The Ramsey Show - App - Get Out of Debt Fast, Get Rich Slow! (Hour 1)

Episode Date: April 28, 2023

Jade Warshaw & George Kamel answer your questions and discuss: Struggling to get ahead working the baby steps, Why you should get out of debt quick, and get rich slow(ly), "Should I buy a car next year?" "Do my HOA dues violate the Baby Steps?" "Should I get a HELOC to add-on to my house" from the blog: HELOC: What Is a Home Equity Line of Credit? Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Join a Personality-led FPU class. Click here! Enter The Ramsey Cash Giveaway for a chance at $3,000! https://bit.ly/TRSgvwy Shop our bestsellers during the $10 Sale! https://bit.ly/TRS10Sale Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Interested in advertising on The Ramsey Show? https://ter.li/s64ye3 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Pods Moving and Storage Studio, it's The Ramsey Show, where we help people build wealth, we help you do work that you love, and create actual actual amazing relationships. I'm your host today, Jade Warshaw, and I am joined by possibly my favorite, the incomparable George Campbell. Wow, you hear that, Dr. John Ohlone?

Ken Coleman, are you listening? Somewhere Ken Coleman is seething. I'm just kidding. But we're here to take your calls about your life, your money. Give us a call, man. The number is 888-825-5225. And let's go straight to the phone lines. We got Amber in Chattanooga, Tennessee.

What's going on, Amber? So I'm starting to try to do the baby steps. And I am having trouble getting started with the first one. Every time I have money put up, something comes up to where I have to use that money because I don't have a choice. So the first baby step for those of you listening is baby step one, getting $1,000 saved.

And so Amber, you're having a hard time with that because you keep falling back and spending it. Am I right? Correct. And are you using a budget right now i am i write down everything that i owe for each paycheck um i go you know like if something's done from the first of the month to say the 19th because i get paid every two weeks i write what is owed in between those days that way not everything's coming out one check um but it seems like you know i try to calculate you know my tithings and stuff for

church plus i want to put money back it's like i can't get either one of those started right so when you are having to go into your emergency fund what are the type of purchases that are causing you to do that are they unexpected charges or is it just month-to-month stuff that you're like man I forgot to budget for that and now here we are um so I was actually starting to get ahead this last month um I had almost $500 put up and my dog ended up started having seizures so I had to go take him to the vet which was very very unexpected and of course I had already paid all my bills for that week and that was the only money I had left to be able to take him to the vet to have him checked out.

So can I ask you like what's your income been like what how much money are you bringing in um so i've been working overtime at work so my past two paychecks have been over 1900 every two weeks okay so you're making almost four thousand dollars a month you know correct here's the thing for folks listening when it comes to emergencies the way that we think through whether something is an emergency where you would dip into that money is it's got to be totally unexpected it's got to be something that's totally necessary and it's got to be urgent right george and you know so the dog was one example is there another example that you can give because i don't want to come at you hard amber uh with the dog stuff just yet so i want to know is there another example? Well, so the house we're living in, we just moved in this past July. We're trying to buy this house, so we're leasing to own this house.

Who's we? Me and my husband and my mother-in-law. My mother-in-law lives with us, so she helps as far as the house. Where is his income going? Towards the house. So you all split bills um we do split bills but he's on disability so he doesn't get much a month so his whole check goes towards the house uh we agreed to do that that way we could put that up for the whole month and then i take care of the rest of the bills i think that is, this sounds to me like a budgeting issue.

I think that you guys need to combine your money together. So if he's making, you're making $4,000 a month, what if his is, how much is his? His is a little over $1,300 a month. Okay. So combine that income and do a budget together. That's, I know that you're saying that, hey, all his money goes towards it, but having it all in one place on purpose. And then, you know, you're saying that, hey, all his money goes towards it, but having it all in one place on purpose. And then, you know, you're just going to have to draw some lines in the sand and say, all right, we got to get this money saved. Most people are able to get a thousand dollars saved in 30 days. And so for you, you might have to go all out to get this money put aside, because if you're just kind of like going little by little. Yeah, a little ankle ankle biter stuff can pop up but if you're like i'm gonna sell stuff i'm where i'm gonna pick up an extra job i'm gonna do whatever

