The Ramsey Show - App - How Do We Pay Off Debt With a Low Income? (Hour 3)

Episode Date: April 22, 2024

🎵 Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Like the one that I have with George Campbell. So funny. I'm your host, Jade Warshaw. The both of us are going to be taking your calls for the next hour. So you can give us a call. The number is 888-825-5225. And we will do our best to get you on the straight and narrow.

George might yell at you a little bit, but I don't know if I could if I tried. He might hit you with a snarky comment or two. There we go. A little sarcasm. I like it. I'll tweet at you passive aggressively after the call. There you go.

All right, let's go straight to the phone lines. We've got Teresa. She's in Austin, Texas. How can we help, Teresa? Hi, Dade. Hey. Hi, George. How are y'all?

Doing great. How can we help? George, please don't yell at me. That should not be anyone's fear. I'm the least intimidating man alive. Okay, so I am totally new today, Ramsey, and we are in baby step two. Okay. I just don't know if I have enough for retirement, and that's what scares me the most right now, because I'm 52. My husband is already

retirement age at 66, and he is still working full-time. Okay. I only have a Roth that I opened up a couple of years ago and it's got 32, about $32,000 in it right now. Okay. My husband also has a Roth that he opened up. It's just got 15,000 in it, but he has a Roth, I'm sorry, a 401k at work. What's that got? $135,000. Okay. And that's all we have. Okay. Tell us about your house. We have a mortgage. We just refinanced back in 2021 to a 15 year mortgage at a 2.125 interest rate. Okay. And what do you owe on it? Uh, 177. Okay. 177,000. Okay. And what are you guys? Okay. Keep going. Keep going. We have a parent student loan that I have been working on since my students, uh, graduated back in 2017. And back in 2018, we started on this repayment plan of $108,000. And I'm down to the last $15,000.

Oh, so you only owe $15,000? Yes. So you've been chucking away on this? Is that all the consumer debt you have left or is there anything else? Yes, that is it. Like I just started in November and we paid off all the credit cards, all the miscellaneous this and that that we had and my husband's truck. Okay, so you have a decent income. What is the income? I made $78,000 last year. My husband made $46,000 and my business made about $20,000. Okay, good. Okay. All right. So what's your question for us today?

Will I have enough to retire? Because I'm 52. I'm so afraid at my age I've passed that mark of the million status. There's a lot of factors that come into play. And so it all depends on when you want to retire. I think you're going to have to work longer than you want know if I'll get there. There's a lot of factors that come into play. And so it all depends on when you want to retire. I think you're going to have to work longer than you want to in order to get there. But I don't think all hope is lost. I love what I do.

I love what I do, so I don't mind working. I can work. The key here is we need to make sure before that happens, obviously, and you know this, that we clear out that $15,000 of student loans. How quickly do you think you could pay off that final $15,000? I was thinking we could have it paid off by the end of this year, but if I keep attacking it, we could have it paid off by September, October. I like that better. Do you have any money right now in savings?

Only my $1,000. We use the rest of it to pay off debt. Okay. I can give you some hope for now, and then we'll give you the current. Just to give you hope for the future, you're 52. Let's say you work until 67. Okay? So if you, with your current nest egg, it's about $182,000 altogether,

all of your accounts, retirement, right? Yes. And you contribute 15% of that $144,000 income you have once you're out of debt and have the emergency fund. That's about $1,800 a month. Well, with a 10% return until 67, you would have $1.5 million across those accounts. So to give you some hope, it's not that bleak. Oh, yay.

But that also means we got to get our butt in gear. We're going to invest 15%. We're going to get the house paid off. Then we're going to invest 15%. We're going to get the house paid off. Then we're going to invest more. And this is a, like your husband is, that means your husband's going to be working long before, long after he wants to as well. Yeah. He wanted to just work another couple of years, but he may have to work more than that. I think he's going to have to work until he can no longer physically work. And even then we're going to find him something he can do. I think the key for you guys, that magic point to where he might be able to,

and both of you might be able to cool out is when you get this mortgage paid off. Because then to George's point, you'll have the 1.5 million and hopefully you both, if social security can stick it out, you'll still have that. Plus no mortgage payment,

which lowers your expenses. This is a reasonable, now you're not going to be like balling out on private islands, but you're going to be just fine as far as, you know, covering your basics. That's right. Okay. So breathe easy there. But in the short term, we got to get on a game plan to get rid of the rest of this debt. What happened to the student? Are they working? She is working. She is married. And both of them have helped pay this off. Okay.

