plan to save money pay off debt build wealth and give generously watch fpu on demand or get plugged into a class for encouragement and support from other people you don't have to face another year of stress and worry you can have confidence in your money f FPU is only available with a Ramsey Plus membership. Start for free by visiting RamseySolutions.com slash FPU. That's RamseySolutions.com slash FPU. Let me ask you a question. When you think of a millionaire, what kind of job do you picture them having? Is it some kind of high-powered executive position like a VP or a CEO?

Well, here's the thing. Only 15% of millionaires actually have jobs like that. The reality is that the top five careers for millionaires in America are as follows. Engineer, accountant, teacher, manager, and attorney. That's just one of the surprising things our team found out when we conducted the largest studies of millionaires ever done. We talked to tens of thousands of millionaires to find out who they are and how they achieve that goal. Our study also made it clear that to become a millionaire, you've got to invest wisely. And a big part of that is getting good investing advice,

not from your broke bros telling you to invest in crypto. You've got to work with an investing pro who can walk with you and teach you about the options that are right for you. Our team recommends vetted, trustworthy investing pros from all over the country. We call them SmartVestor pros. And if you want to get in touch with a SmartVestor pro in your area, we make it really easy. Just go to RamseySolutions.com slash SmartVestor, and you can start building wealth today. That's RamseySolutions.com slash SmartVestor. Rachel joins us in Billings, Montana. Rachel, welcome to the Ramsey Show.

Hi there. Thank you. Absolutely. How can I help today? We're coming into a large sum of money, about $100,000 from a debt owed to us. And while the lump sum is great, the debtor was previously paying us about $1,000 a month, which we rely on to meet our monthly obligations. We have one debt. It's our home. The $100,000 is not quite enough to pay that off, which would be the easy fix because then it would free up money and we'd be just fine. So I'm looking for some advice or thoughts on a good way to allocate that $100,000 in a way

that will help us to continue to meet our monthly obligations that aren't debts, but they're nonetheless. Yeah, great question. So this $1,000 a month, you said that you were relying on this. Without this, are you guys way too tight on the budget? It will be tight. I think we'll be about $400 short. And that's not to say I do feel like we could make some cuts, but that's what kind of gets us down to the $400. We have a big family, seven great kids. Six of them live with us. Wow.

And my oldest has some really severe special needs, another daughter with. Oh, you know, medical bills are a big chunk of that. Yeah. So you're saying there's not a lot of frivolous spending happening in the budget. You know, I hesitate to say that. There's always room to tighten the belt. My husband's a schoolteacher, and I stay home and take care of our oldest son. But we are very blessed, so I don't want to give the impression that we're

due in bloom. What's your household income? Our household income is about $80,000 a year. My husband's a hard worker, and he supplements that a lot in the summer. That's awesome. Good man. Yeah, it is. Like I said, we're very blessed.

So what's left on the mortgage? $150,000. Good man. Yeah, it is. Like I said, we're very blessed. So what's left on the mortgage? $150,000. $150,000? Nine years. Yeah. Okay. And you guys, you're out of debt completely except the home. Do you have a fully funded emergency fund? We have about $2,000 in an emergency fund. Okay. Feels like we need to up that for a family of seven. What would three to six months of expenses look like for you guys if you put a number on it? Well, further than that.

20 grand? Well, our expenses are about, I'm just doing some quick math, about 4,000 a month. Okay. So we're looking at three months would be 12. And because he's the only earning income in the house, it feels like you want to lean towards six. When you've got seven kids, you've got special needs. So that looks more like $24,000. Yeah, probably so. I feel very happy inside to have that. There we go. This is what I want for you, happiness, freedom. So outside of that, is your husband investing 15% of his income into retirement? You know, no, not separate than what his employment invests. He's,

like I say, a school teacher, and they fully fund his retirement. So there's a mandatory kind of contribution that they're putting in from their money, not his? Yep. No, they pay his contribution. They pay his part. Okay. They pay their part, and then they pay his. Well, I want to encourage him to begin investing 15% of the income. I know it feels tight right now, but there's a lot of variables in the situation. What's that? The scary part to me is I know we have to pay our bills and without being able to eliminate those, we do have some pieces of property I thought maybe we should. Again, it wouldn't fix the we don't quite have enough to pay off the home. We probably have about $15,000 in a little chunk of land down the street.

