The Ramsey Show - App - How Can I Invest 15% While Also Saving for a New Car? (Hour 1)

Episode Date: February 7, 2022

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Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host, Dr. John Deloney. Ramsey Personality, best-selling author, is my co-host today as we talk about your life, your relationships, your money, your career. Whatever your question is, we are here to help. We are excited today. It is yet another book launch day here at Ramsey. We've said that a lot lately. This is the fourth book we've launched in about six months and the fourth bestseller. However, this one's really, really special, as if they're not all special.

Every time you have a new kid, it's special. And this one right here is absolutely fabulous. Dr. John Deloney's new book, Own Your Past, Change Your Future, a not-so-complicated approach to relationships, mental health, and wellness. Coming off of the material of him having two PhDs, one in counseling, one in higher ed, the Dr. John Deloney show, and this whole idea that our stories and the traumas that our body has stored can be changed. That's right.

We've entered this weird nexus in the world, man, where we've got all the answers, all the technology, all of the stuff, and we are more anxious and depressed and burned out and cooked and angry and rattled than ever, ever. And, man, there's so much out there, so much great stuff out there, but it's so much. And even I've been living in this stuff for 20 years. It just bogs me down. And so this book was my attempt to bring it all together what can a regular person like me and my wife and my kids what could what are some things we can do to change our life you know heal and move on to heal

from the broken the broken places different people have different kinds of broken places different causes for the broken places different depths of brokenness on different issues everybody's got something everybody's got a story or 73 a bunch of them right 73 stories and uh that's kind of the way you framed the book up uh when i was reading through the manuscript when we originally were looking at the, you know, putting the thing together and working through the edit process and everything. I love stories, but I had never thought about how they leave a grain, they leave a groove in our brain. Yep, and we will track that thing down. So one of the stories in the book is, my sister is a savant. She is smarter than than me 10x and my little brother missed one or two questions on the act and that was it and then there was me in the middle and i could

run fast that was kind of my thing i got asked to uh try out for or to take some tests for the the gifted and talented when i was in third grade third grade dave this never happened to me john i know i know i know this is a futuristic thing not in any grade. Third grade, Dave. This never happened to me, John. I know, I know, I know. This is a futuristic thing. Not in any grade, John. But I took the test. Of course I was. I had a smart little brother.

My sister was smart. I didn't get in. And then you fast forward to, oh, that'll be okay, and what about this, and you need to be in these classes instead of these. Dave, I'm two PhDs in, and not if i get tired or i've eaten just enough gummy bears i'll start thinking i wonder if i should get another thing i'm still chasing this validation grade test from a third grader and so when i can stop and go what am i doing why

am i chasing that story down and we have stories like that from that thing the girlfriend said the way our uncle treated us what that coach said to us one time that dress makes you look fat that yes that dress you don't pretty girls don't eat that kind of food boys only do this no one you're not allowed to be sad all these stories that have just cast this vision for us and we live them out over and over and over and that turns into generational trauma on top of generational trauma and at some point as the great terry real says you got to turn and stare down the forest fire and say enough i'm going to be the one you've done it i'm trying to we're all trying to do that for our kids and for future generations and this book is the blueprint on how to do that i want to change my family tree

that's right we talk about it in the financial realm right all the time and everyone kind of has that dream to change their family tree to go you know i'm never going to do that with my kids and then you open your mouth and you're you hear it man you hear the parent voice it's the worst the exact same verbiage right with the exact same tonality and accent even it's all i mean it's like how did you just like wow that just happened it's lodged way in there man yeah so, yeah, but there is a way to get better. That's right. There is a way to improve. But my point is we all have kids and we say we're not going to do that, which means we have the desire to get better.