So we're all paying towards it. Are they continuing to help? Yes. Are they doing well financially? Could they clear this $15,000? I don't think they can clear it right now. But since January, they've been contributing at least $2,800 towards it every month. Oh, good. That's good. Okay. That means this thing's going to be cleared even

faster than October. I'm hoping. Okay. Yeah. If you were my parents and you were calling the show and I was hearing it, I'd be like, oh my goodness, mom and dad can't retire. I'm going to pay my student loan. I'm going to go get a side hustle and take the rest of this loan on myself. But again, the problem with these Parent PLUS loans, they're high interest rates. The parents are stuck with them. They legally signed. And the parents now can't retire because they're busy paying off their students' debts.

Right. And it crushes families. And so I'm sorry you're going through this, but I want to serve it as a warning to those parents who are about to take on those student loans to go, don't do this. The reason the student loan companies make you do a Parent PLUS is because they don't even trust your student to take on this money. And they'll give that kind of money to rodents. And so these companies are vile. Yeah, they're really, luckily you've got kids with a good head on their shoulders and they're going, okay, yeah, I have some responsibility in this as well. And they're making good money.

A portion of it, yeah. Yes, she has contributed from the beginning, so I've been very proud of her for that. Good. So we know the game plan going forward, knocking out the student loan. We are working hard. Husband two, you guys are not stopping work until this mortgage is paid off, $177,000. And George gave you a light at the end of the tunnel. Listen, 1.5 million at age 67. Is that right, George? Yeah. And she's 67. Now he'll be

much older. He'll be a lot older, which means he's going to be working for the next 10 years. And sometimes this is the reality of trying to have some dignity in retirement. Listen, George, this right here, if you're if you're listening to the show right now and you are in your 30s or 40s, this is what you're trying to avoid. This is why we come so hard and go so hard in the paint, folks, about getting your debt under control. Stop borrowing money. Start doing the things that set you up for a rich, satisfying life as you get older. Because trust me, you do not want to be 52 and 66 years old calling into this show talking about paying off student loans.

Come on now. Let this be the wake up call. That 15-year mortgage, it's paid off in 15 years. That's right. If you're 35, you take on the mortgage. By 50, it's paid off. If you've done nothing else. Take the advice.

Don't be scared. This is The Ramsey Show. You are listening to The Ramsey Show. You are listening to the Ramsey Show. I'm your host, Jade Warshaw, joined by the very funny, very hilarious George Campbell. He makes me laugh quite a bit during the breaks. So kind. Yes. I paid her $5 on Venmo for that, and it was worth it. It's worth every penny. During the break, George was cranking that Soulja Boy, which was very different. Not a visual that America needed. We need healing, Jade. We do. Let's offer them healing through the question of the day. How about that? Today's question of the day comes from Stella. She's in Florida.

Here's what Stella has to ask. How do we budget a debt snowball with low income? My husband is a carpenter and a paramedic and earns $60,000 a year. I'm a stay-at-home mom and homeschool our three kids to save on school and daycare. We rent a house from an acquaintance and pay about 40% less than the current market. Our only debt is $61,000 in student loans. I signed up for every dollar, but with our current income, we are stretched to even put money on that last debt. My husband has been trying for a year to get a better paying job, and I'm trying to figure

out a side hustle I could do from home. If I remove gymnastics and swimming fees for the older kids, as well as reduce our weekly groceries to 150 bucks, it would still take us four years to pay off our debt. That's bare minimum. No restaurants, no presents, no camping holidays. Is this a reasonable ask for our kids for four years? I want to fight this as a gazelle but it would be so hard for so long while they're young um listen i i'm i'm glad that she wants to fight this as a gazelle um here here we're butting up against choices i think um and it's hard because you know you make the decision to stay home and be a stay-at-home mom, which for some people, let's be honest, like what they were earning in the marketplace, it didn't work out for them to have kids in daycare. It was just sucking up that money.

