The Ramsey Show - App - If You Live Fake Rich, You Will Become Real Broke!

Episode Date: January 31, 2025

Live from Ramsey Solutions, this is The Ramsey Show, where we help people build wealth, do work they love, and create amazing relationships. I am Rachel Cruz, hosting this hour with my good friend and fellow co-host of the Smart Money Happy Hour, George Camel. Different vibe on this show, but still fun. It's still fun. Yeah, we don't have a cocktail on the show, but we are answering your questions, America. So give us a call at 888-825-5225 and we'll help you out. And it's anything from your career your money your life relationships anything and everything we're going to start off this hour with alex in cleveland ohio hi alex

welcome to the show hi thanks uh how you guys doing today we're doing great how can we help Uh, so I am 23 years old. Um, I roughly have about 90,000 in debt. Um, 47 of that is, uh, a car loan. My payment per month is $1,200. Um, when I bought the car, I was making roughly 150 per year, lost both those jobs, and now I make about 60 per year. And just wondering, should I voluntarily surrender my car? I really can't afford it anymore between rent and cost of living. I have 47 on the car, about 37 in student loans and 6,000 on credit cards. I did complete baby step number one, working on number two. My mom also mentioned that she thinks I should file for bankruptcy. I'm not sure if that's the best solution, but I just wanted to get your guys' thought on that.

No, on the bankruptcy. I'm not sure if that's the best solution, but I just wanted to get your guys' thought on that. No. On the bankruptcy side. I'll just say that. Yeah, first and foremost. We're not there. We're not even close. So there's some good news for you. I think mom wants you to get a clean slate, and she's kind of wanting you to just shortcut this and be free from the pain.

But there's better options here. And so let's talk about the car. Instead of a voluntary repo, could you sell it and come up with the amount you're underwater on? The car is only worth about $25,000. Did you roll negative equity? I might be able to, but... No, did you? From a previous car.

How do you owe $50,000 and the car's worth less than half of that? The interest on it is 25%. Oh, my goodness. So when I bought the car, it was during COVID. I needed a new car. Didn't have much credit. And they would only approve me for a brand new car. I could not get approved for a used car. And you said, sure, 25% sounds good. That's reasonable. Let's go. I need this $50,000 car. And when you're making $150,000, this is the

problem. You feel like, okay, well, I can afford the payments. And if I can afford the payment, everything's fine. And that's the backwards way of going into when it comes to buying a car. But that's what a lot of people do. I can afford the payment. So regardless of how much interest it is, I can afford it. And then life happens, as you've experienced. Okay, job-wise, Alex, what were you doing before? You said you had two jobs that you lost. What were those? I was a payroll manager for a IT company. And then

I was an assistant manager for a retail store. Okay. And what happened to those jobs? The retail store ended up closing down and I wasn't able to get relocated. And the IT firm also shut down. Oh, okay. So both companies closed. What are you doing now? I work in IT still on like the administrative side. Okay.

Okay. Single? Family, kids? Single? Okay. Where are you living? Cleveland. Okay. are you living alone renting uh rent uh with a roommate um 1300 split between the two of us okay that's good

um okay so yeah i mean the getting the car out do the 25 000 that it's worth where did you pull that number from from a dealership or from like kelly blue book uh kelly blue book and a couple other like just look uh like browsing seeing like what similar um but it's not trade-in value that's private party value yes private party oh man yeah because the problem is you need to come up with the difference even if you do a voluntary repossession they're going to sell it at auction for way less than it's even worth, and you're still going to owe the difference. Yeah. So it doesn't solve all of your problems to even do the voluntary repo.

That's why we're trying to find another solution where you come up with a difference. I'd rather you be $25,000 in debt driving a beater than $47,000 in debt. Yeah, and that's kind of my thought process, too. Trust me, I know this was probably the worst financial decision I've ever made. But, yeah, I'd rather drive a hoopty at this point than, you know, drive this up. Are you able to keep current with your other bills, Alex, right now, making 60? Yes. You are. So this credit card debt is not ongoing to keep lights on and everything?

No. I'm slowly paying that off, thankfully. I mean, honestly, Alex, if I were in your shoes, I mean, I would figure out a way. I mean, it's about $18,000 for the difference of the car, and you're probably not going to be able to get a loan for the difference. Well, you said you owe $47,000 on the car? $43,000. Yes. Oh, $47,000. Oh, I wrote the $43,000.

$43,000, yeah. Okay. So you're $22,000. You're $22,000 under. So, I mean, ideally we'd say, hey, go to your local credit union, get a loan for the difference, maybe $25,000, and spend three of that on a beater car. But I don't know that they'd even grant you that loan at this point.

Have you tried? No, I haven't tried. I kind of wanted to search all my options beforehand. Sure. That's the least harmful of the options is to go to a credit union and see if you can get the difference in a loan and maybe a little bit more in order to get a beater car, get rid of this payment, and then you'll be climbing your way out of this.

And then hopefully in the meantime, we can get your income back up to six figures. Because clearly you're skilled enough and you're willing to do the work. Yeah, for sure. Yeah. If you can get that 60 up for a full-time job and find something 75 or 80, right, in like a perfect world. And then the side hustle is, I mean, that's what I would be doing, Alex. And I'm like, if you can make, God, I mean, you'd have to make 3000 extra a month. I mean, I'm trying to do the math of how to do this within a year to get to even save the amount for the difference, right? So best bets, you can take a loan for the difference. And like George said earlier, a local credit union is going to be your best bet versus a bank. They're the ones

that are probably actually going to sit down with you and run more numbers and look. But so that would be my first option. And then if not, that's probably what I would do. I would probably try to get out of this car before anything else, even before the... It solves half your problems. Yeah. Yeah.

If you can get out of that. And then now the second half, at least it's bearable and you can climb out of that pretty quickly, even making what you make. It's a solvable problem. But I do think income is the biggest part, and then your lifestyle is going to have to get cut down to nothing for probably the next 18 months. Yeah.

And so this is no eating out. This is, hey, the roommate wants to, sorry, I can't hang out. I'm working three jobs. It's not going to be a fun journey. But the good news is you're young enough that you have a lot of time to make up for this. And so all hope is not lost. You don't need to go file for bankruptcy. George, would you, if you were him, would you save the $25,000 first, get the car out, and then do the debt snowball?

Ideally. I just don't know how quickly he's going to save up $25. How fast that is. Because I do wonder, Alex, too, if you paid off the six credit cards and did just the traditional debt snowball, how much payments monthly will be freed up because those are paid off. So even just working down the debt snowball, but knowing you have a freaking $1,200 car payment until you get to it to pay off is not fun.

But in the meantime, I almost would just work the debt snowball until you get there. But thanks for the call, Alex. Good luck to you. We learn from our mistakes, George. We learn from our mistakes, George. We learn from our mistakes. Welcome back to the Ramsey show. If you have jobs like us out into the into the internet,

one of the things that, you know, it's just kind of a known thing. You just don't read the comments. You just kind of let people feel what they're feeling and you just move on about your life. But George, on the other hand, reads all the comments. I live for the comments. George is always in the comments.

I got to find my joy somewhere. And the comment section is so entertaining to me. And we keep getting a consistent comment. Here it is. A lot. Where's Dave? Question mark, question mark it is a lot where's dave question mark question mark question mark question mark one question mark would suffice yes so can you clear the air yes dave is okay dave is fine dave is living like no one else he's in cabo wabo mode

dave and they they are i i mean you know i, I don't know, George. He's left us to run the ship. The grandparents are, they're gone. You know, the kids are asking where they are. And, you know, they're just- I didn't think about that. Your children are like, where's Gwen Patty? They're just living it up, which good for them. Good for them.

So if all of you want to know, he is totally fine. He's alive. This is not a weekend at Bernie situation. Actually doing great. And yeah, George, we have to fill the shoes of the goat. Let me just tell you. Yeah. So no, he will be back.

We promise. He is better than he deserves right now. Yeah. He's tan and happy. He's doing great. That golf swings really. Looking good. All right.

Next, we're going to go to Tammy All right. Uh, we're next. We're going to go to Tammy in Milwaukee. Hey, Tammy, welcome to the show. Hi guys. Thanks for taking my call. Absolutely.

I am 34 and I have had a couple of houses. I went, um, through a nasty divorce a couple of years ago, bought a house, sold it, and bought this one, and this is where I'm in a little bit of trouble. I bought this house debt-free, so I had a paid-off car. I did put 20% down, so I thought it was in good shape.

Yeah, until one thing after another kind of broke and I was fixing things. And now that I've been watching you guys for the last six months, I know that I should not have taken this large of a mortgage because it's about half of my income. Of your take-home pay? Yes. Oh. So what do you make and what's the mortgage?

Sure. So I have you make and what's the mortgage? Sure. So I have a few jobs now. So my first income is about $4,000 a month. That's my primary job. And I see that keep going up, and I'm trying to get promotions and doing well. And then I also bartend on the side. So that helps. And then I'm about to start doing taxes on the side.

So coming up here, I'll hopefully. Okay. How much do you make bartending a month, would you say? About 400, 500. I try to be conservative with that number. A month. Okay. Yeah. Okay. Perfect. be conservative with that number. A month? Okay. Yeah.

Okay, perfect. And what's your mortgage payment every month? $2,000. All right. Got it. Okay, so how can we best help you today? I'm wondering if I should sell my house because it is a lot. Yeah.

Or if I just keep hustling, um, cause what it, what it did was it put me into debt. Um, I was also paying for school and I made the mistake of putting that on my credit card. Um, how much other debt do you have? 37,000. Okay. Is that all credit card? Um? One is a personal loan and the rest is credit card. Okay. I mean, yes, Tammy. The only reason I would say and kind of get to that answer pretty quickly with the house is that you would have to basically double your income for this to make sense.

And you are saying that you see your income going up. But what I would want is the side hustle income not be part of the equation for your mortgage, because I want to get you to a point in your financial journey that you're not having to have a side hustle to keep your mortgage, right? It's not sustainable. Yeah, you want just like, yeah, your regular income to be able to support your main four walls and more. So tell me, how long have you been in the house um i just hit two years uh last summer so i'm good on the capital gain side yeah okay how um how much do you owe on it what could you sell it for um i owe 275 uh and i think i could probably get 410 410 yeah oh wow it went up a lot in two years it did i live in a crazy area um okay i'm more in the suburbs yeah but it definitely did and i put a lot down and i think that might have been another thing.

Yeah, that's true. That's fair. Yeah, yeah, yeah, that's fair. So if you sold it after fees you would net probably $110,000 or so maybe $120,000 if you're lucky? Yeah, I kind of assumed it'd be around that $100,000 just because of realtor fees.

And then you could then pay off your $37,000 in debt leaving you with another $60,000 plus to then begin a new down payment fund while you rent. Did you have kids, Tammy, when you divorced or no kids? No. Okay. So it's just you. Just me and a dog.

Okay. No, that's great. So, yeah, I mean, honestly, Tammy, you know, our goal, at least when I'm giving this advice and George would be the same, is it's ultimately leading you to have a level of control over your money that ultimately then gives you peace. That's what we want, right? I mean, if you build wealth and do all of this, that's later in the baby steps

and that is so doable for people. But the biggest component here is peace. And Tammy, I don't feel like you have a lot of peace when half your income is going to just the mortgage and you have $37,000 of other debt that you're having to pay and you're having to keep up the house. I mean, there's just not, it doesn't sound like a lot of peace. Would that be true?

