The Ramsey Show - App - Don't Let Student Loans Keep You On A Financial Cliff (Hour 2)

Episode Date: March 4, 2024

Девочка-пай Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm George Campbell, joined by Jade Warshaw. It's your show, America, so call us up at 888-825-5225. We'll talk about your life and your money, and we'll tell you the truth, even if it hurts your feelings a little bit, because we care that deeply. Brandon kicks us off in Fort Wayne, Indiana. Brandon, welcome to the show. Hey, George, a big fan of yours. Thank you. I appreciate you guys having me on the show. Absolutely. I came across your book, and it's changed the way my wife and I view money. That's so cool to hear.

That's the basis of our question. Ultimately, our question is whether or not we should go down to one car to pay off our debt. Wow. We have three cars. One of them is a sports car, just a fun toy that's automatically sold. But my wife and I are trying to decide, should we go down to one car to be out of debt as soon as the car sells? Or would that not be smart to do that? Do you have kids? Yeah, we have a one-year-old. Okay. And I'm a full-time student. Okay. And my wife works full-time. Okay. So, and I'm guessing proximity, my mind goes to proximity because when my husband and I were getting out of debt, we went down to a one-car family and we did it because my sister-in-law, my sister went down to a one-car family and they did it with two kids. So we figured, okay,

we can do this. But I do think proximity matters like uh her being able to drop you off at school you know on her way to work those sorts of things do you see a world where that could take place yeah um it'd definitely be kind of hard but she makes her own schedule um and my parents have three cars and there's a chance that we might be able to borrow one of their cars for a month. Ooh. What would happen in that month? So we've literally just started the process. So all we have is her student loans, but we have about $10,000 set aside that we haven't put towards it yet.

So you have $10,000 cash. How much in total debt? $28,000 in student loans. And between the two cars, based off of Kelly Blue Book, we could get $25,000. $2,500? $1,000. $25,000. Wow. For the sports car plus the other car that you're planning on selling. Great. Correct. So between that plus your cash, you have $35,000. You knock out the student loans. You have $7,000 left over. Right. We go purchase a $5,000 car. Yeah.

I love this plan. I think it's solid. Okay. Yeah, it's just a little nerve-wracking, you know, having a kid going down to one car. But even if, like my question was, even if, like, there's a chance we could borrow the car from my parents. But even if not, you think it's still smart? I think it's really... For you to drive the $5,000 car for a while?

Sorry, you're breaking up on us, Brandon. I'm sorry. Just to go down to one car until we can... I mean, you could survive that for a few weeks, depending on how strong your marriage is. I think I could probably make it one week before it starts really tear us apart i think that and my wife works here by the way let me tell you i'm just being honest i think that people don't consider it and i think that they would be shocked my husband and i were a one car family for 10 years we started years yes we sold our car um in 20 2009 sam when we were getting out of debt and we stuck to one car and

then we had two kids and we still had one car and when we moved here when i joined ramsey we bought our second car wow yeah so it can be done it just requires coordination and it's one of those things that when you first start out it's uncomfortable because you're not used to it but once you figure out your rhythms and your routines, it's like, yeah. Matter of fact, I got to the point where I was like, we don't need a second car. And my husband was like, we're earning a car.

You can role play this. For the next week, you guys only use one car. See how it goes. Yeah. That's a good idea. As you get the other two listed and just live like that and see how it goes. And if it works out, keep doing it.