It sounds like they have three kids. It sounds like maybe some of them are in daycare and some of them aren't. It sounded like she said that there were older kids. I would be looking at this right now from her point of view. And I'd say, OK, I've got to get a side hustle. I think sometimes, George, we hear the language of I'm looking for a side hustle. It's like, no, decide on one today. Like decide on any side hustle today. Any money is better than no money. And then you can start, you know, reevaluating and finding what what pays more that's out

there. But pick up something instantly. That's thing number one, I think. And then I do want to also put this out there because it pick up something instantly. That's thing number one, I think. And then I do want to also put this out there because it's just worth noting, getting out of debt takes time. And even though the average, right, the average person that walks through the baby steps, they're getting out of this in two years or less. There are people on the other side of that average, like me and so many others, that it takes longer than two years. And that is okay. That is just part of the journey. And you do have some options here

where you can maybe cut back and increase income. But there is something to be said, and I say this many times, there's something to be said, George, about taking that horse to the Old Town Road and riding it till you can't no more. Like your income is your income. Then sell it once you're done. Yeah. And then when you're done, you're done, but you have to keep riding down the journey. Like it doesn't, it doesn't, there's not an easy button and it's worth noting that. And I hate to say that because it's hard, but there is part of that, that when you choose your lifestyle and when you've chosen the debt that you have to do what it takes to pay off your choices.

Yeah. And as I look at this, I wish we could just look at their budget and see where all this 60 grand is going because I'm confused how they're barely making ends meet. Now, they have 61,000 student loans and it triggers me, Jade, anytime I see someone say our only debt and then they go on to say some crazy number of debt. Any debt stresses me out. But $61,000 in student loans ain't nothing. And so if I'm her, it sounds like there's only one kid in daycare. Should the older kids have gymnastics and swimming?

Kids, plural, that's probably two. Sure. There's one left. That's probably the one in daycare. If this is a game of Clue. That's how I deduce that. I like that. So I would go back to work if I was her.

Because if she can make even $2,000 and daycare is $1,200 or $1,500 for that one kid, that's still money. She's still going to make more. That's right. And net. So I would go out and get a full-time job. I know it's your dream to be a stay-at-home mom, but I'm not okay with it taking four or five years to pay off this debt. That's a really good point, George. And feel free to attack me in the comments if you want. But most kids, if you're putting them, listen, I'll give you my numbers. My daughter's in daycare. It's a really good school. It's $12.75 a month. And then when my son, he was in daycare, but he recently went to kindergarten. So that cleared that other $12,000. So daycare is super expensive. But to George's point, don't forget to re-evaluate

once one of your kids becomes school age and go, okay, now at this point, like you said, I'm pretty sure that she can earn more than $1,200 a month. I believe that she can earn $3,000 a month if she puts her mind to it. And so suddenly, all of a sudden, she is able to clear some margin on that. And that could be going towards debt. And in those moments, you have to have those hard conversations and say, okay, what do I want more to pay off this debt or to stay at home? Is it worth it for me, you personally, to stay at home and have a four-year debt payoff journey or to go to work for two years and have a two-year payoff journey? And then you can go back home.

And so unfortunately, you can't have it all. Sometimes you have to make really hard choices, but just know that they're temporary. Short-term sacrifice for long-term gain, and the kids will be okay. I promise you that. But if you can, you know, $61,000 in debt, well, if we can do this $30,000 a year, it's gone in two years. That's $2,500 a month. So the question becomes, how do we find an extra $2,500? That might mean going back to work full-time. He continues the side hustle, but it's absolutely doable, and this is reality. We see it on the debt-free stage all the time. That's right. That's right. Yeah. Temporary sacrifice. That's what we're talking about. Let's go to Jim. He's in Phoenix, Arizona. Jim, what's going on in your world?