it takes to get this thousand dollars saved so that the big bad wolf is no longer you know breathing at the door you're gonna have to do that and then you're gonna have to make sure that this budget is airtight it sounds like your budget is not as detailed as it needs to be i think there's some money leaks happening yeah and there needs to be. I think there's some money leaks happening. Yeah. And there needs to be a line item for FIDO. You know what I'm saying? You got to make sure Rover has got some money that you're putting aside a little bit every month and like a little sinking fund so that when those vet bills pop up, because they

will, you've got some money to pull from. At least that's what I would do, George. Yeah. What are you using right now to budget, Amber? So I've just been using a notebook that I write everything down. I wrote everything down that I owe every month, how much I pay each month. Plus I also wrote down how much I owe as far as that debt goes. Good. I'll do you one better. And here's what I want y'all to do as a couple. This is not an Amber thing. And then he does his thing and covers his bill. Sit down together. I'm going to gift you one year of every dollar premium. Inside of every dollar premium, you're going to list out your income,

your expenses, your debt, just like that notebook. But there's another feature on there called paycheck planning. And this will allow you to see where the bills fall, when the money's going to come out, because right now it feels overwhelming because you're trying to keep track of that. Let the robots do the work for you so you can focus on getting out of this situation. That means we're selling stuff because right now I'm seeing a whole bunch of margin. Even after the mortgage is paid, you got 3,800 bucks left over and it's disappearing into the abyss because of these little ankle biters and probably some lifestyle spending. Are y'all eating out? No. I try to make everything at home.

Good. Are you guys investing at all? No. Okay, good. Are you getting a tax refund? We did get that tax refund, and I paid off one of our loans that we was paying on, and that pretty much took all our tax refunds.

But remember, baby steps, $1,000 goes first. So did we have that as part of the refund? We did. Okay. So I think once you have that $1,000 as your foundation, our goal is to never touch that. If there's another emergency, let's see if we can cash flow it with future income, with selling stuff. You're working overtime. Can he pitch in at all?

Is he on board with this plan or is it just amber right now pretty much it's just me right now i think that's part of the problem i do too and it's going to cause resentment down the road when you're busting your butt and he's like i don't know what you're working so hard for let's go out to eat tonight you're like i'm trying to do this budget thing man i'm trying to get out of guess out of debt yeah and that's where you guys need to be budgeting together. And him being on disability really doesn't have anything to do with it. You know, I kind of felt like she said that as a, well, he's on disability. He has this money. His money just goes towards that as though it's not as big a part of it, but it is. If you're listening and you're a couple, you've

got to combine your finances. Otherwise you're just, you know, it makes it so much more difficult because I can tell in the way her voice, she feels like she's having to shoulder all of this. And it shouldn't be that way. Well, you live like roommates. Eventually you're going to get that roommate resentment. Yeah, that's true. And so you got to act like married people. You can share a bed.

You can share DNA. You can share a bank account. I promise you. That's right. When you say I do, it's not just I do to the easy stuff. It's I do to the challenges. And money can be a challenge

until you really start understanding what you need to do until you get on the same page. But man, do to the challenges and money can be a challenge until you really start understanding what you need to do until you get on the same page. But man, it's worth it. So true. Well, hang on the line, Amber. Austin's going to pick up. We're going to get you every dollar premium

to help you get on track and get it from Notebook into the app where you guys can share this together. I love it. This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down. And if higher costs aren't enough, the wait times to see your doctor are longer,

and it's harder than ever to get anything approved through the bureaucracy. So if you feel like the system is working against you, try a biblically-based alternative to health insurance, Christian Healthcare Ministries. CHM is a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of over $11 billion in medical bills since 1981. And CHM has also helped them stay true to their values and avoid miles of red tape. And CHM support goes far beyond meeting financial needs. They'll also help meet spiritual needs.