Yeah. I mean, I've paid off like 5,000 in the last six months ever since following your baby steps, which is great, but I don't know if it's enough. Right. Right. And I don't want to work 80 hours a week. Yes, totally. At that pace, it's going to take you another 40 months to get rid of the debt you took on, on top of covering your mortgage, which is already consuming a lot of your take-home pay. So I can feel the stress of all of that making things worse.

Yeah. So I think a good goal to shoot for, Tammy, is I probably would. I would sell the house. I would use some of that money to pay off your debts. I would use some of it for an emergency fund. And then I would quickly get back into a house or into real estate in general. Because I think you can put yourself in a position where you're not a renter forever. But it may even look like a townhome or a condo or something, right?

It may not be even a single family home. Or if it is, it's smaller and it's way more doable. Because I do think prices with homes, they continue to go up. So I don't want people on the sideline for too long. But a move like this, I think will open up so much margin for you and you'll be able to have kind of a clear head to go and purchase something again, because I do think you'll be in a position soon to buy something. Yeah. It's not quitting on home ownership. It's just getting your head above water to do it with a little more peace on the next go around. Cause this just feels like, I mean,

I, I, you can give it six months and see if you can get your income way up. Like Rachel said, before you sell, it's not like an on fire sell today, but it just feels like if there's no end in sight where this is going to get easier and you're going to continue to go into debt, then I think the writing's on the wall that it's wise to sell. Yeah. And then I'll follow your, your plan of 25% of my income. That would be nice. That's right. That's right. I know. And again, it's not a fundamental, you got to do 20. It's just that when it's 50%, life is hard. When it's 25%, you always have margin.

Yeah. I mean, if it was $1,000 right now, right, compared to your income, that changes. I mean, that's $1, dollars freed up right there. And if you, you know, work hard and bartend and maybe do double what you're doing, that's two thousand dollars coming in extra a month to pay off this other debt. Right. It just kind of ends up working so much more in your favor in that way. Is there a growth plan for you to make five, six, seven grand a month in your current role? That's complicated. Our company is going through a lot of changes so i'm not sure is it time to look for another company i i've started looking i i'm a loyalist so we'll see but maybe it is time maybe i need to dig into that further i mean for your for your skill sets

would you say you could ROI better out in somewhere else and you're staying because you love this company or do you think, no, like I'm worth this amount even if I transferred to another company? No, I just graduated so I think I could leverage that. Okay, yeah, for sure.

Yeah, Tammy, it feels like there's some big moves coming up in the future which is all positive though. That's it. I'm like, it's big moves coming up in the future, which is all positive, though. That's it. I'm like, it's freeing you up more and more, giving you more peace and control. And I think it's going to be an incredible thing. I really do. Yeah, renting is not a waste of money if it's going to buy you peace. That's right.

For a period of time, for sure. And then you can save up for a down payment on your next property, and you can just keep that ball rolling. Thanks for the call, Tammy. This is The Ramsey Show. Well, one way to take control of your money and honestly get the most out of your paycheck is by creating and sticking to a monthly budget. And EveryDollar is the best budgeting app to do that because you're able to build out your budget, track your expenses, save for what matters most, plan your spending, all of it.

And it's a really easy to use app that fits in your busy lifestyle. It's right there on your phone. And if you're married, your spouse can have the same account. So you guys, as you make changes, it shows up on both. And you just get this pulse of where your money's going and gives you that level of

control and to hit the goals that you want. So you can download Every Dollar for Free in the App Store or Google Play or click the link in the show notes or the link down below if you're listening on YouTube or podcast. All right, George, we had a Smart Money Happy Hour episode. We have some that just you can tell have hit a nerve with the world in a good way. And we did one recently on things that scream, I'm pretending to be upper class. Because living a higher lifestyle than maybe what you can afford keeps you broke. I mean, when you are living beyond your means and trying to, in a way, kind of keep up with what everyone else is doing

will constantly lead you back to this idea of spending money that you don't need to spend. And sometimes you're spending money you don't even have to keep up this lifestyle. And you talk about comparisons a lot. So this segment hopefully will help you fight those comparisons and FOMO you feel amongst your friends. So here's some signs, some things that your friends

may be doing people out there on Instagram that may show they're faking their upper class status. Number one, flashy designer logos. This is a big one. Most luxury items like a cashmere sweater never have logos all over them. We've talked about stealth wealth. Yes. It's a new trend. It's called quiet luxury, stealth wealth. People that are actually really wealthy, you won't really know it. they don't really have all the flashy stuff that you just look at you know exactly oh that hat that jacket those shoes like you know exactly where everything's from a lot kind of go under the radar you know if you know you know yeah yeah yeah it's kind of that that's like the new vibe which is great i think it's great so uh yeah

that's number one number two is ordering expensive wine when everyone knows that you're on a beer budget. Ooh. Hey, some of these beers now are crazy expensive. But yes, the wine does. That one feels like a ripoff to me personally. You know this, my stance. I do know this. I will not order wine at a restaurant.

But if someone else buys a bottle, hey, I'm happy to share. Oh, I'm sure you are. I'll chip in. Take a glass from someone. Glasses of wine and cocktails can go for $20 a pop versus a beer. Or even better, just a water. What happened to just drinking water with a meal? Why do we got to add more calories to the mix?

And more money. And more money. See, that's not fun, though. I do like an appetizer. I'll just have a water. Rachel's like, I'll have three appetizers and let's try a bunch of... I do. I love going out to eat. Rachel's like, I'll have three appetizers and let's try a bunch of. I do. I love going out to eat.

Rachel lives a little. I do. Number three is talking about money too much. So it's like, oh, I'm leveraging this debt. To get a rental property. For all this real estate. I think those are like some of the funniest Instagram reels that come up on my feed sometimes where people are like, I'm $6.2 million in debt and we are loving it.

And it's like showing all their VRBOs that they've bought in debt and all this stuff. And you're just like, no, no. It's exhausting. And then you've got the crypto bros who are very loud right now because crypto is worth $14 billion, you know, for the moment. And so all these people talking loudly about money is usually a red flag to me. Maybe they don't actually have a lot. Yep.

Next is flaunting wealth on social media. So this is an interesting one because I do think you can, like use vacations for an example. You could see somebody at the same destination on social media, but the way they present themselves, again, kind of back to that stealth wealth of like, oh we're just like maybe i'm showing you some of the stuff but

it's more of what we're doing or like you know the kids and the poor i don't know whatever and then there's those that are like oh no i'm gonna take you around the suite that we oh yeah rented for the week you know or uh you know we're gonna it feels it just feels like i want to show you this amazing life that i live and that's and then the kicker they're like and by the way it was totally free with their credit card points sign up for my course if you want to i'm like oh my gosh get out of here it's true it's true out of town here's another one uh-huh leasing luxury cars oh yes if you're a dude and you've ever posed in front of any vehicle, it's a hard no for me. Your dad didn't hug you enough, and I'm sorry.

That's just the truth. But this is a status symbol that's usually draining their wallet. We just took a call earlier. It is. Guy's got a $1,200 car payment. Yeah. He may look like he's driving great when you see him, but behind the scenes, not doing so well.

And leasing cars. You know the number one city? I read this somewhere. He may look like he's driving great when you see him, but behind the scenes, not doing so well. And leasing cars. You know, the number one city, I read this somewhere, so don't, I don't want everyone in Dallas to hate me. Number one city? Did that, of leased cars? Dallas. Dallas, Texas. That makes sense.

Number one. A lot of young bros who are doing well for themselves. I guess, got those Beamer, you know, and you're always leasing like a Beamer Mercedes. It's always like a, it's a nice car. Where are the guys who are leasing like the Honda Civic mercedes it's always like a i want a nice where are the guys who are leasing like the honda civic you know does that exist no i don't think they make money off that george okay um and then number six over accessorizing flashy nails expensive watches loud hair or loud loud hair makeup is what's on there meaning just i don't know just a lot yeah

no and this, you know, obviously the watches leans more the dudes, but the women, the flashy nails, the loud hair and makeup, we could tone it down, you know? I know, but here's my thing. I'm all for accessorizing. Here's my thing with this. There's a limit.

I know. Here's my thing with this though is, I mean, I do that. I get my nails done. Well, you follow a lot of like the influencer moms and some of them are very sweet and authentic and being themselves. And then some fall into the category of this is a lot.

Yeah. You're trying to portray a certain life. I would agree with that. Like they wake up and they have full makeup. Who's believing this? This isn't real. This isn't real. So, yeah.

So all of these things, you know, can again scream I'm pretending to be upper class. So here's the thing, you guys, not to be faking upper class. How do we get there and be wise because again none of these things in of themselves i wouldn't say right if you like order wine at dinner if you do have a nice designer person none of these things in of themselves are bad but when it becomes your whole persona and it's the only thing you're shooting for in life and again that you will put yourself in a financial position that's not wise in order to achieve these things.

Like that's where the caution lights come on. And if you're doing it with debt, it is a facade. It is a house of cards. You're artificially propping this up. So here's my, you can tweet this if you're listening out there, whatever it is called, whatever platform you're on, whatever free speech platform you choose.

Here it is, Rachel, you ready for this? Can't wait. If you live fake rich, you'll become real broke. Eventually you will be calling the show and life was great and now something happened and you're going i'm in a real pickle because of my financial decisions and so we just don't want that for you yep let it be real and yeah doing things again doing a budget living within your means saving up for an emergency fund getting out of debt so you free up payments so that you can actually use your money to give, to invest, to buy a house that's actually, you know, reasonable for your income. You know, you're doing all these things. And again, it's not going to be like this flashy, beautiful, wonderful lifestyle 24-7. It's not

going to look like that. But there's going to be this steadiness and this like firmness of a foundation under you. And it's not all just like shaky and built on other people's money. That's right. Normalize the 10-year-old used minivan. That's practical. A paid-for car, that's the real flex. Okay. So, yeah.

So, the minivan. And everyone knows I love my minivan. We know your feelings about minivans. Yes. I do love, I love my minivan. I think it's great. It is wonderful. But I will say the plastic on the side of the seats have popped off. So two now are, so when you get in my van, there's like wires and.

Have your kids been vandalizing this vehicle? I feel like that's a personal problem. I don't think that's on Honda. You know what I mean? We can't blame the good people at Honda for that. I know, but I'm like, oh my gosh, this like. I'm blaming Chuck Cruz. He's been working out too much, just ripping pieces of this van apart.

Oh, but it's paid for. That's what matters. That's what's great. Less stressful. You know what? I hit my garage the other day. Big old scrape on my car. You know what I said?

Eh. It's 12 years old. It's fine. Who am I trying to impress? Rachel Cruz? She's not impressed. What am i trying to impress rachel cruz she's not impressed what am i trying to do here so yeah there's a big old scrape in my car so good because i hit my garage all right if you are watching on youtube comment below because we want to know some of yours you know things that you see out and you're like huh are these people trying to trying to be

upper class and they're not you Yeah, or share your stories. The lifestyle fakeness that's out there. And I would say a good bit of it's probably on social media. Can we be honest with that? It helps to just get off of there. I realize I stop caring what other people think when I'm not looking for reasons to be angry and upset and jealous and envious. Just get off and live your life. George, if we could all be as wise and as disciplined as you.