Hey, how's it going, guys? We're doing good. How can we help? Hey, so I had a question. My wife and I started a small business about nine years ago in the middle of, I guess, all of our baby steps. We're currently on baby steps six, just paying off the mortgage on our house. But as we've grown our business, it's grown quite a bit over the past nine years. And we're kind of at this point where we bootstrapped it from the beginning. So basically all the financial backing for the business is us.

So they kind of seem very intertwined, our personal finances versus the business finances. What would be your guys' recommendation on prioritizing paying off your house or taking that money? Because we're at a point now with our business where we need to build onto our current building for an expansion. We're outgrowing the current building that we're in. And so we need money to grow the business because we are kind of limited in cap with our current size of the building. We're in manufacturing, so the square footage kind of equates to output. Sure. So do we, my wife and I are kind of going back and forth,

do we try to cash flow this expansion, which could be from $500,000 to $700,000 building addition, or do you take that money, pay off your debt, but that's going to delay the growth of the business. If there's, um, Is there any other option? Could you lease in the meantime, use, you know, you continue to pay yourselves what you're paying yourselves and put the extra in a separate fund. And so we've talked about that too.

And so we're in manufacturing and fulfillment. So we make products that we sell to consumers. And so the idea of like moving our fulfillment offsite, but there's a lot of logistic issues with that. How quickly could you save up 500K to do this expansion? We could do it now. It's just, it's just depending on how big of a nest egg do we want. And that's always my personal struggle too, because with payroll, we have roughly 70 employees. Our business is somewhat cyclical. So we have, you know, in the fall, very busy, in the spring, slower. So I'm probably a little too conservative on that. By nest egg, do you mean the business savings account?

So you have $500,000 in retained earnings? Yes. Great. And so you were thinking about, hey, we can tap into that retained earnings and increase our payroll, or we can use it for this. So the question is, we could take that money. Could we pay off our house today with that retained earnings? Yes. I sometimes like to keep that in the retained earnings. We have a money market account. It's just, I call it our three to six months savings for the business because there's low seasons, but we're just constantly growing. So it's kind of like we want that money liquid in case we do need to dip into it. I would let business stay business and use the money you're paying

yourselves to cover the mortgage. And if that means paying yourselves more or waiting for this expansion to be done, I'm okay slowing down the home payoff process. I am too. That's my question. If you have enough, I guess you want the other initially like, initially... What's left on the mortgage? How much is our mortgage? Yeah. $2,000 a month.

What's left on the whole loan? Yeah, what's the whole chunk? $350. I would just set an aggressive goal and make it a goal to stick to that. We're going to put an extra $2,000 on the mortgage, and then we're doing our business stuff over here. But I wouldn't intertwine them, and I'd cash flow that expansion as soon as you're able to. I would too, and if you want to pay yourself a couple thousand extra a month, and you can afford to do that, that's fine, but you don't have to take the whole chunk.

This is The Ramsey Show. What's going on? You are listening to The Ramsey Show. Hey, thank you for listening. Thank you for watching. I am your host, Jade Warshaw. I'm joined by George Camel. Now is the time that we get to talk about the best budgeting app in the world. I'm talking about EveryDollar. It is a world-class budgeting app that helps you manage your money the Ramsey way. And I have to say, it's probably my favorite out of all the offerings that we have here, George. I think EveryDollar is my absolute favorite only because it's just so dat gum helpful. The EveryDollar app is home screen worthy. And I don't say that about

a lot of apps. I don't know how you set up your apps, but I got mine in folders labeled alphabetically. EveryDollar stands apart. It's on the front home screen. It's ready to go. Okay, at first I didn't know what you were talking about, but now I do. Yeah, you do not put every dollar in a folder. Every dollar should be... You don't hide it under a bushel. Listen, on...

