The Ramsey Show - App - How Much Income Do I Need To Live Comfortably? (Hour 2)

Episode Date: November 19, 2021

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🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studio, it's The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm Ramsey personality, George Campbell, joined this hour by Rachel Cruz, national number one best-selling author, host of The Rachel Cruz Show. You name it, she's it.

She's got it all, folks. And I'm excited to be co-hosting with her today, taking your questions about life and money. It's a free call, 888-825-5225. If you're a Gen Z or millennial, that's a phone number. And if you pick up your phone, there's a phone app. You can actually dial those numbers and it connects you with a real person. Don't throw the millennials under the bus. I'm a millennial that's a phone number and if you pick up your phone there's a phone app you can actually dial those numbers and it connects you with a real person don't throw the millennials under the bus i'm a millennial i'm the same way now gen zers we can we can throw here's the thing rachel i'm the first one to not want to make a phone call i'd much rather text yes i know but to make the show

interesting we have to hear you and so i just want to encourage people out there who may not make a lot of phone calls to make it the day they do. You know, speaking of phone calls, can I tell you something I think we're going to do, George? What's that? This is so off topic, we just need to get to the calls. Speaking of phones, we're going back to a landline. Really? At the Cruz household?

We're going to get a landline. Tell me the reasoning behind this. For our girls, they love talking on the phone, but they always take our phones. And I'm like, wouldn't it be great for them, and like obviously grandparents would just have their number, but that they could call like my parents or Winston's parents. It's a real actual call.

And it's a phone, and they got, or how sweet would it be for someone to call the landline and the girls are like... This feels like we're living in Mr. Rogers' neighborhood. I love this. Isn't that great? Doesn't it just kind of take you back to just, so we bought on Amazon like actual phones. Very impressive.

Anyways. I thought Winston was like a doomsday prepper and if the satellites go down, we can... I'm the conspiracy theorist. You're here for that. That's the secret reason.

I can't wait until the phone rings at home and one of your girls answers and it's like, would you like to re-extend your warranty for your... I know. Oh, Lord. Your student loan is in deferment. Like some spam. I'm here for it, though. and it's like, would you like to re-extend your warranty for your... I know.

Your student loan is in deferment. Like some spam. I'm here for it, though. Let me know how that goes. So, call us. So, Gen Zers, get a landline. Let's just go back to the day, the good old days. It's going to be vintage soon and cool, just like the 90s clothing has been.

Did you ever have your own phone line? 100%. Okay. Instead of the party line? Yeah. Where you could pick up? Yeah, yeah, yeah. Not the party line, but you had like your own. Like we had a kid. Instead of the party line? Yeah. Where you could pick up? Yeah, yeah, yeah. Not the party line, but you had like your own. Like we had a kid's line growing up.

Oh, no. I wasn't that fancy. And our, should I do our recording? We're so off topic right now. James is about to shut down the show. Are you ready, James? Are you ready? He's invested in this though.

Go for it. Should we do this? I'm sorry, America. I can't. This is a treat for America. Okay, we did a wrap. Please do this. This is Rachel and Denise's line.

You know what to do. Leave a message. We'll get back to you. Wow. There you go, folks. You didn't know you wanted to hear that, but you got it. And that is a Friday treat. You're welcome.

Thank you so much for that, Rachel. That was broadcast live on national radio. I want to remind you. I know. I mean, did you have to sing Christmas songs on your recorder? No one made me. Apparently it's a different time in the Ramsey household. Wow. Some behind the scenes for you folks. This is terrible. Back to the phones that matter. Tommy's on the line in phoenix arizona tommy i apologize and we're excited to talk to you how you doing hey no no worries i'm doing well thank you for taking my call guys did you expect to hear a rap from rachel cruz right before you talk to us i didn't but to add to the conversation i'm actually a millennial so

yeah tommy don't you want to landline back in your life doesn't that just feel better down i'd be down i used to talk to the operators all the time when i was younger my mom would be like tommy give me the phone tommy i love this guy well how can we have 69 i mean all of it it's great yeah yeah so my wife and i are uh somewhat nearly married two and a half years in and um she's studying to actually become a doctor or a pa. So she's kind of in that waiting season right now. So I was just curious, we're on baby step 3B. Now I was curious if I should just be throwing 100% of that right towards, you know, that fund for her schooling or if we should be investing through my company's retirement plan, 401k plan. A little background, we have about $75,000 in savings,

