The Ramsey Show - App - Hard Work Now Makes for an Easier Life Later (Hour 2)

Episode Date: June 17, 2022

George Kamel & Kristina Ellis discuss: Why you should stop investing in Baby Step 2, The power of compound interest, Paying off student loans that are in deferment, How a 16-year-old can set themselves up for success. 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

from Ramsey Network, this is The Ramsey Show, where we help you get control of your money, get ahead in your career, and get on the path to living well. I'm George Campbell, your host, host of the Fine Print and Entree Leadership Podcast, joined today by fellow Ramsey personality and bestselling author, Christina Ellis. And we are excited to take your calls, 888-825-5225. Taylor's kicking us off in Portland, Oregon. Taylor, welcome to the show. Hey, George. Hi, Christina. Thanks for taking my call. Absolutely. How can we help? So a quick backstory is, starting this year, we got more in line with the Ramsey plan and my wife and I are currently on baby step two.

So we paused investing, paused extra mortgage payments. Our two debts that we're working on is my wife. She's buying into her practice this year and we plan on having that done by the end of this year. And then the next one or two years after that, resuming her med school payments and getting that out of the way. And then we'll be debt free. so we're expecting another child next year. And so as we're now with my wife, now being a business owner, we're learning what it means to pay quarterly taxes and estimating withholdings, et cetera. Um, so next year she won't be paid while she's on maternity leave and at the same time she'll go

back to work part-time during the first year of our child's life that's what she did with our daughter and she wants to do that again so it looks like a big drop in income next year so this year even though we're not experiencing her big increase in income because we're on baby step two um it's obviously going to be more and so my understanding is when it comes to safe harbor laws and contributing 110% to avoid penalties based off the previous year's income. So I guess my question is, is it all worth considering trying to budget and contributing to any of our pre-tax retirements again to decrease our tax burden for next year since we're anticipating a drop in income? No, I just don't think that's going to be the life hack and shortcut that it seems to

lower your tax burden. So what's your income starting at this year? What's it going to go to? It's a significant increase this year. I don't know exactly because it's the first year, you know, she's going to, I mean, it's going to be somewhere between $3,000 and $350,000. And I can say this year we're just, we're not experiencing because, I mean, it's going to be somewhere between $3,000 and $350,000. Awesome. And I can say this year we're just, we're not experiencing, because, I mean, we plan on having $150,000 in debt paid off in just this year alone, and then getting the rest of her med school off right away. What's the total debt?

Total, I have to look right at it. Her med school is under $100,000. I believe we're at $90,000 still. I have to go back and look at our chart. But we were able to pause that because it was a personal loan. That was a 0%. We paused it. We said, hey, we'll pay extra once we finish this buy-in,

and then we'll be done with it at the same time we anticipated. So are you guys doing the debt snowball? It sounds like you were doing a little different plan. Are you doing them smallest to largest regardless of interest rate? No. We started this way before. We of uh listened to you more as far as what the death snowball means um the reason why is there was a little we just did it because it's a bigger one a little bit of interest and my wife personally wanted this one done when she

goes on maternity leave with her practice and then since the other one was through her family it was just an easy thing hey can we pause this and then come back and just have it done at the start of next year at a higher rate um i guess technically, no. Here's what I'm feeling for you guys, Taylor. You're doing a lot of wants. And if you start investing and we're paying off some of the debt, but it's not the smallest one, we're not really feeling the progress. And so my worry is she goes on maternity leave, the income goes down, and you're exactly where you were with no money and having all these payments in your life. So if I'm in your shoes, I'm going, we can ratchet this up.

We can get really intense. Let's do the debt snowball. Let's follow the proven plan that millions of people have done and realize that we're not as unique or special as we thought we were. And I think you're going to find yourself in a very different place if you do that. Sure, and I will say one clarifying thing. We don't plan on pausing even paying any debt payments with the child. I know in the past, it's,

you know, or when I've listened to the show, you talk about, um, uh, you know, pausing babysat to when it comes to having kids. Um,

yeah. And I was trying to, you guys have money in the bank. Um, we do. It's, it's tight just since we're, you know,

still basically on her side of things, we're only holding her income to pay for, uh, basically quarterly taxes, and we're living off my income. Okay. Do you have an emergency fund? The bare minimum.

