The Ramsey Show - App - Following the Baby Steps Will Build Your Wealth (Hour 2)

Episode Date: January 13, 2023

George Kamel & Ken Coleman answer your questions and discuss: Saving up to fix a car while paying off debt, "How much emergency fund do I need?" from the blog: A Quick Guide to Your Emergency Fund Why you shouldn't pause investing to pay off the house from the blog: When You Should Stop Investing What to do with an extra half a million in cash, Buying a house vs. renting. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

МУЗЫКАЛЬНАЯ ЗАСТАВКА МУЗЫКАЛЬНАЯ ЗАСТАВКА Live from the headquarters of Ramsey Solutions, broadcasting from the POTS moving and storage studio, it's The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm George Campbell, Ramsey Personality, joined by best-selling author and host of The Ken Coleman Show, you guessed it, Ken Coleman himself, in the building, taking your calls about work, purpose, career, and everything in between. The number to call is 888-825-5225. Susie's kicking us off in Charlotte, North Carolina. Susie, welcome to the show. Hi, guys. Thanks for your time today. Absolutely. How can Ken and I help? I think it's a simple question. I think I might know the answer,

but it's always good to get the reassurance. I'm currently on baby step number two, of which my main focus is an $8,000 car loan. Said car is a little sick and is going to need a new transmission in the near future. Ouch. Yes, I know. It could be maybe two weeks, it could be two months, or maybe another year, but it is coming and I would like to try to prepare for it. With the $6,000 projected expense ahead. I did receive, luckily, a $3,500 bonus that I really wanted to send towards the loan, but was curious, should I pause the baby steps, apply that $3,500 towards the new transmission and work to building that $6,000 and then resume the baby step. The big thing you want to think about here is I don't want to go further into debt. And so if you've got, you know, $1,000 in the bank and you know this transmission is going to cost $6,000, then we need to make sure we're prepared for that since you know what's coming. So I would

be pausing that baby step until we have that situation under control. What's the car worth? I'm just concerned this isn't worth it at all. Yeah, I know. That's my other concern. It's not going to be. I'm going to be putting $6,000 into a car that's not worth it, but I would be going into debt to get a new car or a different car. What is the car?

It's a Buick SUV. Kelly Blue Book currently is about eight thousand so if even with the transmission issue no that was before um who quoted you who'd you get your quote from on the six thousand dollars for a buick transmission um a local um uh service guy and i also have a second quote coming, hopefully today or tomorrow. I'm a little skeptical of that, and I'm no gearhead. Shocking to anybody who knows me. But I recently had a 2006 Lexus, and I was driving it. I wanted to drive it until it died, and the transmission started to go. And I was in that boat to where it was probably worth with a healthy transmission

about six thousand dollars and I took it to a local transmission shop here and they quoted me thirty eight hundred dollars for it so I'm just a bit suspicious I'm not saying that you're being lied to but I like a second and a third opinion I just don't understand why a lexus transmission would be less than a buick transmission and at that point you start to go all right if it's i got to spend three or 35 or 38 or 4 000 um then then you decide and for me i was in a situation where you know i could go just cash flow and i was preparing for it blah blah blah but like honestly my kid didn't want it if my kid had wanted it it, I would have put the $3,800 in it in a minute. You know, and just been like, boom, there you go. Because now he's got his car. So that's where I'm at. If it's truly 6,000, but the car's not worth that, the question is how

many more years can you get out of it with a fresh transmission? And if you can get three, four, five, six years, it's still worth it to me, George. Yeah, especially if you're not going to recoup the costs on this thing, which you obviously won't in this scenario. So I'm thinking, first of all, get a second quote. A quick Google search showed me that it should be more like $1,800 to $4,000 for something like that. So six feels like they're taking you to the cleaners on this one.