Let it shine. On iPhone, where you have the lower level, it needs to be right there on the lower level, the ones that you go to first. And if you're having a problem budgeting, try putting it on the home screen front and center. I bet it'll change it for you. I know, that's right. Oh, I love every dollar. Here's the thing. You can start every dollar

for free and immediately see where you stand with your money. So if you have questions about, hey, why can't I make any traction? Or I can't seem to see where our money is going. Or I feel like we make a lot of money, but we still feel broke. All of these things can be solved with every dollar. Especially if you're like, my spouse has a spreadsheet. I'm like, listen, if you're the other spouse, you don't want to look at that spreadsheet. I know that's right. Unless you married another accountant. I'm telling you right now, it's not working.

And they don't want you looking. Listen, here's the thing with spreadsheets, George. Whoever made it, they don't want your grubby fingers on the spreadsheet either. They're like, back up. You mess with one cell and that whole spreadsheet is like, abort crisis i know scares the heck out of me if you want me to go to sleep and fall asleep instantly try to show me a spreadsheet and i like i'll just fall asleep instantly but when you and sam can just log into the same every dollar app and see that's your transparency what's going on it gives you some peace i feel like every dollar fills in

the communication gaps that are missing between man and wife. Because it's like sometimes you forget to tell your spouse, hey, I went to Publix and I went to the grocery store and spent $17.29 for them to fill it into the spreadsheet or for them to write it on the paper budget. That's a disaster. That's an argument waiting to happen. Make it easy. Download EveryDollar. EveryDollar makes it easy. The free version is incredible, especially for people who are really meticulous. They like to go in and put the transactions in. It's a great option for you.

But if you're like me and you like it a little bit more streamlined, the premium version is great. You can connect your bank to it. And automatically, when you do transactions, those transactions will automatically drop into EveryDollar. And you can categorize them every day, which is a great habit, to just keep you on top of what's going on with your money and what you're spending. So if you're new to every dollar, we'll show you a long-term financial roadmap. That's also part of premium. You can track your net worth, your debt-free date, your retirement date. That's awesome. Baby steps progress. This is what we need, people. This is what you need in your life. And so as part of that as well we're proactively coaching you so we're teaching you within the app

also how to build wealth and how to reach your goals so if you listen to this show every dollar is like the sidekick it's like the batman car is the ramsey show and like in the sidecar is every dollar you need them both together that's all i I'm saying. I like that. I always thought I was the Robin to your Batman, but I guess every dollar. I'm the sidecar, I guess. That's fine. That's Robin. That's what I'm saying.

That's what you need. Ramsey Show is Batman. Every dollar is Robin. They go together. That's all I'm saying. Get it today. It's for iOS, Android, or online. That's it.

All right, let's go to Abby. She's in Indianapolis, Indiana. What's going on, Abby? Hi, Jade. Hey, George. Hope you're both doing well. Thanks for taking my call today. I have gotten myself in a huge mess with mostly credit card and medical. I bought my first home almost three years ago, and now I'm deciding whether I need to sell to get myself out of this mess or if there's a way to stay and and get out of this. Well why don't you tell us about the credit card debt and the medical debt and we can start to look through it. Okay so about $15,000 probably combined I'd say close to in between six and seven on my credit cards and the rest of that is medical.

Okay all right and what's your income? Is there any other debt or this is it? I do have, I mean, the house and a car, but other than that, no. Well, what's the car? Car is $24,000. What's it worth? Well, I'll tell you.

Probably about $8,000 less than what I owe on it. Okay. So it's only worth about $8,000 less than what I owe on it. Okay. So it's only worth about $16,000? Yeah, in between $16,000 and $20,000. Okay. All right. And tell us your income, please. I'm right at under $46,000. That's just my income from work. Now I do get child support for the kiddos,

but I try not to include that if I don't have to. But I basically had to get into that a lot this year to help with bills for the house so on your monthly monthly how much cash do you see um so about 24 50 for my check my pay stub and about 780 with child support plus another 780 okay so um I'm looking at this and how many kids is it? Two. Two. And what are their ages? 15 and 8. Okay. So I'm looking at this and I don't think that anything's on fire that you would have to sell your house unless it's making up too much of a percentage of your take-home pay. So how much is your mortgage? So my mortgage is right at $12.35 a month. Okay, so that's high for you. And it's went up. It is. I mean, when I first bought the house, I was at about a $1,000 payment, but property tax goes up each year. Because my interest rate's great. It's like 2.8% on the mortgage.