20 of that being our six-month emergency fund. And so that leaves us with between $55,000 to $65,000 towards school right now. Cool. How much is school going to cost? Yeah, so school, depending upon if she wants to go the PA route or the doctor route in-state, it will be about $60,000 for the three years for PA or $160,000 for in-state doctorate program. Okay. And that's 60 per year for three years? No, sir. So it's 20 to 35 per year. That's awesome. That's very reasonable. Yeah, it is. I think most of the time with doctors and PAs, they just think they're

forced to take the loan route. So they put in all of their spendings like housing, food expenses, and that's why they get so jacked up. But this is just in-state tuition. That's awesome. Well, what's great about it, too, is she's going to have to – when will she have to make the decision for the $160,000 route? When will that happen? Probably within the next couple of months. Right now, because of COVID and stuff, she hasn't been able to really get like any little to any shadowing

hours. And that's really pivotal for doctorate school, for medical school. So right now it's kind of looking like she might go the PA route because she has more experience. It's higher chances of her getting approved, essentially, or accepted. But, yeah, within the next couple of months, I'd say, Lord willing. That's awesome. Well, I mean, on that route, obviously, you guys have the cash, and you don't have to pay it all up front, obviously, right? You're going to be paying as she goes, which is great, which means you're going to be able to still continue to save, because you have this money set aside, basically, for her tuition, and you'll still continue to be able to save. And then, ideally, you know, if she goes the other route knowing that okay we're gonna have to

save on the side uh and work harder and be more focused to continue to still cash flow her if she chooses that 160 000 routes um but the 65 000 paid for route sounds real good and here's the thing with pa if she goes the pa route she can always go the doctor route later, correct? That's kind of, no, not really. You'd have to do everything over again. All over? Yeah. I do not understand that.

You'd have to go back to residence. You'd have to go back to, from what I understand, you'd have to go back to medical school and then do the three or four years of residency on top. So it's not really a, they really try to differentiate the difference between PA and doctorate and keep them separate so that way that there's the two distinct routes. And so I guess for respecting doctors and the work they put into it and things like that.

Sure. Well, so I would say on the money side, though, Tommy, if – yes, I would continue to invest for retirement if she goes the $65,000 route because you'll have it basically paid for. It's there and you'll still have your emergency funds in place. So yeah, that. Now, if she goes the other route,

then I would pause the investing and then just keep saving up cash and cash flow her through it. But for her, I would ask her to, I mean, that's $100,000 difference. I'm kind of just making these numbers seem like they're not that big of a difference. That's a big difference. But and if the outcome, yeah, and if the outcome is the same for her, if she's getting what she

wants out of her career, out of both, and it's the same, I mean, obviously, I would pick the PA route just to be able to cash flow it and she can jump into it and all of it. But if it's something that she's passionate about the other routes, then she can jump into it and all of it. But if it's something that she's passionate about, the other routes, then she can still do that. You'll always have to pause a lot and save a lot to make sure you're cash flowing it. Yeah, and the upside of the income from the doctor versus PA, look into that and find out what the difference is. We want to make sure there's going to be a good ROI on this regardless.

But cash flow it. Avoid student loan debt. You guys are doing so great. You're following the steps. Super proud of you guys. Rock star millennials. Look at that, Rachel. They're out there. You guys are doing so great. You're following the steps. Super proud of you guys. Rockstar millennials. Look at that, Rachel. They're out there.

You can find them. This is The Ramsey Show. You've got a lot on your plate, a job, your home, your marriage, and your growing family. While you're enjoying the present, you can't help but think about your future and your finances. As you explore your options, consider Christian Healthcare Ministries, or CHM, for your healthcare. Their generous maternity program

and budget-friendly monthly programs have been a blessing to members welcoming children into their families. Visit chministries.org slash budget to see if it's right for you. Christian Healthcare Ministries is a Ramsey Trusted Provider. I'm George Camel. My co-host today is Rachel Cruz.

This is The Ramsey Show. If you aren't strapped with student loan payments, odds are you know someone who is. Millions of people are putting their lives on hold. They can't buy a house or have kids because they're stuck. Or even worse, they're waiting and waiting and waiting for the government to save them with student loan forgiveness. What a joke. Our team produced a brand new documentary called Borrowed Future, and it is out now. It uncovers the dark side of the student loan industry and exposes how the system is built to work against you.