I was suspicious. That's a Google search, so take it with a grain of salt. Take it with a grain of salt, but your year, your model, and yeah, 6,000 seems really high. So if you've got- I hope the second quote that comes in, I'm expecting is a little more digestible. Yeah. So how much do you have in the bank right now? Do you have a thousand bucks? I have that plus the 3,500. Okay. And you're doing the monthly budget. You're covering the four walls, food, utility, shelter, transportation with your future paychecks? Yes. Okay. Yes. So I would also start looking into what would it look like to buy a really cheap, you know, it's going to be a high

mileage piece of junk that hopefully still reliable, an old Honda or Toyota that could get you by instead of sinking all this money into this Buick. So that's another option to look into to use that bonus towards. Okay. That's fair. And actually, here I come with more Ken stories. So the same Lexus I was just talking about, I listed it for $2,500 on Facebook Marketplace. And I said, the transmission is on its way out. It is drivable and you can drive it anywhere you want to. I drove it today, but it's going, you know, running high. I just told the truth. This is the deal. And I got, I got, I sold it for two. So if you were to do that for the Buick, let's say you did the same thing and you got two

to George's point. Now you got to figure out transportation in that time. But if you could take your $3,500 plus whatever you made off the Buick, now we can get ourselves a reasonable used car to get us through baby step two and three. So that's an option, too. That's what I would personally be leaning towards because it hurts emotionally to sink that much money into this Buick that's not even going to be worth $6,000, $8,000 when you put that money into it. Let's be honest. It hurts to put any amount of money into a Buick. It hurts. Gosh. And that just is a great reminder that cars are depreciating assets that are just going to die on you. So don't sink too much money into this stuff. But Susie, I hope that helps

answer your question. You've got a little bit of homework to do before we can give you a real clear answer, but I'm leaning towards just buying a different used car. Okay. Well, thank you so much. It's very helpful. Absolutely. Thanks for the call. All right. Tyson joins us up next in Dallas. Tyson, welcome to the show. Hey, thanks for taking the call, guys. Absolutely. Let's get right to the question. We're up against the clock here. Yep. So I'm looking to pay off my debt in a couple months, and I'm going into Babyset 3 after that. I'm trying to figure out the way to tell where on the range of three to six months I should be for the savings. Okay. Are you single? I'm engaged. We'll be married by that time.

Oh, cool. And what are you doing for work? I do cloud engineering. That sounds sweet. Pretty stable job, stable company? Yes. We actually had good profit this year. Awesome. And is your wife-to-be working? She is. She's a full-time librarian. That feels pretty stable. Yes. So I would, in this scenario, you could lean towards those three months because you're going to be married with two stable incomes. Now, if you had a regular income or seasonal or you're a single parent or you're married with one income, then I would lean towards that six.

Gotcha. Does that help you? Yeah, it does. Start calculating what are all of our bare bones expenses we need to get by. Now, you can add the luxuries in there if you want to be able to live three months and keep your life as is, but it helps to know the variance between them to make that decision on what that number should be. But man, you're on the path. That's awesome. Congratulations. All right. We're taking your calls. 888-825-5225. Your life, your money. I'm George Campbell. He's Ken Coleman. This is The Ramsey Show. ស្រូវានប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប់ប� This is The Ramsey Show. I'm George Campbell, joined by Ken Coleman this hour. 888-825-5225 is the number to call. You jump in. We'll talk about your life and your money. Well, building wealth in this economy, you might be wondering, is it possible?

We keep hearing that question and we get your confusion. There's tons of noise out there right now about inflation and layoffs and rising interest rates, and you deserve answers. And that's why we blew up the internet. We packed the house last night right here in Nashville, Tennessee at our Building Wealth live stream event. And if you missed it, don't worry because we are coming to a city near you. We're taking this thing back on the road. That's right. Dave Ramsey, myself, Ken Coleman, Dr. John Deloney, Rachel Cruz, Jade Warshok, Christina Ellis. We're splitting up the gang all over for our Building Wealth live spring tour, where we're going to dig into all these hot topics and we're going to give you a proven plan to build wealth and keep it. Where are we going, George?

We are going to Indianapolis on February the 16th. You are. I'll be there. Ken, you're going to be in Austin, Texas. Yeah, where the weird people are and the good barbecue. I'm sad. I'll miss that. February 23rd in Austin.

Then I'll be back out in Salt Lake City on April 24th. And then you'll round us out in Anaheim on May 2nd. Yeah, I'm going to have my Mickey Mouse ears on for that one. A nice little spring Disney vacation for the Coleman's, I think, is in the future. Oh, is that what you think? I'm spoiling. If your kids are listening right now, which I know they listen to every show you do. No, they're teenagers.

They don't even listen to anything I say, much less the show. They don't listen to anything you say on air, let alone in the house. Golly. No, they're good kids. They're the best. It's just dad jokes. Bad dad jokes. They weren't even here to hear it. They don't listen to the show, though. I promise you that.

By the way, it's a guarantee not to ever think too highly of yourself. Just have teenagers. They'll keep you humble. Will Ferrell's kids don't think he's funny. I saw that. That gave me great peace and joy. I saw that interview.