It's not doing anything for us. It's just sitting there? You're just paying property taxes on it for fun? We do. It's not a lot. We're in a real rural area, but it is plugged out $100 a year. Okay. Nothing major. No, it's not great.

As far as this lump sum, I would go ahead and I would take, you know, if you have $2,000, I would go ahead and take $22,000 and add it to that savings account to give you a fully funded emergency fund. Okay. Now that leaves you with $76,000. And the truth is, I want you to pay down the house. Paying down the house is not going to solve all of your problems. It's not going to create any extra cash flow for you right now. Yeah. But I still want it to go towards the house. That should still be your next goal. Obviously, we need to be funding college, if that's on the table for all of these kids. Is that part of the conversation?

Oh, I think they pay for their own. You just said you're on your own, kids. You know, so far they've paid for their own. I have one married daughter and two 19-year-old boys that are placed to serve missions for our church, but when they get back and pick up their college again, they'll have to pay for themselves, I think, unless we get really rich between now and then. Hey, I want that for you. And it can happen. I mean, you guys aren't, you're not doing bad. I want you to realize that you're not in a destitute situation

losing this $1,000 a month. Yeah, no, it's like a mixed blessing. I feel it's a blessing. I just, I don't know what to do with it. Yeah. Well, I mean, if I'm you guys, I'm going to follow the baby steps, and you could put a chunk away for college, but if you've already had the conversation and you said,

hey, kids, you're on your own, and they understand that, and they know, hey, we're not going to go into debt, we're not going to do student loans, but you've got to figure out a way. Then you're moving on to baby step six, which is paying off the home early. And so you're going to knock out half of the mortgage, leaving you guys with $74,000 on the mortgage. Are you putting any extra on the mortgage beyond the payment? We aren't.

We aren't. Okay. We aren't right now. I'm not sure we have the best interest rate. I don't know. What are you at right now? Do you know? Oh, we're at 4.5.

Yeah. I mean, are you on a 30-year? No, we did a 10-year. Oh, a 10-year. Okay. Well, I mean, you you on a 30-year? No, we did a 10-year. Oh, a 10-year. Okay. Well, I mean, you could refinance. Obviously, look at the breakeven analysis on that and figure out, okay, if we're going to pay $5,000 in closing costs, how quickly are we going to make up for that with the lower interest rate? And I like it for it to be two years or less, three max.

And so you can look at that as an option to see, especially once you have a $75,000 mortgage, if you can refinance on that, your payment's going to shrink. You know, I didn't think about that, but will a bank refinance? I feel really unwilling to go longer than 10, but maybe that's not the right thinking. Maybe I need to say, yeah, we'll refinance for 10 and do the 75, and then we can meet that obligation. I think you can do better than that. I think we need to work on this budget. Are you guys doing a household budget every month on paper and tracking it?

I do, down to the penny. Wow. Way to go. Yeah, I do. Well, I would do an audit of that and go, hey, are we getting the best rates on our insurance? Are we getting the best rate over here? Do we need the subscription right now?

And I think cutting this temporarily and having that emergency fund in place, you're going to feel such a weight off of your shoulders because you are a super mom right now. You're incredible. I don't know. We're trying, like everybody around us, we're trying to do our best. Well, just know that we are rooting for you. We are in your corner. I would definitely pay down the house, look at a refinance after that and see see if it makes sense for you, and tighten up that budget. But right now there's not a lot of other options. You can't go to work. Yeah. Well, if you give me some things to think about, though,

I like the idea maybe of refinancing the 75 and definitely like the idea of the emergency fund. So maybe I'll just get brave and say we're doing it. I love it. Well, thank you so much for the call. We are in your corner. Man, seven kids. I cannot imagine.

I've got two dogs at home, and I feel overwhelmed. I've got nothing to complain about. Wow. Good times. This is The Ramsey Show. Thank you. so Welcome back to The Ramsey Show. I'm George Camel, Ramsey personality and host of the Fine Print and Entree Leadership Podcast. And I've got a special guest for you this segment. One of our newest personalities, Christina Ellis joins me. Christina, how are you? I'm doing great. Thanks for having me.