Members become part of a family who will pray with them and for them when they experience a medical event. So listen, y'all, there's no better way to take care of health care costs. CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget at chministries.org slash budget. You're listening to The Ramsey Show. I'm your host today, Jade Warshaw, joined by George Campbell, fellow Ramsey personality. And George, you know, all the time we get folks sending us things and our DMs are like,

hey, you got to see this, whether it's money related, whether it's just something outrageous. And you came across something here recently. Yes. I usually when 10 people send me something within like six hours, I'm like, we got to talk about this. Apparently it's trending. I got to keep up with the times. And so thank you to all of you who follow us over at Jade Warshaw on Instagram, at GeorgeCamelWithAK on Instagram. And usually people send me videos just to like rile me up. But this one I thought was going to be a riler upper, and it was actually a funny parody video, but it perfectly sums up what people are seeing out there when it comes to financial advice on the internet. So I wanted to play it for you and get your reaction live.

Okay. I haven't seen this one yet. So let's play it, James. The next time you're going to order Uber Eats, don't. Use that $20 to buy a Mercedes G-Wagon. Why? Because you can write it off as a business expense for the LLC that you registered earlier in the morning. Now you're going to drive that G-Wagon for 24 hours for Uber Eats delivering food. And then you're gonna use that money that you just made to get an FHA loan that you can get a rental property with. Once you get the rental property,

you're gonna rent out all the four units, you're gonna sleep in the bathroom, this way you don't have to pay rent. And you're gonna use what's called monthly recurring revenue. That's passive income. Now what you're going to do with that passive income is buy my course. Oh my gosh. So finance gurus be like, is that how we sound? No, that's not what we sound like. It's what the opposite side. Those people,

those gurus. Yes. So let me just recap the, what this guy mentioned and it's literally, he just riddled off all of the get rich quick crap that you guys hear on TikTok and Instagram. So he starts off talking about the Mercedes G-Wagon. Yes. Use that to drive with your LLC. So make an LLC. Once you get the G-Wagon, it's a tax write-off. You hear those all the time.

It's always an LLC. Then you drive for Uber Eats. Use that money to get a nothing down FHAha loan which you can use to buy a rental property then you house hack by having everyone else live in there you live in the bathroom rent free and that's monthly recurring revenue mrr as we call it in the biz that's passive income baby and then you use that to buy the guy's course and that perfectly sums up how i feel about all these financial guru idiots out there pitching their schemes. Yeah, that's, you know, that's the thing. If you, if you watch one of these Instagram or TikTok videos and you don't

get it instantly, like to me, that's a red flag. Like finance, it's not mystical. It's not like this thing that you've got to be like super smart to understand. This stuff should be simple. Like managing your finances, the concepts are actually very, very simple. So when I hear something like that, I'm like, what, why would you do that? Like, just, just be smarter. Like be smarter than that. Here's my general mantra with financial advice on the internet. If it sounds sexy, run away. If it sounds like work, it's probably the right thing to do. You're on the right path. If it looks like hard work and it makes me go, oh gosh, you're right. If it convicts you, if it gets you excited, that's a sign that you need to run. That's a red flag. We're like, all right, first step to wealth, baby. Get your Mercedes G wagon. I'm like, hey, all right, I'm picking up what he's putting down. What's next? Get a

rental property. Okay, that sounds slick. You're making passive income now, Jade. It's so passive. You don't have to do anything. When I hear the words passive, look, when I hear the word passive income and quadplex, I'm done. I feel like I've heard the word quadplex far too many times. I'm perplexed by all the plexes y'all are throwing out there. Oh my gosh. But this is spot on. So here's the thing. The best way to build wealth is by doing none of those things. And it's a lot of work. It's just getting out of debt staying out of debt investing for the future and things that have proven track records and then just sleeping at night and going to a job you love how's that for the american dream not using your g-wagon as a tax write-off to form the llc and then you borrow from your own self tax-free jade because debt isn't taxable

that's why you got to leverage debt right that's That's what they all tell you. That's what they say. It's just, at the end of the day, it's get rich quick. And we don't preach any of that. We understand and we know that it's a process. We know that when you make the decision to handle your money well, when you put good habits to use, it takes time. Building wealth takes time. I mean, look at your story. You started out with $30,000, $40,000 in debt.

$40,000 in debt, paid it off, but you were able over the course of how many years? 10 years. 10 years to turn a negative net worth into a million dollar net worth. And it's none of the things, I know that was a parody, but it's none of the things that that guy was preaching. Well, what they preach is get rich fast, get out of debt slow. Hang on to it as long as possible. We're preaching get out of debt fast, get rich slow. It's so counter-cultural that it's now become controversial.