But either way, I'd get that $5,000 card and just have it for now until you or upgrade a little bit later with cash you're gonna see savings on insurance too which is great a lot of savings but all the cars are paid off yeah all the cars are paid off the only debt we have is uh is the student loans what's the payments on the student loans uh 260 well it's between like five different student loans comes out to like 267 i think a month oh nice so that i mean that's great that's over three grand that you can put towards your savings goals right as you free up the payment so i think this is a no brainer okay i appreciate it yeah you got it man that's a fun fun call i did not know jade was a one car family one car family for 10 years wow yeah that's crazy i mean even whitney working

at ramsey i rarely get to commute with her our schedules are just all over the place and now with a baby it's like well you got to go home i got a recording you guys work in the same place george you and i could get like rides from people but i just i'm i feel too guilty being like hey man can i get a ride again you drive me home after work listen i i would take uber like every once in a while on the weekend we might have an issue and it's like oh just get an uber and i remember my friend fred would be like why are you ubering just call like we'll drive you like we'll pick you up i'm like no it's i don't want to burden anybody else with it see that's my thing we never viewed it as a burden.

It was just like, all right, yeah, I'll just grab an Uber. That's why we need John Deloney to be like, you're not a burden to your friends. Text him at 3 a.m. Ask for the ride to the airport. I'm like, bro. No, you hit a certain point. I feel like once you hit like 37, you can't ask people to help you move anymore. Thank you.

You cannot like hit your ride. Unless you're Baby Step 2, then I might help you like unless you're baby step two then i'll i might help you move if you're in baby step two oh but once you're out of that just hire a mover yeah there's levels to that because i'm not moving stairs like an apartment no i'll help you put some things in a box well george when a friend breaks something i'm like oh gosh but if the mover does it i'm getting that money back yeah you can like can like, yeah, get funky. You know, when my buddy Joe helps me move and he breaks something, I'm like, well, that's staying.

It was free. He was helping for free. What do you mean? Charge the guy? Yeah. So that part's stressful. Yeah, you have to pay them with something. Even if you're an adult, you have to have drinks or pizza or like there's got to be

some form of payment. You can't just say, come help me move. Absolutely. Well, I was just reading a Consumer Reports article, which I'm a paying member now, Jade. That's how you know I'm getting old. George, you're different. I'm getting old. I'm next step. AARP is up next. But they have a great article because we've been telling people the $5,000 car exists. Yeah, it does. And Consumer Reports had an article from February 14th, best used cars and SUVs for less than $5,000.

There you go. And you wouldn't be shocked to hear the brands on here can you guess them toyota yep uh nissan nope ford nope uh i was hoping you'd hit the major two uh rhymes with ronda hyundai honda there we go toyota and honda took the top uh definitely and lexus was on there too and guess what these cars are 20 year old cars i believe you know it's an 06 accord it's the 04 lexus es but you see these on the road for avalon 05 camry these are invincible cars these cars will outlive me 100 rav4 a 2001 tacoma you see a guy in a 2001 Toyota Tacoma, he's going places. He's got work to do.

You see a guy in the brand new F-250, that thing doesn't have a scratch on it, Jade. That guy's hauling mulch once a year from Lowe's. That's about the only thing he's doing with that. You never see old Volkswagens. You never see old Volvos. You ever see a Saturn on the road? Never.

My guy is still holding on. If you have a Saturn, I'm sorry. It's usually like in a Taco Bell drive through at 3am. Like this man has seen some things if he's driving a Saturn around at 3am. Oh man. And he's in for some things if he's at Taco Bell. Listen, these cars exist. Are they 20 years old? Yes. Do they have 148,000

miles? Yes. Will they still go another 100,000? Yes. Dang right. So don't tell me that they don't exist. Just tell me you don't want to drive it. This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down.

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see us. Why don't you? It's time for our question of the day. Jade, what do we have? All right. Today's question comes from Brandon in Georgia. He says, I will graduate college debt-free this semester. Because of an internship, I will likely receive a full-time job offer of $70,000 a year at a reputable company with a lot of room to move up. That's good. How does someone who leaves college debt-free with a decent income manage their money when it's their first time on salary? I don't have to pay rent. I don't want to have to pay. I don't want to. Thank you. I don't want to have to pay rent or get a car with debt while also having to save money for retirement at the same time. My biggest fear is