So you've been on the team now since October. Yes. A few months in. How are you? I'm doing great. Thanks for having me. So you've been on the team now since October. Yes. A few months in. How are you feeling? I'm loving it. I just crossed my 90-day mark, so I'm feeling pretty good. That's awesome. Yeah.

Well, we are so excited to have you on the team to help us disrupt this toxic culture around student loans, higher education, and parents, and society, and guidance counselors. There's like a thousand villains that you can point at in this situation. Yeah, it's crazy right now. Debt has been so normalized in this space. We are selling 18-year-olds debt where they think that taking out student loans, that it's just normal, that it's just part of the process. And that's not okay. I'm so proud of the work that Ramsey's done with Borrowed Future. And just bringing light to that situation really disrupts that toxic culture.

And it shows students, you know, this is not the way to go. And there are other ways that we can fix this. Yeah. There's definitely a lie that was sold, at least to me. And I know many, many people out there where we, as a society, we said, hey, if you just do really good in school and you get great grades, you'll have an amazing life. You'll go to your dream school and life's going to work out for you. But unfortunately, as you realize, I wanted to go to the school and I got

in and I thought, oh my gosh, I got approved to my dream school and I got $0 and it was $200,000 for the four years for basically a film degree. And even not knowing Dave back then, I was like, this feels like a bad deal for me. I'm not doing this. So I ended up going to a state school. I was out of school for a year, went back to school, finished up, and still ended up with $36,000 in student loans. And I thought, well, I did better than $200,000.

That's the thing. As I talk to students all the time who just kind of shrug off student loans like, ah, yeah, it's no big deal. It's what everybody's doing. It's what all of my friends are doing. And it's important to highlight, like, it doesn't have to be that way. You know, my story, I won a half a million dollars in scholarships. I was able to go to school debt free. My mom really lit a fire in me early. She basically said my freshman year, you know, Christina, you're on your own for paying for college. So you need to figure out a strategy. And I'm so thankful she had that conversation early on because it gave me time to think about what I was doing and try to see like, are there other ways I can go to college? Do I have to follow this notion that you have to take out student loans? And I learned that you don't. Yeah, it really comes down to having a plan, having a strategy and having the conversation early. I mean, we just I just took a call, and she's got seven kids, and she was very honest with them. And she said, hey, you're on your own.

But I appreciate that honesty versus, we'll figure it out. We'll figure it out. And what figuring it out looks like is co-signing hundreds of thousands of dollars in loans, and then everyone's frustrated. Absolutely. It's not a solution. Yeah, it's a tough pill to swallow, you know, to tell your kids, you know, we can't afford college.

It's hard. You know, when my mom told me freshman year of high school, I was like, why are you telling me this? I am a freshman. What can I do about it? But at the same time, you know, I knew she was just trying to be real with me. You know, my dad, he passed away when I was seven from cancer and my family struggled financially.

So even though it was tough, like I'm thankful she had the courage to have that conversation because it needs to happen. That conversation doesn't need to be had with somebody selling your student loans. It needs to happen with parents. Yeah, we have a high school curriculum out there through our Ramsey education team and I got the pleasure of hosting it

and it was so eye-opening as I sat down with high schoolers and I was asking them basic questions. Where do you wanna go to to school? What do you want to do? How much do you think that'll pay? How much will that school cost? And I didn't realize it was going to be an interrogation. There were kids running out of there crying after we were done, and I thought, oh my gosh, I'm the first one to ask them these questions. Their parents are not talking to them about the future. They're just going, la la la la, I have shame and guilt and baggage from my own financial past, and we're just not going to talk about money because that's the healthy way to handle our families. And having that conversation, as much as it might be painful, man, it's so freeing in your situation where you