That's right. We have the desire to change our story, to change. And those of us that are believers uh this is not a book exclusively for christians but uh it's a book for anyone including christians and uh by a christian and so it but those of us that are believers we believe that you can change that you can be transformed the cornerstone right you can be and people who aren't believers believe you can be transformed or changed too we just think there's a a higher source god that i can do all things through christ who strengthens me and and i can be transformed by the renewing of my mind and i can start quoting

scriptures over the top of this and i can change my kids by speaking right blessings over them and not in some weird mystic way but just in other words be nice to your kids act differently right you don't have to make this some kind of spiritual thing it's be nice well and most of us are are we we act with the models we've been given we treat our kids the way our dads treated us and then the way they treated theirs and what's so amazing about your show is something as simple as a debt-free scream give somebody driving their car all by themselves a picture of oh that's me and they did it i can do it and this book is that for how to treat your kids how to treat your spouse how to treat your co-workers how to take care of your neighborhood and your community how to take

care of yourself man how many of us dave talk to ourselves in a way that we would never let somebody talk to the waitress or talk to the woman at the cash register every one of us every one of us yeah self-talk is one of the meanest human beings out there right and so just you're talking about being kind this book's gonna help you learn how to be kind to yourself and the healing will start there man i'm excited brand new it's launch day which means uh the pre-sales started today the actual uh street date will be in april april 19 i believe uh yes if i recall it was and i the book the brand new book own your past change your future it is on sale available for pre-order today and if you go to ramsey solutions.com we're going to throw in

all kinds of extras about 300 worth of bonus items that includes the ebook includes the audio book and something we've never done before we teamed up with one of your sponsors the folks at better help which is online counseling and we're going to give you a 300 value a one year or one month ticket for free counseling yeah online that company stepped up in a major way. They're big believers in this book, but the idea that I can get through this and go, whoa, I need to make a call right now, and they said, we'll step up and provide you that number. And of course, it helps them, but a month free counseling with the pre-sale order.

It's only $20. So if you wanted to do this wrong, you could say, I get a month counseling for $20, and they give me a book. I'll send you a book. But that's not exactly the way we're doing it. But it's the net result. It's a great, yeah, that's really grateful to them for stepping up. Yeah, it's pretty cool.

And that's with the folks at BetterHelp. So the book is Own Your Past, Own It, Change Your Future. Dr. John Deloney, brand new major trade book. This thing's going to be huge. The content is world changing, life changing. Be sure you get it pre-ordered right now at ramseysolutions.com. Most people know me as the guy who did stupid with a lot of zeros on the end. I made my first million dollars in my 20s the wrong way and then went bankrupt. That's when I set out to learn God's ways of managing money and developed the Ramsey Baby Steps. By following these steps, I became a millionaire again, and this time the right way. After three decades of guiding millions of others through the plan, the evidence is undeniable.

If you follow the Baby Steps, you will become a millionaire and get to live and give like no one else. My new book, Baby Steps Millionaires, is now available for purchase. When you order my new book, you'll learn how ordinary people built extraordinary wealth and how you can do it too. I'll walk you through how to invest, build wealth, and bust through the barriers preventing you from becoming a millionaire. Baby step your way to becoming a millionaire. Get your copy today at RamseySolutions.com. That's Ramsey Show. I'm Dave Ramsey, Dr. John Deloney.

Ramsey Personality is my co-host. Launch day on the pre-sale of his new book, Own Your Past, Change Your Future. Tyler is going to start off this hour in Manchester, New Hampshire. Hi, Tyler. Welcome to the Ramsey Show. Hey, thanks for taking my call today. Sure, man. What's up?

Well, here's the situation. We bought a house in Denver, Colorado back in May of 2013 for $283,000. The current balance remaining is about $220,000. And when we moved, our original plan was to keep it as an Airbnb short-term rental. Denver changed its laws where you can't have it be a short-term rental if it's not your primary residence, because now we live in New Hampshire. So we're currently transitioned to the corporate rental scene, which is 30 days or more. And it's very successful. Rent it out probably 98% of the time.

Yearly, we gross $80,000. We net $20,000 after paying the mortgage, paying all the bills. My question to you is, should we sell today? Because right now we fall on a two out of five year rule for primary residence. We did live there for two consecutive years. So our current mortgage in New Hampshire is at $330,000. And I think I gave you all the information that I was going to tell you. You did.

How old are you? I am 37. Okay. As you know, probably, if you've listened to the show for 30 seconds, the way we try to answer questions here is, if I woke up in your shoes knowing what I know, having done all the stupid butt things I have done in my life, what would I do if I woke up in your situation?

Okay. A couple of observations. Number one, this thing takes up a lot of your energy, your time, and your emotions. Correct. For 20 grand. Number two, it is across the United States, on the other side of the world.