wasting money renting before I feel I'm financially capable to take on buying or mortgaging a home. What's your advice? I love this. I think this guy's just now getting started. He's got a nice career set up for himself. The first step is to get on a budget. That's numero uno. If you don't have an every dollar budget, you need to down one today. The free version is amazing, but the premium version is even better. So I'd say that that'd be his first thing. He says, I don't want to have to pay rent or get a car with debt. So my next piece of advice is don't. Over here, we just say that we live a debt-free lifestyle and we draw a line in the sand and we don't borrow money. So for you, the next thing is to probably use that great income to start saving up for a car. And to answer your question about

renting, I would rent for the time being. I'd get a couple of roommates, get a couple of guys and just get used to living that adult lifestyle, right? You're getting up, you're going to work every morning, you're saving up for a car,'re on a budget start getting your your your confidence built that you can live on what you make and then at the right time I would look at buying a home I'd make sure that I have the right down payment in an area that's right for you with your job and I would not look at renting as a negative because I feel like here you're kind of feeling that renting is a negative and i it's not it's just buying you time until you can afford to buy a house the right way and that's truly what it is george yeah i'm just exhausted by this narrative that society and parents are telling young people which is renting

is a sin it's a waste of money you better get into home as soon as possible and i get the heart behind it it's what i'm meaning yeah but it creates this, and it means people jump out of college at 22 and they're like, I need to buy a house, even though I'm not ready. Now, luckily our friend Brandon has no debt making 70K a year. That blows my mind. I wasn't making half of that when I got my first job out of college. I know. And I moved to Nashville and what do you do? You get some roommates, you get some side hustles. And so I think that's a smart move. Be ready for the first month deposit, last month rent, whatever that is, be ready for that financially.

So I would just save up a bunch of cash and maybe work part-time so that when you graduate, even before that first paycheck hits, you're ready to make the move and go rent somewhere with some roommates. And renting, George, to your point, it does get a bad stigma and it's not it's not a bad thing my husband and i rented for over 10 years before we bought a house and our situation was different

we were trying to pay off almost half a million dollars of debt but in many ways i can liken it to what's going on right now because the housing market is so expensive that people feel like i'm never quote i'm never going to be able to buy a house. And I'm like, you will be able to, instead of it taking three years or four years, it could take six or seven or seven or eight or eight or nine or 10. There is part of this that I just want people to feel encouraged that just because a journey takes longer doesn't mean you won't make it to the finish line and doesn't mean it's not worth it to rent until you get there. Amen. And last thing I'll say, Brandon, if you're listening, and I hope you are, is when you go from making nothing to making $70,000, the life hack is to keep living like you make nothing. Keep living on less than

you make. If you can learn to live off of 20 grand when you make 70, you're going to be unbelievably wealthy. But for most people, they just fill in the gap. They make 70, we're going to be unbelievably wealthy. But for most people, they just fill in the gap. They make 70, we're just going to spend to 70 or they spend 80. That's the American story right there. And so if you can avoid that, avoid lifestyle creep, avoid the comparison culture and lifestyle, you're going to be just fine, my friend. So great question. Love that. For any young person that's listening, someone about to graduate, send them this call. It could change everything. All right, let's get to the phone lines. Philadelphia is up next. Angela joins us there. Welcome, Angela. Hi, how are you?

Doing well. Thank you for having me on the show. Absolutely. What's going on today? My question is around student loans and emergency funds. So I'm older. I have a pretty decent salary. I contribute to my 401ks. I have brokerage accounts. And my issue is my mentality around dumping all of my emergency fund into my student loan. So I have exactly the amount to pay off my student loan in my emergency fund, but I am terrified to start over again. How old are you?

Building that emergency fund. 41. And how much do you have in student loans? $50,000. $50,000? Let me tell you what's terrifying. Having $50,000 in student loans decades after you graduated? When did you graduate?