Yeah, it requires a paradigm shift in your mind 100% because what we teach, it is not out there in culture. When I go on Instagram and the TikToks, everything is, you gotta start investing now, time is money. And I'm like, well, wait a minute and i'm like well wait a minute wait a minute wait a minute is this really the best uh is this the best path that's going to get me there the the i want to say the fastest but you know there's so much more to it it's not just going fast and

and wealth gained hastily will dwindle that's what i'm thinking about in my mind right now proverbs 13 11 wealth gained hastily will dwindle but whoever's what I'm thinking about in my mind right now. Proverbs 13, 11, wealth gained hastily will dwindle, but whoever gathers little by little will increase it. That's timeless. Timeless. My man Solomon was doing Twitter before it was cool. Okay. I know that's right. Speaking in tweets. All right. Let's take a call. Let's talk to Mike. He's in Columbus, Ohio. What's going on, Mike? Hey, how you doing? Thanks so much for taking my call. My question is around buying a car. So my wife and I, we're on baby steps four, five, and six. We don't have any debt except our mortgage. We owe about $200,000 on our mortgage.

And I really want a new car. The car is going to cost me about $40,000, and I wanted to get it next year. But I'm conflicted. I keep going back and forth because it's like I can't justify paying that much for a car when I still have a mortgage. So my question is, should I pay the mortgage off and then quickly ramp up the savings to get a new car or should I just go ahead and get the car? What's your household income? About $270,000 plus incentive can be up to about $30,000.

Way to go. That's very nice. So how quickly could we pay off this house, making 270 with no debt? So we did analysis. We did like three years. We can do it in like three years. I believe that, and I bet you could beat it. So here's the question. Can you wait two years to get this car, three years to get this car? I to get this car i think i can the car i'm driving now is a beater um it's about 10 years old but it's still running very very well um but i'm just i keep getting embarrassed driving it honestly um who you trying to impress mike you make 300 000 you have any debt i mean let me ask this do you have to go straight to the $40,000 car? Can you upgrade what you have now slightly and cash flow that

and then save the big gift for after the mortgage is paid? Yeah, so I thought about that as well. But then it's like if I want to get a car, I want to get something I really want. So I might as well just wait and just wait it out. So it's either wait it out or just get the car. Here's the thing, Mike. I mean, I've had the car for eight years. so it's like i can wait three more yeah you're not violating any of the ramsay principles we're not mad at you it's okay if you get the car i'll tell you what i did i

dangled that mortgage in front of me until that was paid off to upgrade my little beater honda civic and when i did it it went from this I deserve mentality to I earned that. Let's celebrate. And so that's just how I'm wired. I'm wired where I need a goal in front of me. Otherwise, I get a little lazy. I get a lackadaisical. And so there's nothing wrong if you save up and pay cash for a $40,000 car making 270. There really isn't. So if you're itching for it, go for it. But don't regret it either and go, man, I hate myself now for doing that. I could have paid down the mortgage. It's fine. When you move from baby step three to four, it's from intense to intentional.

And some people go harder at the mortgage like I did. Some people go, all right, it's going to get paid off within two years anyways. So let's upgrade the car. And the rule of thumb there, when it comes to vehicles, things with a motor in it, you don't want it to be any more than 50% of your annual income, things with a motor, because we know they go down in value. So with his case, I mean, he's got $270,000 in income, which is amazing. So buying a $40,000 car, I mean, I don't know what his other cars are worth, but I'm sure he's within reason here. Within the 50% limit.

That's funny. You know, it's funny. You guys are definitely cut from the same cloth, because if it were Jade, I'd be like,'m just gonna you know upgrade slightly if you're sick of driving a beater and then I'd probably go all in but I mean but it's kind of like baby step one I kind of like the fire under me of hating this beater so much that it drives me to pay off the mortgage faster you get a mid-tier car that you're like this is nice that's true going everything's fine but it also matters how long it took you to pay off the debt. Oh, that's true. It matters how long you were in the process before because some folks, by the time they pay off the debt, they're like, I need something. I need to feel like I rewarded myself.