I'm the most humble guy you know. All of it. But you can check out our Smart Money Happy Hour episode as well on YouTube and podcasts where we dive into this conversation even more. This is The Ramsey Show. The Employee Benefit Research Institute recently did a study asking people uh really have a million or asking how many people really have a million dollars saved for retirement and according to the research only 3.25 i'm sorry 3.2 percent of americans have a

million dollars or more in their tax advantage accounts like a 401k or an individual retirement account and IRA. 58% of Americans have less than $10,000 saved in their retirement. So as a Ramsey Show listener, the question is, are you staying on track with the baby steps to reach your financial goal? If you want to know that, make sure to take our quick quiz to check your progress and received a personalized plan that's just for you. So you can head to the show notes and click the link titled, Are You On Track With The Baby Steps? and complete the quiz for free. All right, let's go to the phones and let's talk to Lee in San Antonio. Hi, Lee. Welcome to the show. Hi, how are y'all today? We're doing great. How can we help? So I have a question. I just got turned on to your show about a month ago and I've become an addict.

And I kind of learned about the baby steps several years ago from a friend of mine and it really burned a hole in me. So just this week, I paid off my vehicle. I paid off all my personal loan except for my house. Oh my gosh, Lee. Did you have all this money sitting around and you just weren't willing to part with it? Yeah, kind of. I paid off all the credit card student loan. I took a lot of extra gigs as a contract nurse and stuff.

Awesome. That's a big step. You drank the Kool-Aid. Way to go. I did. I did. So my question, I am married. We've been married for 30 years.

My husband is terrible with money. He has almost put us in the poorhouse three times. So about when I got turned on to this a couple of years ago, I've separated our finances completely because, you know, you give him a debit card, he has money. If he had checks, he had money. So we have never agreed on money. He doesn't make as much as I do, but he is definitely not hurting as far as his credit sucks. He can't go anywhere. Sorry for the word. We've heard worse today. So he, he, I just found out that he did put all his stuff into like one of those credit consumer people.

He didn't talk to me about it. So when I was out on, I've always done our income tax. When I was out on the COVID run, he did one income tax return and he forgot to tell me he had spent or took money out of his 401k. So anyway, that's a $9,000 bill. I told him he has to pay it because that was his mistake. He didn't say anything about it. He didn't report it. And now he gets to pay it. So going back a couple of weeks, I was listening to your show. And I heard, I know I heard y'all talk about the Bitcoin and all sell it, whatever. But I do remember him mentioning something and I haven't been able to find the show about if you had stock, like SQL stock. So when I worked in

the hospital, I used to buy stock from them and it wasn't much, but when I checked on it the other day, it's worth 35 grand. My question is, do I want to sell it and then pay some of that IRS? Because I'm in Texas, so everything's community property here. I owe half if he defuncts. Or do I take that money and do a Roth IRA for last year and then put the rest into my six-month emergency fund? Or should I just leave it and let it go still? Okay, so you have the $35,000.

The tax bill is how much in your husband's name? Nine grand. Nine grand. Those aren't both our names, but it was his mistake because he took the money out of his 401k. Got the taxes and penalties and all that. Yep. What did he use that money for?

I was gone. You have no idea what he spent it on? Does he have an addiction? Frivolous. He likes to cook. He likes to buy junk. People don't rob their 401k to buy junk. Well, I cut him off from my stuff, like I said.

He buys junk, believe me. He likes clothes. He likes junk. He does. Okay, so what's the total debt? Is it just the 9,000 or is there more where this came from? Well, his that I know of that I'm on is the 9,000. He did not tell me how much he has put into that thing. Those are his credit cards, whatever. He is not online. The house is in my name. My my carter is in my name everything's in my name okay okay so from a practical standpoint lee i would probably pay it off because it's good it's in your name i mean it's yeah for you guys which sucks that it's

his mistake um and i say sucks that it's his mistake because of the way you guys have been living um yeah but i so i would do that i would um do you have money saved or are you on baby step one because your net worth no my net I already have my I have my thousand dollars in a separate account I have paid all my accounts off and I my my net worth with all my IRAs and investments because I put money in investments when I was doing the COVID thing also and paying off loans and also my net worth according to my Quicken account or whatever that is, or whatever was on my computer, because I'm not a really good money savvy person, is about $670,000. Way to go. That's great.

My house only owns, I only owe $172,000 on my house right now. Okay. Okay. But you've been doing the solo essentially. You're just like, whatever you do, you, I'm going to manage my money and not go into debt and hit my goals and you're not dragging me down. So the question to if you sell, and the stock is in what again?

It's in a hospital stock, in a big corporate hospital. Oh, okay, okay, okay. So when I bought it years ago, it was only like, you know, from payroll deduction and I've just kind of like left it on the back burner. Yeah. I mean, I bought it years ago. It was only like, you know, from payroll deduction and I've just kind of like left it on the back burner. Sure. Yeah. And it was like 25, 50 bucks when I bought it and now it's worth like 300, I mean, it's $35,000. That's what I found out. That's amazing. So you'll probably, what's your, do you file single or married filing jointly at this

point? Oh, we still do married filing jointly just because it's cheaper that way. And what was your income last year? Last year was 94, but this year I got above 97. Okay. So it'll likely fall into like a 15% capital gains tax on those stocks since you've owned them for longer than a year. It's going to be long-term capital gains tax and it'll likely be 15%. I would talk to your tax pro about what that number actually would turn into because you'll need to have that, you know, be able to pay the taxes on that come tax time. But I would definitely sell these stocks, pay off that 9,000 and then fully fund your emergency fund. And then be putting the rest in your Roth 401k or I'm sorry, your Roth IRA that

you were saying and just be putting... Well, because I just found out yesterday when I called my HR benefits and stuff, we do have Roth IRAs available here at my job. I mean a Roth 401k. I have just 401k, I'm sorry. Yes, right. Okay. So that and your Roth IRA are going to be your friends

because the great thing is when you take the money out, like versus this stock where you're having to pay capital gains, you wouldn't pay anything and you could just cash it out and it would be all $35,000 of yours. The only difference is you won't get the tax deduction come tax time because it's on the Roth side. Yeah, that's right. But that's worth it because of how much you're going to be making in interest over time.

So I would do that. And then, Lee, I mean, that's the… Should I put it into this year's IRA? Like go ahead and put it in, like if I sell it, I get it before I file my income taxes, put that into the 7,000, like 7,000 into my IRA for last year's. And then I could worry about the taxes on the long-term capital gains for this year. Yeah. I mean, that's one way to do it. Before tax time, you can fund last year's, you and HSA and all that stuff. So that would be a good thing to do. And then make sure you have your fully funded emergency fund set up before that. And if you have enough, you can fund the rest in that IRA. But the bigger glaring issue here is this marriage, Lee. It's like the elephant in the room. How long have you guys been married 30 years okay so i did talk i did talk to an attorney um and basically he was like it's cheaper to keep him so because you know you're

gonna have to split your assets and everything yes i also want to think about your the quality of your life and not just about the dollar signs but i I'm just, I just feel for you. I mean, has it been 30 years of this? I mean, the way he handles money and the way he approaches money is the same as how he approaches life, correct? Yes. I mean, he's very, I mean, he's not a,

I don't even know how to say it. He's an oxymoron on his whole world. I mean, he's, so the kids need him for something, he's there. He's never been not there. Yeah. He did have an infidelity issue years ago. I don't think that's a problem. It hasn't been a problem, um, anymore, but. Okay. Well, I would, I would say this Lee too, just for the wholeness of who you are as a person, what George is saying is, you know, making sure that

you're a whole person and how you can do that best, you know, is your decision for sure. But I would keep my money separate at this point because he's not proven otherwise and I don't trust him. So I hope that helps, Lee. And good luck to you. Well done on all the progress. Thanks to all the guys in the booth and Kelly, the lady in there. Oh, yeah, Taylor. We have some ladies in the booth and you, George.

It's a great co-host. This is The Ramsey Show. Live from Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I am Rachel Cruz, hosting this hour with my good friend, best-selling author and co-host of our other podcast, Smart Money Happy Hour, and George Campbell.

That's you. That's me. I didn't introduce you. I George Campbell, that's you. That's me. I didn't introduce you. I just gave you all the titles. I appreciate that. I'll take the accolades. You don't need to mention my name. And we are answering your questions this hour

at 888-825-5225. And to start us off, we have Dustin in Palm Springs, California. Very nice area. Hey, Dustin, welcome to the show. Hey, thank you. So my wife and I were in our mid thirties and we are so close to baby step seven. We can feel it. But we have one small hurdle that we got to jump over to get there and differing opinions kind of on how to resolve it and hoping to get some advice and maybe you guys can break a tie for us. Perfect. Can't wait.

What is it? What's going on? All right. So we've knocked out all of our debt using the baby steps. We paid off about $350,000 worth over about two and a half years. Wow. $350,000 you guys paid off? Yeah. Well, not all paid off. We sold stuff. I mean, we had everything under the sun. Wow. Well done. Automobiles and campers, and I don't even like camping. So all we have left now is our primary home and we do have a vacation home. And what we want to do is sell our primary home and move into the vacation home, which we like better anyways. And basically the net proceeds from selling our

main house will pay off our vacation home, which will become our primary residence. Wow. Great. The problem. Yeah. So we're ready to go. The problem is I bought the vacation home prior to our marriage and I unfortunately bought it from a friend. He's carrying the note. Um, and when I kind of brought up to him, you know, excited that, Hey, I'm going to have a big, big check for you. He kind of pushed back and you know, he's kind of saying he wants to spread his capital gains tax over the 10 year note that we'd agreed upon at the 4% interest rate and kind of just, you know, park his money in that investment. So my question is, how do I do this? I don't want to burn a friendship. My wife wants me to just

slap a check on his desk, but she doesn't have to play golf with him on Saturday morning. So I'm not really sure how to approach this conversation without, you know, So he basically kept the mortgage in his name and you just pay him the mortgage payment and he pays for it no we did it all legit we went through a title and escrow company and we drafted up a purchase agreement um and basically it's it's just a loan from him basically you know i did a 20 down payment with him um and i do pay him you know basically as the bank but i am on the title of a deed, all that stuff. Okay. Okay. So you're, so it is your home. Correct. I mean, yeah, it's your

home and he's just the bank is what that is. Just seller financing. Yes. Correct. And I wish I didn't do this because now I'm in this situation, but yeah, basically when I brought up to him that, you know, you know, I owe him about 500,000 and, you know, I have the ability, well, we'll, once we sell this primary home to pay him off, but he just doesn't sound very excited about it. He wants to just go per the terms of our agreement, pay it off over 10 years. So he can, you know, expense that capital gains over the 10 years rather than. Has he actually talked to a tax pro to see if this loan repayment counts as income? Well, he said that was for, yeah, so, well, it does because you have to pay tax on the interest portion of it, I think, and then,

you know, on the principal, he's, you know, it's capital gains rate, I believe, because it was paid off, you know, for him. Yes, so to answer your question, yes, he said he talked to his CPA, and basically, if I pay it off, he will have to pay capital gains on the proceeds. Is there anything in the contract that you signed with him that would prohibit you from just paying it off? And that's the issue. There's not. I've read over it a hundred times, and it's like legally and all that, I can go pay it

off. Yeah. So boo-hoo, friends. Here's your $500,000. You're going to have to pay taxes on it. Did he not make money off of this? Did he not benefit from this whole thing? No.