Number three, you were not living in New Hampshire and said to yourself i want to go buy a corporate rental in denver you became a corporate rental landlord by default not by strategy or design not by intentionality agreed agreed um is there a number four there probably is um all that to say as much as I love real estate and as much as you have maximized this property, oh, number four would be the capital gains issue. You're going to have a gain of how much on this?

I would say the tax accounts are random numbers for me. If we were to sell before the capital gains, we just have to pay depreciation. That would be 5K. And if we sold to sell before the capital gains we just have to pay depreciation that'd be 5k and if we sold after may of 2022 we would owe 55 000 yeah yeah so you get this you up to a half million dollars of gain is tax free on your personal residence if you have uh haven't violated the two and five rule which is what you're talking about. And that, as of May, is when you have violated that. You've rented it more than three of the last five, right?

Correct. At that point. What would you give for the house if you sold it right now? What's it worth now? Between $600,000 and $650,000. And pay off your home mortgage. Correct. That's number five.

I listed five reasons just now why I would sell it. I don't have a good reason to keep it. Okay. I have one additional fact here. I do have about $350,000 in stock options from a company I worked for, which is also an option to sell because I'm not very diversified in that. It's just one company's stock. So I was curious, if you had those facts, would you sell the stock just to pay off your

primary residence to keep your rental? I would sell the stock to get more diversified, and I would sell the rental house. I'd sell them both. That's right. And then if you want to buy and do some kind of a rental let's do it in your neighborhood there okay and if you want to fool with the type of rental you've been fooling with if you're enamored with the airbnb or the corporate rental scene but as you described i mean you're bringing in 80 and netting 20 um which you know after mortgage and everything so um there's just not a lot of fun here.

Fun for me is bringing in 80, and most of it stays. That's right. That's more fun. On, you know, $600,000, you're making a $20,000 rate of return. Or fun is selling this house and having no house payment in 45 days. That's real good, man. And or having the money from the stock sale to buy another rental. Just go pay one for your next neighbor's house.

Closer to you. And pay cash for it. I like that plan. So if I'm you, I'm out of the property in Denver. But those are my five reasons. And I just have to think through kind of a pros list, a cons list, the old thing you draw a line down the middle of the page, and I start looking at it and thinking that through.

And generally, that list serves me pretty well. Different items on the list have different weights. You know, you could have one item on there that offsets the other 14 on the other side. Like, I just like it. Shut up. You know, that kind of thing. That's okay. That's an okay item to have on there. But there's a lot of reasons to be out of this. And I think you already knew that. You just wanted me to say it out loud teach me about the two and five rule uh if you own a your personal residence and you move out and start renting it okay and you rent it more than three of

the last five years okay over two years then you lose your capital gains exemption on your personal residence you sell your personal residence you can make up to a half million dollars profit, married, filing jointly, no taxes. So I thought when you sold it and... If he sells it as a rental after he's rented it for too long, he loses that. So he'd have $55,000 in extra taxes if he waits till May. If you sell your primary residence... You have zero taxes up to a half million dollars gain. Oh, I thought you had to roll it into your next house.

No, that's an old rule from the 70s. Oh, wow, oh wow okay now that rule has been gone for almost 20 years now okay fantastic yeah you're you flat out make 250 000 single 500 000 married profit don't have to touch it wow okay you can do anything you want to do with it yeah i'd get out today yeah there you go and and you don't have to roll it into another property you don't have have to do a 1031. You don't have to do anything. Because it's still classified as a personal residence until you rent it too long out of the five years, and then you lose that exemption. It's no longer treated as a personal residence. Now it's treated as selling a rental property, so you've got taxes on all the game.

There you go. That's how that works. Josh is with us. Josh is in Charlotte, North Carolina. Hey, Josh, what's up? Hi, hi guys good to talk to you you too um i'm a former antioch kid so it's great to talk to you dave oh cool um so i wanted to ask you guys me and my wife are in baby step 3b we just finished paying off our emergency fund and we've got a small project that we got to do before we can start investing. My main question for you is before I got into the baby steps, I saw a video of yours years ago

talking about car payments and how you shouldn't spend so much money paying a car. Instead, you should pay yourself that car payment so that you can pay cash for cars for life. My question is, I was wondering if this principle still applies in the baby steps or if it may have been an outdated type of thing. And the reason I'm asking is because if we applied that principle, that'd be about $400 a month that me and my wife are putting towards our next cars. And it's not a lot. We didn't have big car payments, but the problem is we don't have a huge income. So if we continue to do that once we start our investing, we're going to have a hard time hitting that 15% mark. Yeah, Josh, the answer is very simple, okay?