Here's the thing, Jade. People call in and they're broke and they're like, I'm about to buy a $60,000 car. Mike's over here making $300,000 with no debt going, hey, can I buy a $40,000 car? I love it. Yet again, it boils down to when you do this stuff, guys, you have options. You get to ask fun questions like that. Can I buy a $40,000 car now or can I buy it later? This is The Ramsey Show. You're listening to The Ramsey Show i am your host ramsey personality jade warshaw joined by george camel and uh george during the break we had some lively discussion

about honestly just the state of personal finance right now um all you all you have to do is turn on the news for a second to hear inflation all-time high mortgage rates you know folks are going crazy and and it's just here's the thing there's a lot going on there's a lot going on with the economy there's a lot going on with the government um and you kind of just have to choose how it's going to affect you. And we did a segment a while back and we called it the perfect storm of stupid. And I like that. And I think it's time to talk about it again, George, because we're seeing this and the stats have come out a record 69% of the public at this time holds a negative view about the economy. So ask yourself whether you're driving in your car right now, you're watching on YouTube, is that you? Do you have a negative view about the economy. So ask yourself, whether you're driving in your car right now,

you're watching on YouTube, is that you? Do you have a negative view of the economy right now? The stats tell us you probably do, both now and in the future. And it's probably because of the headlines. Because of the headlines, exactly. And only 24%,

we're just going to go through this and tell you guys, 24% are saying they don't feel like now is a good time to invest in stocks. Oh, they're saying now is a good time, which means 76% say like now is a good time to invest in stocks oh they're saying now is a good time which means now is a good time 76 say it's not a good time yeah they're wrong they're wrong three out of four people are saying don't invest right now it's a bad time to invest which is really just the opposite because i'm like no when the when the market is down that's when you want to invest it's on sale it's on sale it's the kind of sale i want to fall for

yeah and you know there's just so many things's on sale. It's the kind of sale I want to fall for. Yeah. And you know, there's just so many things going on. It says many people aren't cutting their expenses and they're keeping their lifestyle the same. Even though, like I said, you can throw a rock and hit somebody who's going to complain about inflation. You know, you can throw a rock and hit somebody who's going to complain about mortgage prices, complain about the cost of a vehicle, complain about their wages, complain about... But at the same time, no one's doing anything to fix it, George. Well, they're cutting back on retirement. This is wild. Historically, high inflation forced a quarter... Forced. I love that term.

They were absolutely forced. A quarter of Americans to slash their retirement savings and a full 12% to quit saving entirely over the last year. But on the other side, we also have record high credit card debt. Yep. We're seeing record numbers of HELOCs being taken out. And record numbers of buy now, pay later. When you say record, I want to hit this number, George, because when you say record numbers of credit card debt,

I need you to understand it's almost a trillion with a T. That's a thousand billions. And a billion is a thousand millions, which means your brain just exploded with zeros. Yeah. That's just what happened right there. So what this is telling us, George, is people know there's a problem.

They feel there's a problem, but they're going to the wrong solution. Instead of saying, hey, I'm going to stop borrowing credit card debt, or hey, I'm not going to take out any more, you know, any more of the equity on my home instead they're doing things like pulling back on their investing using their savings you're you you feel that there's a problem but you're using the wrong solution in order to

solve it so let's try to help these people and understand what you need to be doing well there there's a paradigm shift that has to happen first because we can tell people hey you should get out of debt you should save for emergencies That's all good and well. But until you believe that there is hope for the future, until you believe that the American economy will recover like it always has time and time again, then you're not going to do anything about it. When you listen to hope stealers and you just become a victim, right? If inflation is the villain, then you're always going to be a victim. I that that's so true i mean you need to say that again george these folks need to hear that again if inflation is your villain then you will always be a victim

because guess what inflation ain't going anywhere no it's been here since the beginning of time it's just a little dinosaurs and inflation yep so it's not going anywhere it's been higher than it has been in the past but if you are really your life is out of control because inflation is up four percent higher than it has been, then you are already screwed financially. That's right. That's such a good point. You know, I'm not going to sit back here and act like these these things that are taking place aren't real. Yes. Like people are feeling the pinch of inflation. That's a real thing. People are feeling like they can't spend their money as willy nilly as they once did, because that is the fact. Like there is a pinch going on right now. But I think like you the point you made, George, is true. These things, they they happen in cycles. Right. There's always times when the market is down.

