The Ramsey Show - App - I Owe $32k on a Car Worth $18k! (Hour 1)

Episode Date: January 25, 2023

George Kamel & Kristina Ellis answer your questions and discuss: Renting vs. buying a house, from the blog: Should I Rent or Buy a House? "I owe $32k on a $18k car... what can I do?", Why you should never borrow on your 401(k) and stay away from HELOCs, from the blog: What Is a Home Equity Loan? The best way to save for grad school. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Девочка-пай Live from the headquarters of Ramsey Solutions, broadcasting from the Pod's moving and storage studio, it's The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm George Campbell, joined this hour by best-selling author and Ramsey personality Christina Ellis, and it's a free call at 888-825-5225. You jump in, we'll talk about your life and your money. Samuel kicks us off this hour in Charlotte, North Carolina. Samuel, welcome to the show. Hey guys, how you going? How are you doing, man? How can we help? Doing pretty good. So I guess my main question is, I'm moving out from my parents' house soon to the state of Florida. My girlfriend lives there, so we're planning to get married. And my question is, this would be my first place on my own. Would it be better to go for an

apartment lease or try and do a mortgage? Because honestly, the prices are only a couple hundred dollars difference, depending on like a small house versus like a one bedroom apartment. So I'm just trying to figure out the best route to get there. What's your timeline on things? So you're moving to Florida. When's that happening? You're going to marry your girlfriend. When's that happening? What's that look like? My plan is to move there sometime this spring and then get married around the end of the year. Okay. So initially when you move there, you're going to be living by yourself for a while, right? Yes, exactly. Are you going to have a roommate? That's what I'm trying to figure out. Are you pretty familiar? I'm not against it,

but I don't really know anyone there yet. So we're going to see. Okay. Are you pretty familiar with the area of Florida that you're moving to? Yeah, I've visited a couple different, or probably like 10 times at least. So I do know the area pretty well. Okay. And what's your financial situation? What's your income? Yeah, so right now I run my own video production agency.

Awesome. It is my own business, but I do have a couple retainer clients, so it is sort of guaranteed income on contract. And so anywhere right now from around 50 to 60,000. Cool. And you would keep that business running if you moved to Florida? Is it something you can do remotely?

Yes. Most of it is remote, but I do have enough time to go out and do physical jobs around the area, that sort of stuff. Cool. Well, Samuel, this is all super exciting, like moving out of the parents' house, getting married. This is awesome. How old are you?

Yeah, I'm 18. Wow. You're a stud, dude. All right. How much debt do you have? I have no debt right now. The only payments I'm doing are just car insurance, phone bills, and a couple other subscriptions, around about $300 a month. Cool. And then how much money do you have in the bank? Uh, right now I have around 5,000 saved up. Um, so not too much. So that's what I'm trying to, trying to figure out. Is that just enough to get you moved and, you know, first month, last month deposits, all that kind of stuff? Yes. But I do have a lot of gigs already signed on and contracted for this year. It's just a matter of getting it done and getting paid for it. Okay. So back to your original question, should you buy or should you rent? You should absolutely

rent. And not just because you don't have money for the down payment right now, but also because we don't know the area, you're going to get married at the end of the year. So I would sign probably, you know probably a year lease when you get over there and you're not even engaged yet, right? No, not yet, no. But you still think you're going to propose and be married before 2023 is over? That's the plan, yes. This guy's got a lot of drive for 18. A lot of respect for Samuel. I love it. Hey, Samuel, if I'm in your shoes, that's how we often answer these questions.