went, okay, at least I know what I need to do now. Right, exactly. A lot of kids don't have that wisdom and insight early on, even just career-wise. A lot of students think, you know, I have to go to the fancy school if I'm going to be successful. Like, I have to go to a name brand school, and a lot of those schools cost $70,000. And that's just not true. You know, if you walk around Ramsey, it's a competitive workplace. You know, we have amazing people here. And if you ask people where they went to school, a lot of people went to community college. A lot of people went to an online school. A lot of people just took non-traditional routes, and they're still here working next to people who did go to prestigious schools. So the reality is that you don't have to go to the fancy school to be successful. That is true all across workplaces

in America. You'll have somebody sitting at a desk that went to an Ivy League, and you'll have somebody sitting right next to them that went to community college. So you have to just find your own path to success that's debt-free. Oh, yeah. And these days, with the digital space that we live in, there are just so many opportunities. I mean, MIT has so many free courses out there where you're learning the same things that you would inside of the classroom that would cost you thousands upon thousands of dollars. Right. And now there's amazing certificate programs. There's digital marketing certificate programs. There's all sorts of coding boot camps and things that you can do online that'll get you incredible jobs that make great money. So it's

like, think outside of the box, explore your options. There's not just one right path. Yeah. And that's one of those things that we need to keep beating the drum on because students do think, well, if I don't go to college, I'm a nobody. Like all of my friends went and here I am in my town and I'm just not going to have a great life now. Well, what's crazy is that trade school, that's still a great option. The trades are not going away. And the thing is, is no matter how hard the economy gets, no matter what the world looks like, we still need electricians. We still need plumbers.

So it's like college isn't the only right route. It's the right route for a lot of people. But the right route for a lot of people is also going to be trade school. It's going to be all these different options that are out there. So it's important to figure out what is right for you, what is right for your student, even if it doesn't look like what everybody else does. And one of the problems is we live in such a comparison culture. And it's so it's so much about your status and social media. And what I'm seeing is the number one job that students want is to be an influencer and to be a YouTuber. And while that's great, that they want to have an impact in that way, and they want to be front and center, that's fine. You know, we're, we're on camera, we're in front of microphones, there's nothing wrong with with

wanting that. But I question the motive behind it and the heart behind it and going, man, what do you really want? What do you really want to apply full force in your life? What do you want to dig into? What is the topic? What is the area of focus? And once you ask those questions, you can get to some really interesting answers. Right, exactly. I also think like speaking of comparison, I think a lot of parents fall into the comparison trap. You know, I've heard parents talk to me and complain to me that, you know, in the high school environment, all these parents are talking about, well, where's your kid going to school? My kid's going to an Ivy League. My kid's going to this fancy school. And they almost feel pressure to have their kid go somewhere fancy or to sign on the dotted line for a parent loan. That's so toxic that the parents are using their kids as a pawn to elevate

their status. Or I went to this school, therefore my kid needs to go to this school too, because this is our legacy. And they're going for the football team and they're going because of the landscaping and the water slides and the world-class cafeteria. And we've lost our dadgum minds. Yeah. There's just so much toxic pressure in this space. And what results is student loans. Like that's what happens when we don't have these conversations about, you know, what's actually going on and the challenges, you know, people just end up getting kind of roped in to that trap. Yeah. So what can parents do if you're a parent listening out there and you're going, all right, Christina, I haven't saved for my kid's college. I got to have this conversation saying,

I can't, I can't do this. I can't cash flow it for you. What would you say to that parent? Well, the fact that they even want to have real conversations about money with their kids, that's amazing. There are so many parents that are scared to have that conversation or they just don't think about having that conversation. So let your kids know what they're going to be up against financially. Have those real conversations about where you guys are. What are they going to be responsible for when it comes to college and their future? And then take debt off the table. Like, you be the first person to tell your kids, we're not doing debt.

Like, we're going to go a different direction. Like, that's not what we're doing. And then help them cast a vision for their life. I think a lot of kids, you know, they leave high school and they don't really know what they want to do. So they're vulnerable when they're out there. But, you know, help them cast a vision and connect the dots of like, what does it take to get there? You know, they may not need a four-year degree.