But what's hurting me is, you know, it's gone up every year because of the property tax. And I'm really at a point. Did you have this house when you were married? No, I'm single. Single mom. So you got this house post all of that and knowing full well that you were making 46 at the time

and still do? Yeah. Because this is just a lot. I mean, over half of your paycheck is going toward the mortgage, and so it's not really a shocker that there's not much left to throw at the debt. Yeah, it's definitely hurting me, and I don't think now that I think back, and I'm like, we tried so hard to get a house. I was working two jobs prior to purchasing it,

paid off all my student loan debt, paid off some credit card debt I had at the time. And then about a year after I moved in, they started racking back up. And a lot of that was, you know, groceries, things we needed for the house that I didn't have cash for. And it just became too much. Yeah. Well, if we can't get our income up for the long term, our core income, get that 46K up, this is going to be unsustainable because the debt isn't really the problem. And the house payment truthfully isn't that large comparatively to what you would pay in rent. But overall, because of your income, it's really going to be a struggle to make any headway. Yeah. And it is because I mean, all the cards and collections, I've paid three off since

the end of last fall. I paid one off about $1,800, another $500, and another $400 balance. But I don't have the money each week. I mean, by the time bills are paid monthly, I'm left with a little over $400, and that's groceries, that's gas, that's household essentials. So if you freed up all of your payments, let's say you took your credit card payment, the medical debt payment, the car loan, What does that all add up to a month? For the, you said the credit card. So basically what I'm paying out a month, I mean, I'm not paying anything on the credit cards right now monthly besides on two of them. I pay a total of $65. So what I have left between that and all my mortgage payment, car and other bills, I'm left over with just over 400 a month.

Well, I think part of it is the credit card balance is going to continue to go up. The interest alone is more than $60. Yeah, it's killing me. And I don't even know how to tackle those now because thankfully I've got it. I think the car needs to go. Yeah. How do I get out of that, though? I just, that's my...

You'll need to come up with a difference that you're underwater for. And I wouldn't go to the dealership because they're going to give you tiddlywinks for that car. You need to sell a private party to get the most value out of it and get as close to that 20 as possible. And then you need to come up with the other four. And that either needs to be a loan from a credit union, plus as much as you need to get a beater car for now, or you need to save up $4,000, which is going to be difficult as you're laying this out, saying, I barely have a few hundred bucks a month left. Do you have any money saved anywhere? I have 401k. 401k, and that's it? No cash?

No cash. Okay. What do you do for a living? I work for an insurance company. I'm a broker service rep. Okay. I've been there almost nine years. Well, the home is a last, last, worst, worst, worst case resort. So I wouldn't go selling it to get out of this. I agree. Because honestly, you're not going to find cheaper rent. It doesn't solve all your problems.

I've looked for months and I agree with you completely. That's been the only reason I didn't go ahead and go forward with it. Because everything else is going to cost me just as much as I pay now. The income is the key to unlocking this puzzle. And getting out of that car and then tackling the rest of the debt. And by the way, settle that medical debt for pennies on the dollar. Call them and settle it up when you have cash. This is The Ramsey Show. You're listening to The Ramsey Show, our scripture and quote of the day. By the fruit, you will recognize them. Do people pick grapes from thorn bushes or figs from thistles?

That's Matthew 7, 16. Josh Billings said, be like a postage stamp. Stick to one thing until you get there. I like that. Well, then you get thrown away. Oh. Yeah. So, I don't know. All right. I'll mull on that one for a little bit. Marinate on that, George. then you get thrown away. Oh. Yeah. So, I don't know.

All right. I'll mull on that one for a little bit. Marinate on that, George. It's a single use. See if it makes more sense later. But I guess that's life. Single use. You only get one.