Because right now you've got a wide open space. There's so many different ways you can go. But if I'm in your shoes, I'm going to try to get as little obligation and stress as possible. So I love what George said about a roommate. I'd be looking online, joining Facebook communities, maybe networking with your friends,

see if they know anybody in the area. Maybe your girlfriend knows someone and see if you can just be a roommate to somebody who already has a lease. Like that leaves your options open. Yeah, it just takes kind of the stress off of it. Now, when it comes to buying a house, you don't need a credit score, but you will need rental history. And so make sure that you have good track record of you're making a consistent monthly payment on time. You've got a few trade lines open, like you mentioned, your cell phone bill, something you're paying consistently every single month, your internet bills, those subscriptions, they're going to be

looking for things like that just to prepare you for the time you are ready to buy a house. And also, like with your girlfriend, there's going to be so many factors with the home buying process. Like you're going to get married eventually, right? And so she's going to have her opinions on the house. She's going to, you know, want certain wallpaper, a certain layout. And so being able to make that decision together once you're married is going to, you know, just involve her in the process. You're not going to get locked into a house that maybe, you know, in a year, once you're married, she's like, I don't like this house. I want to go somewhere else. Oh yeah. And when you get married, man, it's a lot of life change at once. So I'd even encourage you guys to rent for a year. You're probably going to need more time just to save up because you got to save up for a wedding too

in the next year. And we don't know who's going to be paying for what. You're going to have to buy an engagement ring. So there's a lot of life expenses coming up that I would be focused on before home ownership. You'll get there. You're going to get there way before most of America will ever get there at 18 with no debt making 60K. And so I'd continue to just try to live on as little as you can for the next year as you get married and maybe you sign a lease and then she joins and you kick the roommate out. That's always a fun game to play. So that's an option as well you can think about. Well, Anne, you're in such a great spot now. The fact that you are calling the Ramsey Show at 18, you know, on the front end of all these decisions, that is awesome. And I think we get in the spot a lot of times, you know,

especially when you're young, it feels like you need to hurry. Like you need to hurry. You need to get the house. You need to get married and all these different things. And I think it's awesome that you're getting married. But with some of these other things, you don't have to be in too big of a rush, right? You don't have to lock yourself into a long-term mortgage. Like you can make a big step in moving to Florida, but you don't have to like have every single thing figured out straight away. So your next goal, Samuel, is we've got to get this move done. Let's figure out what our rent situation looks like. Then we're going to start, make sure we have an emergency fund in place of three to six months of expenses. Once you know what those are going to be,

then we're going to be saving up for the engagement ring. Then we're going to be planning for the wedding and paying for that. Then once all that's over and we have a new situation in this marriage, we can then focus on saving up that down payment. And I want you to have at least 10% down. I love 20% or more because you can avoid PMI and only get a 15-year fixed rate mortgage. And it's so easy to get tempted by the 30-year and say, well, we'll pay it off like a 15. And it gives us wiggle room. I don't play that game. How about we get a 15 and pay it off like a seven? And by the time you're 27 years old, you've got a paid for house and the rest of your life ahead of you with your bride. Well, and what's beautiful too, at this age, at 18, just starting their lives, getting married,

like these are your textbook baby step millionaires, right? In 15 years, y'all are going to be killing it. You're walking into your thirties with a paid off house with a huge retirement account. Like that is your future if you follow these steps. How'd you hear about this stuff, Samuel? I'm curious. Yeah. I mean, I have a friend of mine who used to work at Ramsey. And so he sort of introduced me to the different things. And then I just started watching the YouTube videos and I was just watching it while I was eating lunch. And I'm like, I should call in and just see what they have to say. I love it. I love watching the highlight videos. That's awesome, man. Well,

we appreciate that. Our YouTube team especially appreciates that. Such an awesome vehicle to get people who may not know about us to go, oh, they stumbled upon this. And with all the just trash stuff on the Internet and social media and TikTok and YouTube, we're going upstream here with some countercultural advice, which is not get rich quick. It's get rich slow. Slow down. Use wisdom. Pay cash for things. And you wouldn't believe the hate we get for just saying that basic stuff. But it's God's and Grandma's ways of handling money.