They may not need a master's degree. They may need that trade certificate. You know, there's so many different routes that just really lock arms with them and help them figure out what works for them. I love it. Christina Ellis, folks, one of our newest Ramsey personalities focused on this toxic student loan crisis. You can see her in our Borrowed Future documentary. You can stream that on Apple TV, Google Play, Amazon, you name it. Christina, so awesome having you on the team. Thanks for having me. So thrilled to be here. This is the Ramsey Show.

I'm George Camel. You jump in, America, and we'll talk about your life and your money. The number to call is 888-825-5225. Steve joins us from Green Bay, Wisconsin. Steve, welcome to The Ramsey Show. Good afternoon, sir. How are you doing? How can I help?

I'm doing great. Another day of being alive is a good thing. I afternoon, sir. How are you doing? How can I help? I'm doing great. Another day of being alive. It's a good thing. I love that attitude. I just got a question for you. I turned 60 back six, seven months ago. We've got about 80-some thousand left on our house. And I'm just kind of curious if it would be wise to take money that we have set aside from our 401K and stuff to pay off the house and be debt-free. So how much is in the retirement account? Roughly, it all depends how the market keeps going if it keeps going away it's not going to be much

about $750,000 okay and is that everything you have saved for retirement yep and you're still working what's your household income before taxes just around $50,000

$50,000 before tax. Okay, and you have no other debt. You just have this mortgage payment. You have a savings account with three to six months of expenses? Yes. I want confidence here, Steve. Do you have it? Yes, we do.

I've got roughly about $20,000 set aside. Okay, good. But I was kind of thinking to take that and then some of the money from the 401k to pay off the house. No, no, no, Steve. Well, you're saying you're retired, right? I mean, you're still working, but you can take this money out penalty-free. Yep. I mean, if I'm in your shoes, I definitely want to be free of this mortgage. And making $50K, how much margin do you have in your budget every month?

Not a lot, really. There's not a lot of margin. You're saying if we continue down this path, I'm not going to be able to pay off the house anytime soon. If we continue the way we are and if my plans go the way that I want to and not the way God wants to, I could have it paid off in five to six years. Okay. And do you plan on working for the next five to six years? If I have the lowest payment, probably. Yeah. Well, I want you to have a great retirement. Is this everything you have to your name, the $750,000 plus the house? Yes.

What's the house worth? About $300,000. Okay. So we're close to baby step billionaire status if you're not already there with all of your assets, right? Yeah. Way to go, man. That's awesome. That's something that very few Americans have achieved. with all of your assets, right? Yeah. Way to go, man. That's awesome.

That's something that very few Americans have achieved. It's a great thing and everything, but maybe it's just me and I just got this debt and I want to get rid of it because I'm sick and tired of it. Sure. What's the payment every month? $850. $850. Okay.

So it's not a major part of your world or even your income at this point. No, and we're paying extra on it every month as it is. Okay, good, good. That was my question, is how much margin you had. Could you just pay this off and let your retirement sit where it is and continue to grow? But there's nothing wrong now that you can take this money out penalty-free, and that'll free you up. I know you're unplugging some of the compound growth there, but when you're freed up from that payment, you're going to be able to invest even more. Right? Would that be your plan?

Yeah. That would be my plan because I'm thinking if you get take-home 30-some a year times five and that's $150,000 plus the interest. Yeah. Well, now that you're of this age, I mean, obviously we tell people never to take money out of retirement, but you're of retirement age, and therefore now is the time to start to use this money for your benefit. And getting out of debt, including your house, that is one of those benefits. So if I'm in your shoes, yes, I will take just enough to get rid of this house payment, and then I'm going to invest like crazy. I'm going to try to increase my income. Even as you enter into your 60s and continue to work, I'm going to try to get that income up so that we can have a great retirement instead of try to ration it all out, even though it's $750. I want it to be a million plus. Should I just take it from the retirement fund, or should I take what we have set aside too? No, I want you to don't touch that because that's your emergency fund.

Well, I'm also thinking too, if I take that and less from the 401k, then the emergency fund will get built up just as quick. Well, I don't want you to deplete the – this is not an emergency. You know what I mean? This is paying down the house. You're going to get there. You're going to build it up fast. But I don't want you to deplete your emergency fund in order to pay off the house faster. Because then when an emergency hits, you're screwed.