So this is from grad school, and so that would be like 10 years ago. Ooh, girl! Listen, I have two ways that I like explaining this. One is just math. It's really just the math for me, because if you think that you have a balance sheet, yeah, if you if you say that you have $50,000 and that's what's keeping you warm at night, the math would differ and it would disagree with you because technically that you owe that whether you admit it or not you owe it to I know you know so there's that piece of it I I also yeah but I'm worried about um like if something were to happen with my house where I literally need like five thousand dollars for something or so how much do you make every month um about seven I probably bring home

about seven and is it just you yes it's just me okay and how much was your student loan payment um so last year i really after like just really getting into my finances and making just making sure that i'm like doing what i'm supposed to do i really i upped the payment so right now my student loan payment is actually it's this isn't something I chose. It's $1,500 a month because I paid for that. So I really am trying to knock it out, but I'm like, do I just pay this three to five year course

that they have me on? I'm doing no right now. Angela, the whole point that I'm trying to make to you is you make $7,000 a month. It's just you. Your student loan payment alone that you've chosen to pay is $1,500. Which means next month you're free of $1,500. How quickly could you save up $5,000 and get that cushion back under you that you want?

Yeah, that's fair. Yep, that's fair. You'd save it so quickly. Plus, I'm guessing there's probably, if you wanted to get really intense, I know there's more margin somewhere in the $7,000 that you could stack that up even faster. Right now, you're living in the way I like to describe this. It's like the student loan house, like on the, on the inside, it's like modern and beautiful and the payment's not that much. And you know, you've got 50,000 saved and

you just think that there's like this beautiful landscape in front of you. But the minute you open up the door, you're like on a cliff and like, like be like it's just your one false move is and you're falling off a cliff and the sun is burning you up and it's just like doomsday out there and as long as you stay in the house you're fine but your body knows that you're in danger and that you're on this cliff and as John Deloney says all the time your body keeps the score and so I really do think that there's a toll that we pay mentally and psychologically and physically inside of our bodies for having this debt yeah and it is definitely more of a mental toll because I've worked so hard I'm just like oh I could just pay this off but also it's

like but then you will have nothing no I think that's a lie that your brain is telling yourself you will have something you'll have your income back and you'll have savings, the same savings that you had in a matter of a few short months if you get after it. You'll be there. You stack up the money you're putting toward the payment in an emergency fund with your amazing income. And how much do you have in the brokerage account? Well, I have some 401k, but I think my brokerage has about $80,000.

Girl, you're good. You're fine. This is paranoia if you don't pay this off today. We're so proud of you. This is The Ramsey Show. This is The Ramsey Show. If you like what you hear, please consider subscribing, leaving a review, or hitting the follow button button sharing it with a friend

maybe a text a link whatever it is we appreciate it you guys are the best marketing plan we have out there and we so appreciate the millions of you that listen faithfully every week and you tell your friends about it and they add it to their repertoire of podcasts or shows or youtube and all of a sudden you know know, life change starts happening, and they start getting excited about what could be with their money situation, and it all could start with you. So thank you guys so much for sharing the show. Dakota is up next in Phoenix, Arizona. Dakota, what is happening? Hey, guys, thank you for having me on. So I have about $60,000 worth of debt, and I was hoping to get some guidance from you guys on where I should go next.

Okay. What kind of debt is this? So I have two car loans, a car for myself and my wife, uh, that total just, uh, about $30,000. And I have, uh, a business that my business partner walked out on. So I'm owing him the rest of that money, uh, debt as well. So $30,000 to him. Like a buyout from the business? Exactly, yes. That's $30,000. What's the arrangement for that $30,000? So I work in an industry that monthly income varies just a little bit. So I have the leeway

to pay either $500 or $2,000 a month. Obviously, I'm trying to get it done as quick as possible, but it's hard to with the varying income. Interesting. So what do you bring in every month? Not just you, but your wife as well. So we bring in anywhere from $6,000 to $8,000 a month. Okay. And these cars, so you said together they're worth $30,000.