It's The Ramsey Show, and you can join the conversation at 888-825-5225. សូវាប់ពីបានប់ពីបានប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពី welcome back to the ramsey show i'm george camel joined by christina ellis this hour open phones at 888-825-5225. Courtney joins us up next in Jackson, Tennessee. Courtney, welcome to The Ramsey Show. Hey, thanks for taking my call. Sure. How can we help today? So I'm like super upside down on my car and I am in baby step number two and it's actually my highest debt, but it's just, it's causing me so much trouble. Not the vehicle, but the payment itself. It's just outrageous. So I'm trying to figure out what to do as far as, you know, my vehicle goes.

How much do you owe on the car? I owe about $32,000. Okay. And what is it worth right now? $18,000. Okay. And what is it worth right now? $18,000. Ooh. How did it get to this point? What did you buy the car for?

After interest and stuff, it was $49,000. So you paid $49,000 for it. What was it worth at the time you bought it? Do you think it was worth $49,000? I don't remember. I want to say it was like $35 or so, and the interest is, I think the interest is what got it all messed up. What's your payment, and what's your interest rate? I pay $6.88 a month. Yeah, it's rough.

What's the interest? The interest rate is 12 point, I'm sorry, 15.12%. Why did you get such a terrible interest rate? Honestly, I'm not sure because this was the first vehicle I ever financed. And after that, I got other debt. But before the car, I had like $3,000 in student loans, and that was like all that was on my credit. Oh, my goodness. What's the term for this?

How long is the loan for? Six years. Six years. What kind of car is it? A 2018 Volkswagen Tiguan. Okay. How long have you had it? Eight months, and that's how deep, how low the value has gone in eight months.

It's gone down that quickly? Or do you think you bought it a little too high priced? Maybe I bought it, you know, but I was just thinking, wow, you know, it's decreased in value, I guess. Who sold this car to you? The dealership I work for. No. Yeah. the dealership I worked for no oh yeah was it like a a co-worker that's a friend or or how did that happen yeah it is a friend but I don't work in the sales department I work in the service department but yeah it was a friend and I'm not sure like know. Have you talked to them about this? I have.

What did they say? And I think that pretty much they're telling me, like, at the time, like, the market was just so messed up on cars. Have you had any, like, frank conversations with them? Like, asking kind of, like, what was the value of the car when you sold it to me? I haven't, but that is a good idea. I'm actually on my lunch break right now, so I could do that when I come back here. There's no way that car was worth $49,500 when you bought it, which is how much you're paying with all these payments. I know.

And actually, it was like $55,000 after I put the – I did get all the warranties and things on it. How long have you worked? You can return that warranty, right, and get some money back out of this? Yeah, I could return the warranty. How much would that give you back? Probably about maybe $5,000. Okay.

And how much money do you have in the bank? I have about $2,000 in my checking account, and other than that, I just have $1,000 for an emergency fund. Okay. How long have you worked for this dealership? About a year now. Do you feel like, in general, they typically have pretty good integrity? Most of the time, yeah.

Yeah, and my coworker, he's actually a friend of mine, and, you know... My friends don't screw me over at 15% interest. That's what I was thinking, too, is, like, I feel like I've been screwed over on it, and, you know, financially, that's a big... I want to know how much this guy made off this deal. Yeah, probably a lot. And, you know, I'm 22, so I'm not trying to be stuck in this for seven years. Ooh.

So the $18,000 value that you say your car has, like, is that from Kelley Blue Book? Is that somebody at your job that said that? KBB. Is that private party or trade-in? Yes, that's private party. Okay. I'm going to still do some more homework and research every single place that buys used cars. And that's online, that's local dealerships to see how much you could get for this. Maybe even try my boss and I'm saying, here's the situation. How is this car that I just bought eight months ago for this price now worth 18? And kind of walk through the situation with your coworker.

Because my hope is that as your employer, there's some sliver of heart there that maybe they'll even consider buying it back from you. At a higher rate. Right. Closer to what you paid for it. Right. There's going to be stupid tax on this either way. The only other option here to get out from under this thing soon is if you went to your local credit union and get a personal loan for $14,000 to cover the difference. Right. And now you're $14,000 in debt instead of $32,000 in debt at a much lower interest rate. And I have other debt, but it's just, it's $14,000 in debt instead of $32,000 in debt at a much lower interest rate. And I have other debt, but it's $7,800, and I could pay that off pretty quick.