It made me feel better. I could come in from some national media hit in New York or whatever, and I'm all excited about it, and my kids are like, yeah, whatever, Dad. Whatever. Or we're out of the cheese. Go get us some cheese, Dad. You're cringe. You're cringey.

You give us the ick. I'm cringey. So now I lean into it. Yeah. Right? So if that's cring's cringy i'm gonna do more of it that's part of fatherhood yeah well comes out on the show every once in a while but george keeps me in line i try to keep ken young that's what i'm here for so if you want to join us for building wealth in any of those cities indianapolis austin salt lake city anaheim start at just $49, or you can get a four-pack of tickets starting at $175. Bring your friends. Find some if you've got to do that.

It's going to be amazing. RamseySolutions.com slash events to reserve your seats now. Mark joins us up next in Richmond, Virginia. Mark, welcome to The Ramsey Show. Hey, guys. Taking a call. Appreciate it. Sure. What's going on with you? My wife and I are currently in baby steps six, and we have the question as to whether we could ever pause Roth contributions to go ahead

and pay off the house. We contribute about $900 a month into our Roth. And if we pause it for a year, we get the house completely paid off. And I got a woman in college that will finish and we're cash flowing her, but then another one starting college right when she graduates. So just trying to figure out how to put all these four, five, and six steps together. How much are you contributing as a percentage of your household income right now into retirement? 15%. And you want to pause that down to zero in order to pay off the house faster? Pause it down to about two or 3%. I've got most of that 15% going in a Roth, but I've got a few other things that I'm paying into as well. Okay. I would not suggest that, Mark. I would continue at 15%

and worry about college later. Again, your retirement, there's 100% chance that you will need to retire. There's a 50-50 chance the kid gets through school, graduates, and they can get scholarships. They can work part-time. There's a lot of options to help them go to school debt-free, not a lot of options for them to help you retire with dignity. And that's what we see a lot here on the show is the parents sacrifice their investing in order to take care of other things, which are doing great things right now. But then all of a sudden, the kid has to help take care of the parents because they didn't prepare well for retirement. So I would continue the 15%. It's not going to slow you down by that much. How long does it extend that? I was so close to the mortgage being paid off.

Oh, I know that. You're so excited about it. That would be a chunk gone. Well, if I had to shave it from anywhere, it's not going to be from investing because you do the opportunity cost on you pausing that investing and what that will turn into in retirement. You'll want to throw up looking at all the money you threw down the drain. I got an idea for you, Mark. So 900 a month for a year would pay the house off. So instead of generating that 900 in additional mortgage payment by pausing your 401k or your Roth investing, I'm going, how can I make through side hustles, selling stuff? I mean, nine times 12 is, what is that? $10,800? Last time I checked.

Ken, that's real good math. Boy, folks, I had to take my shoes and socks off for that one. I haven't hit that multiplication table in a while. So basically what I'm saying is, how can you generate, how can you make $10,800 multiple ways to pay the house off in the same timeframe, but you don't touch your retirement? What do you think? Yeah, that sounds like a good plan. I know, man. That's why I suggested it. What if you have $2,000 worth of stuff in your house? Now we only got to come up with, hold on a second, $8,800. Oh boy, I'm getting, it's, boy, I'm really on a roll. Ken's on fire. You know, that's the idea. I love that you want

to fast forward it. But don't rob it from your future. Yeah. Good, good, good, good, good. That's what I was going to say. Yeah. I love that. And also do a budget audit and go, hey, are we overpaying for insurance? We've got to shop that around. Hey, are we always getting a refund every year? Let's change some withholdings so that we have that income back in our life. And you start to do that across the board, and I think you're going to find that $10,000. What's your household income? About $100,000.

What do you do for a living? I'm a pastor. Oh. Ken loves pastors. I'm a pastor's kid. Are you handy at all? Like, do you even know what I mean by that? I'm not even sure I'm saying that properly. No. Okay. Neither am I. My dad was bivocational. He was a pastor of a small church, but whenever we got into some bigger purchases or things that he had to do, my dad was very gifted with, and so he would do a good construction work, handyman work, all that kind of stuff.

My point is, how can you make $10,800 with your skill set, your connections, your experience? That's what I'd be doing. Is your spouse working outside the home? Yes, yes, that's our combined income. Okay, what do they do? She works at a high school. Okay, is there any way where she might be able to do some tutoring after school or summers?