You'll see Dave Ramsey weigh in on the epic failure otherwise known as the student loan program, along with featured interviews from industry insiders and thought leaders like Seth Godin, Seth Frotman, and Dr. John Deloney. We're coming at this hard, folks. We're taking big swings at the student loan problem with the goal to arm parents and students across the country with the truth. Here's the truth. You do not have to take out loans to get a college education.

You can graduate debt-free and avoid the predatory student loan industry. Borrowed Future is available to watch now. You can find it on Apple TV, Amazon Prime Video, Google Play, or just go to BorrowedFuture.com. Rachel, I love that call we took before the break about student loans. And his wife's going to go to med school debt-free. I know. Isn't that great? You don't hear that very often.

And it's because they had a plan. And they had a wise choice when it came to what college she's going to in-state. And that whole program, 60 grand for PA. Yes. And she's doing it. And he's exactly right that, you know, when you just even entertain the idea of debt and you think, okay, well, I mean, we have to have debt. And you go down that mindset, that that trail then you're not nickel and diming everything you're you're adding stuff here and there and oh here here here do you know what i'm saying like you don't feel the urgency to get it as low as possible and that's on anything even a car right if you think oh i'm gonna have to get a car loan you're like oh yeah i'll do that upgrade

here what's 40 versus 50 yeah you don't feel it um but when you pay cash that's one of the that's one of the beauties about it is that you end up spending less but also it's because you're working so hard to get the price down because you're like, no, this is my hard-earned money and you feel it. And I wonder if there's data on this

but people who pay cash for school, I wonder if they're more invested, if they're studying harder, if they're trying to ace the test because you paid good money for that. Or the graduation rate's higher. Yeah. Yeah.

I wonder. I would guess that it's higher if you paid cash. And I bet there's stats out there for sure. Or the graduation rate's higher. Yeah. Yeah. I wonder. I would guess that it's higher. Oh, I'm sure there's that, yeah. If you paid cash. And I bet there's stats out there for sure. But I'm proud of them. I'm proud of people going, you know what?

Student loans aren't the only path. And we're going to forge our own path over here and we're going to do it with cash. And they're going to do it. And here's what it's like when I'm sitting in this seat, especially and I'm talking to people, I'm like, man,

it can be frustrating because we know it's possible. We know it's possible. Choosing a school you can afford, even going to a community college, scholarships and grants, all of these formulas. Is it easy? No, it's not easy, but it is possible. Then when we talk to people that do have debt, their largest amount of debt always is the

student loan. It's like, oh, man. I did an Instagram post of some shoes that I bought that it was like my buyer's remorse is what student loan. And it's like, oh man, I did a Instagram post of some shoes that I bought that it was like my buyer's remorse is what I say. Like my, one of my spending regrets in life. Um, and they, and some people, and so I asked people, what's your biggest spending regret? And so many, it was student loans because it's like years later, it's a degree they're not using, um, or they could have gone to a different school and gotten it half you know the price of what they pay anyways i just thought that was fascinating i wasn't thinking when i thought spending when you think about a purchase you don't think about

student loans yeah yeah i was expecting like a thing and so but hearing so many student loan answers in there of the regret and i'm like yeah i mean it is it's it's a hard one so the documentary bard feature it's it's amazing yeah go watch if you haven't. It's 88 minutes. It's a great weekend watch. And if you've got kids, oh my goodness, it's a great thing to watch with them because it sparks conversations. What I found after talking with so many teens is that parents aren't having the conversations. And so they're wandering into college when they're 17, 18 going, my parents never really talked about it. And they just said, we'll figure it out. Next thing you know, they co-sign loans or took out the parent plus loans or let the students go

off and take out 200 grand on their own. And it all comes down to communication, expectations, where are we at financially? How much can we contribute? And a lot of it stems from shame from the parents too. Yeah, sure. We can't pay for college. So we don't even want to talk about it. Right, right. But that's what I even love about this message of getting under, like the underbelly of this whole industry. Because like you're saying, these are 18-year-olds making decisions. So there is a part of me that,

I mean, in that Ramsey, I'm like, we want to fight for those 18-year-olds. It's not fair for them to walk in to an office and they have no clue what they're doing because no adult has talked them through it. And someone says sign and they sign because they don't really know. I mean, they're 18 years old.