Can you split them out for me so I can evaluate them? Yes, I have a Toyota Tacoma 2019 that's $20,000. And then she just got a new, not new, but it's a used Hyundai Elantra. It's a 2019 as well. I think there's $14,000 on that. Okay. It's a 34 between the two. If you were to sell the $20,000 car, would it bring anything? Or are you upside down?

I have like $10,000 in equity in it right now. Okay. I might consider getting out of one of these car notes, especially since you could get something for one of them. Yeah. And my only hesitation about doing that is I live in Arizona, but I work in California, and I just want to make sure that I have reliable transportation to get there.

Well, you said if you sold it, it'd bring $10,000? Yes. So that's what you would net? So it's worth $30,000, you owe $20,000? Yeah, and that's private. I'd probably get a little bit less selling it to a dealership. I would somewhere like $7,000. So there's some money there to get a reliable vehicle.

And if, I mean, think about it, your wife's vehicle is only $4,000 more. So if you were to, if you were really up against it, you guys could switch for a little while until you get right side up on this debt. Yeah, luckily she works from home, but I feel bad leaving her out here without a car. My parents aren't exactly. No, you'd be getting a $10,000 car. Oh, oh, I got you.

Yeah. Okay, that makes a lot more sense. Yeah. What kind of business are you in? I own a tattoo shop. Okay.

And you travel for that? Yeah, yeah. So the shop, luckily, it pays for itself. The shop, I mean, so the shop itself has a savings as well,

but I just don't want to touch that just in case something does happen. I know I have to replace the floor soon and all that. I've never really had this much debt in my life, so I'm a little bit anxious to say the least. And you have no savings for yourself? We have a personal savings of somewhere around $3,000 or $4,000.

But I've literally emptied my bank account. I mean, I have some other investments, like somewhere around $8,000 with a precious metal that I have vaulted with the company. But, like, that's about it. Well, I'm getting rid of that. Yeah, I'd probably dump the precious metal and take $3,000 from your pile in savings and go get yourself a reliable car with cash after you sell yours. And what's your payment on that? My monthly payment on my truck is $600 a month, probably $800 total with insurance.

So you'll free up that money as soon as you sell this thing. Yeah. Which is going to add a whole bunch to your income every month, which will help you get rid of the business debt and get rid of her car loan, and so you can see how this thing snowballs. Yeah. Yeah, I'm so anxious not to have that security net,

because that's all the cash I have. I don't want to touch the business. Security net? You've got $64,000 in debt. That makes me anxious. Yeah, that too. Not a piddly savings account. Yeah, yeah, true.

So I'm getting rid of the precious metals. I'm cashing out on that. You'll be lucky to get, I mean, precious metals aren't a great, quote, investment, so you'll be lucky to get out of that what you put into it. What'd you say it was? 8,000? Yeah.

Listen, you take that money, you take 3,000 and you're, I mean, you're almost out of this car note with your wife. You sell your car, you take that 10,000, buy yourself something in cash. This is happening really quickly with the cars. And then you've got, you're on the hook for 30,000. And then with that, you freed up $600 from your car note how much is her car note uh I think it's like 270 a month okay so you said with insurance six seven eight so you've got an extra thousand dollars that you're going to bring to the table relatively soon to pay off this 30,000 okay that's not bad so I would

set an aggressive goal that scares you just a little bit where you're like, all right, by this date, I will be completely debt-free if I just commit to this plan. Okay. What do you think a reasonable, like, like, like four or five months, like that intense? Once you have a 30K left for the business debt, then go, all right, I can put, uh, you know, 4K a month towards this and be done in seven and a half months. And so it depends on when you make your budget using every dollar, that will show you exactly how much margin you should have if you follow the budget. Okay, cool. So it's going to be, you know, a few months where you're like, we can't go out to eat. We got to cut some subscriptions. We got to sell things laying around that have been collecting dust. Some old tattoo

shop equipment we no longer use. And let the fact that you only have a thousand dollars saved to be the thing that just lights the fire under your butt to get to to keep going intensely at this right like you said it makes you feel like you're out there to only have a thousand dollars saved and it should it should make you feel like holy moly i gotta get my life together yeah no doubt and you're you're a tattoo artist, I assume? Yes, that's correct. So can you make any extra side money? Oh, no.