Hey, okay. There you go. George. I'm going to start making my own quotes. I feel like you made this a little bit depressing instead of uplifting. I just feel like out of all the things you want to be like, I didn't think posted. That wasn't on my bingo card. I'm going to be honest.

All right. But hey, it's a tough gig picking the quotes for the day. I got to hand it to the team. What's your favorite quote? I'm't think post it. That wasn't on my bingo card. I'm going to be honest. But hey, it's a tough gig picking the quotes for the day. I got to hand it to the team. What's your favorite quote? I'm putting you on spot. Oh gosh. I usually go versus because I try to be better than you. Okay. Versus a quote. Quotes are man-made, Jade. That is true.

Scripture is forever. It's inherent. Yeah. Okay. Well, what's your favorite scripture? I've been mulling on Proverbs 13, 11. hastily will dwindle but whoever gathers little by little will increase it listen you hit my line of work it's hidden in your heart i like that it just it does something for me for the get rich quick bros out there i'm like this is why that's that's the thing i like it how about you john 10 10 what's that one uh i have come that they might

have life and life to the fullest or a rich and satisfying life. I like that. The first part is the thief comes only to steal, kill and destroy, but I have come that they may have life and life to the fullest. I like the context of it. That helps. That's good. Good stuff. Alright, we're just over here talking. There's our Bible drills for the day. We did it.

Alright, hide the word deep in your heart. It will serve you throughout life. Alright, let's go to Cleveland, Ohio where we've got Jordan on the line. What's going on? How's it going, guys? Good to be talking to you. You too. Hey, I have a quick question. I know the time is short, but I'll give you a quick rundown. So my wife and I are trying to decide if we should sell our house and just about everything we can in order to pay off all of our consumer debt and then relocate to a different house and different location.

Cause she is wanting to go from full-time to part-time in order to homeschool our children. Okay. And, and so we're going down to my income and with my income alone, um, it'd be, it'd be almost impossible to keep the momentum going with our debt snowball.

Our total debt is around 8484,000 consumer debt, but we own our homes $119,500 roughly. And then talk with our realtor, we could sell our home for $260,000. Okay. Okay. And then if you sell the house, you're moving out of Cleveland and where are you moving to? So I live, I live south of Cleveland, um, in West Salem. So I'm Ashland, Ohio area. So we probably stay in like the Wayne County, Ashland County area. Just do the work for me at least. Is it at least less expensive? Yes. It's less, it's least expensive down in these two counties. Okay. So the plan is we're selling, we want to sell the house, pay off all the debt. We'll have

a little bit of money extra. That'll be your emergency fund, I'm guessing? It would be. So we already have our emergency fund built up to $2,000. And so that would just be our extra money that we can use for down payment or whatever we need for what we can. Well, you need a fully funded emergency fund. So once you pay off the debt,

you're going to need three to six months of expenses for your new location. So that would probably be closer to 10, 15, 20, which would still leave you another 10, 15 on top of that to save up for the down payment. That's your kind of starter down payment fund as well. Okay. But I like this plan as long as it's what you want to do anyways.

And so selling the home because you want to move is different than selling the home because you want to get out of debt faster. Our main goal is because we want to have a small little homestead. We'll homestead at heart. Okay. But we live in an HOA now. We have a half acre now. It's perfect for having a homestead, but the HOA doesn't allow anything other than dogs and cats. Right. half acre now it's perfect for having a homestead but the HOA doesn't allow anything other than dogs and cats right so so our our initial goal is to actually buy some land um and to start a homestead but with her wanting to go down to homeschool and and slows down that snowball a

little bit we're trying to expedite that so we even keep around the edge we just sell the home and then after the emergency fund is funded and everything's paid off, with what's left, we do a down payment on a chunk of land and then put, like, a cheap mobile home on it that we could pay cash for and then live in that until we save money to build. We've just kicked around so many ideas, and we're kind of like, before we make any more stupid decisions with money, let's call you guys. I might make this homestead thing, like, it might be the five-year plan, maybe the 10-year plan. I don't know.