It always rebounds back up. But you've got to understand that that's just part of this thing. And if you are going to continually take those reasons and say, this is the reason that I can't get out of debt. This is the reason that I've got to, you know, use credit cards to get by or this is the thing. You're just those reasons are just turning into excuses for you, because at some point you've got to make that transition and go, OK, what can I personally do? Because I'm the type of person, whatever it is that you're whining and complaining about, there's probably something that you can do personally to change it for the better instead of waiting for some external factor to come in,

whether it be the government or whether it be for your job to give you a raise because they may not give you a raise. You're telling me the boss and the government aren't gonna change my life? Come on, Jade. Here's the thing, the people who are complaining, these are the same people who fall

into these stats americans spent 20.7 percent more at restaurants than they spent on groceries in 2022 now there it is wait a second hold on so we're all struggling and so we're gonna go eat out because that's the solution well george to our spending problem you know it's cheaper to eat i gotta say this in a voice george it's cheaper to eat in a restaurant my time is worth more than that i can't be at home making food my time is more valuable than that they just put the youtube sound effect on that is every youtube commenter every tiktoker out there and then jade on travel right revenge travels back delta reported record advanced bookings for summer travel despite industry-wide inflation and fares so air travel is the most expensive it's

been in a long time and we're all out there going we're gonna book this thing six months out on the credit card because we're gonna get the points we're gonna use the points we're gonna hack the system bro the system is hacking you it's hacking you're the hack yeah this is insane this is like an intellectual inconsistency because on this side you're you're saying oh it's a problem this is not fair but then over there it's like yeah but it must not be that much of a problem because i'm still going to restaurants i'm still going on a trip to hawaii and i'm still gonna take out a car note for 717 because that's the price of the average car note right now and then let's talk about the economy jade because this is the true, but I have some perspective to share that I think will make everyone feel better.

What? These are real numbers. In the last 40 years, the S&P 500, which is the index that is used to really track the stock market in the US, in the last 40 years, the S&P 500 was up 32 of those 40 years. That's right. And get this, 22 of those years, there was a return greater than 12%. Wow. Everyone out there is going, you mean you're making 12? Well, dude, you're looking at your 401k in the last year or two. Have some perspective. The S&P 500 was up over 12% for 22 out of the last 40 years. I'm not betting against the American economy, and I don't think you should either. And when you look at it, the years that it was down, the next year, it's rebounded right back up. So when it's down,

you're buying on sale. When it's up, you are making some sweet coin yeah and that's how you build wealth you just leave it don't touch it don't pull it out because you're scared because you saw a headline and especially don't turn to buy now pay later and he locks as some kind of solution to all your problems please please i i feel like we need to give these people what the true solution is because george you and I know it. You know, like I said, you guys feel that there's a problem and you're right. There is a problem. But the solution is not borrowing more money. You cannot borrow your way out of debt. You cannot borrow your way out of financial strain.

You've got to actually draw a line in the sand. You've got to stop borrowing money. And if you didn't hear, we just announced something that's very, very, very excited. Me, all the other personalities, George included, Rachel Cruz, Ken Coleman, John Deloney, all of us are excited about this thing that we're doing, guys. We are hosting Financial Peace University. All of us. We're all doing our own class. And we want you to join because we understand how this can affect your life. I got to do this last month with a group of folks and George,

the average turnaround was $10,000 in five weeks. In debt paid off and dollars saved. Yes. Five weeks, 10 grand. 10 grand per household. Wow. Five weeks. Now think about that. Think about how that would change your life. If you weren't worried about inflation because you had a $10,000 turnaround, you see the debt going away. You see the savings build up and you go, I'm less worried about the headlines because that's not what changes my life. I mean, this financial peace class, if you're listening, we will give you the link that is also on the YouTube page. My class starts May 8th. George, yours starts June

20th. And you can go online and sign up, fpu.com. Check it out. Sign up today, guys. This is what helped us get out. This is what helped my husband and I pay off almost half a million of debt. This is what helped George pay off over $30,000 of debt. This is the plan, and the plan works. Sign up today.

