The Ramsey Show - App - How Having an Emergency Fund Brings Peace of Mind (Hour 3)

Episode Date: April 15, 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. I'm Dave Ramsey, your host, Ken Coleman, Ramsey personality, best-selling author of the book Paycheck to Purpose, and host of the Ken Coleman Show. He's my co-host today. Open phones at 888-825-5225. Mina is with us in Washington, D.C. Hi, Mina. Welcome to the Ramsey Show. Hi, Dave. How are you doing today? Better than I deserve. What's up? Good. Yeah, so I recently got married, and we have a baby coming on the way.

And my husband, I personally don't have any debt. I don't have any student loan debt. But my husband has some from undergrad and his master's, and he's wanting to be a theology professor. And so currently he's pursuing his PhD with a, you know, fully funded with a stipend and everything, but we have about $86,000 or $87,000 in his student loan debt. Um, and I mean, thankfully I have been like set up pretty well. Um, and so I'm kind of in a position where I could wipe it all away for him, but I didn't know, like if there should be a different strategy because we have a baby coming in a month. What do you mean set up really well? What have you got and where did you get it? So I worked for my dad basically since I graduated from school and so he helped me a lot with my savings and investments and everything. So I have money in like Marcus Goldman Sachs account and money in like invested.

How much? So right now I have about 60,000 saved. I mean, that's actually after we combined bank accounts. So like that is me and my husband's combined savings. And then we have about another 50 in my investments including and I include that in my Roth IRA. So I've built up some in my Roth. Okay how much is in your Roth? $17,000. Okay that's not accessible so you have 23 left other than that, right? They did say it was accessible. I think it can be. No, it's not. We're not messing with the Roth.

Okay. So we got 23 and 60. So you got 83,000 and you owe 86,000. Mm-hmm. 33. 33. So I'm sorry. You have enough to pay it off and have $5,000 and you owe $86,000. Mm-hmm. $33,000. I'm sorry, you have enough to pay it off and have $5,000 plus your Roth. Mm-hmm. I don't want you doing that until the baby comes. Don't do that until the baby comes?

Right. Because I want mom and baby to have the comfort of a big old pile of money. When baby comes and baby's okay and mom comes home and we figure out what we're doing with life then and we're living on a budget where we live on less than we have coming in and we've got a game plan, then yes, I do want to pay off his student loans. Okay. But, yeah, I guess what scares me is that the interest is accruing.

I mean, obviously, daily. It's not accruing that much while a baby comes it's just a little bit yeah i i mean it's right now it's it's accrued about um about 2200 as of today like 2200 in interest which um yeah obviously it's moved it up to 87 000 about yeah you're going to get a little bit of interest but in return you're going to have a bunch of money. Okay. If you want to throw $30,000 or $40,000 at it, that's fine, but I want you to have a really fat nest egg until baby comes.

And then you can talk about coming down to $5,000 and clearing it out. But the last thing I want you to do is have zero debt and zero money and have a baby come, and there's a bit of a hiccup, and, you know, it throws things sideways by $10,000, and now you've got to worry about a bill and a baby, and we don't need to be worried about that. Yeah, and you would suggest then putting $40,000, like at most? Yeah, that'd be fine. $40,000 or $50,000 towards it out of the you got about 90 and so if you throw 40 or 50 towards it you'll be fine and that that at least lowers the interest

that's occurring you're still sitting on 40 or 50 at that point and then when baby comes you just pay it off pay it off completely like there's no like i should yes i should just have it appear yes zero zero yeah and he's not borrowing any money to finish the phd and are you going to be working or how you got your you guys are living off the stipend or what yeah so we're living on the side i'm working full-time as a tennis coach um but it's i mean it's i don't plan on like ideally i would like to be home with the baby, but I just don't know, like, with, I mean, insurance will obviously be through the roof.

Well, the good news, oh, well, it's not that bad. You're young and healthy. And the good news about tennis coaching is you could do that with individuals and set your hours and, you know know not be leaving the baby very much right i i don't even know if i yeah i want to want to do that i think i mean he himself has talked about how he'd rather like be working okay as long as you guys can eat and you're not and you're not broke i just long as you can have enough income coming in between the two of you that you figured that out. Yeah.