I mean, I'm sure once I get the business, or I get rid of the car payment, one or the other, I'll be able to throw some extra income from the business towards that loan as well. But could you open, let's say, Sunday afternoons? I'm going to do some extra hours. Oh, yeah, yeah. Right now I'm working five

days a week, but I try to come home as often as I can to see my wife because I'll look at this year, maybe five days every two weeks because of the split between the business partner and all that, you know, I was supposed to be two weeks on two weeks off. Yeah. I'd figure out a way to create a more stable life where you're not having to travel as much. Yeah. Yeah. That should be part of this. Part of this getting financial stability is how do I just change my lifestyle? Yeah. What does it just look, what does it look like to do tattoos in your area?

I mean, I'm, I'm so sorry. That's okay. Uh, I mean, we stay pretty busy as a shop. Um,

I make $150 an hour and I typically do two tattoos a day. Um, but obviously with economic slowing things have kind of taken a little little uh that back unfortunately nobody has stimulus checks anymore so it's not as busy as it was but yeah i see what you're saying so for me that looks like uh understanding okay how long am i going to let myself be in a situation where I'm not making enough to make a living? And what can you do in the meantime to fill in that gap? Are you investing at all right now? My precious metals were the only investment that I really had. Okay. I would pause all investing until you get this debt cleaned up. Once you have the debt

cleaned up, then we have to build a fully funded emergency fund of three to six months of expenses. So if your expenses are $4,000 a month, let's call it six months, you need 24 grand in that account so that you have a force field between you and life. And then you never have to touch debt again. Yeah, because I know the shop has at least like four or five months

where it can operate just on savings alone. And then yeah, just my personal stuff, I maybe have like four or five months where I can operate just on savings alone. And then, yeah, just my personal stuff. I maybe have like one or two months between everything I have. But, yeah, okay. Yeah, the similarities between your personal life and business are strong. Where do you go? All right, if I can run this thing debt-free with a pile of money in the bank to protect me, it's going to be a lot more peaceful.

I still had questions because he's got the shop, but he's traveling. Is he just traveling to do individual tattoos for singular clients? Dakota, tell me if I'm wrong, but you're going to the other shop to do tattoos? No, when I'm out in Arizona, it's just spending time with my wife. And then when I go back home, I work. So the shop is not near your wife. So there's the problem. We need to move your family to where your work is.

That's what we need to be looking at in the future. How far away are they? It's about four hours. Goodness gracious. Why not just start a Can you start a shop right by your house? Unfortunately not. Most of my clientele that I've built, I've had to be in California for ten years now.

Starting over, I'll be sitting around waiting. Time to build some new clientele. This is not a life that's sustainable, man. Thanks for the call. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Jade Warshaw. Reminder that we've got some great shows on The Ramsey Network when you're done with this one. So check them out at our website, RamseySolutions.com. We've got the Rachel Cruz show, Ken Coleman show, Dr. John Deloney show. I've got a Smart Money Happy Hour with Rachel Cruz. That's a fun one.

We're recording right after we're done with this show. So that'll be a good time. And then a YouTube channel that I launched less than a year ago that's gone gangbuster. So check it all out. We have no shortage of content. You can't point at us and go, those Ramsey people, just not enough. No, that's gone gangbuster. So check it all out. We have no shortage of content. You can't point at us and go, those Ramsey people, just not enough. No, it's a wide variety.

Hours a day. And Jade will soon one day, hopefully, have a show. One day. I can't wait to see what it is. Listen, I got a gleam in my eye. Just let me be a guest. That's all I ask for. Of course.