I love that video. It's the free car video it's called and um the the but but i did a poor job of communicating in the video i communicate all the math nerd stuff fabulously because it's one of my gifts but but what i didn't communicate was that it's not a principle by which we tell you to actually go do things i was merely trying and i goofed to illustrate the idea that if you will save and invest money rather than pay payments you will end up wealthy and the point being that if you took the the the illustration of that point was that if you invest a car payment instead of paying a car payment pretty soon the money off the investments alone will buy you a car ever so often.

But the concept should not be trapped within the subject of car. The concept is generally stay out of debt, invest, and then you've got money. But the concept is also don't borrow money for cars. Don't borrow money for anything. Right. Because if you've got payments, instead of paying yourself payments, you don't become wealthy. When you pay yourself payments, you become wealthy. When you pay your self-payments, you become wealthy.

So it's not outdated. The illustration is still fabulous. I'm still proud I did it, but I didn't do a good job of saying what this means is not you should actually do it. What it means is that you should actually save rather than be in debt. Dr. John Deloney, Ramsey personality, best-selling author, is my co-host today in the lobby of Ramsey Solutions on the Debt-Free Stage. Jason and Lindsay are with us. Hey, guys, how are you? Hi.

Great. How are you? Welcome, welcome. Where do you guys live? Oklahoma City. Oh, I love Oklahoma City. Thanks Hi. Great. How are you? Welcome, welcome. Where do you guys live? Oklahoma City. Oh, I love Oklahoma City. Thanks for being with us. Thank you.

All the way over here to do a debt-free scream. How much have you paid off? $105,000. Woo! How long did that take? 22 months. Good for you. And your range of income during that time?

About $95,000. Wow. Very good. What do you guys do for a living? I work very hard at home. At home schooling. Take care of kids. Wow. Very good. What do you guys do for a living? I work very hard at home. At home schooling. Taking care of kids. Okay.

And then I manage property for our church. Okay. Excellent. Very good. So what kind of debt was your $105,000? Our mortgage. Oh! Looking at weird people!

Way to go! I love it! Way to go, you guys! to go you guys thank you excellent excellent excellent so man oh man you pay off your house and everything so tell us the story what happened 22 months ago it was actually way before that in high school uh we dated in high school and my parents for his graduation gave him your financial peace revisited book wow and he would say um he never read anything that wasn't required at school so that was really like his first just for enjoyment

voluntary reading voluntary reading your future in-laws give you a book that's required reading yeah yeah and he was just he read it right away and totally bought into everything. And my dad was a new listener on your show. And he bought us tickets to go to one of your live events. And I'm not sure if I've told them this. I probably have. But at the time, I was probably 16. And it wasn't great at math and didn't care about money really so far at that point. So I expected it to not be fun.

And it was so fun. And it was so engaging. And we just loved it it and we decided from the moment we were married that's what we wanted to do we we've never had any debt since we've been married except a mortgage so it's been a dream this whole time to pay it off and so so we had a goal that we wanted to have it paid off by the time we were 30 and we were working towards that and had made significant progress and then god told us hey, I've got some kids that don't have a home and we need you to take them and make a home for them. And so we had to change plans and use all of our house money to buy beds and cars and things like that.

And so we had a little bit of a delay, but here we are. So how many kids did you adopt in that one swath uh so we have six that we adopted within a total of about less than two years we adopted six in one officer was there a group there was um three siblings and three siblings oh okay all right so that first group was the kind of god whispering in your ear or yelling in your face or whatever he did okay these kids need a mom and dad, and you're it. That's so cool, you guys. So you've got a three-in-three grouping, a total of six.

What's the age range? Well, 15, and then we actually just had a baby six months ago. Oh, wow. Okay. Why not? Well, that was in the middle of our – So in January of 20, we just decided, you know what, we're done bringing babies home and we aren't moving anymore.