But I'm thinking long term, like, oh, well, it's going to take me years to get out of debt with this car. Where did the $78,000 come from? Because I thought you said you only had $3,000 in debt when you got the car. Well, I had $3,000 at the time, and this was a stupid decision. But after I got this car, I started getting all these things in the mail, like, oh, you're approved today for this and that and this and that. And at the time, I was just like, oh, yay, extra money. And I took out a personal loan, but I'm never doing that again.

I've learned my lesson because the interest rates on them are outrageous and I actually um had like a two thousand dollar loan that ended up being like forty five hundred dollars overall so well I'm assuming that you've had your I've had it moment that you're done with it. I've had it, yes. I've had it. I'm too young to be stressed about this. I've got goals, and I'm like, no, I'm trying to get out of all this while I can. Heck yeah. Well, start ripping up your mail, and if it says 0%, or if it looks like free money, run as far as you can. Because there's no such thing as a free lunch.

Yeah, there is no free money. I learned that the hard way. They are not your friend. And by the the hard way. They are not your friend. And by the way, this dealership is not your friend. Yeah, I thought about that. What are you making at this dealership? I make about $50,000 a year. Okay. Do you have any credit cards right now? I don't. I actually paid. That was my number one baby step. And the baby step number two, the first thing I did was pay off a credit card. I owed like $288 on it. I paid it.

I called. I canceled. And I'm out of the credit card situation. Okay. So this $50,000, is that your only job? You've got one job right now? I do only have one job. I've been searching. I've been listening to y'all. And a lot of people are talking about like DoorDash.

And I've been considering doing like a part-time DoorDash job. Just something to get a little more money to try to pay it off faster. Yeah, you can also look into grocery delivery services like Instacart or Shipt. You can even try Amazon Flex if that's in your area to deliver packages on your own schedule and you can make some good money doing that. Well, and it's like, I didn't know that was a thing. Yeah. And right now with where you're at, I know you're mad that like you're in this situation at 22 years old. Like you said, you've got goals. You need to get out of this. So I want you to take that anger that you feel and that frustration and just channel all of it into doing everything you

can to get rid of the stat. I want you working 60, 80 hours a week. I want you cutting back to the bare minimum, eating, you know, as cheaply as possible. Like we have got to go scorched earth on this. Yeah, for sure. And I have been, I've got the app that you guys talk about. I've been budgeting. It's just like, I was just trying to think about the long run and what I could do about my car. Well, see if you can talk to the dealership and go, hey, listen, you guys screwed me on this deal and I work here and that is not cool to treat an employee that way. So here's what I'm asking. Trade in this car. Give me the crappiest car on your lot to get me out of this situation. And if you still need to go take a small personal loan from that credit union to cover this mess and get out of this thing, then do that.

And then we're attacking the rest of the debt while driving this beater car until it's all done. Yeah, I'll do that. I'm down to drive the beater car, whatever it takes to get out of this situation. Good. And stand up for yourself, Courtney. Don't take crap from these guys. And I'd be leaving this dealership as soon as I'm out of this mess because I don't trust these people. I'm George Campbell joined by Christina Ellis this hour this is the Ramsey show you can give us a call at 888-825-5225. Especially if you've got questions about college and further education and saving for college and getting out of that student loan debt. And what about student loan forgiveness? Christina is the expert on that subject and would be happy to jump in and help you with

those calls. All right, Christina. So earlier this week, as I've been hosting, we covered some stupid tax moments, which is what we call, you know, financial decisions that we regret that has some zeros on the end. We read some off the internet that were funny and sad. Jade and I shared some of our own stupid tax moments. And I thought Christina is perfect. And it turns out it's a lie. You had a little stupid tax moment. I had a i had a very recently right so we're doing no spend month right we've not been spending anything aside from essentials we've been doing it with

this community been super committed to it so it's kind of nice because you can look at your bank account and there's not a lot of charges in there um our budgeting's been super easy to do but i got into our bank account the other day, and I saw a few Amazon charges. And I was like, how can that be? We're not spending any money this month. Like what's going on Amazon? So I go into our account. And normally, this is really sad. Y'all, this is kind of embarrassing to admit on air. But part of the reason for doing no spend month is because we were going a little crazy on Amazon. Like, you know, it's so easy to just get a little thing here and a little thing there. And all of a sudden you have all these Amazon transactions. So, you know, normally it's drag and drop, drag and drop, drag and drop.