Hey, I'm going to be on your show coming up. Remember the little people. That's right. Jade has made an appearance on the George Campbell YouTube channel. People loved it. Right, right. All right, let's go to the little people. That's right. Jade has made an appearance on the George Campbell YouTube channel. People loved it. Right, right. All right, let's go to the phone lines.

Frederick joins us in San Diego. What's going on, Frederick? Hi, guys. Thanks for having me. I purchased a home in 2021 for $500,000 with a 2.5 interest rate, and it's now appreciated to $750,000. I'm thinking about selling it and getting a bigger home because my family's growing. Aha. Okay. How many bedrooms is your current home?

It's three beds and two and a half baths, and we have our second child actually due this week, probably today or tomorrow, actually. Whoa. That's exciting. Yeah. Yeah. Very exciting. And just thinking about getting into a four bedroom, my wife and I are hybrid workers, so things are getting a little cramped here and our backyard's a little small. So just think about taking that equity, rolling it into a house a little bit more north and getting more house. What would that do? Have you ran the numbers out as far as monthly payment and what percentage of your monthly payment it might be

um so looking at the houses if we're doing a $750,000 house for all the equity and we still owe right around the same uh but the interest rates being like 6.5 to 7.5 percent now my monthly payment would go up maybe like $300. Okay. Which isn't like terrible. Is that a 30-year or a 15? That's a 30. I know you guys love 15.

Aha! Wop, wop, wop. Got him. Well, what would it look like, since you guys are making this move anyways, to move to that 15-year? What percentage of your income would that be, of your take-home pay? Oh, man. I haven't done the math, to be honest, on a 15.

It'd probably be almost. I'd crunch it. Yeah. And it's not to be a rule follower. I think the goal should not just be to upgrade a home, but to be completely debt-free and own that home outright. And the fastest way to do that, and the cheaper way to do that, is with a 15-year.

Not in payment, but as far as what you'll pay in interest, the interest rate will likely be lower. And so I think long-term, you'll be grateful you did that. As long as you guys are in a good financial spot, do you have no debt with an emergency fund? We have an emergency fund, but we do have two cars. Oh. Uh-oh, this equation is getting worse and worse, Frederick. Are you regretting the call? No, I really do think that, you know, what George and I are saying, we just want to set

you up for success financially. So I would look into paying off these cars before we make that move and get under an even more stable financial footing. And then I would not upgrade house unless I was also willing to upgrade to a 15 year fixed rate mortgage, which for you is, let's be honest, that's going to feel very, it's going to feel like whiplash because you're used to having that lower mortgage monthly payment. You're looking at the monthly payment and we're all about, like you said, George, paying this thing off in the long haul. When we look at a car, we never go, well,

what's the lowest payment? That's broke people talk. People go, well, what is the total cost of the car and can I afford it? And so obviously we don't yell at you for the 15 year fixed mortgage, but I think, you know, looking at what it would take to get rid of these cars and what's in your emergency fund, that would be a good first step. So how much are the car loans total? So we have two vehicles. I think total we owe right around 65. And what's your household income? I make 100 and my wife makes right around 90. Awesome. So we have a great income, but we got a lot of car, man. That's a lot of payment. Is that a thousand bucks a month in payments at least? Yeah, we're pretty much right there. The other caveat to this I was thinking is I could rent out my house and then just... No, I don't think so.

That's a lot of risk and stress in my book, taking on two mortgages and hoping that it all works out perfectly. We've taken that call where it doesn't work out perfectly. And so that's why we steer people away from that one. What does it look like for for you guys i'm just looking at what you said you have a five hundred thousand dollar house it's three bedroom two and a half bath and you're about to have your second child correct okay so one bedroom is for you your two kids share a bedroom and you've got a bedroom that's an office that's is that the plan right now but my wife my wife also works from home too so it's just okay so then that means somebody's in the living room or someone's in the you guys are having a laundry room i yeah exactly i personally and this is you know you're a grown

man you'll go away and do what you feel but i personally would not i've had two 15 year fixed rate mortgages and I'm astonished how quickly you pay it off because of how much of the payment is going towards the principal as opposed to interest every month. And I think that you'll just be blown away if you do that for the first time. Likely six figures less in interest on the 15-year versus the 30-year when you crunch the numbers. And that will make you want to throw up seeing how much money you're throwing away to the lender to bless them.