Yeah, he's going to make a lot of money off of it. You know, he bought it 25 years ago. So he's going to make quite a bit. I guess my worry is that I'm either going to upset my wife or my friend, right? Because it's like she wants to have it done. Or your life, Justin. Or your life. You guys have freaking paid off $350,000.

Like, you guys are on a plan together for your life, and you did this side deal with a friend, and your life has changed, and your priorities and your goals have changed. And so, sorry, friend. It's not like you're putting your friend in debt. Boo-hoo. He gets $500,000,

and he's going to have to pay some taxes on it. He can wipe his tears with $100 bills. Like, sorry, dude. And I'm being very insensitive. If I were you, I would feel much worse because it is a good friend. I don't have a lot of empathy

for the friend. I mean, yeah, Dustin, like the writing's on the wall. You have to do what's best for you and your family. It'd be very unwise to make an unwise financial decision

for you and your family because of the feelings of a friend. And so I guess that's, that's just going to be a hard conversation I need to have with them and say, listen, this is 100%. And I think you can give him some time and say, Hey, I'm not doing this tomorrow. You know, um, our goal is to do this in 12 months or whatever the goal is for you guys, when you sell your primary home, all of that, like if you can kind of map out a timeline,

give him some time and space and just say, yeah this isn't happening tomorrow but it will be happening in the next year and i looked over the agreement that we signed and i'm sorry i know it's not ideal in your situation but like this is this is our values and our priorities with our families to be completely debt free and um and and yeah this is what we're deciding to do. And again, Dustin, you're not completely screwing the guy. Do you know what I mean? You're not paying you the debt back. Yeah. Sorry. Yeah, that's another thing.

He's a little older, and that was part of it, too. He's like, well, and he gave me a great interest rate at 4%. He's like, well, I can kind of guarantee to make my 4% of that money. And like I say, he's a little older. In reality, he can just go park that in a high yield and make that. Exactly. That was kind of the point I was trying to bring up to him and he he just he'll he just didn't seem jazzed about it and it put me in a weird situation where i'm like man i don't want to like burn a friendship with a

guy that i you know i've had a long friendship with but at the same time you're not matching up with the goal and i'll be honest too if you're a friend i'm like trying to put myself in his position right if i ever was in that deal and i had a young guy come to me and be like, you know, oh my gosh, we're able to get out of this deal because we have the cash, we have the money. We're so excited. We're going to be debt free.

Like you would hope that it doesn't burn a friendship that in fact he celebrates with you. And you know what I mean? Which I know like this way of thinking is different to celebrate being debt free. And be thankful a friend paid me back, which is very rare in today's world. And the other thing, Dustin,

is that when he loaned you this money, the relationship already changed. It turned into a business partnership transaction and it moved away from friendship. And so this is what happens with friendship. So the truth is, if you pay it off and he decides to not be your friend,

was he really your friend? Yes, George. He sure. There's a piece of it though i know what you're saying i know what you're saying i would never burn a friendship over them that's right like yeah yeah that's it so like what i'm saying if he really destined is not your friend anymore after this then like to george's point then he's looking to make money off of you don't mean like it feels weird if he if he is gonna cut ties with you as a friend because of this move. That's weird.

Yeah, that would be weird. I don't think that would happen. It's just, I guess I'm, you know, I hate to even say this. I guess I'm kind of just being a sissy about having the conversation because of the vibe I got when I brought it up, you know, a couple times over. And I even told, you know, my thought was just, let's just park our money that we make from the primary home in a high yield and just pay him off. And then I kind of, you know, we're quote unquote, we feel debt free-ish because the money's there. But my wife says, you know, she's so excited because we did so good on the first, you know, six steps, call it, that she's ready to just finish, quote unquote, finish the journey and be done. Yes.

Listen to your wife, Dustin. Her vote counts 1,000 times more than any of my friends. And I love my friends. And you have a little bit of that people pleaser in you, Dustin. I hear it. And so, yeah, this is grown-up stuff. And be a man, suck it up, and talk to him. And again, if he is weird after this because of this whole thing,

like, that's a weird guy anyway. I'm going to add this to one more reason to bizarre. One more reason to not borrow money from friends. That's the new book. And family. Yes, all of it. This is The Ramsey Show. Welcome back to The Ramsey Show. Up next, we have Ethan.

Oh, we have Mike. Sorry, Mike in Asheville, North Carolina. Hi, Mike. Welcome to the show. Hey, how y'all doing? I got a good one for you. Okay, perfect. So we COVID hit, we did a big remodel. It was about $100,000 that we've invested to create home offices. As a result, we kind of credit carded everything. and we've been living paycheck to paycheck for a while. And I've just lost my job this week. We were trying to do a refinance and that fell through. And so long story short, we went from about 195K in income to about 65 and looking for advice. And we cannot sell the house because it's under remodel.

We're not allowed to sell it for at least a year, and the remodel is not quite finished. Oh, boy. Okay. Is that more than just getting the two home offices during COVID? Y'all done more remodeling? Yeah, it was extensive. We kind of expanded the second floor,

and just with the goal of ultimately selling. But it's obviously when I lost my job, it was kind of a deal where it kind of put the brakes on everything even more after living paycheck to paycheck. And so we're obviously doing it the wrong way. So looking for advice on how to get out of this. How much more debt do you have? What's the total amount and break it down for us? Okay, so the mortgage is 202, and we have things like cars and credit cards, and a lot of that is just due to the remodel, but it's $210,000 and other non- mortgage debt. Oh my goodness. Well, we can sell the cars. What do the cars have to do with the remodel? They don't.

Yeah, so the cars we're paying, one of them is $394, and the other one is $380 a month. How much do you owe on the cars? How much debt's on them? Yeah, approximately $28 in total. Okay, break them down. What's on them? Yeah, approximately 28 in total. Okay, break them down. What's each one? Well, one of them is about $13,500. The other one's $15,000. Okay.

I'm confused. You said you had $210,000 in other debt and only 28 of that is cars. You're saying the rest of that is credit card debt? Well, unfortunately, we had like a foundation loan, a bunch of it's credit card, a student loan at about $20,000. And I think, yes, the rest of it is either small loans like through Home Depot or credit cards. Correct. And what were you doing for work where you guys were making about $200,000? Software developer. Okay. And what were you doing for work where you guys were making about $200,000? Software developer. Okay, and what are you doing now? I am looking for work, but I'm going to work on some certifications. I took a job that wasn't

ideal for obviously my career and skill set, and so that's something I'm going to be working on is some probably Azure certifications. Are they going to cost money? That, as I understand it, will help. A little. The test, the actual certification exam, is only $165. But then you need to, is there some kind of online education you need to get that will cost money? Or can you just do the certification test? I can.

There are some sample tests and some certification videos that are very helpful, but it's minimal charges, if any. And how quickly do you think you could get a job making six figures as a software developer? Well, I've applied for a bunch of jobs already, but it's a matter of finding the right fit. I would like to focus on the skill set to some extent, but probably in two weeks I would be able to pass that certification. Okay. If I was in your shoes, Mike, a right fit would be a luxury and a privilege. Right now I'm going, who is willing to pay me $100,000 to write some code? And I'm going to do that so I can survive.

Because right now, I don't see a way out of this with your monthly payments and your income. You guys are going to continually go into debt. Is your wife working, Mike? Yes. Okay. Is she making the $65,000? Yes. Okay. So if you made $100,000, then you guys can get back up to $165,000.

I was at $130, but yes. Okay, yeah. So, I mean, ideally replacing that completely like what you're saying. And then, yeah, I mean, and then from there, Mike, it's just a complete overhaul and mindset shift and change on how you guys have been viewing money. And you said it at the beginning of the call so i'm not telling you anything you don't know but the way you've been

doing it it has to be the complete opposite so this is cutting up credit cards this is i mean if any of your cars have equity in them i would just sell them and get a five thousand dollar car i mean i would do the complete opposite of everything i've been doing up into this point because that's where you're actually going to start to see some progress. And I really feel like, Mike, you guys need some quick wins in here. Yes, the income is number one. But I would be cutting up credit cards tonight. I mean, no more.

No more. Like, you guys are not in a place to even have them around because Because so much of this is credit card debts. And I know it was all in, you know, because of the remodel, but the whole mindset, yeah, of going in when you don't have the money, it just, that can't be it anymore. And then, you know, walking through the debt snowball of paying off and breaking all these out too. So when you say, yeah, some of these are credit cards, breaking each specific credit card out.

So you guys may have a long list of debts but as you start knocking these out that's where that momentum starts are you guys able to stay current on payments right now well we had a small severance um but it was only five thousand,000. And so our current, just our debt load is like a little over $6,200 for the month. And so the money we've got in hand will, you know, it might last a month. Yeah, I mean, you guys are, you're on the edge of running out and going back into more debt. And so can you do three side jobs this week? Yes. It doesn't have to be software.

It could be Instacart shipped, Uber, Handyman, whatever skills you have, go do it to bring in something while you look for that work. I had one job where I picked up some work to do some light remodeling for a lady, and that was $530. So you're pretty handy? I've collected about half of that. Yeah, I mean, I'm doing the remodel myself, so yeah. Okay. Well, today we start Mike's Handyman business, and you're going to charge $50, $60, $70 an hour

and put it on your neighborhood Facebook group and hand out some flyers and go, I'm doing good work and I show up on time and get referrals, word of mouth, and get this business going and do as much of it as you can until you get that next software developer job. That's what I would be doing if I had your skill set. Yeah. And I think what's hard, Mike, is there's a level of like deep humility that you're going to have to have in this process. Because between now and getting your new job, making anything and doing work that maybe you never thought you would be doing is what's necessary right now, right? Because I don't want you guys, like what George was saying, to get behind.

So bringing in $1,000, $2,000, $3,000 a month on numerous things that you're pairing together and you're working late i mean do you guys have kids at home yes two how old are they um yeah so 14 and 17 okay do they know about any of this i'm sorry do they know about your financial situation at all? To some extent, yes, high level. Okay. It might be good to sit down with them and have a hard conversation and say, listen, the next year or two, it's going to look different for our family. We used to go do stuff and eat out and do all these sports, and right now we've got to really tighten up and get out of this financial mess. Here's what that's going to look like.

Yeah, and even if your wife can work overtime, Mike, too. I mean, I would be doing that. I mean, again, income is going to be your best bet and then cutting lifestyle, which we're just saying, and it's going to be. Yeah, I mean, I mean, if you guys if you get back up to that one ninety five, I would be living like I made 80 because the sixty five thousand is covering the bills basically per month, right? I mean, living on seriously on nothing. And you could really turn this around. If you could throw, which sounds wild, wild numbers here, but if you could throw $100,000 a year. Yeah, out of that non-mortgage debt in two years.