We, you know, put it in, you know, beauty category. We've got clothes, we've got all these things. And occasionally there's a charge that comes through that we don't know what it is. And, you know, my husband and I, we share budgeting duties and it's easy to just go, okay, well, we'll just put that in the miscellaneous category. It's like one charge, it's 10 bucks, it's five bucks. Doesn't happen too often. But you know, it does happen sometimes. So I see these two charges come through. And I'm like, I'm racking my brain. So I go to our recent orders. I'm like, thinking I'm like, did my husband cheat on no spend month? What's going on? And there's nothing in my recent orders. And I'm like, okay. So then I'm like, did my husband cheat on no spend month? What's going on? And there's nothing in my recent orders. And I'm like, okay.

So then I go like digging around in Amazon and I'm like looking for any sort of transaction. And I finally see George that we have been signed up for Paramount Plus and Discovery Plus for 10 months. Like no clue, never opened the app. For 10 months straight. For 10 months straight. Ouch. That is so embarrassing. When does that add up? Did you figure out what that number is? It's like well over a hundred dollars. It's $10 for one

charge and $5 for the other. Ouch. Right. So I call Amazon and I'm like, I did something stupid. I'm surprised they even picked up. A real person picked up. Oh, it took a while. I had to like go through some form and then they have the automated system. I just kept being like real person, real person, customer service, real person. And finally someone picked up and it took a while i had to like go through some form and then they have the automated system i just kept being like real person real person customer service real person and finally someone picked up and they were like yeah we can give you a refund well we'll do one month and i was like one month i was like can i at least have a few months so they refunded three months and i had seven months still of stupid tax wow i know y'all i spent nearly a hundred dollars that's got to hurt in stupid tax never open the app and I think I guess the only thing I can imagine is that our kids like grab the remote

at some point and try to watch like the first episode of Yellowstone or something no not that I know of wait was it the new iCarly reboot oh George you caught me on Paramount Plus you caught me it's the only reason I can imagine signing up for this thing I mean yeah so I'm like

those subscriptions will get ya y'all I promise I'm good with money, but that's real stupid. There you go. So that's my stupid tech story. But thank God for no spend month because I'm like, I'd have woke up three years from now and been like, wait, what? What have we been paying for? So this is the strategy of these companies. It's just like you forget about it and it's a small enough that you don't really fight it. At least tried to fight back and you got three months back i tried but i mean i also kind of deserved it like that's just a good reminder to me to like pay attention to the details don't just get lazy and be like oh well it's just one transaction that i didn't realize what it was there you go like i should have been paying better attention like that is on me and also these

companies can be kind of sneaky like there's also like you know if you've got your smart tv or whatever and they have like a show up there and it looks like it's part of your queue but sometimes when you click on it it's like the seven day free trial yep and in actuality you're signing up for an account with that service providers like man or it was just my kids i don't know last week i signed up it was like a showtime there's a movie that's only on showtime so i was like great i'll sign up for the free. I immediately went into my phone and canceled it. And it says, cool, you have 29 days left of your trial. Enjoy. And it was done. So I think a good life hack is to immediately cancel it. And they'll usually still give you that remainder of your trial. That's good. If you know what happened. So there's a life hack. Oh, and yeah, do a little

budget audit. Go back into all of your bank statements and go, do we actually know what happened. So they know the fact. Oh, and yeah, do a little budget audit. Go back into all of your bank statements and go, do we actually know what that was for? Is that legit? Do we still need that? And you will give yourself a raise just in doing that. Yeah, and that's one of the benefits of doing a no spend month because it's like you clear out everything.