This is your way out. Don't be complaining anymore because we just gave you the solution. You're not gonna have an excuse after you go through our fbu class this is the game right here it's your chance to sign up uh head over to the website now and do that financialpeace.com this is the ramsey show you're listening to the ramsey show i am j Jade Warshaw your host today I am joined by fellow Ramsey personality George Camel and we are taking your calls give us a call the number is 888-825-5225 and I've got William in Atlanta Georgia ATO what's going on William

hey good afternoon, guys. I just want to start off by thanking you guys for what the entire Ramsey team does. I mean, when I look at where my wife and I are financially at 25 compared to our peers or even those approaching retirement, it brings us an incredible level of peace knowing where we are. So thank you, guys. Thank you. So I trust the Ramsey team. So that is why I have

a question about our HOA. My wife and I just purchased our first property and it is a high rise condo that we will use as a rental property when we pay it off. You know, it's in a fantastic location. The amenities are top notch, you know, gym, pool, movie theaters, great staff. It's clean. But one of the things that I don't hear often when HOAs are discussed on the show or in the comments on YouTube is, you know, the HOA can kind of help control the type of people you're living with, which tend to be, you know, high-functioning, high-performing professionals, which matters to me. So that is why I was able to rationalize getting into an HOA, but I also recognize being in my mid-20s, having zero life experience in the real estate space and no wisdom in real estate. But what I had just laid out made sense to me, and we pay $650 a month, but we're only a couple months in. We just purchased and seen a recent conversation

Dave had with a caller on being in an HOA made me think we may have stepped into something we should not have. So we can afford the HOA. We've studied the financials and everything checks out, but I'm just kind of wondering what could I be missing here? What are the dangers that I'm not thinking about? Well, what's your mortgage payment with all of the property taxes, homeowners insurance, everything included, interest? Yeah, $2,500. And then plus the $650,000. And that puts us at $3,150 a month all in? Yes, sir.

And then what's your after-tax monthly income? After-tax monthly income, we're right around $12,000. So then, you tell me then, what's your hesitation on this? Because we tell folks, you know, when you're purchasing a mortgage, you don't want it all in, talking about taxes, fees, HOA, payment. You don't want it to be more than 25% of your take-home. And you're under that. You're right at 26. So you're pretty much spot on. So yeah, I mean, we're good in that. I'm comfortable with that. It's more so just hearing that conversation the other day made me question whether or not there may be

something that I'm missing being in an HOA. For know, an unexpected cost comes up where they're going to force us to pay a certain amount of money. Yeah, everyone goes, all right, we all got to chip in 10 grand to cover this. That's a part of being a part of an HOA. Yeah, the fee can go up. Absolutely. So there is some risk there. Is there anything else? I mean, at this point, I guess my question is, is it enough that it would make you move on because you're in the condo now? Right. No, it's not. And again, it's fine. We can afford it. And we just got into our professional career. So our professional income is only going to grow from here. And so I'm not too worried about the HOA going up.

I'm more so wondering what other potential dangers there are being in an HOA or being a homeowner in an HOA that I may not have considered. I wouldn't call it dangers. It's just more the annoyances of like, all right, we've got to follow the HOA rules. If they say we can't paint the door red, we can't paint the door red. And so, you know, there's all the kind of the parks and rec level pettiness that goes along with HOAs and the meetings and the frustrations. But I part of the HOA. He tries to get on the board so that he can have kind of a control, a little bit of a say in what's going on and kind of see what's going on sooner than the other members might know what's going on. So I feel like if it's something like that, you might want to see if you can get involved in it. But I'm like, George, I wouldn't say it's a danger.

Just know that it's a variable cost and it has the ability to change over time as do, you know, your taxes could change over time. You know, there's things that can change when it comes to a mortgage. So that's why we teach it the way we do, because we want to make sure that you do have plenty of margin if something like that were to take place. But very, very good question. I like that. If you're worried about it get involved with it yeah and it sounds like william's about to be the newest member of the hoa very excited for him he seems like he would make a good a good hoa but it feels like like presidency you can only last a certain number of years in the hoa before you're like all right i'm out guys i did my part well as

long as you do a good job if you do a good job you can stick around for a while but i'll tell you the houses we've moved in the hoa man sometimes it's like y'all aren't doing anything. We're just giving you our money. And a lot of times you come in and there's just a giant pool of money. They're not doing what they should be with it. I'm like, can y'all replace the sign in the front? Can we get some new trees planted here? Can we rip?