Well, she's not a teacher. She works as an administrator. On the administrative side. In an office, yeah. Well, there may be opportunity for her to even do some side hustles so that you guys kind of split the weight of this. Is she as excited to pay off the mortgage? We're both pretty excited to get the mortgage paid off.

Well, then here it is. It's $5,400 each. Make it a competition. Who can come up with it first? Who earns the $5,400 quicker, and then they get to choose the romantic weekend getaway trip after we pay off the house? Can you go uh do some weddings maybe oh there we go with the honorariums that's an idea oh yeah yeah i've been throwing all the

honorariums that i get through funerals and weddings at the at the at the house there i i'd be doing every wedding i could possibly what do you what do you get for a wedding these days that's a great question what what do you give me a range these days? That's a great question. What would be the expectation where you go, okay, I think this is fair and generous if someone was willing to do this much? Well, you get paid less for weddings than you might expect. I'm just looking for a number. What's the number? The range is between $150 and $300.

All right. That's fair. Now we start to go, how many of those would I have to do? And you're limited, obviously. So what I'm trying to do is really take you down the path to, I could come up with $5,400 pretty quickly, and my wife could probably do it as well, cleaning houses, doing whatever we got to do. If you really want to knock it out in a year, it's right there in front of you.

Yeah. Yeah, that's good. And by the way, worst case scenario, it out in a year, it's right there in front of you. Yeah. Yeah, that's good. And by the way, worst case scenario, it takes one more year, which is incredible. How long was that whole journey then paying off the house? Oh, it's been a while. I mean, we didn't get really kicking it into the house until really recently when you start to taste it. Oh, yeah. And now you're in high gear. When you got the big X's on the thousands and you're marking them off,

that's when you really start to feel it. Oh, I love it. Incredible. I especially love pastors becoming completely debt-free. That's incredible, Mark. We're so proud of you, thankful for the work you're doing in your community, and wishing you the best with the house payoff. This is The Ramsey Show America.

888-825-5225 is the number to call. You jump in, we'll talk about your life, your money, your purpose, your work. We are here for you. I'm George Campbell, joined by Ken Coleman this hour. And Laura joins us up next in Charleston, South Carolina. Laura, welcome to the show. Thank you. What's going on? So my husband and I are retired. We moved from New York to South Carolina, Charleston. We are completely debt-free, and we have a year's worth of expenses saved up. Wow. But due to the house sale, we have about $500 to invest, and we want to know the best way to do that. So did you pay for a property in cash when you moved to Charleston? Yes, we did, actually.

Once we sold the house, we paid that off as a second home, so yes. So you got two homes? No, I sold the one in New York. Okay, so you're down to a primary residence that is paid for. What's that house worth? Probably about $400 now. All right, and what's your your nest egg in retirement uh we're about 300 all right is that in like 401ks and iras

yes okay and aside from that you've got 500 sitting in cash yes awesome and what are you guys planning planning to retire on as far as income? So we have some rental property that we take home, about $50,000. Okay, so you do have other properties. Yeah, and that property is pretty much what's maintaining us. That's why we're able to be retired. All right. How many properties do you have?

It's just the one. Okay, and it brings in 50K. Yep. That's awesome. And that one's paid for? Yes, it is. Way to go. You guys have done so well. How old are you two? 56 and 58. Great. Well, it's a wise question to ask. What to do with this $500,000? I want this money to work for you long term. Are you going to need to touch this money in the next few years or is this just, hey, down the line, 10, 15 years from now, it would be great to have this money grow for us?

Just down the line for it to grow and obviously to help children and grandchildren. Great. Are you wanting to purchase more property down the line or do you want this to just kind of create a return for you? Well, a little bit of both. Property has done well for us, so I'm leaning towards that, but I wanted to hear from the experts. I love it. Well, there's a few options here. Clearly, you guys are comfortable with rental property, real estate, and so it's a great option to purchase a property. If you can get a kind of a deal on that and you pay for it in cash, if you can find something that's, you know, maybe two, three, $400, $400,000 that can cashflow another 50 for you, that's great. Or the other option is you put this $500,000 into an index fund or a mutual fund. And with an

average return of, you know, eight to 10%, that could also create 40, $50,000 a year in compound interest. And so it's really what you're most comfortable with. Some people are going, Hey, I know real estate. I'm comfortable with real estate. I don't want to ride the stock market rollercoaster. The house is going to appreciate over the next 10 years. I want to put that in real estate. You could split the difference. You could buy a $250,000 property, put the other $250,000 in index funds and mutual funds, and watch that grow. The key is to do one or the other. I wouldn't just leave it sitting in your bank account at 0% interest. Well, 3%. You've got it in a high-yield savings account? Yes. Good, good. Well, you guys are doing so great. high-yield savings account? Yes.