Our grocery bill is pretty high, though. It's kind of like our – I mean, we're living in D.C. It's not where we want to be. We want to be in, like, a more red state. But, I mean, just our grocery bill, I mean, we – Is that where he's studying or something? Yeah, yeah. For the two of you something yeah yeah for the two of you it's just the two of you right it's just the two of us right now yeah let me tell you something i got three teenagers two of which are boys don't even talk to me about grocery bills it's crazy you guys

can do better than that yeah you got a lot of other things to worry about than your grocery i was gonna say so So here's the thing. I love her intensity, Dave, but I hope she grasps that you were giving her an insurance policy that means peace of mind until baby gets here, and then you can attack it. But that's such a huge deal. I hope a lot of people hear that. That's really great advice.

The first three baby steps, save $ a thousand dollars quickly with great intensity pay off all your debts except your home smallest to largest in that order with great intensity like sell so much stuff the kids think they're next put the dog on ebay the cat on craig's list i mean everything's gone no life scorched earth beans and rice no eating out no vacations we're cleaning up the mess baby step three in that same intensity is finish the emergency fund now when you finish the emergency fund and you have no debt except your house then you move from intense to intentional but until then you're wide open now when there is when you're in the middle of a storm, like you say, the boss comes in and says, in 60 days, we're laying off 70% of the people that work here. Well, that's a storm.

Yeah. So you push pause on paying off the debt or building the emergency fund, wherever you are in one through three baby steps, until you get the other side of the storm. In the case of a pregnancy, obviously it's a blessed event, it's not a storm, but we're going to prepare as if it matters more than the getting out of debt, because it does. Then we get the other side of it, baby comes home, mom and baby are okay, we push play again, which means we clean out everything down to $1,000 and pay off debts until we're debt-free.

That's exactly what I was telling her to do. This is The Ramsey Show. Thanks for joining us, America. I'm Dave Ramsey, your host. Ken Coleman, Ramsey personality, is my co-host. Today's question comes from Julian in Texas. My responsibilities at my job have increased significantly. I've received routine raises,

but they're not reflective of the increased responsibilities I've been given. I approached my boss with my concern and gave him a number that I think I'm worth based on similar roles. My boss agreed that I deserved a raise and said a raise would show up on my next check. The raise was 5%, less than half of the number I'd suggested. Feeling frustrated, I applied for a couple jobs at other companies. I received an offer for 2% more than the amount I asked my current employer for. But the kicker is I didn't like the interview and I don't intend to take the job. Is it inappropriate to use a job offer to leverage a raise at my current job? My heart is telling me no, but I want some of that good old-fashioned Ken Coleman sense knocked into me. Okay, wow, that puts the pressure on me. I got to cuff him upside the head, apparently. Julian, here's the thing. I think there's too much emotion in this, and I think at

this point to take in the job offer that gets you 2% more, so it looks like a 7% bump from what you've just been offered. I think here could get really manipulative, and I think the emotion I'm seeing in this, and I understand why you feel the way you feel based on what you've said, but if your boss agreed that you deserved a raise, you told him a number, and you gave him what you think was evidence. Now, I don't know how good your evidence was here. I don't have the luxury of talking to you back and forth, but based on what you're saying, the boss heard you, agreed, you told him the number you think you deserve, and they gave you half of it, and you don't want the other gig anyway. So this feels really manipulative. Is it inappropriate? No. Unless, well, let me finish what I mean by inappropriate. I know what

you're saying. It's not unethical, but it runs the risk of being very manipulative. And so if you want to call that inappropriate, then certainly I get that. And so I just wouldn't do this. You've been given the raise. They told you what they think the raise is, and now you've got to be an adult. And going back in and trying to wa wave another job offer in front of them that you do not want feels childish to me and it wouldn't do it i don't think it'll serve you well at all it doesn't change the fact that let's say that you went back in and wave this

and they gave you a 10 percent raise way through the roof yeah all of a sudden you're not going to be over all these other things that's exactly right yeah you you you feel underappreciated used you feel like they didn't take care of you and the only way that you get your right amount is to threaten them so when after you finish threatening them and they give you a big raise because of that, even maybe even more, you're still going to feel like they don't have your back, like you're underappreciated. Like, you know, the only way I got what this company should give me is I had to be a jerk. And, you know, and so you need to leave is what you need to do because you're done. But you don't need to take this other job. So you need to keep looking, get you another job, and you need to leave.