Yeah, I mean, seriously. I mean, there's some big changes. Yeah, selling the cars, getting rid of what you can, selling stuff too, Mike. Go around your house, sell all the crap you guys, you know, that you have, doing what you can. But if you hold on the line, Taylor's going to pick up and we're going to give you Financial Peace University. It's our nine lesson course.

And you and your wife sit down together and even your kids and watch this. You guys binge this weekend because, yep, life's going to look different in the household. And that's exciting, Mike, because that means you're going to be winning. Today's question of the day is brought to you by WhyRefi. Now, we don't recommend refinancing on everything, but for distressed private student loans, there's WhyRefi. And we trust WhyRefi because they help you with a low fixed rate

interest rate that you really couldn't get anywhere else. And it's going to help you stick to your budget and get out of debt. So learn more at YRefi.com slash Ramsey. That's the letter Y, R-E-F-Y.com slash Ramsey may not be available in all states. Today's question comes from Matthew in Idaho. My wife and I are millionaires after years of working through the baby steps. In the beginning, it was exciting. The baby steps happened fast and our children learned to have Christmas on a budget. But once we got to the point where we had an emergency fund, the house was paid off and we were building wealth, everything just started to seem very routine and boring. How do we keep the excitement going

in our financial lives? If there was ever a Rachel Cruz question, this would be it. You were made for this question. George, you are so good about keeping your financial life exciting. Yeah. Because you're the spender. You're like, I've got some ideas. Yeah. And they're like, he's like me. He's like, well, I like a financial goal. We saved the thing. We invested the thing. But now what? Goals. Now you have to actually figure out who you are. I'm kidding.

Find hobbies. That's right. Okay. So I always go back to this because it's so spot on. And I agree with it 100% and it's science. But Arthur Brooks talks about what you can do with money. Five things. And four, bring happiness.

And one does not. So this is what I would say to him. To Matthew, you can give, which brings happiness. You can save, which actually brings happiness because it shows progress. You can buy experiences with people you love, and that brings happiness. You can buy your time back and then use your time well spent, right?

So if you have someone mow your lawn, have them mow the lawn, but you get time back, but go work out or like go do something productive. And then number five, you can spend money on stuff, but that does not produce joy. And then Ray MC, we always talk about you can give, save and spend, right? So kind of using that framework, if I were you, Mike, I mean, if there isn't a big goal out there, and I would say Winston and I, we've kind of gotten to this place. Our house was a massive goal. That was in in 2019 and then we made it a goal for a pool and we actually were finished we're not now I know so that what we took I mean it took us probably five years to save for that

um and so now we're at this point when we were planning our 2025 of like okay we don't really have a big financial goal in place um and I would say that for a time period, I think that's okay, because we shifted the excitement and like, hey, what's the next thing to some of those things Arthur Brooks talks about. So like plan a fun trip with your family, like have some experiences with them. Give someone a trip, right? If you have the money, like, are there people in your life that you could bless them of like, oh, gosh, this couple really helped us walk through some hard times. And we want to give them a weekend away, right? And like, what are things you can do? And then the giving aspect, which Winston and I even changed some of our giving goals this year. And we are, we like have a percentage now in our every dollar budget that is above our tithe,

above everything else we do. And it's spontaneous giving. And we're going to force ourselves every month to do it and to say, yeah, where can we give spontaneously to someone throughout the month? If we hear a story, if we experience someone at a restaurant, a waiter or waitress, give an insane tip. What are ways we can do that? And that fueled my excitement, George. When we planned all this out a few weeks ago as we were kind of talking through the year,

it was like, OK, we don't have a big goal, quote unquote, we're saving for. There's no baby step eight. Yeah, yeah. But we're being more creative with our giving which does make it more exciting we are going to travel some this year so we put that in the budget um so yeah so like leaning in on these things that actually will bring you joy and i'll probably you know buy some shirts from abercrombie you know it's just what i do uh but overall like where do we put our time and our energy and our money? Put it in the stuff that's going to bring you joy and excitement. And for me,

that's giving and experiences. But that's probably just my personality. No, you nailed it. I think there's usually a flat tire situation when you're really good at saving and investing. And then the giving side usually is a little lackluster. And you have a hard time just spending for fun because it feels frivolous after everything you've been through. Are you speaking out of your experience, George? This is me. I'm working on my flat tire, Rachel, trying to spend more, enjoy life a little more. But I relate to Matthew's situation because the baby steps are so great because it gives you a very exact process. If you do this thing, you'll hit this goal. And then you get to baby step seven and it's a choose your own adventure of live and give like no one else. Yes. Yeah. And so that's where he has to figure that

out for himself. And maybe that is, we need to find some hobbies. Maybe I'm going to try golfing or I want to get back into this thing that I used to love as a child. And I really need to pick back up piano lessons. Yes. Whatever the thing is for you and your family and go, Hey, this is something we never thought we would do. Or back in the day, we were like, nope, we can't do that. Yeah. What can you say yes to now that was a no five years ago? Yes.

That's good. That's really good. Make that list. Yeah. Of what are things that we wish we could do. And you got, you and Winston just did your annual dream date recently. Yes. That's what I was talking about.

Yeah. And we had the, we had, we had every dollar for our monthly budget up and then we had Excel and Winston has all these crazy formulas of implementing taxes. I don't know. He has all this. He does it all. I got to get that spreadsheet from Winston. I need some new formulas in my life.

Yeah, and that's the interesting thing is people really do. On the show, we talk about, for a lot of listeners, and for those of you that are new to the Baby Steps, a lot of people are starting out on Baby Step 1. They're just trying to get that $1,000 and pay off debt, right? But this long journey of money, I always want you guys to hear from us on this show that the goal of building wealth and being in a really secure place in Baby Step 7, where you don't even have a house payment, your house is paid for, retirement's being funded, like all of that. It's not just to continue just to get more and more and more and more and more and more and more and more and more, right? There is an outflow that needs to happen. You need to do things with your family, give to others, give others great experiences in life.

Like there is something about using money as a tool. It's not something to hoard and to keep, but you're doing this to leave a mark on the world. I mean, there's something beautiful about that that I think is really innate in how we're created. And so leaning into some of that, because I do think there can be this mindset, maybe early on, you know, maybe Baby Steps like four, five, six, where there's like, my goal is just to like,

get money, get money, get money, get money, which right, you're funding retirement, you're wanting stability. But there's been listeners here that have been with us for eight, nine, 10 plus years that are Baby Steps millionaires. And they're like, yeah, and they're on the other side. And the ones we talk to that have this joy about them, this countenance about them that we meet, it's because they've been able to do some cool stuff. And every now and then they'll drop

their story to us, you know, the things they get to do. But I don't know, there's something about this whole idea of building wealth. It's not just to build wealth. It is what you do with that wealth that brings you a level of joy and happiness and how we're created. Beautifully said, Rachel. Gosh, no notes. No notes. No notes. So Matthew, spend some money. Go on a great trip and be a generous giver. Go find things that bring you joy with giving because that's the best. All right, George,

there are some social questions that we get all the time. I love a social question. Yeah, when it comes to, I do too. I don't see them on here. Do you have your- They did not give, we are missing our social question.

I got one, I'm just kidding. All right, here we go. You ready for this one? Shoot. Zach from TikTok asks, how much is enough or normal to spend on an engagement ring? I want Rachel's opinion on this so badly. I don't think I've ever talked to you about this.

Isn't the jewelry people out there, don't they say three months and we say one? Generally, we'd say one month salary is like a top limit. Sorry, one month salary. That's what I meant, yeah. Yeah, but three months out there don't they say three months and we say one generally we'd say one month salary is like a top one month salary that's what i meant yeah but three months out there i think like zales and you know i think they usually say a three month salary came up with it should be 17 months of your salary i think it was i think it was the diamond company like the people that did the diamonds you know decades ago to beers or whatever that's it i was like i don't want to mispronounce it but i think they came up with the three month salary rule and we'd say pull that back a little bit

a month i think a month is great but let's yeah the weddings engagements rings it is expensive george i'm i'm glad that i'm out of out of that season because nowadays like what people are spending it's insane to be in, to go to all the stuff. I mean, it is. Well, and then the comparisons. Can I just be honest? It's the women on women comparisons of, oh, let me see the ring. Oh, that's cute.

You know what I mean? Like the guys don't care. No man has ever cared. No. It's just like we don't want the woman to be upset. That's why we go into it. Are they going to know it's from the lab and not a blood dime? Oh, yeah. What do you think about...

I could give a rat's toot about where the... If that's what you're basing this marriage on, well, was it did they work hard for the diamond or did a laboratory... Don't care. Get a moissanite. It's about the beauty of the ring and does it match her personality. And does it make sense financially? Because that is an industry

that you can spend so much on. My wife's ring was not that expensive. There you go. It's not a blood diamond. I'm not even sure it's a real diamond, Rachel. I don't even like you saying that. It was just a beautiful ring. That's what they call them.

I don't know what else to call them. Lab grown versus nature found? Real. Real. I mean, it's like an actual jewel. Producer Kelly, she's showing her ring going real that's the that's the word you're looking for this is the ramsey show so one of the best things that you can do for your finances is to get a tax pro that you trust

in your corner they'll help you advise you when it comes to the best moves for your situation, especially if you own a small business or you've had big life changes in the past year. So you can go to ramseysolutions.com slash tax pro to find CPAs and enrolled agents that have been vetted by the Ramsey team. Tax season is upon us. It is happening. I got my appointment. Do you have your appointment? There you go. You know, that's the free spirit and rachel winston really i'm sure it's coming i get usually the email of the like invite and all the things oh that's nice that he at least invites you you're on the calendar invite there yes i do the same but for whitney oh see there you go there you go it's great but you can go to ramsey solutions dot com slash tax pro to get someone in your corner today. All right. Next up, we have Morgan in Kansas City.

Hey, Morgan. Welcome to the show. Hi, Rachel. Hi, George. Thank you for taking my call. Absolutely. How can we help? Well, I'd like some guidance today on how to navigate my brother-in-law with tragedy.

Excuse me if I get emotional. On January 14th, my sister-in-law passed away unexpectedly. Oh, my gosh, Morgan. That was just, what, two weeks ago? That was two weeks ago. She's 38, and they have three children, and it's been pretty tough. I'm so sorry. Thank you.

That's heartbreaking. So how are they doing? As good as they can do for right now. They have three children, 15, 5, and 2. The 15-year-old is from a previous relationship. So I think financially her father is able to provide a lot. But to be honest, they weren't prepared. I mean, nobody is, but he's kind of in a financial mess.

Okay. So I have a few numbers. I don't have all the details because it's still very fresh, but I've gathered a few things. To my knowledge, they don't have very, I don't think they have any savings. Okay. Bought their house two years ago for 170,000. I believe their mortgage is $1, have any savings. Okay. Bought their house two years ago for $170,000. I believe their mortgage is $1,400 a month.