Good, good. Well, you guys are doing so great. Also, do you guys have a good financial advisor you're working with? We actually are in the middle of interviewing five of them that came from your website. Oh, wonderful. Well, I'd get a second opinion from them as they dig more into the details of your financial picture, but I don't think you can go wrong either way because you guys are comfortable with real estate. I think that's a great option. And I don't think you can go wrong with a long-term mindset in the market with index funds and mutual funds. Okay. Sounds good.

So I talked it over with your husband and land on a SmartVestor Pro. And man, I just feel this is not the average call we get from folks that are retiring, Ken. No. I mean, and by the way, very young. To you, George, 56 and 58 feels a little older. To me, it's like they're 56, 58. They've got paid for home, primary home, paid for rental property that they're essentially living off of. $50,000 is spinning off, and they're in really good shape. $500,000 in cash? That's a good problem

to have. Checking the boxes. I love it. And I'm just curious. I didn't get a chance to ask her, you know, moving from New York to Charleston, South Carolina, that's got to be a real change too. Cost of living, way less. Yeah. So, wow. Good for them. It's just a great picture of what it looks like to live out this plan. Yeah. And the amount of just peace in her voice and the amount of wisdom she was walking with. Oh yeah. Inspiring. I want to be like Laura when I grow up. Love it. Let's go on to Bryce in Sacramento. Bryce, welcome to the Ramsey show. Hey, thank you so much. Absolutely. What's going on? Well, I got a lot going on. Um, let's start. I, on. I got married about four years ago, and immediately after marriage, my wife and I found out that she was diagnosed with multiple sclerosis.

Oh, so sorry. Thanks. Yeah, it's been a rough go. So she needed to stop working for her health, so I've been a sole provider. But I have a hard time finding out a career that's right for me and something I love to do and so just trying to keep us afloat while she goes through her bachelor's degree which has been debt-free so far and we just got some medical news yesterday, thinking the future is going to look pretty rough moving forward,

but she's still going to push forward in school, and we have about $15,000 in debt just from credit cards and stuff. The medical debt is kind of off the charts. We don't even know where it's at. It's gone to collections. I'm just trying to figure out a good way to keep pushing forward. When I'm working as a landscaper, I haven't found out what I'm passionate about yet. Yeah. Well, there's a lot to cover in this. I want us to focus in on the money situation first,

because I do have a couple tools that I want to give you. I want you to have the Get Clear Career Assessment in my book, From Paycheck to Purpose, because it really will help you get some clarity. But we've got to get this money situation figured out, George, first and foremost. I just have to ask quickly, I'm not trying to get you to share all the really negative medical news, but I just, I wonder, does the medical news that you got that says the rough is going to be, the road's going to be really rough, does that road and the prediction of that road being rough, does the medical news that you got that says the road's going to be really rough, does that road and the prediction of that road being rough, does it make her finishing school, does it make that a wise choice? That's something we're considering now. She's going to be trying to be an LMFT psychology. She'll be done with her bachelor's this spring and wanting to get her master's,

but now she may have to have brain surgery. And, yeah, so we're trying to figure out, you know, what's the best choice moving forward. We don't know yet. We still have to get a test done, an MRI, and have another review. I just, as you're getting all that medical information, George, I just think it's wise to press pause on any more tuition. The degree, the master's will always be there if, in fact, we should be pursuing that.

But this is a reset right now, and this is getting you guys out of debt and setting you up to kind of navigate these choppy waters. I can help you down the road. In fact, let's make sure we schedule him to call my show where we can go a little deeper and getting him a better gig. George, what does he need to do right now financially? So where are you guys at as far as your bank account? You got 15K in debt. What's in the bank? Right now, like 60 bucks and 120 bucks in the savings account. Okay. So we're going to call this storm mode, which means we're pausing the baby steps. We're going to make minimum payments on our debts and just keep up with them. The goal is to not have any go to collections. We're just keeping up. You can be proactive with whatever your lenders are, the credit card companies and say, listen,

my wife is diagnosed with this medical condition. We don't have the money right now. We're just trying to stay afloat. And when you do that, the goal is to stack up as much cash as possible to put you guys in a better financial spot until we know more, until we know what the next step looks like in this. And so what are you making right now landscaping? Well, because it's seasonal and varies, it's roughly between 60 and 62 after taxes. Okay. And when you're not working on the seasonal side, I would pick something up right now. It doesn't have to be the dream career path. We're going to get you there. That's right.