We really want to get serious about this because we had had other mortgages that we had tried to tackle, but we had moved for different reasons. And in the middle of working really hard to pay this off, he was surprised, baby. And so that was kind of one of our moments of um what do we do we're working on paying off our mortgage how are we going to have a baby also and and we did god we just kept working and through it all you've never had any debt ever except your mortgage correct that's incredible that's why they're smiling so big that's how you can have seven kids and be that joyous we are so happy to be here

how big how big how long y'all been married 15 years oh wow okay so you're what 35 I'm 35 and 37 yep okay all right wow so this story this story goes on a long time that's exactly right yep six kids then a kid and a paid for house in 15 years pretty stinking amazing that's exactly right. Yep. Six kids, then a kid, and a paid four house in 15 years. Pretty stinking amazing. That's exactly right. All straight out of high school. High school sweethearts. Yep.

Yeah. And so, let's see, 10 would be 12. So this is like 2006 or something you went to that event in Oklahoma City. Yeah, we got married in 2006. We had went to one while we were dating before that. Oh, my God. It might have been 2003 is when he graduated and read your book. Almost 20 years ago.

Yeah, we actually saw Russ Carroll, too. We did. Oh, my goodness. Russ was our first team member. Served at some live events. That was fun. Yeah. So what was the hardest part over the last two years?

And I feel silly asking a mother and father of seven during a pandemic. what was the hardest part of the last uh couple years to get this thing moving to keep it going uh i would say saying no to them uh because there's a lot of things to say no to and he says say no to me yeah so that you can say no to them yeah right yeah we just have you just have to say no to a lot of things. But now you can say yes. Yes. Now we can say yes. Forever. Yeah. Have you received that first paycheck that's deposited but you didn't have a mortgage payment? Oh, yes.

How does that feel? It feels amazing. It's all your money now. It's all our money. We don't owe anybody anything. Wow. Wow. It's a beautiful home.

Yeah, the home. They just showed it on YouTube. Wow. That's powerful. This is so cool you guys so um so the idea that you can't do this biblical financial thing and stay out of debt and get out of debt and live on a plan with a big family is hogwash they're proving that it can be or you can't do it if in adopt to oh and adopt yeah adoption is let's just try time six right

it's totally false you you can you can do anything you set your mind to and that you're a team on. Yeah, you just have to have a goal. It has to be in front of you. Stick to your plan. We had a, I know there's a picture of our youngest daughter. She's coloring a box. We made a chart really for them to feel a part of the team and for us to see it every day. And I told him it was just as motivating for me.

And they colored boxes off every month for however many payments we made that month and um so yeah so you tell you tell people having a plan is a big deal what else do you tell them the key to getting your house paid off with seven kids at 35 is um again it would be saying no to a lot of things and being a team if you have have a family, if you have kids, make your kids part of it. Because I know you're going to ask biggest cheerleaders, but they truly are. And they love feeling a part of it. And it was all of our dream together. Started out as ours and became all of ours.

I would say sticking to the budget and just having a goal and having it in front of you every day that you see. You guys seem so mature beyond your years, so chill. What was the biggest fight you had about money during this time? It had to be one. Yeah? No, I can't really remember. I don't think they fight, Dave. I don't.

I don't. They were middle schoolers. I think they, when someone's about to get mad. Oh, yeah, they've been in love since they were four. Yeah, yeah. Everyone sees it coming, and it's like the Matrix. You already know how to get out of the way. Yeah.

Yeah. It's incredible. I think now, I wouldn't call it a fight, but I enjoy being able to say, no, I can buy that now. We don't have a mortgage. You lost your leverage. I know. I know.

Because the answer goal to always be when we pay off the mortgage then we can get that so now i remind him we've paid it off well i love played well played i love that god can whisper to you and you have the courage to be obedient and still get your goals and still give these kids a home you guys are pretty amazing people thank you really are they are they some lucky kiddos, without a doubt. Lucky that Mom and Dad, more than anything else, can hear God's voice and obey. Because that makes for a great life.