Okay. It's a little over $1,000, but we don't have three to six months now. Cool. And how much do you have left with paying into the practice? We started at $150. At the end of this month, we would have paid $90,000. And so, yeah, you say $60,000. You have $60,000 left.

And then how much do you have left in other debts? It's just for med school. I believe it's $90,000. I have to go look at the chart again. We haven't looked at it because we decided to put everything kind of towards this practice, have it done in one year, and then get back with the med school and then be done with it. So between the two, $150 total? Just between those two.

Okay. And you said that you paid $150 last year. Is that kind of like your plan? No, I plan on $150 this year. Sorry. $150 this year. We started, we kind of, we're in, I think, January 1st of this year. That's when she started, you know, being a owner. And so that's when we kind of went full steam ahead with the buy-in and just have that out of the way. And then next year have the pay-off. So at the end of this year, it'll be $150,000. Okay, so do you guys know your debt payoff date?

Like between everything and on the current path you're on, when will you have the debt completely paid off? We didn't write it down because when we have another kid, I just wanted to leave some leeway. We planned on, I said, one to two years, and we didn't make an exact date just because we didn't know how impacting having a child is. We don't know if we wanted to be prepared if, you know, say if the pregnancy doesn't go as planned or there's other medical costs. And say if it forces having to stop in order to pay medical bills if something happened. I don't anticipate it, but just in case. I would definitely have some money socked away for this baby and make sure that mom and baby get home healthy. And then if they are, we can throw that money on the debt.

But I definitely would. I love that you're intense about the debt, but I also don't want to leave you guys in a lurch where you have $1,000 in the bank and you have a medical emergency happen. Right. Luckily, I have paid leave. So I still have a job, and I have paid leave while we're off. And that's what we did with my last daughter. And since it went well, we were able to live off my income even during that time.

Okay. Well, I like you guys doing the debt snowball, maybe socking away five or $10,000 until baby and mom are home safely. Then you can throw that on the debt if that's the case. And I know you want to invest. I don't think the tax credit is going to be worth it. It sounds like you're trading a dollar for a quarter. And so I don't think it's going to alleviate a lot of the tax burden. But I would talk to a tax pro. You can jump on RamseySolutions.com and get in touch with one of our endorsed local providers in your area to make sure that we're not missing anything here on the fine print. Sure. Sure. I appreciate it. Yeah, it's all new for us with her being an owner

and how we're trying to withhold quarterly. So it's just trying to get some advice. It's all new for us. Yeah. Well, I'm pumped for you guys. Excited for the baby. It sounds like this medical practice is going to be just going zoom, zoom, soon, Christina. So this is a good situation.

Big shovel. This debt's going to be cleaned up soon. But I think following the debt snowball is where they're going to see the most progress. Absolutely, yeah. Congratulations, y'all, from the new baby. And it's obvious with the way the practice is going to work out, once you get this debt paid off, you're going to be able to pour gasoline on this fire and just really amp up investing, which is awesome. That's what I'm here for.

Y'all, this stuff works. I'm telling you, and I know it sounds like I'm just cocky and arrogant saying to do the debt snowball, but it's because I've met way too many families on the debt-free stage. And I don't, where are all the avalanche debt people who are going, I paid off my debt from highest to lowest. Look at me now. I'm debt-free. You just lose steam. Well, and you did it yourself. Like you were walking proof of it. You saw how it worked in your life. And now you're baby step seven, living the dream. That's why I'm so excited about this stuff, and I want that for every single family, especially these young couples out there. Man, you can really make some progress when you get on the same page and you follow this plan. You've got a paid-for house in your 30s.

Life looks different. That's what I want to help create. This is The Ramsey Show. show. Folks, listen up. I know some of y'all are putting off getting life insurance because rates went up, restrictions were added due to COVID, but it doesn't change your responsibility to take care of your family. Lucky for you, insurance companies are lowering their rates again, and there are more options than ever to let you skip the medical exam. Yes, it's actually easier than it was before all this mess.