Okay. I think he makes, they both worked for a trucking company. I think he's in like the 70 to 80 range. Okay. And I believe she was about 60 to 70. So he's losing half of her income. Yeah. And also she was getting $1,700 a month in veteran benefits. And

they did not pay for the survivor benefit. No survivor benefits. So he lost that too. Did she have any life insurance on her? I think she had a small policy through her work, maybe $20,000. No will. They have $15,000 in credit card debt, two cars. One has a small loan. I believe it's her car. And she may have a small 401k. She may. My question is, she might. I'm not sure. Is that him wondering if he does, or is it you just saying she might? It's me wondering because my wife and I have been following the day of steps for years. So we're on four, five, and six. So my brain automatically went have been following the Dave steps for years. So we're on four, five and six. So my brain automatically went to write up the baby steps.

I was just trying to gather everything I have. So that is kind of a high level overview. So I don't know if you should take her life insurance and just try to walk up the baby steps. I don't know if credit cards that are only in her name, if I should tell them to stop paying because autopsy results are pending. And so we may not get the death certificate for about two months. So I don't know if he can do much of anything until we get a death certificate. Yeah. Oh, Morgan, I'm so sorry. So in these kind of situations, when there's something so unexpected and so tragic, um we usually advise the families not to do anything major for probably about 12 months because there is and that's why i haven't

asked these questions yet this is just kind of what i've gathered because this is i mean this is so heavy it's just pure grief right right well and he's and he doesn't i mean he can't even probably you know put together a thought and so for you just to kind of be a side support, right, and at least be able to gather and do, you know, some level of work for him is such a gift, Morgan. I mean, honestly, you're giving them such a gift by even kind of navigating this part of their lives because everything, yeah, I mean, I just, I can't even imagine. So I, you know, I wouldn't do anything again, big from a decision standpoint, unless they get to a point where there is something big, right? If they get six months into this and he can't pay the mortgage and they're, you know, you know, there's, you know, foreclosures pending or like something like really big, right?

Then we have to make some big decisions. But whatever I think he can do to the degree of staying somewhat afloat for a year, maybe some small things, and we can maybe talk to you about those here on this call. But overall, I wouldn't make any big, big decisions. So I think, because again, the emotion, you just can't see straight. She handled all the finances, so he's trying to just open bills.

What accounts do we have? I mean, he's starting from scratch. So it's just tough all around. Oh, oh. So that's kind of where he's starting. Like he said, you know, I'm going to Verizon today to get my name on all the accounts. He's on a scavenger hunt while grieving i mean that's that's the hardest yeah that's the hardest part is that life continues on right in the middle of all this and you're like i have to

be a grown-up and like kids still need food do this yeah i mean oh oh so terrible okay um so yes i think you know your gut on starting to kind of starting to put the baby steps in place, that plan, I think is a good one. Again, I would find the life insurance. I would get as much concrete information as you can because that's going to help you guys navigate this. But for him, to get him to live on 70K and be comfortable there probably will mean offloading some of this debt

so that they don't have all these payments. And I would have him look through every account possible to see if there's any savings. And I would probably start working on paying off maybe these smaller debts if they do have credit card debt. And sell her a car. Yeah. And get rid of that loan. In the meantime, that's a short-term thing that could relieve some pressure here. And then with the credit card debt. If there are credit cards only in her name. Yeah. If they're only in her name, he may not be liable for them. It just depends on

how things are set up and will the estate pay it out of her assets and his name on that. And so that's, I can't tell you for sure. If her name's on the mortgage, they can, I mean, technically, they can come after those things. They're not going to go after like the mortgage or her retirement accounts, but if she has any other assets that can be used to pay this down, they will use that. But I would not be in a rush to pay off this credit card debt. And I would not let the creditors pressure him and lie to him and say, no, you need to pay this today. Do send a copy of the death certificate to the credit card companies. Once you get those, get a bunch of copies, probably 10 copies minimum to send to all the creditors involved. So these credit cards are in just some, some of them are just in her

name. Is that what you're saying, Morgan? I think they might be. I think a handful might be. And I would pull her credit report and his just to verify and make sure that, yeah, that that information is correct. Get a lay of the land. And you can do that for free. You can have them go to this website, annualcreditreport.com, I believe is the site. And you can pull, don't ever pay to get this pulled. Perfect. Yep. There it is, annualcreditreport.com. You believe, is the site. And you can pull. Don't ever pay to get this pulled. Perfect. Yep, there it is, annualcreditreport.com. You can pull from all three bureaus and get a real picture of, here's the reality of where we're at, and now we know the next steps.

And he's lucky to have you to help and clean up the pieces. And if we can help in any other way, let us know. But this is just one of those reminders to everyone else listening. Get a will in place today it's not going to cause you to die any sooner but it will cause your family to just grieve your loss instead of also lead you on a scavenger hunt and guess yeah and have the government decide what happens to your stuff may i address your listeners for just one minute. Please. Excuse me for getting emotional. Get this done, guys.

Because instead of just being able to grieve, take three months off work, six months off work, take the children on a trip, he's in a financial mess. So on top of grief, there's headache, frustration, and stress. So please, this stuff happens every day.

I know, excuse me, none of us think it's going to happen to us until it does. So if anything, just get enough life insurance to cover these things while you clean up the baby steps. Well said, Morgan. I know. Thank you so much. It's not easy to go on radio like this and share. I'm so sorry. Everyone listening, including us, we're thinking of them and praying for them and wishing them the best. And just to continue on what Morgan's saying, we believe in this so much, you guys, to get your wills done. Zander Insurance for life insurance. Get 10 to 12 times your annual income. If you're a stay-at-home mom, you need half a million at least on you.

Get life insurance today. Morgan, we're praying for you guys. George, thanks for the hour. Thanks to everyone in the booth that's making it happen. Thank you, America. We'll be back. Live from Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I am Rachel Cruz, hosting this hour with bestselling author and my co-host on the Start Money Happy Hour, George Hamill. What a pleasure. And it is Friday, and we are here to answer your questions.

So give us a call at 888-825-5225. We're talking about your money, your life, your relationships, your career, anything and everything. Give us a call. Starting us off, this hour is Jacob in Washington, D.C. Hi, Jacob. Welcome to the show. Hey, guys. Thanks for taking my call. Absolutely. How can we help? So essentially, I'm 29 years old. I'm currently living with my parents. I have been for a while

just saving up money. I'm lucky that I have a good relationship with them. I've saved up about $95,000 and I have about $13,000 in debt. Right now I have a house under contract that is definitely a fixer-upper it needs a good amount of work and remodeling and I just want to know if you guys think I should pay off my loan first or fix this house up to bring its value up before I do anything else do you have the cash for the fixer-upper for the repairs you're wanting to do? Are you using that $95,000 for it? Yeah, my closing costs would be around $53,000 out of that. That includes your down payment?

Yes, that does. Okay. And then I don't know exactly how much the remodel is going to be. It's remodeling bathrooms, kitchen, floors. It's just hard for me to know how much that remodel is going to be. It's, you know, remodeling bathrooms, kitchen floors. It's just hard for me to know how much that's going to cost. And I don't know. Whatever you think it is, double it and you might get close. So honestly, what I would do, Jacob, is I would, yeah, you're going to have probably 42,000 left over. I would pay off the 13,000 in debt and the remaining, I would put away you know for or is it it's just you right you're single

yeah yeah um for probably a three-month emergency funds and then above that anything you have use cash for the remodel and and go you know take it one step at a time especially if you're cash flowing it because sometimes people we actually had a call last hour and they went through and remodeled the whole house put everything on credit cards and then he lost his job and they can't keep up with everything so pay as you go move at the speed of cash and even if that means bathroom by bathroom room by room one project at a time it's going to take longer to do that and you're going to live in a construction zone because of that but it's way more of a safer bet to do it that way. Okay. Yeah. I've talked to my parents about paying off the loans. A lot of it's student loans. 11,000 of the debt is student loans. And since the interest rates on

them are so low, all of my debt is under 4% interest rate. They pretty much advise me to just keep paying it off slowly. So it's good to hear from you guys that I should just get rid of it. Yeah, because debt's not a math game. If we were playing math, we wouldn't be in debt in the first place. I mean, this isn't necessarily all about looking at interest rates. Part of it is you not having any payments. So if something happens or when something happens, you've lowered your risk completely financially by having no debt, not owing anyone anything and having savings in the bank. I mean, that's, you know, that's like the best position you can be on versus keeping these around,

just what people do. And then you can, and then if you wanted to play the math game, Jacob, you could and say, okay, here's how much we're paying in payments in the student loan. If I didn't have it and I invested it, how much would I have at 65 versus paying Sally Mae over a decade of my life? I see. Yeah. So, yeah, we're a pretty hard line here. I would say the way your parents think about money is very normal in America and they're looking at interest rates and that it's not a big deal. But the way we see it is the faster you can get out of debt, not only is there more peace

from an emotional standpoint in your life and like a mental health perspective, like not owing anyone anything and that autonomy is unbelievable, but also your income is your largest wealth building tool. And when your income comes in and it's all yours and it's not Sally Mays and a credit card and a car payment, like you have your income to be able to do incredible stuff with and it's because you get to make that decision no one else is forcing you into that decision okay so paying off this debt will slow down the remodel i mean that's the reality of the math and that's okay it's okay to move slower move at the speed of cash don't go

take out a second loan against the house to do the remodel. Just go as you can with cash. You're a young guy. You're very able. You make good money, I assume. If you save up this much, how much do you make? I make a little over $107,000. That's insane. You're going to get this remodel done so quickly with no debt and emergency funds. Are you excited about a remodel? Because this is one thing in life too, Jacob, just to throw it out there that it seems really like romanticized and there's like HGTV shows about this and it's, but once you get in it and you're like, oh my God, I have to live in this for like two years. I don't know. Is that, does that sound fun to you? Like, do you enjoy that kind of stuff? Yeah. The prospect of being able to make it my own is exciting. Okay. I would say that my dad is a lot more into it than I am. You know, he really wants me to get

this house so that he can go in there and work on it. Is he doing the remodel? He's getting pretty old. No, he's, I mean, he'll help out where he can. He's pretty handy. Okay. But, you know, for things like electric and plumbing and whatnot i do not want i want a professional doing that kind of thing sure okay and also make sure that you're not funding your dad's dream either yeah he has no financial stake in this right he's just helping his son living vicariously through him with a good old house project yeah and the house is pretty close to him so i think he wants me to get a place near him. Okay.

Okay, hold on. Hold on. Sorry. It just sounds a lot, Jacob, like your dad's wanting you to do a lot of this stuff. What is like, what do you like? Have you I don't know. Do you do you feel any of that? Or is this is this what you want to do? Is this where you want to live? Is this the process you want to be going through? It is definitely where I want to live. The area, it's super high cost for houses around here. In this area, it's hard to find a house, at least one that I'm looking for, for under $500,000. Sure.

So this house, it being a short sale and the remodeling needing to be done, it's coming in at 370 is what they accepted. So I think that I could build some pretty quick equity in it. Sure. Okay. So what's your mortgage that you're taking on? The mortgage would be, it'd be around 2,500 a month. Okay. And that's a 30-year conventional loan? Is that what you did? Yeah, that's correct. Well, and you're bringing in, what's your take-home pay every month? Is it $7,000 or $8,000?