Like, isn't it that your frontal, like your brain, the frontal lobe, isn't even fully developed until you're like 25 or something. And I'm like, oh, you know, they're making these decisions that follow them for the rest of their lives. So parents, I mean, George, I think that's great. I think it's a great encouragement for parents

to dig in and have the conversation. Yes. And talk about it. Go check it out, borrowedfuture.com. Open phones this hour, 888-825-5225. Alexandra joins us from Chicago, Illinois. Alexandra, welcome to The Ramsey Show. Hi, George. Hi, Richard. How are you guys?

Doing great. How can we help? I'm 32 years old. I'm in baby step number two. For the first time in my life, I feel like I have, you know, some control. 2020 really kicked me into gear to start paying my debt. I started with $124,000. Now I'm at $81,000. Way to go. Congratulations. Thank you. I went from making less than $20,000 a year to now making over $50,000. Great. But I'm having a little bit of guilt, not a little bit, quite a bit actually. This morning I was crying about it. I'm having guilt with giving. I have two brothers who live in Mexico, and they are way under the poverty line.

And I feel that now I'm at a place where I can actually help them. But every time that I'm doing my budget and all the extra money that is going towards my debt, I feel like I should be helping them a little. That's just what I want to know. Well, Alexandria, you have a beautiful heart. I can just hear over the phone your longing and compassion for brothers that you love and knowing how their living conditions and living below the poverty line, it hurts you, right? I can feel that.

I have two thoughts around it. And then George, obviously, I want to hear yours. But my first is that we always encourage giving. No matter, even on Baby Step 2, we want you to be giving. And really, 10% is like our recommended percentage. Because the element of giving it we want that even from the beginning because it makes it that much easier to continue to give as you start to build wealth so so that giving portion you can choose where to give that and so you know for um people that are part of a local church for instance we say hey that can be your tithe you can give that to your local church or if someone is not um have a walk, it could be to a nonprofit or something. So,

I mean, you could say, hey, this 10%, I'm going to give to my brothers to help them right now in this season. I would not be mad at that. It's not like you're enabling some bad behavior, right? I mean, they're just in a totally different situation in Mexico. And so, you could choose to do that and then still focus on your debt snowball. Because my other point that I want you to hear is once you pay this off, even though it's going to be a little bit of a journey for you, you've knocked out $40,000, $43,000 already, which is amazing. And so you're going to be able to be debt-free sooner than you can even imagine. And when you don't have those payments and you have that emergency fund, you're going to be able to be debt free sooner than you can even imagine. And when you don't have those payments and you have that emergency fund,

you're going to be able to do so much more giving, which is even more exciting. And it's easier to give because you have the margin when you don't have the debt. So I do want you to still be intense with it because, because ultimately it gives you not just you freedom, but it gives you the ability to help others in that sense when you don't have the payments.

So if you want to be giving a little bit to them right now while you're out of debt of that giving portion of your budget, I don't see anything wrong with that because you are helping someone in need. That's beautifully said. And the one thing I would add is you probably can't give them enough money to get them out of the situation. That's a great point. And so I don't want you to feel like you have the burden to fix their life. But what you can do is support them in figuring out what

it looks like to get them back on their feet. And that may not be monetary. That might be finding them an opportunity from where you sit in Chicago and going, hey, let's find you a job where you're able to afford your bills and get out of this poverty situation. And that may not mean the 50 to 100 bucks that you might be sending them every month, but you've got a beautiful heart and we're cheering you on on your debt-free journey and definitely hopeful that your brothers can get out of this situation. Thank you so much for that call. Sweet stuff. Rachel, good stuff there. This is The Ramsey Show, I'm George Campbell, Ramsey personality and host of the Fine Print and Entree Leadership Podcast. Joined today by Rachel Cruz, host of The Rachel Cruz Show.

Rachel, in the first hour, we took a call from a gentleman wondering if he should buy a car, how much car he should be buying, with some other goals he had going on. And you decided to do a little poll on your Instagram. What was going on with that poll? Well, we were talking about how cars have become the status symbol, right? That's what Dave always says in the opening of the show. And how a car really is supposed to just get you from point A to point B, but yet it's become this luxury item in our world that people love. So I just asked the question.