That's what you need to do. Well, here's what happens. This will wear off. Dave is right. If they gave you the 10% immediately, you would feel like you won something, but you'd still feel like, well, they're going to keep giving me more, keep giving me more, and that's the point. A raise doesn't fix this kind of damage here.

I'm not sure this company did anything wrong but you think they did that's right and the fact that you think you've been mistreated by them that's right you're done you know you you're you're language all through this email is i'm done i'm done uh and so you don't really want them to give you the money because then you'd be staying in a situation that you think is unfair unjust they don't appreciate you they whatever they don't they're not fair people they don't pay comp right they don't you know whatever you know you just don't like these people anymore and so that that's thing one thing two is this anytime you're facing a business ethics question

or for that matter most ethics questions you don't have to take a class on business ethics all you got to do is switch shoes yep walk a mile in the other guy's moccasins all right now you're an employer you had a guy that came in and said he was worth x and you said yeah he's probably worth some more and you gave him some more he's pissed about that he works for you and then he comes back in and says um hey i got a even better job offer uh the whole way this goes down if you work for for us, we would say, take it. That's right. We'd say, take it.

So if you switch it, you see how scummy it is. Yeah. And so just to wave something in front of their nose that you don't intend to take just to manipulate them, Ken's right. You wouldn't want somebody to do that to you, so don't do it to somebody else. Treat other people like you'd want to be treated. It's a real business ethics lesson. And so if somebody came in and started waving something in front of me like that, I'm going to be going, you know what?

I think you should take it because you don't work here anymore, so you're going to need a job. It's stuff like that. I mean, we probably wouldn't be quite that snarky about it but that's how it would that's how it would be playing in my head yeah and even if they didn't tell you to go right away it would start to erode the relationship to where it's already the beginning of the end that's right yeah don't ever put yourself in a corner folks here's the thing that's that's playing chess against yourself and uh that's not smart because then you're forced out to take a job that you

don't want i'd rather you leave on your own terms jerry's in raleigh north carolina hey jerry what's up hey how are you today better than i deserve what's up so um about five years ago i came to america with a full scholarship and a cell phone i work for a year now in public accounting and because of a visa issue i have to go back to school now throughout this year obviously i started at zero i've saved about thirty thousand dollars and um i'm gonna have to pay for college, which for me is going to be about $45,000. So I was wondering, as I won't be able to take out a regular student loan and I'm going to have to take out a personal loan, would it be more beneficial for me to pay off most of college cash and take a small amount or just keep the 30K and finance a whole amount that I would go to college with

and pay it off throughout the next few years as I go back to public accounting probably. Explain really quick on the visa why you feel like you have to go to school. Okay. So I work for a big four firm and they decided to sponsor my visa, right? So that puts you into a lottery. And in this lottery system, unfortunately, I was one of the unlucky few. You have about a 20% shot. It used to be about 50, but in the last few years, it's changed to about 20% shot. And now I have to go back to school.

And then after school, I should get another three years if I get a STEM-based degree, which is why it costs about $45,000. That will give me another three shots. And the company I work for has already agreed to hire me back. All right. And then on the $45,000, what type of school are we talking about? Well, it is harder for me to get into school since I am an international. So it's going to be a regular state school.

It might be even a private school. But it'd be a good degree, like business analytics or something like that. Something I'll be able to use. All right. All I'm going to challenge you to do is, is get the absolute cheapest option possible. You're not getting this, you're getting this degree to get another ticket in the raffle. And I just think you can beat that price to where you don't have to pay anything out of pocket other than the 30 or way less. I just do not rely on student loans for this to get a raffle ticket. Or loans, private loans. No loans at all.