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It really is time co-host today. I'm George Camel, and we are here for you, America, taking your calls. 888-825-5225. All right, Christina. So on the show, we like to have some fun. We like to react to some videos out there floating around the interwebs. And our team brought this one to my attention, and I thought it was a fascinating anecdotal video that can teach us some things, especially to the young people out there, Gen Z, millennials, who are trying to make a buck and make it fast, which leads to some short-term thinking. So I thought we'd play this video and get your hot take on it. You ready? Let's do it. Let's play it. If you had the choice between a million dollars cash and your option of getting

a magic penny that doubled in value every day for 30 days, would you know to pick the right one? Let's find out. For one, you'd have a penny. The next day, you'd have two pennies. The next day, you would have four pennies. Day 11, we have $10.24. Day 12, $20.48. Number 16, $327.68. Day 17, $655.36. Number 21, $10,485.76. Day number 24, you have $83,886.08. Day number 27, 671,088 dollars and 64 cents and on day 30 we have 5.368 million dollars and 12 cents

wow what an interesting little study there so the question was i could give you a million dollars today or give you a magic penny that doubles every day now most people if i asked if i went on the streets of nash Nashville with a microphone and said, hey, what would you take? Most people are going to take the million dollars, right? Would you agree? Because they're not thinking about the power of the compounding growth of that penny. Right.

And I think it's true of our society these days as I watch a lot of videos on social media and it's all zero down this and you need to get on this and passive income and here's how to make this much money today. And a lot of it stems from people are strapped with debt and they're looking for an easy way out. They can't think that far out. They're thinking about this weekend, not five years from now. Right. Delayed gratification. That's what it's all about. I mean, being willing to say, you know what, I'm not going to take, you know, this thing right now that seems so obvious and easy, but I'm going to put it in investments and I'm going to wait for it to compound and become something amazing. Yeah, putting that million dollars, even in a great investment, you're not going to get to five million within 30 days.

Right. Well, the thing is, is a lot of people, you know, they're not willing to wait for that. They're willing to, they want to spend the money right now. They're not even just taking the million and investing it. They're just going, I want to use it right now for this or that. And it's like to be willing to let your money make money for you is so powerful. Absolutely. So I'm taking the penny. I don't know about you. I'm taking the penny. I'm in. Now, if you said I'll give you a million or you can have 5 million in 30 days, it changes the equation. I'm like, oh, okay. Easily, everyone's going to say I'll take the 5 million in 30 days, hopefully. Right. But when you say a magic penny, it doesn't sound like much.

And that's kind of true when it comes to investing. You're putting a little bit away every single month and you're going, 50 bucks a month in an investment account, that's going to make me a millionaire. And you go, well, over 40 years it does, but most people would go, nah, it's not even worth it. I'm just going to throw it over here. I'm going to spend it. I'm going to put it in crypto. But the boring thing is usually the best thing. That's what I've found. Right. It's like Dave was talking about earlier in the week, where it's like, what's easy now can be hard in the long run. And if you're willing to do what's hard now, it can equal easy in the long run. So if you're willing to take that money and invest it and make some sacrifices, you may not spend as

lavishly right now, but it can provide security and an amazing bank account in the future. It's like it is worth it. Doing what's hard now, making the sacrifices, putting the money away equals easy later. Doing what's easy now and just spending the money and not saving, not taking advantage of compound interest equals hard in the long run. So it's like be willing to do hard now so that you can do easy in the future. Amen.

Yes, that short-term sacrifice leads to long-term gain. And short-term thinking usually leads to long-term pain. There's your rhyme for the day. There you go. That's good. I love it. Well, thank you for indulging me with that video. I thought it was fun. I was like, oh, it's amazing to see how quickly it grows.

Yeah. And, you know, as you get older and you get a million dollars in that investment account, it's amazing how quickly it turns to two million. But it took you a long time to get to that first million. So have delayed gratification. Think long-term You'll thank us later. Good stuff. John joins us up next in New Orleans. John, welcome to the show. Hey, thanks for having me. What's going on? The current situation with the student loans and whatnot, my wife and I were both teachers. Never made much more than poverty line, really, into the last couple of years. I got out of the educational system and got into a sales environment.