You know, and sometimes it is a good idea to get involved with your HOA because you can have a say-so in things. You can get the ball rolling on things and make sure that your money is being spent the way at least you want it to be spent and you can convince others. It's like Congress, but you have a little more involvement. You know, I don't agree with how they spend, but I can raise my voice and say, I don't like it. Well, guys, if you're a new listener and you want to dive deeper into the Ramsey baby steps, we want you to go to RamseySolutions.com and click the get started button. Probably today you've heard George and I talk about all sorts of things. We talk the lingo around here. We're talking about baby steps.

We're talking about different rules and it's kind of a Ramsey thing and we don't want you to miss out. So go to ramseysolutions.com and click that get started button. We'll help you figure out the next best step for you on your financial journey based on exactly where you're at today. So that's ramseysolutions.com slash get started. And as always, we love that you guys listen to the show. We're here because y'all are here. We wouldn't have a show if you didn't listen. So we're extremely grateful that you guys tune in day after day, whether it be podcast, YouTube, whatever it is. But hey, we want you to share the show. We want you to tell other folks about this. If it's helped you, if you enjoy it, or maybe you just find it entertaining. Just click the like button, click the share button on whatever platform that you're listening.

We would really, really appreciate that. So let's take another call real quick. We got Neil from St. Louis, Missouri. What's going on, Neil? Hey, I have a question. I was wondering about getting a HELOC loan on my house for a home addition. No! What's this addition? All right, so I have a house I bought for $130,000, really good interest rate, whatever. I got five kids and a sixth one on the way, $1,200 per foot. So I figured spend another 50, 60 grand would be cheaper than going to buy like a $300,000 house, you know? So. So you're going to basically build a mini house on top of your house for 50 grand?

Yeah. Oh yeah. I got a lot. I'm a contractor, so I can do a lot of work myself. So it costs me like 50, 60 grand to hire out like the stuff i can't do like foundation stuff do you have any debt uh um i think yeah i got uh just my home and then uh since i have so many kids so fast i bought a big van for 25 000 i got a loan on that but i kind of have cash sitting there where i could pay it off i just how much cash do you have in the bank? I got like 30 grand in my bank and then like 40 grand in investments. Are these non-retirement? Yeah, just general mutual funds.

Okay. And then cash in the bank for just like kind of on the side for business and payroll. I always like to have a big chunk just have for a couple months of payroll and stuff. Okay.

So here's an idea. I don't think you're going to do it, but I'll tell you what I would do if I was in your shoes, which is how we answer calls on this show. I would take that 70 grand. I would use a portion of it to pay off the van. I would then set up your fully funded emergency fund of three to six months of expenses.

And then once I have the money beyond that to cash flow the renovation on the house, I would then do it. But I would not take a HELOC, putting your home at risk, paying stupid interest and setting you backwards financially. That's true. And the money that you have set aside, I agree with George wholeheartedly, the money that you have set aside that you said was maybe for payroll and business type expenses, I just want to make sure that you are managing that money properly and that you're keeping it

separate from your personal money. And just know that whatever money that you pull extra from that you're gonna have to pay payroll taxes on it so just understand what that's going to look like and it's going to be a a pretty penny of that because you know uncle sam oh yeah you're gonna make sure you get the old capital gains on those investments as you pull them out that's right and definitely no non-retirement investments but investing my reserves feels like a terrible idea because if the market goes down, I'm screwed. That's dangerous. Yeah, that's true. That's a good point. You want to have that cash on hand. Well, guys, that does it for today's show. Hey, be sure to join us next time. And until then, remember, you can tell me you won't do it, but please do not tell me that you can't.

With God, all things are possible. Hey, what's up, guys? It's Jade. If you love the show and want a deeper dive on your money journey, we have a weekly newsletter that gives you trending and helpful articles and tips on following the Ramsey way. Just go to ramseysolutions.com today to sign up for our newsletter. Again, that's ramseysolutions.com to sign up for our weekly newsletter.