This is a raffle ticket, and that's the American language for it. It's a lottery. It's exactly what you called it, but it's like, hey. And I just think there's so many other ways for you to get this degree that are much cheaper. There's this thing called college hacks, and it sounds crazy. It's not. But you can actually test test it's like good old

fashion clep test is what it is and you can actually get that degree it's not a degree you're you're saying you're going to shift from a work visa to a student visa right yeah yeah so i didn't get my work visa so i have to go back to school in person which gives you a student visa that's the only way you get to stay so you don't have to get back to school in person. Well, which gives you a student visa. That's the only way you get to stay, right? So you don't have to get the degree. Yes, sir. Oh, okay. So this is all a visa play. You're moving from a work visa to a student visa,

and you're hoping to move back to a work visa after that, right? Yes, sir. Yeah. So, again, you're buying a parking spot to change it from a raffle ticket. And so buy the cheapest parking spot. Go to school somewhere for 30k or less don't take out a loan yeah this has nothing to do with getting the education other than you you're going to benefit from that while you're doing it but pay cash for that and um

yeah that's that's what i would do thanks for the call Ken Coleman Ramsey personality is my co-host today open phones at 888-825-5225 Jackie is with us in Canada hi Jackie how are you hi Dave hi Ken I'm so glad to be connected with you today you too how can help? I just have a question. So my husband and I, we followed your principles for probably the last 10 years, I'd say. We took financial peace years ago. And we are in a fortunate position to only have our mortgage, and it's $70,000. And the property that we live in, that's our primary property, is worth about $570. And just recently, our mother-in-law, she had a fall, and she's going to be living in a, we're just wondering, would we sell or would we rent our primary home at this stage?

So that's the question. So you're going to move into his childhood home. Exactly. And who are the other owners of the home? Just his mother and him. Okay. And her portion is turned over to him at death? Exactly.

Yep, that's exactly right. Is that via a will or a deed restriction or what? Well, they're both co-owners on the deed they're just uh you know yeah it doesn't matter well i don't know canadian law okay okay no the will's the same the will is all written out it's his property so his sister she's also a farmer she's already been given a farm as well and she has her own farm. I see. So she has two properties nearby. Okay. So your mother-in-law has gone into a nursing home, probably will not live in this house again.

No, I would not expect that. Yeah, okay. And so you're going to move into the farmhouse. It needs a bit of work. So we could cash flow the renovation. Our income's about $180,000 between the two of us, plus we have two small rental properties, and they bring about $37,000 a year.

What's the, how much renovation? I can't picture it being, you know, you could spend a whole ton if you wanted. To make it livable, I'd say probably $20,000. Well, it was habitable when she left. Yeah, exactly. Yeah, there's just, you know, water. More livable.

Yeah, yeah. There's no water. Nope, there's water. it would just need a treatment and as well um you know because of the condition of the water maybe some of the bathrooms and the plumbing would need upgraded i see okay all right so how much cash do you guys have um well my husband likes to keep a large uh emergency fund so there's enough money there 65 000 there plus you know a few other accounts um i'm sorry how much money do you all have oh all told yeah liquid access or you just mean how much how much cash do you guys have?

Well over $100,000 cash. Okay. And then we have about half a million in retirement. And then we own the two rental properties and a lake house for ourselves. Okay. All right. So the $100,000 includes a proper emergency fund of three to six months. Yes, exactly.

Exactly, yes, that's in there as well. And you guys make $180,000. So if we set $30,000 aside, you have $70,000 left. And if you spend $20,000 on the farmhouse, that only leaves $50,000 to throw towards your mortgage. Are the other two rental properties paid for? Yes, yes. Okay, are you going to rent your current home? That's what we're thinking.

We're not sure. Do we rent that or do we sell that? Only if you plan to pay it off very quickly. Yeah, two years is what we were hoping. Oh, I think about one year. Because I'm going to use all your cash. Okay, okay. $30,000 emergency fund.

Do the renovation. That leaves $50,000 to throw at the $70,000. You make $180,000. You ought to pay off $20,000 in less than a year okay okay you follow the math yeah that's very doable yeah yeah and so you end up with three rental properties and a paid for farmhouse and it's renovated a little bit you're probably going to renovate it some more as you go along but you make 180,000 and you have zero debt. At that point, you can renovate it a little more if you want to with cash, right? Exactly, yeah.