Makes for an incredible time. I'm so proud of y'all. Get them all up in the shot. Everybody wants to meet them and everything. It's very cool. We've changed a lot of family trees here. Absolutely. We've got a copy of Baby Steps Millionaire for you because that's the next step in your process, the next chapter in your story, and you will be there without a doubt.

And, wow, I think you're already wealthy beyond measure. Oh, my goodness. It's pretty amazing to look at this. Pretty cool. And a copy of Total Money Makeover, maybe you can give it to somebody, and it'll be the first book they read that's not mandatory. So I love those stories. I love those stories.

So well done. Thank you. All right. It's Jason and Lindsey and the Tribe of Seven. Yeah. I love it. All right. $105,000 paid off in 22 months, making 95 house and everything by the time they're 35.

Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! Yeah! Yeah! That baby's getting it on it now. Oh, man.

That is so fabulous. Wow, what a great story. Powerful. Oh, man. That is so fabulous. Wow. What a great story. Powerful. This is the Ramsey Show. We'll be right back. Dr. John Deloney, Ramsey Personality, is my co-host today. Open phones at 888-825-5225. Jeff is with us. Jeff is in Los Angeles.

Hi, Jeff. How are you? Well, I'm just great. Thank you so much for having me on. Sure. What's up? Well, I came to you on my evening commutes. You come on after Hannity, and that's how I came to you, and I listened a bit.

I really like what I hear on your show. Thank you. You're welcome. Thank you. So I'm 59, never owned my primary residence, coming to retirement and planning on purchasing a retirement home, but I'm completely unexperienced in the real estate world. And I want to treat myself well, but not come anywhere close to getting into becoming house poor. So I wanted your advice on what to spend and then also how to pay for it. Okay. How much money do you have? $2.5 million.

Okay. What are you thinking about spending on a house? I'm thinking $500. Okay. And if you pay cash for that, there'd be no problem. Okay. I just used some of your $2.5 million and whatever. The millionaires that we have studied, their homes from a $1 to $5 million net worth,

we studied about 10,000 of them in the research that we've done. The data tells us that the typical millionaire in that setting in the one to five million uh net worth which is where you said their home is somewhere around one quarter to one third of their net worth okay a quarter to so you're you're right there i mean you know you're you're exactly there in that range with a half million if you you told me a million, I'd start to flinch because that'd be like 50% almost of your net worth or 45% of your net worth. I'd flinch and I'd start asking more questions. I'm not taking out a mortgage.

You've got the money. And a half a million, unless you're moving out of L.A., is not much of a property. Well, I am moving out of L.A. Okay not much of a property. Well, I am moving out of L.A. Okay. All right. Where are you moving? Yeah. Back to Arizona.

Back to the – I grew up in Scottsdale. Oh, yeah. I'd like to go back to Scottsdale. Yeah, you can get a decent property there for a half million. Okay, that's cool. I mean, depending on the neighborhood you're in and all that kind of junk, right, as always. But, I mean, that's a doable task. What did you do for a living?'d all this money come from uh i'm i do lighting for films so you're just working doing that all these years you own a

company or officially yes but it's just me the company is literally just me but but you do have to i do have to have a license but i mean so you're you're um you're an independent subcontractor in the film world essentially and you've saved your money all these years or did you make it all in one lick no no it's just been a slow slow go the whole way i i was yeah just save save and keep how much of it did you inherit memory wise it's been a little while i think 180 from my dad and the rest of it that's it okay all right so you're you don't have this wealth because of an inherited money you have it because you've systematically saved it over a large number of years,

which, again, you fit the model of the typical millionaire that we studied. I'm going to send you a copy of the book Baby Steps Millionaires because you are one. You didn't follow our baby steps to get there, but you are a typical millionaire in America today, how ordinary people built extraordinary wealth, how you can do. You'll enjoy the book because you'll go,

oh, that's me. I'm in there. And on behalf of not-so-pretty faces in the world, thank you for being a great lighting guy over the years, man. Dave, you and I both, man. Those lighting – No, it's the makeup people that have Bondo that I need. The filler.