And so I would take that exact money out. You said you have how much left on that mortgage? $80,000? Roughly $80,000, yeah. So you're going to take $80,000 from that $750,000 in the retirement account, and then you're going to invest that new $850,000 you have back in your life into your – you can do catch-up contributions. You can invest like a crazy person so that you can retire with $1.5 million in five years.

That's what I want for you. Okay. So I was going back and forth on a couple of different ways of doing it. I wasn't sure if it was a good thing to do or not. Well, now that you're of age, there's no penalties. That's what I would do personally if I was in your shoes, Steve, get rid of that mortgage payment. And a lot of people may say that's backwards because you're missing out on the returns. But guess what? Right now, not a lot of returns to be had. So freeing yourself up from that payment is going to reduce all of the risk that you have in your life. Thanks for the call. Jill joins us now

in Scottsdale, Arizona. Jill, welcome to the Ramsey Show. Hi there. Thanks for having me. Sure. How can I help? Hey. Well, I'm having a car conundrum. I am one of those folks that keeps their cars forever. Not that I'm particularly attached, but I just do. And I purchased a car in 2003. It's a Hummer. It was an H2. I paid cash. I was able to because my grandparents had passed and left me some money.

So I'm at a point now where my car is 18 years old. And every other month, stuff is going on. So I put a deposit, a small deposit down. New Hummers are coming out. I would like to stick with my brand. Oh, you want to stick with the Hummer? Okay. Yeah, it's going to be electric this time. Not sure how that's going to work out, but after I do my due diligence, we'll see. But I don't know how to go about this because obviously I can't pay cash like I did. I mean, I forked out about $70,000 for that back in 2003. So just trying to figure out how much to finance and what to put down. I've got some time before they're going to

be available. I believe 2004 early is when they're going to be available. So I'm going to start saving. Yeah, I can simplify this for you. You're going to finance $0. That makes life a lot easier. $0. Okay. Yeah. So I want you to pay cash for this car. You do not need to go into debt for a depreciating asset. That's not going to set you up for success.

So how much is this car? What's the car cost? Okay. This time around, it's going to run about $85. Holy crap. What is your household income? I pull in a total right now in my new career, about $61,000, but I've got some investments sitting.

Jill, Jill. Oh, my gosh. My head is on the desk. You make $60,000 and you want to buy an $85,000 vehicle? I don't have any debt. It doesn't matter. That is more than your annual income tied up in a depreciating asset. Okay.

So don't finance, pay cash. Yes. And here's the thing. This car is too much of your world. Our parameter around vehicles, anything with a motor in it, is it should not add up to more than half of your annual income. So if you're telling me you make $60,000, we've got to get you a $30,000 car. And now the situation was different.

Even if you keep them for 18 years? I mean, I've only put $10,000 into the car. Even if you keep them for 18 years, you're still going to get screwed on this deal. And what I want for you, now, with the inheritance, that was a different situation. I still would have told you that's way too much car to be buying. And I know that you see the shiny commercials and electric. Oh, man, it's so much nicer than mine. But you're just not at a place to do that for where it makes sense for your future.

And I know you don't have debt. No, I understand. Do you have an emergency fund? I used to make a lot more money. I used to make a lot more money. So when I changed careers, my income got cut in half. Sure. Are you a millionaire? I've been, my income got cut in, like, half. Sure. Are you a millionaire?

I stayed home with my daughter for 10 years. I was. And I did stay home with my daughter for 11 years when she was born. So I made that decision, and I'm happy I did, but I'm in a different position now. Yeah. Well, I appreciate the call. I definitely would not spend $85,000 on a car making 60K.

I want you to pay cash and do it where it's no more than half of your income. And that means you're going to look for a great used Hummer, if that's what you want, that is under $30,000. You can look to the future for that electric one. Once it depreciates in value, you can go ahead and buy it. Appreciate the call. That puts this hour of The Ramsey Show in the books. Hey, it's Kelly, associate producer and phone screener for The Ramsey Show. If you would like to do your debt-free scream live on the show,

make sure you visit theramseyshow.com and register. We would love for you to come to Nashville and tell Dave your story.