I asked people to be honest. I don't know if they were very honest, George. That's a good start. Yeah, yeah. At least asking for honesty. I did. So I asked, why be honest. I don't know if they were very honest, George. That's a good start. Yeah, yeah. At least ask him for honesty. I did. So I asked, why do you want a nice car? Because of what other people think

or you just like nice stuff? And the winner, which I guess I'm not shocked is, I know I gotta get these up. Perfect. Okay. Was 93% like nice stuff. Okay. 7% say because of what people think. Wow.

I appreciate that. The 7% honesty saying, I'm just doing it for other people. I just think it's more, right? It's got to be. Let me get the numbers. There was a third option. 66 people said because of what other people think.

836 said because they like nice stuff. Again, that was just in the last hour. If there was an option C, do you think most people would select that of a little bit of both? What's the option C? A little bit of both. I like nice stuff. I mean, that would be, I mean, yeah. I don't want to be ridiculed by my friends.

I think about my Tesla. 80% is for me because I just genuinely want a Tesla. 80-20. 80% I like nice stuff. 20% And then I'm sure there's a 20% that's like, oh yeah, Tesla people are probably like, oh, that's a cool Tesla if you get a Tesla, you know? If you rolled up to Ramsey Solutions in that Tesla, I'd be like, Rachel, this is a dope

car. Like, I would be very impressed. I'd want to ride. Right. And am I lying to say that? I'm like, oh. That feels good. Right?

But that being your leader, your leading motivator in life when it comes to money is terrible. So that's like where it gets super unhealthy. It'll set you up for failure. Yeah. Yeah. And I always ask the question, if nobody sees the purchase, do you still want it? And I've done that with my Tesla dreaming. And yeah, I do.

Still want it. Like literally no one ever saw it. I want to sit and drive an electric car so bad. Yeah, it's fun. What's your dream car? Even if nobody saw it, like that you just genuinely were like, ooh, that would be fun. I'm going Tesla too because I'm a giant nerd and I like the tech. George.

I just like the technology. I don't need the revving engine like Dave does. Dave's like, if I don't hear it. There's not oil. There's no oil in that engine. It's not a real car. That's not a car. That's not oil. There's no oil in that engine. It's not a real car. That's not a car. That's a computer.

That's nice. Listen, if I never had to do an oil change again, praise Jesus. God, we just spent so, car, man, why are we getting off on this? Who needs it? All right. We had car repairs this month. Ooh. This month.

And the oil pan, which I didn't even know that's a thing, had to be replaced. And that's like what's supposed to be replaced in cars that have like 200,000 miles. Now, mine's up in like 90,000 but yeah you gotta like the it was terrible and then they had to fly it in from a you know another country and then it gets stuck on some ship in port can't come to port and all of it anyways the car was in the shop forever and i was just angry i was like i hate core stuff one more reason to get the Tesla. Amen, brother. Amen. Well, hey, open phones this hour. 888-825-5225. We'll talk about what you want to talk about, and if that's cars, that's great. But we've got Esmeralda on the line in Stockton, California, and we'll see what her question is. Esmeralda, welcome to The Ramsey Show.

Hi, guys. Thank you for taking my call. Sure. Speak directly into your phone. It sounds a little noisy. So I just had a quick question. I am about to switch careers, not careers, but jobs. I currently work as a correctional nurse, and I make about $120,000 a year. And I'm going to go be a school nurse to have my kids' school schedule, and my salary is going to drop down to about $80,000 a year and I'm going to go be a school nurse to have my kids school schedule and my salary is going to drop down to about $80,000 a year and my husband makes about $120,000 as well and we just sold our car so we just got rid of $33,000 and we have about $35,000 in credit card debt and about $180,000 in our mortgage.

So I just wanted to know, I'm just having a hard time with the whole salary reduction and how much is enough for a family? That's a great question. And you guys are in California, and so I know this looks different for people in high-cost-of-living areas, but you don't get a pass on the math. And the truth is, it really doesn't matter. I mean, there's people who make $40,000 who live very comfortably. There's people who live in million dollar houses who feel like they don't have enough. And so what's going to make you feel like you have enough is when you have margin.

And right now you've got a pile of debt here in $35,000 of credit card debt that's making you feel like you don't have enough. And so can you live on $200,000 income, which is what you'll go to in California, comfortably? Yeah, you can, but not when you have a pile of debt breathing down your neck. Esmeralda, what's the $35,000? I know it's credit card debt, but what are you guys charging on it? Oh, it was just we did furniture and just like odds and ends that have piled up over the years.