And we paid off $45,000 in credit cards, $30,000 in personal loans. We are down to $195,000 in personal loans. We are down to 195,000 in student loans. We both have advanced degrees. 195 in student loans and 215 on our mortgage. We have a 15-year at 2.25%. And so the real reason I'm calling is we are in a time of 0%, just a pause on student loans and we are up because we can do retroactively we there were some things we didn't understand about the

payback programs because we did the public servant thing so we're under review right now to see if we qualify for all those years we were teachers and didn't get credit for it under the public service because we didn't know that was a thing we really really didn't do our research. That's our own fault. And I want to know how you guys would say to proceed. You know, we have a farm. Other than that, though, this is this is the last payoff thing. Should we wait until, you know, we receive credit or to find out the decision? And it could be, you know, several months. So you said you're under review right now. Did you have a certain length of requirement for how long you had to be a teacher in order to get that? And have you met that? Well, it was public service.

So it was any not-for-profit. And it was 10 years paying under that. And the new law that was just passed said that they can go back and review retroactively as long as the applications are certified. I think it's October or something. And you did 10 years of service, correct? I'm actually at like nine years right now, and I'm still in a not-for-profit situation. It's just I got into a different, I'm not in education anymore. My wife is still in education. So the current job still qualifies potentially for this forgiveness? Yes. Okay. Yes. It's tricky because so much is changing right now, right? So many, you know,

laws, there's temporary benefits, there's talk of potential major forgiveness. It's just a very confusing industry. And we're getting that question a lot. You know, do we pay it off? Do we take the chance? Do we see? But on the flip side, the interest is paused right now. So it's such a great time to be paying down on student loans. This is a really great time to get ahead. Now, you said you have $195,000 in student loans. Is the whole $195,000 under review? Yes. Yes, it's all public student loans. None of it is private.

And have you received any timeline for when this might go through? So as long as we have our application submitted by October, and the woman was very frank on the phone that this could take a while. So they said they said they could get a decision as quick as 30 days. But I've never had anything with the government that was quick at all. So. Right. And interest is still accumulating in the meantime, right? Is that 0%? Well, once we hit August, interest is going to be accumulating, right? Right.

So if I'm in your shoes, I'm starting to carve out space in my budget again for that payment. I'm starting to think through how am I going to attack that payment. I'm not waiting for the government. I'm not waiting to see what they're going to do. You know, I'm thinking about how am I going to pay this off as quickly as possible. Now, I know a lot of people are nervous because they're like, what if it gets forgiven? And I paid off my student loans and then I missed the opportunity for forgiveness. If you're in that situation and you're concerned about it, then I would still start putting the money aside in a high yield savings account so that, you know, if it doesn't get forgiven, you have that money set aside to immediately pour onto your loan

and potentially get it as quickly paid off as possible. Yeah, that was going to be my suggestion to John, is just sock money away in a savings account, and 30 days from now, when they go, nope, sorry, you don't qualify, you go, cool. I have $40,000 in a savings account. I'm going to start attacking the student loans myself. But in your situation, when you're so close, it may be worth seeing the review and maybe

it does get forgiven. I'm not mad at that. It'd be awesome. Yeah. Yeah. Thanks for the call, John. This is The Ramsey Show. We'll be right back. When our team gets together here at Ramsey Solutions, we talk a lot about our mission to change America's toxic money culture.

It makes us real mad to see people get trapped by debt or to watch kids sign away their future for student loans. And for the folks who work here, this is not a J-O-B. This is a mission to change lives. And if that sounds like a passion you share, you've got to check out all of the exciting roles Ramsey Solutions is looking to fill ASAP. There's never been a better time to find a job doing work that matters. We need developers, UX designers, and writers to help us build digital products that actually change people's lives. You can check out what it's like to work for us before you apply.