But we need to get our income up in order to get as much down as possible. What is your income? My income is roughly $70,000 with overtime. And that would transfer to the new location? Yeah. I'd say I'd keep it the new job. I work pipeline, so I travel all over the place. Okay.

And she wants to, right now she's still working full-time, but she wants to go part-time. What's she making full-time, and what will she be making part-time? So she is a stay-at-home special ed teacher. So she makes roughly $42,000, $45,000. And then when she goes down to part-time, from the first job that she's looking at, she be practically losing a whole paycheck so we'd be going from um to 25 to 3 000 from her to 12 to 15 so it's literally cutting in half um yeah and the kids how old are they four and two four and two can i can i suggest another option yes because she's actually listening oh okay, okay. Hi, wife. Here's the thing. Your kids are, they're still daycare age. They're not like school, school age yet. I mean, the four-year-old, when they turn five, six, they'll be going into kindergarten. But

there's part of me that wonders if while you have this income, if you just attack this debt and just go crazy and make this kind of a two or three year plan and say, hey, we're going to go crazy. We're going to pay off this debt with our cash flow. Then when we're good and ready, during that time, we're accruing equity in the home as well. Then when we get ready to sell this house, we're going to get max out of it. And then you're kind of going into this with more money and just kind of with a little bit of grit under your belt. Um, and then the kids will be really school age. Like it'll be time for them to be in first grade and, and, um, kindergarten and that kind of thing. Have you given any thought to that? Cause listening to your situation, if,

if the kids were already in elementary school, I might think, okay, yeah, she wants to get this started now, but you kind of have a couple of years before all of that even starts. Okay. Yeah, we've kicked around that idea too. It's just, yeah, we've kicked around all kinds, like all three of those ideas we've kicked around. We just didn't know which one would be more financially smart, I guess,

because one is the quicker way to where we can move into a nice, because we've worked on that hard. And so we found homes that we could afford that are nice, that would sustain us for a period of time until we're able to get there. Well, the thing is, as far as financially smart goes, you're letting go of an asset that was appreciated, and then you're going to buy land and put a mobile home on it, which goes down in value. And so overall... That's option b option a is the live in a sub a suburb with no

land and just bank and then just live off my account save up and then eventually once they get to make land of that one but my point my point for you is you've got two years where you can let this asset that you've already put money and time into you can let it appreciate more and it's kind of like um i i don't, for me, I'm like, I've got this asset, I have the ability for it to make more money for me so that when I do go to sell it, I could have a full down payment, not just 10,000 or 15,000. Okay. Can you sell anything as part of your debt? 84,000? Are there cars here? There's one car. Yeah, it's her car okay is it a lot of your world as far as the value um yeah it's it's 48 000 of that wow that thing needs to go

yeah she was afraid you'd say that that's the golden ticket you buried that lead hoping i wouldn't talk about it goodness gracious what's it worth because we rolled over negative equity from a truck that I purchased back when I was four. I was just being stupid. There it is. So what's the car actually worth? So the car is worth probably $32,000, $33,000. Yikes. So you're upside down a good $16,000 on this thing.

Yes, sir. And there's no money saved anywhere. We didn't ask that. Do you have any money saved anywhere? We just have $2,000 for our emergency fund right now. Got it. Yeah. Listen, you've got some options here. If you want my opinion, my opinion is I would sit on this for two to three more years. I would pay off this debt with my hard earned income while you've got the two good incomes and you can do this as fast as you want to do it, you know, and then I would, you know, you can give yourself a cutoff if you want to. Okay. By the time junior gets in kindergarten or by the time junior hits first grade, and that's when we start the homeschool, that's when we turn the key and initiate this. But I would take care of the, I would definitely do that. I'd work. Here's the thing, Jordan, your options get limited when you have debt. And so everyone has dreams and

I want to be staying at home and I want to go part-time and I want to have the homestead, but debt limits your options. It's a thief. And I hate that for you, but let that be a lesson to everyone out there that debt is never a blessing in your life. It always holds you back. I love it. This is The Ramsey Show. We'll be right back.