Yeah. So over the years, you've been paying on this debt for a long time? Probably about two years, just kind of the last year and a half, we've just kind of been living life and buying stuff, going on vacation. And now that I'm able to, I finished my BSN, so I was able to apply for a school nurse position. And now that I'm actually going to take it, I'm like, whoa, well, I know I'm going to take a pickup. And now I'm like, oh, is this the right move right now for us?

Yeah, well, here's the deal. You're still going to be making around $200. If you're making $80, he's making $120. You guys are still making an incredible income. And so y'all's issue is going to have to be, hey, hey i'm gonna have to set some boundaries and actually get serious about this because you guys have kind of just been floating around having fun going on vacation buying stuff and just not really thinking because you've had the money to cover your mistakes and suddenly when you don't have the money to cover your mistakes anymore and you're down forty thousand dollars a year yeah it's gonna you're gonna feel it exactly

why you're calling right you're feeling that intensity and and as well that's the intensity that you're going to have to clean this up i mean people they do it all the time and and if i were you guys i mean your life is going to look drastically different for the next nine months of your life like i would buckle down and do nothing i would i would sell some stuff you guys bought on those credit cards that you're not using anymore i would not go out to eat i would not go on vacation i would do nothing and I would get rid of this because if you can take this intensity and actually get serious about it, this $35,000 will go away. You guys have the income to be able to do it. You're going to be able to really knock this out. Even if you go and take the nursing job, which I'm not mad if you do that. I think that if that's what

you're wanting to do, that's great because you guys still are going to have a great income to pay this off, but you got to get serious about it. And you guys have not been serious about this. And, man, when you pay this off, like George said, it's going to put you in a different spot. It is going to bring the freedom that you're wanting right now to be able to switch jobs and not feel the stress. Okay. Yeah, we sold our cars on Monday, which that took off $33,000. And we have two other cars that are paid for. So we're good with that.

And my husband's like, I'm so proud of you. You actually gave up a nice luxury car to drive your paid-off car. I was like, well, I want to do this. I want to be able to be home and spend more time with the kids. And, you know, my salary eventually will go up to $100,000 in about three years. Each year I'll get a pay raise, and of course he will as well. So I guess it's just a drop down right now that I'm like, oh, we're going to have to get adjusted a little bit. Well, here's the thing, Esmeralda.

You called asking how much money do you need to live comfortably, and right now I don't want you to be comfortable. I want you to be uncomfortable for a short season so that you can live your best life later on completely debt-free. Because clearly, this comfortable living, doing whatever you guys wanted to do, it's not a great life because you're sitting here with a little bit of anxiety about, is money enough? And what about these bills that we're paying? And maybe some buyer's remorse, some regret, some shame. And I don't want any of that in your life.

And you guys have a fantastic income, like Rachel said. Buckle down. Get rid of this thing in six months and clean up. Get an emergency fund in place do you guys have any savings right now we do we have about um like 20 000 or so okay well if you're following the baby steps throw it at the debt you've got 1000 starter and 19 is going to get thrown on that 35 of credit card debt and all of a sudden you're gonna go oh my gosh we can see the light at the end of the tunnel i would write a big check tonight as Esmeralda. I really would. Because y'all need a shock. You need, like George said, you've kind of just been floating around.

You need something to kind of shock the system. And man, when you do that and you said, okay, we're going to just throw this, get rid of all this other debt, pay down the credit card, it's going to make you get into gear to pay off the rest because you're going to want that emergency fund back because you want to get comfortable again, which I don't blame you. But you need a little shock to the system. Yeah, I'm here for it. You guys got this. You guys got it, Esmeralda.

You can do this. I'm not worried about it, but you're going to have to get some self-discipline in place and get uncomfortable so that you can be comfortable later on. That's true financial peace. This is The Ramsey Show. I'm George Campbell, joined today by Rachel Cruz. You are listening to The Ramsey Show. Give us a call, 888-825-5225. We'll talk about your life and your money. Pat joins us in Sioux Falls. Pat, welcome to The Ramsey Show. Hello. Yeah, hey, I just started a little business in LLC,

and I went to the bank to get an account, a business account going going and they recommended a credit card and then they did yeah they did and uh you know back of my mind i knew what they would say but um i'm calling to see if i was right about what they would say no credit cards it doesn't matter if it's business or personal or nothing that that that sounds about right to me. Did you end up doing it? I did, but I can cancel it. So I haven't even got it in the mail yet. Like I said, I was wavering, and I called my wife, and she said, yeah, get it. And I still went back and forth, and then I said, I tried to call you guys yesterday too.