So that's another reason I'd look at that. But, Frederick, you told me a 15-year, man, that'd be tight. And I'm going, well, if you freed up the $1,000 from the car payments, that 15-year payment wouldn't seem so scary, would it? No, no, definitely probably way more reasonable. And that's where I go, like, I think you guys can do the 50. You make 190. I think it's reasonable to do that 50 in a year,

but we need to get rid of these cars. And if that means we got to sell them and downgrade for now, I mean, if you have enough equity and you can have some net profit out of this, it might not be a bad idea. How much do you have in the emergency fund? We have right around three months worth. So I think we have close to 20,000 right now. Okay. What do you think you'd get for these cars? You think you'd get 65 or 70 or 75?

Well, so we would probably be under on the cars because we purchased them brand new. They'd appreciate the fastest when they're brand new. Yeah. Okay. Well, I mean, with our parameters, there's nothing wrong with keeping these cars, but I think it's holding you back from that next step, which you told me you urgently want to get into a house and you got the new baby. To me, the baby trumps the fancy car, and therefore I might still consider selling those

cars and purchasing something with cash. Even if you can get what you put into it and you use 19 out of your 20 in savings to go get you two cheaper cars, you both work at home, not a ton of travel happening, that might be the move so that you can get into that house faster. I think so. And honestly, I'm just looking at numbers. If you're looking at a $700,000 house, that's what you're looking at, right? And you're putting the 250 down that you're getting from the sale of the other house. You're rolling it all over, right? Yep.

Okay. 15 year fixed rate. I don't know what your mortgage rates, you know, I don't know what the rates are and everything, taxes and everything, but I'm looking at Tennessee 6.7, 6.7% mortgage rate, taxes, fees. It puts you at 4,90000 a month and i'm looking at what you said 190k is your gross yeah what's your current mortgage uh current mortgage i'm paying 3300 a month you're saying it would go up to about 4100 on a 30 year right around yeah i think it was at 3900 was going to be okay and Okay. And this puts you at 4,900, so worth a thousand bucks more. and that's exactly

where your car payments are, if not a little less. And so I think this is very doable, but we just have to trade in paying lenders for these cars into let's build equity and get this house paid off. That's the trade-off

and that's a worthy trade-off. Okay. All right. Thank you, guys. Absolutely. Thanks for the call, man. I's a worthy trade-off. Okay. All right. Thank you, guys. Absolutely. Thanks for the call, man. I hope you do it because I'm excited. I get excited when I see people trade in the payments they were making.

We say, you know, if you want to do interest right, wealthy people earn interest, broke people pay interest. That's a big difference. And so when you get rid of those payments, you free up $1,000. For most people, it's more than that. When you add up all of the debt payments in their life. And instead, you use that to build wealth and pay off the house and invest. The numbers start to just boggle your mind.

Boggle the mind. Yeah, that's so true. And if you don't believe me, go into RamseySolutions.com, use our free investment calculator, and add up what your debt payments are and put that as the monthly contribution. And do that from your age up through 62, 65. Oh, mind's blown. Eight to 10% return.

Thank me later. You'll be like, oh my gosh, let's pay off the debt today, honey. We could be bajillionaires. Yeah. It's so worth it. I'm just thinking about owning a house in 15 years as opposed to 30. Absolutely. You know?

Don't give yourself wiggle. That's what we hear. Well, you got to give yourself wiggle room. Uh-uh. We got the emergency fund. Get out of here with that wiggle room. Miss me with that. This is The Ramsey Show. I'll see you next time.