Yeah, right around there. I mean, I gross a little over $8,000, and I take home a little over $6,000. Okay. That's a hefty mortgage payment out of that $6 that six to be putting $2,500 toward the mortgage. That's a hefty mortgage for your first home as a 29-year-old. You make good money. I hope you continue to make it, but we've taken five calls on the show just today where people were making great money and then they weren't, and they still had the mortgage payment to pay. So i'd caution you that you're biting off a lot how what would be that ideal i mean if you're if you're taking home you said 66 grand or so um monthly i bring home a little over six thousand dollars you'd be looking more like a

seventeen hundred dollar payment would be more ideal yeah fifteen hundred bucks so it's a it's a lot it's not like unmanageable. Nothing's on fire, but I'd be looking to make more money to sustain this. Yeah. And just make sure, Jacob, too, that again, this is something that you want to do. This isn't your dad. And because your dad said it's a good deal. Your dad also is the one that wants you to keep your student loan around, too. So you're 29 years old, you know, make your decisions for sure. But just be having some adult filters through your life where your parents sometimes aren't always correct. This is The Ramsey Show. There's a lot that goes into buying and selling your home. And a lot of these decisions can feel

very overwhelming. It's a big process. And that's why we created Ramsey's Real Estate Home Base. It's a place with all of our tools and resources that you need to be prepared when you buy or sell your home. You're going to find calculators, start to finish guides, how-to articles, a podcast, a book, and even a video course, all packed with actionable steps to really help you navigate this buying and selling process. So make sure to check it out at ramseysolutions.com slash real estate or click the link in the description. And again, this is a great place to help find agents, get an idea of what's going on in the housing market in general around America and everything. So there's so much information. Give you more confidence.

Yes, for sure. All right, let's go to Abigail in Milwaukee. Hi, Abigail. Welcome to the show. Hi, I'm so excited to talk to you guys. Oh, so glad you called. How can we help? Okay. So my husband and I are in baby step two. We've been paying off our debt for about a year. And we recently switched homeowners in turn, just trying to get a little bit more margin every month. And that was just about a month ago. And upon inspection of our house, they said that our house is not insurable because the roof needs to be replaced.

And they're dropping us as of February 5th. Oh, boy. Oh, gosh. Quite boy. Oh gosh. Quite the ultimatum. Yeah, yeah. So we're trying to replace it as soon as possible, but also trying not to go into debt. So I'm all yours for advice here.

How much debt do you guys have? So currently we're at about $130,000 of consumer debt, not including the house. We paid off about 46,000 so far. Oh, wow. Is that a lot of that student loans? No, actually. I never graduated. My husband didn't go to school.

It's pretty much your typical lifestyle creep after moving into our house. So it was credit cards, a little bit of a student loan, pretty much everything. You guys drive nice cars? Okay. So my husband's car is paid off. And it's a Subaru Legacy 2015 or something. I bought my car in 2022, and I have big regrets. It's a 2020 Honda Passport. What could you sell it for?

Good question. Kelly Blue Book says a maximum private party would be like $27,000 and I owe $32,000 right now. Okay. And you guys have your baby step one, just a thousand bucks in the savings account right now? I have like $1,800, but that's just because I'm self-employed and I like to have a little extra just, you know, as a buffer, just in case. But no other money saved anywhere else? Besides like a little in a 401k, no. Okay, okay. So yeah, $5,000 difference there in the car. Anything else you could sell?

You know, I have really been thinking about that and like making a list and, you know, I could probably scrap together like $5,000, you know, but it's going to be at least $11,000. What's the roof going to cost? Have you gotten some bids on it from different roofing companies? Yes. So we are having a friend who does it as a side business and he quoted us about $11,000. Yeah. Have you gotten any other quotes? No. But from what I've been talking to people, the general consensus is that that's as low as it's going to go. This friend with the side hustle, would they be willing to set up a payment plan with you guys where they do the work, you keep the insurance, and you pay them over the next, let's say, six months? That's a good question. I don't know.

I would have to look into that. What was the stipulation with the insurance company? Because you can't get this roof fixed in three days. I know. So what did they actually say? They said pretty much we're not insurable. We're dropping you as of February 5th, and then I have to reapply when the roof is fixed. So is there going to be a gap in coverage here?

Yeah. I mean, there's going to have to be. So I reached out to the mortgage company and they said they're going to have to force place insurance for the lapse. Which will be very expensive. Yes. Yes. How much do you guys make a year, Abigail? It varies. I had a baby this year, or sorry, I had a baby last year. So, and I'm self-employed, so it was a little bit less, but roughly around $100,000. Okay. Would the insurance company accept a short-term repair to extend it, extend the life of the roof?

Or is this like this? I mean, I doubt it's not falling through. Yeah, it's not falling through. Our previous policy said it was good until 2028, and that's why we hadn't actively been saving for it. But it's weathered and everything. And I reached out to my agent, and he said, because this company said that it's not insurable, it's going to be pretty hard to get full coverage insurance. To get a new company? Yeah. And the mortgage company, they want full coverage. How did you find your current

insurance provider? It was a recommendation through my realtor actually a few years ago. Okay. Have you shopped with an independent insurance broker? They are an independent. Okay. So yeah, they're not tied to one company. Okay. I think your best bet is the saving grace that your friend does this, hopefully professionally, as a side hustle. You know, it worries me a little bit. Like, yeah, they do it on the side. Do they know what they're doing?

Oh, yeah. Yeah, they're definitely professional. Yep. They've worked for bigger companies before and everything. Okay, good. They're licensed and everything. I would beg them to do this work so you can keep your current insurance and say, we're going to put this at the top of our debts and get this thing paid off. And that way you

keep your insurance and keep your home protected because that is way too much risk on your part to go either uninsured or paying this exorbitant amount for the mortgage company to cover it. Yeah, absolutely. There's one more little piece to the puzzle if you have time. Yes, we do. Okay. So my, I know this is usually, you know, not advised, but my dad offered to loan us some money and pay him back when we sell the house someday. I don't, it doesn't feel good, you know, to accept that. And my thought was if we end up going that route, I want to come up with at least half. But what are your thoughts on that? I wouldn't.

Honestly, I would talk to your friend. I would rather have that situation where you're actually having a payment plan within just the friendship of the contractor versus having a completely third party, which is your dad. So I think the gut on that is correct. I would not, I wouldn't. And if you have to come up with the money like tomorrow, you could sell the Subaru downgrade to a beater for a season in order to come up with the money since it's paid off. Yeah. And be a one car family for a little bit.

Yeah, that's very true. Yeah. So that's a worst case, but don't go into debt for this. Cut up your credit cards tonight. yeah that's very true yeah so that's a worst case but then abigail don't go into debt for this cut up your credit cards tonight like this consumer debt 130 000 you know like yeah like the like i want you i want y'all out of that like i want that freedom which is gonna take um you know you feel the pinch now with the roof but once you guys get over this like keep this momentum going and if you if if he if he can work extra if you can i mean whatever you guys get over this like keep this momentum going and if you if if he if he can work extra if you can i mean whatever you guys can do to get out of this consumer debt um yep the better off

you're going to be for sure yep absolutely yep i still would consider selling your car when you can come up with the difference in cash i still think it might be a good move to speed this up because this is going to be a grind i want to see you guys get out of this in under years. So if you can't do that in under two years on your current plan, I think selling the car is the move. All right. Thank you so much. Yep. Thanks for the call. Man. Lifestyle creep. We're talking off air, Rachel. The more people make, the more they feel like they can afford financial decisions that will cost them later. And they go, well, we can afford the payment now. We're making $100,000.

We can afford the payment on the car or the credit card. Let's just do it. We'll take out the HELOC and do that renovation. We always want. And then life happens. Yes. The roof needs to be replaced. They lost the job.

They lost income from a loved one who passed. This is real life. That's right. And people get starry-eyed when life is great, we're willing to take on the debt. And it continues to be. We've been saying it for decades. Dave has it since we've been here. But this whole idea, I can afford the payment, you guys, that cannot be your financial plan.

That cannot be it. It's 0%. It's only 300. It's only, it's only. The payment is not it. Can you buy it in full? That's when you can afford something. It's not the payment because the moment an income changes and suddenly all these bills are due, suddenly, oh no, we can't afford what we thought we could. Versus when you own everything and something changes,

it's like, okay, well, we have cash in the bank. We're in emergency funds. We're gonna have to figure something out. You're in a totally different position. It is not worth leveraging to take away your peace when life happens. Not if it happens, but when it happens. This is The Ramsey Show. Welcome back to The Ramsey Show. We are going to Gabe in St. Louis. Hey, Gabe. Welcome to the show. Hey, how are you?

We're doing great. How can we help? So I'm trying, my wife and I right now are trying to figure out what would be our kind of next best move when it comes to paying down debt and future planning. Right now we have about $47,000 worth of a mix of unemployment and minimal consumer debt that we use to do some home renovations. And I just think probably it's all mostly tied to unemployment, honestly. Um, are you employed now? Yes, I'm employed now. My wife is employed now. Um, we just went from a basically $140,000 income home to a $60,000 income home for about six months.

And so at that time, we still hadn't paid off our home, but now our home is completely paid off, and we're just left with the unemployment debt. And part of that is also a car that I had with that previous job because it required me to be on the road a substantial amount of time. And there's a car loan attached to that? Yes, there is a $18,000 car loan attached to that. I was just driving a lot and so I needed something that was very reliable and good on gas.

What's it worth today? For private party, it's maybe worth $22 worth 22, but I've struggled selling it, um, at that. And a dealer would basically just null and void what I owe on it if I were to try and sell it back to them. Okay. That would clean up a good chunk of your debt. And what are you guys making now as a household? Uh, around 120.

Oh, good. Okay. And what's your question? Well, the question is, part of this whole plan is we're trying to help my wife's parents immigrate to the United States. And we're also trying to move closer to family. Right now, we're pretty far away from them. But my question is, should we put our home on the market since it's paid for? Or should we, since we're within the same state and within driving distance, put it as a rental to create more cash flow as we're paying off this debt and

then potentially just rent for a little while until we get things more figured out where we are planning to move to. How much can you sell your home for? Around $240, $250. Okay. And the area you guys are looking, have you guys run comps or anything on or looked at homes that are for sale that would be reasonable for you guys that you would want? With what we'd want, I mean, we'd probably have to put on a little bit of a mortgage that would be reasonable for you guys that you would want? With what we'd want, I mean, we'd probably have to put on a little bit of a mortgage again,

which ideally we wouldn't have to do. We may have some options to rent a property from family or friends in the area. It's just we're trying to figure out what would be the best scenario right now. Do you guys know the area well enough that if you bought a home, you know, like, oh, yeah, this is this is the area we want to be in? Or do you feel like it would be smarter to rent for a year to understand the area? No, we both live there for six or seven years. So, you know, we feel like we kind of know where we want to be. It's just more of what jobs would be available for her when we get there. So there could be a dip in income for a little while, while you figure that out. Ideally, you get them lined up and then you make the move. Correct. And that's the plan already. We're not

planning to move until we get more things lined up, but it may be hard to get both of us lined up at the correct time, which is why I'm inquiring about should we... I would not keep it as a rental. I think there's an option C and D. So option C would be you sell the house, you pay off all of your debt, the 47K, you use some as an emergency fund, whatever's left now becomes your new down payment fund, and either you option C, rent for a while until you guys know where you want to go, you have the down payment saved up. Or D, you go ahead and buy immediately with whatever's left. But I would sell the house, pay off your debt, get the emergency fund in place, and then use the rest as a down payment. Okay.