Just follow us on Instagram and Facebook by searching Ramsey Careers. And if you want to apply for your dream job at ramseysolutions.com slash careers, now is the time to do it. ramseysolutions.com slash careers. Open phones this hour, 888-825-5225. I'm George Campbell, joined today by Christina Ellis. Lincoln joins us up next in Philadelphia. Lincoln, welcome to the show. Hey, thanks for taking my call. Absolutely. How can we help? I'm 16, and I want to learn how to set myself up for success financially. Love to hear that. Yeah, I make around $4,000 a month and I have about $4,000 in the bank.

Wow. What are you doing for work? I work for the family company and I've been working since I was like 14. And you're making $48,000 at 16 years old? That's correct. Wow. What kind of work is this? It's for restaurant maintenance. Cool.

Good for you, man. And so you have $4,000 in the bank. It sounds to me like you don't have any debt and you don't plan on getting any. Nope, I wouldn't. Stay away from that if I can. Wow. What do you want to do in the future?

Is this like a career and a job that you want to continue on, or are you thinking about going to college and changing it up? No, I don't want to go to college. I know that. I like working. I wouldn't mind staying with the business. I like working on automotive stuff. I do.

Like on the side hustle, I flip cars. I buy and sell cars, and I flip them up and sell them. So I could do something like that. But for now, I'm just going to stick with this business. Very cool. So it sounds like you want to just follow an entrepreneurial path in general. So is college maybe not in the picture for you right now? No, it's not.

Okay. So if we're not worried about that, that takes away a large expense in your near future. So, I mean, at this stage of life, do you have any expenses? You're living at home right now? Living at home, yeah. No, I'm just banking all the money. I love it. I just looked into a 401k, and I'm just curious.

The company matches 3% of whatever I put in. The company you're working for right now? Yep. Oh, awesome. Well, absolutely. If you're able to do that, I don't know the restrictions at 16 years old of when you're eligible for that. I know the Roth IRA is 18, so I would look into that on the 401k side. Yeah, and do you have an emergency fund right now?

I'm not sure exactly what that is, but I have like $4,000 in the bank, roughly so. That's a good start. So, I mean, I'm guessing you don't have a lot of expenses right now, but you might in the next few years if you move out of the house, right? Yeah, correct. Okay. So I would make sure to get that, you know, maybe take that $4,000 up to $8,000 and call that your emergency fund for right now until you have more real life expenses as you kind of go out on your own as an adult. But beyond that emergency fund,

I think it's really cool to start investing. Take advantage of that match. That's going to be 100% return instantly on your money. So I love that. Start there. And if you've got any Roth options, Roth is going to be tax-free growth. So you're going to use after-tax dollars,

but then the money's going to grow tax-free. And if you're going to use after-tax dollars, but then the money is going to grow tax-free. And if you invest that in a Roth IRA or a Roth 401K and invest in good growth stock mutual funds, you're going to be a millionaire. Probably my guess is by your early 30s at the latest if you follow this plan. Okay. And on top of that, once you're investing 15% of your income into retirement accounts, then you can start going, all right, let's save up for a down payment on a house once we got that plate spinning. And now at, you know, 22 years old, who knows, maybe you could pay cash for your first house. Okay, yeah, I mean, I'd want to get out and go on my own at 18. Cool.

I would rent first, so maybe rent somewhere for a few years while you keep saving up and saving up. But if you keep living on Lesson You Make like you are right now, you're going to be just fine. The fact you're even calling with this question at 16 years old gives me a lot of hope for you. Okay, yeah. Yeah, let's get him into Ramsey Plus because are you working on a budget right now? Do you have a budget? No, I just started listening to all your podcasts, and so I just thought I'd give you a call out of question. Nice. Curious, where's all your money going right now? You're making four grand a month. Yeah, I wanted a classic car when I was like younger. So I bought a classic car. And so the money's kind of in the

car. How much is the car worth? Probably around $10,000. Okay. Well, that's reasonable for your income. Good for you. And you paid cash for it? Yep. Awesome. And that's your daily driver?