Those lighting folks, man, that's a hard job. They're up on scaffolding all the time and hanging and doing all kind of stuff. It's incredible work, man. It'll work. Appreciate you. He worked hard for that. He's done a great job, man. That's a hard job. They're up on scaffolding all the time and hanging and doing all kinds of stuff. It's incredible work, man. It'll work. Appreciate you. He worked hard for that. He's done a great job, too. Yeah, you're right on track, brother. I wouldn't worry about your plan at all. It sounds very reasonable. Washington, D.C. Michael's on the line.

Hey, Michael, what's up? Hey, guys. Thanks for having me on. I appreciate it. Sure. How can we help? Hey, so my wife and I are $65,000 in debt right now, mostly credit cards and some from a car. And right now, when we've looked at our budget, we put it on an Excel sheet,

and at the end of the day, we have more going in the negative than coming in positive to spend on our daily needs. Okay. We're kind of at a loss right now. Financially, we're scared for our future, for what we're supposed to do, and we're so much in the negative

that we can't even get to the positive. I'm trying to follow your baby steps of saving up $1,000, and I can't even do that because I'm in the negative every month. What do you all do for a living? I'm a teacher and my wife works for the government. What do you teach?

Elementary school. Okay, good. And so what's your household income? About $110,000 a year. Okay. How much do you owe on the car? I owe $17,000 a year. Okay. How much do you owe on the car? I owe $17,000. Mm-hmm.

Okay. Well, I hear the stress in your voice, and I have been there. You make good money. You live in an expensive area, so $110,000 doesn't go that far. It sounds like you ought to be able to live on that, but you're in Washington, D.C. It's expensive. How much is your house payment or rent? It's about $2,000 a month.

Okay. That's high, but it's not what's killing you. So where does the rest of the money go? Yeah, your money, there's a leak somewhere. How much do you all eat out all the time? Well, credit cards, what are you buying with the credit cards? It's from past credit card usage. You only have $40,000 in credit card debt.

Yeah. The payments are between each of them. They're about $200,000, $300,000 a month. Yeah. Okay. Okay. Here's what I would do if i woke up in your shoes it sounds like there is uh you are being killed death by a thousand cuts i don't hear a major hole in the side of the boat i hear lots of little leaks from years of doing budgets with people that's what i hear okay um

so the little leaks sound like this you're going to go on a scorched earth thing and turn this thing around because you're stuck the good news is you're sick and tired of being stuck i can hear it in your voice you're a little bit scared a little bit desperate a little bit pissed off that's a really good mix for changing things because you're going to have to get radical so here's what i going to do. I'm going to start a tutoring business tomorrow. You can make $50 to $100 an hour tutoring elementary school kids in the afternoons. I've had people get out of debt doing tutoring that were teachers all the time. I hear it all the time.

And there's such a need of people like you to be able to do this. And then you're not going to see the inside of a restaurant unless you're working there. You guys eat out too much. You spend too freaking much money outside the walls of your home. You don't need to go on vacation, period, until you get this mess cleaned up. You need to get the credit cards out tonight, light a candle, and have a plastic surgery ceremony and chop them all up into little bitty stinking pieces, and you are never borrowing money again for anything.

And with the extra income and the reduced outgo, if you can – have you gotten a big tax refund? No. Okay. If you can't find some money in dialing this thing down with all of that, you're going to have to sell the car. But the car is not your problem. It just might be a little bit of the solution. A $17,000 car debt on $110,000 income is not good, but it's not drowning you. And I'm talking to a guy who sounds like he's drowning. That's right.

Split me your salaries. What do you make versus your wife? My wife is about $60,000, about $50,000. Okay. There is a hard moment, and nobody likes to talk about this, there is a hard moment when you look at your total life, you're teaching government work,

and you look at how y'all are scraping by, you're scratching your claw, and you ask yourselves, is this where we have to live? Is this where we want to live? Is there another place that we would be interested in doing life? And my wife and I have had that conversation.

It's hard. It's gut-wrenching. And it also was life-giving ultimately, right? So some of those big existential questions you can have on top of the grinding and the clawing that you're doing to get out of this thing. To get unstuck. So hang on. Kelly's going to pick up. And I'm going to sign you up for Financial Peace University and every dollar of the premium app.

And we will show you hand in glove how to do exactly what you need to do to get this message straightened out. We'll walk with you, brother. Hold on. This is James Childs, producer of The Ramsey Show. You can listen to all our shows

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