How many acres? 400 acres. Wow. Yeah, a beautiful piece of property, legacy. You know, a couple generations have lived there and three living generations. Jackie, that sounds really cool and romantic. Is that where you want to live? Oh, yeah, I do.

I love the property. Okay. And we also have a lake home so we can enjoy time between both pieces. Okay. Yeah, absolutely. Just making sure you weren't living his dream and not yours. No, not at all. Okay.

Shared, very shared. Sounds like a lot of fun. Sounds like a lot of fun. It's 400 beautiful acres. Wow, I'm a little jealous. That's amazing. And Jackie truly represents the most positive stereotype of Canadians that I have ever heard. She is poster child, so kind and nice and pleasant, just an enjoyable person.

She represented her country well. Well, you hear about the Canadians being the nicest people on the planet, and Jackie is exhibit A. What a fine lady. There you go. Easy to get along with. Yeah, so great. We're moving to the farmhouse.

Yep. She's like, of course I love it, Dave. Just got to have no more of that water. That's all. That's all I require. She's low maintenance. Very fun. Open phones at 888-825-5225 hey folks our event season is in full swing we would love to have you be part of our events

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as a virtual event, a two-night virtual event. George Campbell is going to hang out with me as well. We're going to go through the basics of investing, but we're also going to get deep into investing. And I'm going to open my personal playbook, what I do, including what I do with real estate. And I actually own a lot of real estate. This is not a theory for me. So if you want to be part of that, you can check tickets on that as well. This is The Ramsey Show. Our scripture of the day, Proverbs 3, 6, in all your ways acknowledge him and he shall direct your paths. Thomas Sowell says, some of

the biggest cases of mistaken identity are among intellectuals who have trouble remembering that they are not God. Classic. Classic passive-aggressive just mic drop there by Thomas Sowell. Boom. There he goes. David is in Chicago. Hi, David. Welcome to The Ramsey Show. Oh, thank you very much. Thanks for having me. Sure. How can I help? My question is that I'm trying to do the baby steps. I got myself a little bit of a quagmire with my debt,

mostly real estate investment, but nothing horrible. So I'm trying to apply the baby steps, and I'd like to sell one of my rentals, but I just don't think my tenant is going to be able to relocate and or somewhat of a moral quandary. Anything. Why is your tenant, why can't your tenant relocate? I just don't think that she'll be able to get another home, especially one as nice and

large as this one, to house her and the kids. So you're not charging her market rent? Yeah, it's close. I mean, I could probably charge her more. So if she's getting close to market rent, why can she not take close to market rent and go rent something else? I don't think she, I just don't think that it's really available. I think it's really going to put her in a position.

Why is it not available? You think you have the only house? No, no, I don't. I don't, but I think she's paying for her mom's rent, too, and I've tried to counsel her that maybe they could live together, but I don't think that's available. She's been late and behind, you know, you know how it is as Reynolds. And I just, like I said.

Well, let me ask a question. I'm curious. Did you feel this way? Did you have this concern for her before you talked to her about the possibility that you were going to do this? No. Yeah. Yeah, I did. Okay. And what was her reaction when she when you told

her that this was a possibility? I broke it to her a little bit but not I really haven't come down. You didn't answer my question. What was her reaction? I didn't really say it. I didn't say anything about selling it. It really hasn't come up yet. Oh. I know it's not going to go over well because i don't i don't think she's going to find well but there's a lot of thinking you keep using the word think listen i it is not your job to manage her house that's right you're her landlord not her boss you're not her daddy and um so you're paying she's paying almost market rent so she can pay this take the almost market rent and go rent something else, take the almost market rent, and go rent something else. And if she wants to combine households with her mom, that's completely her business and her problem.

It is not your job to manage her life. Yeah, you're right. And you're not doing anything wrong to take an asset of yours and say, you know, you don't want to be mean or nasty about it. And if you want to give a little bit more notice, there's nothing on fire here. Instead of giving you, I don't know, is she on month-to-month? She is now. She didn't want to resign last summer. Oh, she didn't want to resign last summer.

No. Hmm. Yeah. Hmm. I get a fair amount of runners like that that don't want to re-sign but they're not committed to you you don't have to commit to them the point is i think if you said okay i'm legally bound by the lack of a lease to give you one month's notice i'm going to give you three months. That's a good compromise. And that gives you plenty of time to work your way through this. I've appreciated you being our tenant, except for those times that you didn't pay on time.