Yep. Sweet. Well, you sound like you're in a good situation. What I want you to do is, I think right now you're making good money and you're super young and what I want you to do is make sure that you understand the basics of budgeting and where your money is going. And so when Ramsey Plus, when we sign you up for that, you're going to get every dollar premium.

And I want you to make your very first budget. List out your income on one side and all of your expenses on the other. And the truth is you may not have a lot of expenses right now. And so whatever is left after that, I want you to sock away in a savings account. And you can begin investing once you have that fully funded emergency fund. So that's going to be your A1. Let's get another $4,000 in that savings account. And then we can start investing 15% of our income, which for you is going to look like, let's see, probably $7,500 or so. And then beyond that, let's save up for a down payment for the future, maybe some cost to kind of get out on your own

and rent somewhere. You're going to need probably first and last month's deposit and maybe some furniture. So I want you to set yourself up in that way to where when you go out on your own as an adult, you're going to be like, this is easy. I have money.

This is great. This is awesome. And you're not scared of working. And that's the number one greatest skill you can have is a great work ethic. Yeah. And in that Ramsey Plus membership, you can go through FPU, Financial Peace University, that really walks you through the seven baby steps that we do here at Ramsey. And right now you're in baby step three, developing your emergency fund, and you're about to go

into four through six. And then hopefully soon you'll be on baby step seven, paying off a house and just being in a really great spot. But it'll give you that foundation of knowledge so that you really know why you're doing what you're doing, how you're doing it, and just having that really strong foundation as you move forward. Way to go, man.

Hang on the line. Austin's going to pick up. We'll hook you up with a year of Ramsey Plus, which includes all the videos on Financial Peace University and our premium budgeting tool, EveryDollar. Our question of the day comes from Blinds.com. Find out for yourself their 100% satisfaction guarantee. It means even if you mismeasure, you pick the wrong color,

they're going to remake your blinds for free. You're going to get free samples, free shipping, and with the new promos they run every month, you'll save even more. Just use the promo code RAMSEY to get the best deal. Today's question comes from Amanda in New York. We have a sophomore in high school. Due to some bad financial decisions on our part, we won't be able to help him with college. How can we help him not have to take on a huge amount of student loans?

I love this question. So my story, my mom couldn't help me pay for college financially, and she sat me down freshman year and had a conversation and was just really real with me about money and was like, you know, I don't have the money to help you, but I believe that you can go to college and you can pay for it debt free. You don't have to take out student loans. So I want you to get inspired to figure out how you're going to do it. And it really lit a fire in me. I started applying for scholarships and was able to win over a half a million dollars in scholarships and go to school debt free. Here's the thing. Having those conversations early with your student can be so helpful. A lot of parents feel uncomfortable. They feel ashamed. You know,

in this question, she says, you know, we made some bad financial decisions. And so money can feel very shameful and overwhelming. So that can be tempting to not talk to your student about it. But here's the thing. A lot of students are arriving at college age. There's seniors in high school, and that's the first time they're having a conversation with their parents about money. And they're going, I didn't know that my parents weren't just going to cash flow my education. And then they're kind of panicked and more likely to take on student loans. But if you're willing to have that conversation when your student's a sophomore in high school, that is such a gift. If you can't pay for their education, be real and then inspire

them to start thinking about ways that they can go to college debt-free, whether it's scholarships, whether it's working for an employer that offers incredible tuition assistance, whether it's going to community college free first. There's a lot of different options for graduating debt-free, but start creating that strategy early. Yes. Find that local affordable school. Have the conversation. Maybe help them get on a plan to apply for scholarships.

Are you going to work part-time to pay for this? Man, that can be a game-changer. But it starts with a conversation. Parents, you've got to be talking to your kids. I know there's shame and guilt and all kinds of baggage you might have, but you're going to set yourself and your kid up for success if you have that conversation as early as possible. This is The Ramsey personality and host of the Fine Print and Entree Leadership Podcast. You can find both of those on the Ramsey Network and wherever you listen to podcasts. Joined today by Christina Ellis, and we are taking your calls, 888-825-5225. Kathy joins us up next in Denver, Colorado. Kathy, welcome to the show.