And so what's left, you really have to evaluate. That was one of our goals this month is, you know, since we're not spending anything and even with groceries, we're just paying cash for groceries. So it's like anything in our account that's not supposed to be there is going to show up so we've been evaluating every subscription everything that comes through our account even things that are like somewhat needed we're like is there a better way to get that cheaper is there a

way that we can cut down because the goal is not just to not spend for a month we're trying to you know buckle down on our budget as much as possible down all the expenses long term i long term. I love it. Well, thank you for sharing and being so vulnerable. You're so brave, Christina. Oh, man. I'm embarrassed by that one. I love it. Thanks, George. Well, let's get to the phones.

Angela is in Akron, Ohio. Angela, welcome to The Ramsey Show. Thank you. Thank you for having me. How's it going? Good. How are you? We are doing great.

How can we help today? Okay. I have a question. I have $18,000 on a HELOC loan at currently it's like 9.2%. Okay. So when I was reviewing some other financial things and looking and thinking of ideas of how to reduce this, I looked into my 401k. Now, my current rate of return is only 4.7. So I can borrow 14,000 of that from my 401k. Is that smart for me to do? No. That would be equivalent to you having an arm injury and going, you know what, I'm going to break my leg to move the pain there to make the arm better. And so we're just robbing Peter to pay Paul. And even worse, you're robbing Angela's future with interest. What kind of friend would Angela be? I was told when you pay back your interest, you're paying your interest to yourself.

That's not a lot. That makes no sense. Then why wouldn't we all be borrowing from our 401ks because it's a money-making scheme? I don't know. I just found the gold mine. No. It's going to the company. You're not giving yourself interest. You're paying the payment back into the account, but the interest you're not gaining. That goes to the company. So the lady on the phone that said, well, the interest goes back to your account,

she's meaning like to their account. Yes. There's no way that is factual. So I would not do this 401k alone for a thousand reasons. I would go ahead and attack this HELOC with a vengeance. What did you use the HELOC for? I had to, it was a divorce situation. I had to get out of my primary mortgage, which I was only at like 3%. So then I got the HELOC, and at the time, I thought that I had signed on at 5% fixed, you know, because it was a special, it was supposed to be a special thing of the HELOC. Well, it turns out, let's just say it didn't work out that way. So now I'm just at the variable rate.

So my total amount, and it's on my mortgage, my actual total amount is like $33,000. So what I was going to do is take $15,000 of that, and I have an offer for a 0% interest for like 15 months. And then get the other 15 off the debt. Angela, you keep getting bitten by snakes, and you keep going back into a den of snakes. You don't think that that's a smart move? The only solution is to pay off the debt. There's no amount of borrowing we can do and moving things around from the 0% over here. You're just going to keep falling into these traps.

Well, Angela, I appreciate your vulnerability because you said like... I'm frustrated for you. Right. And you thought you hit a goldmine and you were not the only person. That is why these companies have skyscrapers. That's why there's people that fall into these traps because it seems so good on the front end yeah we need to get on a budget sell everything you can make as much money as you can and attack your debts from smallest to largest using the debt snowball method hang on the line i'm going to send you financial peace university it'll walk you step by step through this i'm also

going to gift you every dollar premium our our budgeting tool, and these things paired hand-in-hand will get you out of this mess without having to borrow any more money. Run away from all of these offers. They're not offering you anything but lifelong payments. Thanks for the call, Angela. This is The Ramsey Show. so Welcome back to The Ramsey Show. I'm George Campbell, joined by Christina Ellis. This hour, the number to call is 888-825-5225. All right, Christina. So we just took a question from Angela and she was asking if she should borrow from her 401k to pay off the HELOC. And we of course told her this is a bad idea. Do not borrow from your 401k for a whole bunch of reasons. But it also brought me to the

idea of the HELOC because I just saw this article yesterday from lifehacker.com. And here's the headline, why every homeowner should have a HELOC ready to go. And so the author goes on to explain that a hurricane had swept through and his first floor turned into an aquarium. And so they didn't have the money for the repairs. But then he remembered they took out a HELOC, which is a line of credit against your home. And it saved their butts. And it goes on to explain how HELOCs are the greatest emergency fund. And it just reminded me that, you know, it's a better emergency fund, an emergency fund.