Hey, hey, don't put this on us, Pat. I got voicemail. We didn't sign up for the credit card, credit card pat i got voicemail so i decided to go into debt uh well pat tell me this what was your reasoning going you know what i'm just gonna go ahead and do the probably gave you some good some good excuses well i'll tell you i'll tell you what it was it was um my wife was thought the 1.5 would be cash back would be be a good deal. Ah, cash back. You talk to successful business owners and they're like, man, the 1.5 is what did it. So I'm going to be a multiple, you know, a bunch of this. It's just a little small business.

I know. You know, it happens so fast. You're filling out all these forms for this LLC and everything else. You know, then this and that. They rope you in. Yeah, I can get rid of it. I just wanted to check with Dave before I did anything. Whenever it comes to these decisions, Pat, I like to go, who benefits from this decision?

And in this case, the bank benefits from this decision. That's why they're pushing the credit card, is because they're not going to make a whole bunch of money from you taking out a business debit card. They're hoping you rack up some debt on this thing and pay a whole bunch of interest over the course of your life running this business. So I'd like to warn you, I appreciate you guys taking my call. Absolutely.

Thanks, Pat. Thanks for calling. Cut it up. As soon as that card comes in, cut it up and maybe go to a different bank just to stick it to them and get a business debit card. That is what Dave carries.

A new bank will do the same thing, George. Well, go to a credit union. I just don't want to do business with a bank that sold me a credit card. That's all I'm saying. That's what they all do, though, right? Well, yeah. I mean, they're banks. This is what they do.

They're out to make money. That's what they're doing. But that's what we do here at Ramsey, right? Yes. So we're a big company, millions upon millions of dollars, and we only use debit cards. Sure. Believe it or not. Yep.

Yep. Even the real estate here is paid for. All cash. We move at the speed of cash is what we say around here. And what it does, though, I mean, on a business perspective, is it makes you make different business decisions when you are using cash. When you're using debt, there's a level of, let me try to test it, and if it doesn't work, I don't know.

You're not as emotionally kind of freaked out. But when it's your cash, you're like, I'm going to make sure this thing that we're investing in is going to give me some ROI. You have a deeper emotional investment when it's your own money. And then on the flip side, on the consumer side with the points, I mean, this is something we hear all the time, George, that people have credit cards, whether it's, oh, it's a just-in-case thing, or I do it for the airline miles and the points. And one thing I want people to realize is that, because people do pay off their credit cards every month, right?

There are people out there, they're paying off, and they're quote-unquote benefiting, and they are getting the cash back, all that. But you have to understand, you're getting all of these points because the majority of people, the average American is carrying $16,000 credit card balance. So people, because they are mismanaging their money and the banks are making tons of money off that, you now, quote unquote,

get to reap the benefits of a system that's screwing people and they're putting people in bad positions. So I'm like, I don't even want to play the game. I don't even want the points because you're not doing it. It's dirty money. A little bit is what it feels like because I'm like, because there's some, you know, single mom out there who's trying to make her bills and she's using the credit card

to help her in that because it's the only thing she knows. And I get a free $70 Southwest flight. I'm like, no, no, I will pay for my own Southwest flight. Thank you. I don't know. It just drives me nuts. There's a moral argument to be made that we really don't talk a bunch here at Ramsey Solutions.

We stick to the financial part. But there is a part where it's just, it's a corrupt industry and it's hurting people. And you have to decide, do I want to be a part of an industry that does this to people? I don't want to play the games. And 1.5% is not going to change your life.

It's a few hundred bucks back. And I tell people, give yourself some cash back. That's what you can do when you live a debt-free life and you have the margin change your life. It's a few hundred bucks back. And I tell people, give yourself some cash back. That's what you can do when you live a debt-free life and you have the margin in your budget. And if I want to go on vacation, I don't have to hope that I have the points at the end of the year. We just budget for it and go on vacation.