Thank you. I appreciate you taking my call. Happy to take it. What's going on? Well, I'm 58, have not saved for retirement. I just recently read the book, the Baby Steps book, and I'm 2'3000. I owe about $180,000 on my house and was wondering if I should use that money to put toward my house. I am making an extra, almost an extra house payment per month now and have been for the last six months.

Awesome. What's your income? I clear about $4,000 a month. Great. And you've got the margin you've gotten so you said you're in baby step three you've got no debt and a fully funded emergency fund so you should be in four at that point oh yes i'm sorry yes um i have about fifty thousand saved in my emergency fund okay it sounds like that's more than six months of expenses for you. Yeah, about a year. I just didn't know if I should invest some of that in my house or where I should go from this point on. Yeah, and so you're getting $100,000 of inheritance in a few months.

Uh-huh. So what I would do if I was in your shoes, I'm taking whatever is beyond the six months of emergency fund plus the $100,000 inheritance and just throwing that at the mortgage. So like $125,000 toward the mortgage? Yeah, I mean that would leave you with, what, $55,000 left? Right. That's a good place to be.

And you said you're making an extra payment a month, and now a whole bunch more is going toward the principal instead of interest. Okay. And so then I would start to map out, okay, in two years I could have this mortgage paid off. Okay. And so then I would start to map out, okay, in two years, I could have this mortgage paid off. Okay. If I can throw 25 out at a year, I don't know what's feasible for you, maybe two and a half, three years, but that would be my next goal. And on top of that, you are able to do some catch-up contributions in retirement. Do you have any retirement options at work? No, I'm self-employed. Okay.

Well, you still have got options. I mean, you've got the SEP IRA, Solo 401K. So if I'm in your shoes, I would talk to a SmartVestor pro. You can jump on to RamseySolutions.com and click on Trusted Pros. Get in touch with them to figure out what the right kind of self-employed retirement plan is right for your situation. And then I would start socking away a bunch of money in there. And I would start doing 15% today. And whatever's beyond that, you can continue investing after the house is paid off. Okay. Does that make you feel better for your retirement? Because here's the thing. Once you remove that mortgage payment, it's going

to change what your retirement looks like. It's going to lower your expenses. Right. Are you going to get Social Security or their pensions? What's your plan to actually retire? Are you going to have to work for another 10 years? I probably will, and Social Security is all. I don't have a pension. Okay.

Well, I would be about the business of getting this house paid off. Let's start investing 15% as soon as we can into some self-employed retirement plans. And then once the house is paid off, we can increase that investing and really start to ratchet it up as you continue to work for the next decade. And hopefully, fingers crossed, that will be enough with Social Security to cover all your bills, which you won't have a lot of because you won't have any payments, right? Yes. Okay. Well, that's my plan for you, Kathy. Call us back if we can help along the way and jump on RamseySolutions.com.

Get in touch with a smart investor pro. Kathy, you can get there. I know I can kind of hear a little bit of hesitation in your voice and a little bit of concern, but you can get there, especially with an almost paid-off house. You're going to be feeling pretty good in a few years. So thanks for calling, and we're rooting for you. Yeah, and it may be a different picture of what retirement looks like. It may not be lavish vacations, but you can cover all your bills, you can put food on the table, and no one can take anything away from you

because you own it all, including your house, and that's a good place to be. Appreciate the call. Lucas joins us up next in Fort Mill, South Carolina. Lucas, welcome to the show. Hi, Christina and George. How are you all? Doing great. What's going on? So I just had a question about, so I'm on baby step three right now. I'm 19 years old and I'm, you know, saving towards the three to six months of expenses. And I just had a question about the $1,000 emergency fund that you save in the very beginning. What do you do with that once you're in baby step three to that?