Maybe two somethings. But part-time jobs, I know you're carrying a lot of weight right now. Yeah. And it's a tough season for you, and I hope there's better days ahead. But the goal right now, storm mode, stay afloat, stack up cash until you know what's next. Once we've got some stability, continue on in the baby steps, get rid of that debt, get the emergency fund in place. That's the best thing you can do financially. Hey folks, welcome back to The Ramsey Show. I'm George Campbell, joined by Ken Coleman this hour. Hey folks, welcome back to The Ramsey Show. I'm George Campbell, joined by Ken Coleman this hour.

If you're listening to the show, I gotta assume that you enjoy it, at least sometimes. And if you do like it, here's what I would ask of you, because the show's completely free. We're not taking donations, this is not a telethon, but here's what I do ask. Would you consider subscribing to the show wherever you're listening, leaving a review wherever you're listening, and sharing it with a friend? We want to spread as much hope as we can this year, and one of the ways you do that is through word of mouth. That's how I listen to new things. It's got to take Ken telling me, dude, you got to go check out this show.

And that's how this stuff happens. That's how life change happens. We appreciate you guys doing that. It's usually me telling you, you got to buy these pair of shoes. That's usually what it is. But appreciate you guys doing that. It's usually me telling you, you've got to buy these pair of shoes. That's usually what it is. But, Ken, you're a history buff. You're always telling me about shows on Netflix. They always start with some year.

I can't remember any of them. He's like, you've got to watch 1892 and 1799. Well, it's the Yellowstone series. People know what I'm talking about. And then there's one, All Quiet on the Western Front. There's too many wars, too many characters, Ken. I can't keep up. Now I don't feel like i can trust you with my recommendations you're gonna tell i fall asleep during these old old-timey war movies you're a sci-fi guy aren't you yeah i like action adventure

comedy yeah there we go you mean jurassic park yeah okay big jurassic fan all right open phones at 888-825-5225 jeff is hanging out in New Mexico. Jeff, welcome to the Ramsey Show. Hey, how's it going? Great. How are you? Good, good, good. How can we help today? Well, I'm trying to make a decision as to whether I should buy a house right now or if I should decide to continue to rent. Right now, my rent's about $2,250 a month, and I don't have any credit card debt. The only debt

that I do have is I own my Jeep and I have student loans. What's left on the Jeep? About $14,000. And what is left on the student loans? About $84,000. Whoa. Well, you called into our show, I'll give you our advice. And that is until you're out of debt with a fully funded emergency fund, we're not even ready to start saving up that down payment. How much money do you have saved? About $80,000. Okay. Well, that's good news at least. What's your income? Roughly about $135,000 a year. Oh, wonderful. Great shovel there. And so the question becomes, if we throw almost all $80,000 at the debt, that would leave us with $18,000 to pay? Correct. And then making 135, how quickly could you pay off $18,000? Oh, I'd soon probably, probably three or four months.

To now think about that. Three or four months from now, you don't have any payments, and we can save up that emergency fund of three to six months of expenses in a few more months beyond that? Be ready to purchase the house. And then, so let's say, you know, you have this goal of saying, hey, six months from now, I want to pay off all my debt and have an emergency fund in place. Now, for the next six months beyond that, I'm going to start saving up that down payment, which by the way, you have freed yourself of all your payments. So you're going to save up

that down payment really fast. Okay. And then you go, what goal do I need to have saved for this down payment? 15 year fixed rate mortgage. That's no more than about a quarter of your after-tax income monthly. And that will help you figure out how much you need to put down. It could be 10%. It could be 20%. It could be more. Have you looked at homes in your area that you would want to purchase? I have. We've been looking around. I guess the biggest part was is, and I had an idea of what you all would say. I watch your show pretty frequently, but I guess the part I was thinking was, man, that rent is just eating me up and it's just going nowhere. Well, what's your take on that? You're making 10 grand a month? Yeah, roughly about 10 grand. And so that's that 2250 is less than 25% your take home pay and which is reasonable. Yeah, it feels high, but you have a great income.