Right. With money in the bank instead of putting your house at risk. Oh. And so that's exactly what a HELOC is, is it's a home equity line of credit. It's what it stands for. And along with your HELOC that you get approved for, there's transaction fees, minimum withdrawal fees, inactivity fees, early termination fees, required balances. And of course, there's a variable interest rate, Christina.

Oh, George, that's painful. And they say it's based on the market, but really it's just however they want to screw you that month is how that works. And here's what the scary part is. When you take out a HELOC, your home is at risk because if you default, you misstep on those payments, the bank can take your home. And an emergency fund is supposed to protect you, not put you at more risk, right? Like this is not a safe way to go about things. They are not your friends. They are not

there to protect you. People see it like, well, it's just attached to my home. So it's better than going and taking on new debt. Yikes. But it's also attached to your home, your primary residence. Yes. Super scary. It does not create cashflow. It's just a giant credit card attached to your house that can also make your house go away because the bank can take it. So instead of the HELOC, here's a better solution. Have an emergency fund of three to six months of expenses and have good homeowner's insurance in place and check on that homeowner's insurance every year. Because as the value of your home goes up, you need to make sure the

replacement cost is also going up inside of that homeowner's insurance. That's such a good call out. And it's just a good reminder, you know, to let today be the day where you check your subscriptions, you check your insurance, make sure you're up to date on everything and have everything you need. Because it's, you know, you don't want to look back after something like a hurricane or some sort of natural disaster and think, if I had just made a phone call and adjusted things a little bit, things could be totally different. Like, let this be your wake up call to check your insurance and make sure everything is set. Yeah, we are seeing a rise in people taking out these HELOCs and 401k loans because they're going, well, it's better than a credit card and I can't

have the credit limit that I can with my HELOC. And it's just a different way, a different trap, different flavor of the day that's holding Americans back from building wealth. Well, and it's also kind of just a different mindset. Like when Angela was talking, she was like, I thought this was the golden thing, but then I got the 0% financing offer. And what if I put it over here? And it's like, or what if we just got aggressive and paid it off and had an emergency fund? Like you've got to shift your mindset to, you know, not just look at these like quick fixes

and these things that involve debt, like try to actually solve the root cause, like the root issue, which is getting rid of the debt and then having an emergency fund so that you don't go back in debt. Yeah, don't fall for these marketing shortcuts these companies are offering you with zero percent introductory offers. There's no free money out there. The only way to do this is to pay it off. And we recommend the debt snowball method. List out your balances from smallest to largest. Take on the side job.

Do the overtime. Cut the expenses down to nothing. It's the only way to get this out of your life once and for all. And it's worth the effort. It is worth the effort for that peace of mind, like to not have to live in this anxiety filled game of trying to figure out how to beg, borrow and steal to keep things moving around. Like you can solve this for good. Amen. All right, let's get to the phones. Ashlyn awaits in Fairbanks, Alaska. Ashlyn, welcome to the show. Thank you. It's good to be here. We are glad to have you on the line. How can we help? So I'm getting married in 17 days.