That's right. That's simple. Yes. So we've got an episode all about this on my podcast, The Fine Print, and it's called The True Cost of Credit Card Rewards. So if this is you and you're out there and you're going, well, what if I pay it off every month?

And what if, and what if, and what if? And you're wrong. Just go listen to the episode. We talked to an ex-Capital One employee, Elena, who really dished. She spilled the tea, all right, on the credit card industry. 10,000 social experiments they run. You're just a mouse in their maze. And when you get to the cheese, you think, but I'm winning.

I got cheese. And then you zoom out and you go, no, you're just a mouse in a lab being socially experimented on. So go check out that episode. You can go to fineprintpodcast.com or just search for the fine print wherever you listen to podcasts. All right, let's take a call here. We've got Lauren in Las Vegas, Nevada. Lauren, welcome to The Ramsey Show. This is amazing. It is amazing. Lauren, I think you're amazing. How can we help? No one's ever that excited to talk to me and George. She might think this is Dave. Dave is not here, Lauren. I'll get him next time. Thank you, Kelly, for putting me through. Real quick, my husband and I were on Baby Step 6. Yay for the program.

Congrats. Thank you. We just moved into our home here in Vegas, and we did it the Ramsey way. We're just trying to decide how much to save for home improvements versus paying down our mortgage. After everything, we have about a surplus, I mean, on average from $2,000 to $5,000 that, you know, I either put towards paying off the mortgage, but then I thought maybe I should pause doing that and save for improvements. I don't know. Well, I don't think it's an either or here. I mean, how urgent are these improvements?

Are these nice to haves or is like the roof going to collapse? No, these are definitely nice to haves. We plan to be in this house for, I mean, as much as you can plan, right? 10 years at least. You know, we're in a neighborhood, we picked this neighborhood for our kids. We want to grow up and, you know, have our kids grow up with friends in the neighborhood. So that's where we're at. That's awesome. How much is left on the mortgage? A good number. That's okay. I mean, yeah. You can't shock us.

Just throw it out there. Okay, a million. Yeah. Okay. We're still here. And you said you did it the Ramsey way, which makes me think you guys can afford this. You put 20% down or 10% to 20% down,

and the mortgage payment is no more than... Yep. It just sounds funny to say out loud. No, absolutely. A million. What's your household income? I'm curious. Yeah, it's, I mean, the $350,000 base and then add-ons. That's great.

That's awesome. You guys are doing great. Way to go. Thank you. Yeah, my husband works very hard, and we're a good team. Well, don't be ashamed. It's awesome. You guys are crushing it.

Yeah, so I think, so Lauren, with the money you guys are putting extra, you said you have $2,000 to $5,000, I guess, a month. Is that what you're saying? Extra. On average. Yeah. Yeah. When I say that, because some it's not, we don't have overage.

And then other days or other months we have like 5K, just the timing of things. Totally. So. Well, at this point, here's what I would do. And George, you obviously, I want to hear your thoughts. But you guys look at, so the mortgage, you got about a million left. And I would do, I would do a 10-year plan that you're going to be in this house for 10 years and say, okay, when do we want this mortgage paid off? Like, when would it feel great? And do

some math to see, okay, what's realistic if we, because again, you're on baby step six. So we say this is the time you get to kind of take your foot off the gas, enjoy life a little, do some house improvements. You can do some of this, but I would still have a time frame, a goal just for you and your husband to know, hey, we would love to have our house paid off in X amount of time. And that could be in five years. That could be in seven years. But kind of aggressive because we really want you to have that house paid off. But that feels good.

But for you to still have margin in your budget to live life, because I still want you to say, hey, OK, so that's our goal is to get it paid off here. So then how much extra do we have per month to play with? How much how many vacations do we have per month to play with? How much, how many vacations do we want to take a year? You know, do we do a one improvement on the house? Maybe one every year and we cashflow it. So you,

you can still live your life, Lauren. So it is going to be, it's not an either or, it is a both. It's a decision you and your husband are going to make. Yeah, we still want to be wasteful because I've got to tell you,

I was what your dad called a princess before. No, you're not being wasteful at all. No, you're doing great, Lauren. Just allocate to both and start saving up in a sinking fund and maybe start paying off the house once those improvements are done. Hardcore. Way to go. Great job, though, Lauren. You're doing great. That puts this hour in the books. This is The Ramsey Show.

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