And you don't have to say that, but, you know, you're acting like this is some kind of freaking stellar tenant. They don't pay market rent and they don't pay on time. So I missed where i'm excited about this tenant so um you know i uh and that's not being mean it's just uh like you got really one job when you're a tenant or two don't tear up the house and pay the rent on time these are the two jobs you got so um it's your job to make sure you're charged market rent so um uh so i know you don't have a moral dilemma at all you can be kind and you could give more than adequate notice and say you know i'm sorry gosh if there's any way i can help you with this i'll try to help you

uh but if helping you means uh you staying in the house this 90-day mark, that's not the type of help I'm talking about. But if we can assist you in any way, I can tell you about my friends that have properties, help you find something like that. I appreciate this, but that's what we're going to do. We're going to give you three months' notice. Listen, she can process this in three months and if she's angry at her landlord who she refused to sign a lease with for giving her three months notice who's only required to give her one month notice uh that's her fault not yours that's her fault and so i think this is all about david he's such a nice guy that he's worried about a confrontational situation.

And we'll understand that, but this is nothing more than a difficult conversation and it's not his bag and I get it. But she's going to be fine just by virtue of only, she don't want to sign a deal anyway. She's got options. She knows it could change at any time. David, you're a really good dude and you're just fretting over a difficult conversation and it's going to be over in about yeah 45 50 seconds i mean there's not a lot to it yeah it's um hey gonna be selling the house i'm gonna be sending you a note in the mail so we make it formal that um you know july 1st we're gonna be done august 1st whatever it is and i'm giving you plenty of time you had 30 you have a 30 day right um but i'm gonna give you 90 days just because you've been here a while, and I want to be kind.

And thanks. That's it. I'm done. It's really it. You really don't have to have a big, long thing here. It's not a whole bunch of feelings. I've had landlords in my life, and none of them had any feelings for me. That's right.

Just none of them did. I never had one that did that and i mean if you get a situation like we had one one time that uh you know guy got a terminal cancer diagnosis oh you know and he's got four months to live and he lost his job because he lost his health and his wife had three little kids at home and all this and so you know we just didn't charge him rent we let them live there and let her live there after he passed for a little while i mean we worked we worked with them but but that can't go on for eight years either no even that you know it's a is a period of time we can have some grace and mercy with somebody in that situation but just simply they're gonna have to move that's you know

this lady she really just gotta move i mean this part that's why folks that's why you want to be an owner when you can be and um and not in a stupid way don't go buy something you can't afford because i'm afraid my landlord's gonna do that oh by the way if you don't have to move sign a lease hello then they've you know he if he had a one-year contract then he'd have to honor that morally ethically legally, legally, everything at that point. So there's the process. And here's the other thing. Those of you that are thinking of owning real estate, you need to have a policy of raising the rent every single year.

Because I've been doing real estate for about 40 years and rents have gone up every single year. And the people that I know that get stuck in situations like this, they don't raise the rent for five years because it's a nice person and they pay on time and they cut the grass in a little pattern. And then we just love them. And you don't raise the rent for five years because it's a nice person and they pay on time and they cut the grass real in a little pattern and then we just love them and you don't raise the rent for five years and suddenly you've got a way below market situation and then you try to raise the rent and they have a fit like they think they're the owner so it's really good it just keeps the relationship accurately defined when we raise the rent even if it's a little bit. What's the Dave Ramsey way on that? Do you look at the market and then just undercut it a bit? We look at the market and we go, if they've been with us a long time,

it's a little under market. Okay. But not, I mean, I'll take it all the way to the max plus some. Been there one year, we just take it up to market. If they've been there five years, we tell them when they come in too. Right. Next year, rents are going to be higher. And just expect, go ahead and know

yeah good you know and that way they're not shocked like what you know what right i don't understand what i mean what do you mean what rents are going up and so that if you don't have that pattern you set these you set an entitlement expectation in place and it creates real serious problems later it's a real bad idea. That puts us out of the Ramsey Show and the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Thank you. We'll see you next time.