Woo! Congrats! Exciting. Thank you. So my fiance and I are kind of in a big life transition point. We're both going to graduate this spring. And he's about to go off to PhD school. He's going to go for his PhD in chemistry. And so we're looking at a bit of a move, and he's definitely, like, for his PhD school, they're going to cover at least the first few years, but it's possible that he won't have funding

for an additional couple years if he has to go on, like, a five- or a six-year plan. the first few years, but it's possible that they won't, that he won't have funding for an additional couple of years if he has to go on like a five or a six year plan. So my question really is looking at saving up money to cover those last couple of years of his tuition if we have to, but I'm not sure what the best way to save that money is. He kind of wants to put it in some kind of like real estate. But since we're moving and all of that, I don't want to try to invest in real estate. I'm looking at like just high yield savings accounts or bonds or something like that. But I don't know what the best way to save that money is. So what's the timeline for this? Are we talking two years from now? You

might need to have this cash liquid? We're talking like four to five years. Okay. And how much are you thinking? Like if you have to pay for that last few years, what's the total cost? That depends a lot on where we go. We've got like three very different top schools right now. One of them is Dartmouth, one is UC Davis, and one is University of Colorado Boulder. So it would vary a lot, but definitely I'm thinking in the $40,000 to $60,000 range. So are any of these schools offering like a full ride completely paid all the way through? We're not entirely sure yet. That's kind of where in the stage still is figuring that out. And that'll depend a little bit. It'll kind of dictate where we go. But I'm thinking that they'll offer usually,

usually they offer at least four years, but if you take an additional couple years, they often don't cover that. And walk us through, okay, what would take a couple more years? Like they've got the four years of funding and what's kind of the variables that would determine if it takes longer? So the variables really are just like how fast he wants to get through it, how much he wants to put into it. Would he be working during this time? He would be. So a lot of the PhD school is research-based.

So he'd get paid a little bit for the research or if he took on a TA position, he would get paid for that a little bit. Are there employers that would fund this if he just went into the workforce full-time? Are there employers that would go, hey, we'll fund your PhD? I don't know, honestly. I don't know what that would look like. What was his purpose in getting the PhD now versus waiting and working a little bit? Just to continue his studies, I guess. He really wants to become a professor. Okay. So if I'm in your shoes, like I'm doing a lot of this research

on the front end. I love that right now you're diving into savings and we'll talk about that in a second. But, you know, one of the biggest things is like diving into these details in this ROI analysis, making sure it's going to pay off. And even with the different years, like getting super motivated on the front end to say, you know, I don't want to take six years. If I got four years paid for and I'm not working outside of this, like I'm going to make sure I finish in four years because that's a huge problem with undergrad right now. I think the stat is like only 40% of people graduate in four years. And it's like each of those years costs a ton of money. So I would be really thinking wisely and even just like get out a spreadsheet and start doing the numbers with each school, like ask those details,

talk to the scholarship department, the financial aid department, ask them, you know, I want to know and map out exactly how much this is going to cost me, what years are paid for. And, you know, compare that before you decide on this huge move, which is so exciting, getting married in 17 days, all these cool transitions. Like I want to know the numbers because if I'm in your shoes, like that's going to make a huge, that's going to be a huge factor in deciding where we go, where we start our lives. And then just also, like George said, evaluating the ROI of actually getting the degree, you know, is right now the best time to do it? Is there an employer that would possibly pay for it? Is there a school that you can go to completely free? Because there are PhD programs that are free all the way through. So do you guys

have any debt right now? We do not. Okay. Well, if I'm looking at it on paper, it looks like you have to save 10 grand a year for the next four years, just in case, right? I don't know that that's worth investing. You could put in an index funds if you wanted to, but you're probably just better off putting that in a high yield savings account. You can get three or 4% right now. Or a 529. Or a 529 is another great option to have some tax benefits as well. So good luck on the journey. It sounds like there's a lot of variables. Just get through the wedding right now. We can make the other decisions later. Congratulations. I'm going to send you guys Financial Peace University as a wedding gift on us as well.

So hang on the line. Austin will get that over to you. That puts this hour of The Ramsey Show in the books. My thanks to Christina Ellis and all the folks in the booth and you, America. Appreciate you listening. We'll be back real soon. Hey, George Camel here. If you love the show and you want a deeper dive on your money journey,

we've got a weekly newsletter that gives you helpful articles and tips on following the Ramsey way. Just go to ramseysolutions.com today to sign up for the newsletter. Again, that's ramseysolutions.com to sign up for our weekly newsletter.