And when it comes to, you know, when it comes to the mortgage, you go ahead and you're going, well, the mortgage could be 2250 or less, but it's a short-sighted thinking because there's so much more to worry about as a homeowner while you've got payments on here, over here with your student loans and your car payment, which adds insult to injury and a whole lot of stress. So Jeff, I just want to challenge you on one little mental flip here. It's not the rent that's eating your lunch. It's the debt. It's your expenses. That's what's doing it. So you've got to live.

Now, you know, if you want to live somewhere else where rent is cheaper, you can do that. But the mindset here has got to be the debt is what's eating my lunch. All those extra payments. I've got to pay something to live somewhere, right? That's non-negotiable. That's the mindset switch. So now, because you get distracted if it's like, well, the rent's what's dragging me down, so now I've got to go buy a house.

That's not what's dragging you down. It's the debt. Do you understand what I'm saying? I do. What do your payments add up to every month? Roughly about $350 payment on the cheap, but I put down $1,500 a month every time. And on student loans, I put down roughly about $1,000 every month, but it's only a $600 payment. So you're throwing $2,500 at the debt right now to pay that off early?

Yeah. Right. Nice. That's awesome. So now imagine that being freed up and that working for you instead of paying for the past. Okay. And you start to go, all right, I'm going to be a homeowner soon. I just got to really start to do things one at a time with focused intensity, which means I'm getting out of debt. That is my next A1, which means, you know, 79 of that 80,000 can be thrown at the debt tomorrow. Does that scare you a little bit to have $1,000 in the bank? A little bit, yeah. I like it. I like it. Because guess what? You make $135,000. So you're going to be okay. If something happened, you had a real emergency, you could pause and cash flow it, right? Right. Yeah, that's true.

So I hope that gives you some peace and confidence on this plan. You got an amazing income, and I just want it working to build your future instead of paying for the past, which is what it's doing right now. You're throwing more in payments on the debt than you are to the rent. That's true. And rent gives you freedom right now. Your HVAC breaks, it's not your problem. Yep. So you're going to be there in no time, way faster than most people. Even with this pile

of debt here, you got a bunch of money in the bank, you have an amazing income. And I believe in the next year or two, you will be a homeowner and you're going to do it with such peace and clarity and wisdom. And then you're going to pay it off early because again, you're doing the 15 year and you don't have any payments except for that mortgage, which is a reasonable mortgage, which means you've got margin to throw extra on that. How old are you? 30. 30 years old.

Ken, I guarantee you by the time he's 40, this thing's paid off, and he's a baby steps millionaire. I agree. 100%. Jeff, how does that feel? Well, smile for me, do you? There we go. There we go. We got Jeff smiling, Ken ken that's a big win i'm telling you this is big but ken i what just happened there was we just rearranged the pieces

of just of jeff's life to give him some hope yeah because right now a lot of people are just doing too many things at once they're trying to pay off the debt but they also want to be homeowners but they know they should be investing in the 401k and they've got the match over here and they want to go on vacation and you can on me about nerding out about history, but I also nerd out. I read a lot of, like, neurological books and psychology books, the way we think. And there's a very famous psychology study. It's world-renowned. And the short version is they put a bunch of people in the room, let's say 20 people in a room, and they said, here's what we want you to do.

We want you to watch this seven-minute video. And it's a bunch of guys doing a basketball drill where they're passing the ball all the way up and down the basketball court. What we want you to do is focus on how many times the ball is passed in the seven-minute video. That's the only thing. Sit there with a pencil and write down every time the ball is passed. So the respondents were like, okay.

Halfway through the video, they had a guy in a gorilla costume run out on the middle of the floor, stand in the middle of the drill for about 30 seconds, and then leave. When this video was over, the people running the study came back in the room and they said, how many times was the ball passed? And every respondent gave their number. And then they said, how many of you saw the gorilla? And only people saw it now why do i share that that's pretty wild that's a lesson on focus the power of focus they were focusing only on how many times the ball had passed so we just got jeff to a place where his focus should be and only on paying the debt off and when we focus on the right things everything else goes with it it It's maniacal.

It's successful. What are you focused on? That's the question. Life lessons from Ken Coleman involving basketball and gorillas. You can only get that right here on The Ramsey Show. We'll be back. We'll be back. Hey, folks. Ken Coleman here. Did you know The Ramsey Show is one of the most popular podcasts

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