So is that set aside for like smaller expenses or do you add it to the three to six months of expenses? So once you have all your debt paid off, you're paying off that three to six months expenses, that $1,000 emergency fund, that was a starter emergency fund. So now you're building out a full emergency fund. So that $1,000 is part of that emergency fund as you build it out. Yeah. So just to add to it, same account. Okay. That was my main question. I just wasn't sure. I had it set aside in cash and then I was

saving toward probably the last three weeks, something like that, toward a separate emergency fund. So, and the question just kind of popped in my mind if that was supposed to go toward that or if it was separate. So that's basically it. Hey, you're further along than you thought. Yeah, that's awesome, man. Yeah, I'd park it. I mean, you can do a local savings account

attached to your checking account. You can do an online high yield savings account. That's where I park my emergency fund. But keep it in one place and only call it the emergency fund. This is not another savings account for an upgrading car because what

happens is you get a little confused as to what's an emergency and what's not. Is it urgent? Is it necessary? And is it unexpected? That is a true emergency. And once you have that, man, you're going to have some financial peace in your life. Love it. Definitely. That's what I'm going for. Awesome. Thanks for the call, man. Will joins us up next in Birmingham, Alabama. Welcome to the show, Will. How are you doing? Hey, I'm doing good. How are y'all? Great.

How can we help? Oh, yeah. I was just going to give y'all a call. So I started listening to this show about maybe a year and a half. But I was kind of dumb before and didn't know all the rules. And I had bought a car while I was in school. And so right now when i say i owe 10 000 to it and uh during college when i started listening to y'all i kind of got

in that saving mentality and i saved around around 30 000 in my savings and uh my question is though i went online and kind of saw the value of my car now and it's worth a little bit more than what i bought it for so i was considering selling my car and then just buying the next one in cash and kind of getting around seven or eight thousand in return and i was going to see if y'all wanted me to go ahead and just pay my car off or go ahead and sell it and try to get that profit in return and just get a lesser car. So you owe 10K on it. What is it worth? It's worth like 17,900 right now. Wow. So you could clear 8,000 on this, like you mentioned. And then what would you go buy?

Right. And that's the question because I have enough cash, you know, just to go buy one in cash, especially after I sell my car. So I was, I kind of don't know what, I swear I was going to ask you all a question, like what kind of value of car should I go get? What's your income? Right now, so I just graduated school. It's around $50,000. Oh, awesome.

Plus commission. And this is all the debt you have is the car? Later. I also have some college loans, too, that'll start, I guess, in six months, whenever that'll be around. How much student loan debt? That'll be around $20,000. Okay. And you have $30,000 in the bank?

Yes. So you're telling me you could turn around, take the $30,000 in the bank, and pay off your student loans and the car loan today? Yes. So you're telling me you could turn around, take the $30K in the bank, and pay off your student loans and the car loan today? Yes. See, I'm just a little nervous. I've had that saving mentality. That number in the bank just makes me feel secure. You're not, dude. You owe $30,000 to people.

That makes me feel insecure. Right, yeah, I know. I'm just worried. That's a false sense of security, yeah, I know. I'm just worried. It's a false sense of security, having that money in that bank account. Right. And I know that, and I knew that was the real answer. It's just, you know, I don't... It's tough giving that money.

It seems like I'm just giving it away, but I know it'll be better in the long run. You signed up for all that debt, my friend, and once you pay it off, you're going to feel a whole lot better. So if I'm you, keep $1,000. And if you can find that extra $30 on top of that, just pay off all the debt. And then you can make the decision if you want to sell the car. What do you think, Christina?

Yeah, I agree with that. And, I mean, it's a pretty tough car market out there. So it's a little bit challenging to find reliable cars. So if you like that car, you have the money to pay off all the debt, and then you can start saving up your emergency fund. I think you're in a really good spot, even though I know it's nerve wracking to pay off the debt, to not see the savings account quite as high, I think you're going to feel a lot more secure and breathe a little easier knowing you're completely debt free. And you're really young still. So

you've got a lot of time to save, build that back up, invest and really win with money. Absolutely. That puts this hour of the Ramsey Show in the books. My thanks to Christina Ellis, my co host, all the folks in the booth, and you, America. We appreciate you listening. We'll be back with you before you know it. Have you been inspired to make a change with your money? Want to know where to start? Take our three-minute money quiz to get a plan you can follow. Go to ramseysolutions.com and search for Get Started to get a plan for your money.