And when you say you need to help the parents immigrate, is that costing you guys financially? Is it just they need a place to stay? What does that entail? They'll need a place to stay? What does that entail? They'll need a place to stay. They should still be able to collect their retirement when they're here, but we do also have to show that we have a place for them to stay because their retirement wouldn't be enough to manage that part of the puzzle. That's my concern. Are you funding their retirement for the rest of their lives when they move here? No, no, we shouldn't have to. Like I said, it would just be more of

finding a place for them to stay when they got here. And so part of our mindset has been because they've come and visited us a couple of times. They've stayed with us. We've had the space at our current home for them to kind of live in like a mother-in-law suite, not directly with us. So the new home would have to have that space available for them. That's part of it. Right. Or the option to add on something along those lines. And if you guys go take out a 15-year mortgage and pay it off fast, I'm okay with that. But I would pay off the debt when you make this move. Sell the property, pay off your debt, get the emergency fund, use the down payment. If it's not enough to get you the place you want or need, then I would pause and rent for a while. Okay. Would you be of the mindset to cash in a small portion of my 401k to pay off the car,

so that way we don't have to worry about that and shrink that debt down? Well, robbing your retirement, I assume you're not 60. How old are you? No, I'm 35, but I don't have much put back anyways right now because part of that came out to kind of manage for a previous unemployment stint. It's a very expensive mistake to withdraw from your 401k or even take a loan against it. We would never advise that unless you're on the brink of foreclosure or bankruptcy, which you guys aren't. You're going to sell this home and you're going to have a giant pile of money, which is going to clean up the debt. Okay. And if you really want this gone, you could sell the car, find something real cheap to drive around for now in the meantime. But with the sale of this home, it kind of leapfrogs you into some

further baby steps, which is great. Okay. So I wouldn't touch the retirement and that'll put you in a place as well when you're in this new house to actually be building for the future instead of paying for the past and now you know you guys have been through some things you're trying to help out family you're trying to do a lot at once so this is going to be just a chaotic season moving isn't fun selling a house can be chaotic but you know yeah these are the steps to take and i think in the time being because you guys don't have this hard and fast deadline or timeline even of when all this is going to happen is i would be saving a ton of money right now when there's like this limbo of looking at hey we know this is going to be coming in the future we don't know exactly when then you know be in this mode of like

hey let's just like live on nothing. Get some money here. Start saving and saving and saving and saving. Start maybe chipping away at some of this debt. And then when it comes to this point of, okay, now we can make this big decision, you have a pile of money too. So I'm like, use time on your side, Gabe, throughout this. But I would start chipping away at this debt because the less you have of debt-wise, the better off you're going to be. And being a long-distance landlord,

not as fun as it sounds. So keeping it as a rental and the cash flow, we've seen this time and time again, it's just not worth it. It's not. And I mean, if you have a paid-for rental and that's what you want to do, then that's great. But this whole idea of like this real estate game that a lot of people feel like, okay, I have to play this in order to become wealthy. It is a way to build wealth for sure, real estate, but it's not the only way. And again, people make so many mistakes going into it because they are like, oh, we'll take out, you know, we'll take out a mortgage on it, but the renters will pay the mortgage and it'll be fine. Everything's gonna be fine. And then you realize, oh no, it's a house and things break. the renters will pay pay the mortgage and it'll be fine everything's gonna be fine and then you realize oh no it's a house and things break the renters don't always pay on time and you're having to pay the mortgage for that month when they were supposed to be the ones paying and

all of it so yeah simplifying your life is the best way to do it and if you want to get into the real estate game then then start slow like start start low. Low, low, low, low, low. Because there's some cheap houses out there, George. I mean, even here in Nashville. You can go out to drive an hour outside of Nashville. Rachel, I need the big single family with the giant yard and the fence. The whole thing. You can start slow and low, like Rachel said, a crock pot.

Crock pot. That's how we like it. That is. Don't microwave your financial goals. It doesn't work. No. This's how we like it. That is. Don't microwave your financial goals. It doesn't work. No. This is The Ramsey Show. Our scripture of the day comes from John 10.10. The thief comes to only steal and destroy.

I come that they may have life and have it to the full. Lillian Dickinson said, life is like a coin. You can spend it any way you wish, but you can only spend it once. Beautifully said. Well done. All right, let's go to Ethan

in Athens, Georgia. Hey, Ethan, welcome to the show. Hey there. Can y'all hear me okay? Yes, we can. How can we help? Perfect. So I guess my question is, what's next? What do we do now? My wife and I, we have zero debt. I wish I could say that it's, you know, because we worked really hard and paid it all off and all those things, but we've just never kind of been in a position of debt. We started out with pretty much nothing,

but we've built up a pretty decent cushion now. And we feel comfortable with where we're at in life, but we have a lot of life changes coming in next year. We're going to have our first child. Congratulations. Yeah. Thank you. We're going to have to buy two new cars.

We rent currently. We would like to own a home that's going to change sometime in the near future. We eventually want to move. I helped start a new company this year, like going into this year. And so there's just a lot of change that's coming forward. And though we have a good cushion, I know that it kind of feels like we're one or two poor decisions away from losing that entire cushion that we have. And I am terrified of going into debt. And so I don't know what to do to kind of keep us safe and kind of get us ahead so that we don't have to touch that in the next two years. You don't want to touch the cushion. Is that cushion the emergency fund or is the savings beyond that? It's a little bit of everything. So we have probably that's kind of total liquid around $70,000 to $75,000. Okay.

Is that in just one account? It's in various accounts. Okay. Spread across a couple accounts, but I mean, it's not making anything. It's just kind of at the bank, essentially. And then we've got another 75 or so that's in an account for an inheritance account. That one, I believe it is still a cash account. We've paid the tax. Okay. From an inheritance, Ethan? Was it from an inheritance? Yes, it was from an inheritance. We've kind of kept that off to

the side. It's also not making anything, but we haven't touched it. We wanted to use that for down payment. So we have a total, including my Roth IRA, about $160,000 or so. But liquid is about $150,000? Yeah, roughly, yeah. How much are your expenses per month, would you say? Really low. We've been blessed.

We're renting from friends, and we have a nice little three-bedroom. They've let us rent for like $900 a month. Okay. So how much would it cost you? Like how much do you guys need a month to live off of? For food, everything. Yeah, food and everything. I would say I looked at it the other day, I think it was around probably the 3 to 4 mark.

Okay. I think we could bring that down. But obviously, that's in the 9B. We're about to go to a season where it's going up. Yeah, 12 to 15K would be a good emergency fund for you guys. And how much do you guys make a year um before tax we probably make uh around 115 or so okay perfect um okay yeah so i mean i think um you know you could do some of these at once i think maybe spreading some of this out too

would would be helpful i mean the baby's coming, so that's amazing. So yeah, I mean, with that, there will be some expenses, which is beyond insurance if you have to pay the deductible, getting the nursery set up, some baby stuff. I mean, yeah, so there will be some expenses there, but babies can be as expensive as you want them to be or not, depending on your choices of what you all buy and then the next thing that feels pressing maybe are your cars are they really on the last leg or

you guys mine is on its last leg okay got it you know 370 to 80,000 miles on it it's been paid off for years okay I probably won't do anything with it I'll probably keep it and use it as my around town car I mean it's paid off my wife still has a little I'll probably keep it and use it as my around town car. I mean, it's paid off. My wife still has a little bit of life in it. And so I would actually rather sell that one first and get what we can for it and then put that towards another reliable vehicle. Okay. How much do you think you guys would need for that? We could get probably around six to seven K for hers. And, you know, looking online at the stuff that we want we're definitely purchasing used but something that will last a long time i've got a toyota i've loved mine

so maybe 10 maybe 10 grand that you bring in so maybe 17 grand or something or more yeah somewhere along those lines yeah somewhere between the 20 to 30 mark is what we've been looking at okay okay so that yes that leaves you guys about 120,000 left after that car, the emergency fund, um, some money for the baby. So let's just go like, you know, I don't know, one, one 15 ish that you guys have left. Um, and then what's the business thing that you guys are wanting to do? Did you say start a business? Yeah. So she is, we're actually going to lose her salary eventually. Probably our goal is for her to stay home and be home with the baby. I am an architect, and so I've kind of gone into business with some others,

and we've kind of started our own thing. A consulting firm? Yeah, and I'm secure in that for the time being. It's new, but we've got some good legs behind us, and so I'm not worried about that going anywhere. I got laid off last March and that was kind of a big surprise, but it worked for the best, honestly. Until baby's here, I would want stability in my life. That would be me. And so whatever money is left over after your emergency fund, baby's here safe, you upgraded the cars, let's

say 15,000 each. You're going to have six figures to throw as a down payment. And so then the next step is to, you said you don't want to implode your life here, get a 15 year fixed rate loan where the payment's no more than a quarter of your take home pay. And that might mean, hey, we can't buy the $500,000 home because we can't afford a $400,000 mortgage. And so you might need to rent it a little longer if that down payment's not enough. That's up to you guys to figure out what house is going to fit with that budget. But that's a way to not bite off more than you can chew.

Yeah. As far as investing goes, like I said, we don't have any debts right now. We're not investing in anything. With our money, my wife is pretty nervous of that. And the best marriage advice i ever got was don't do anything if both of you aren't in peace and so if she's not at peace with it i've i've tried not to do that as well well okay let me say this though let me stop can i stop you

here let me stop you okay yes so i i understand that advice but also when your fear is not matching up with facts then that's then that doesn't make sense. So she has a fear that honestly, factually is incorrect. I know she may feel that way, but you guys have money, and you've said it twice on this call. We have money just sitting there not making anything, and just because your wife is nervous about it. So she needs to get comfortable with it, and that means she needs to understand this more. she needs to look at the history of the stock market she needs to look at rates of return she needs to understand what a mutual fund is where you're diversifying you are putting your money in 90 to 200 stock it's not a single stock so there's not this event

that one company goes down we lose everything um so there there is a um some literacy some education yeah so i under i i appreciate the notion as a husband that if we both don't feel good but also if i don't feel good driving and i want us to walk everywhere that's not rational right so like that we need to learn how to drive yeah yeah so there there we give some financial peace let's do that yeah absolutely we're going to gift you guys financial peace university watch all nine lessons and the investing lesson will give her some peace because you guys a great job explaining it. Let me say this, Ethan. You guys need to be investing. That's the only way you're going to build wealth long-term and have actual retirement. So you guys need to invest 15% of your income and it's not 50%, right? You guys are not putting

half of what you're worth into the market, but 15% of both of your incomes need to start going to Roth IRAs, 401ks. And these are proven out accounts, Ethan, that again, yes, yes. Does the market go up and down? Absolutely. But this is long-term investing. And on average, it's anywhere from 10 to 12% the market does. So I, yeah, I want her to be comfortable with it for sure. But I also need her to lean into facts and not fear because fear

is a terrible driver in life. And so especially financially. So yeah, you guys need to start investing 15% of your income. And then the next big thing I think is the house after the cars are replaced. I think getting into the market is the next big goal for you guys. And you've done a fantastic job, Ethan, both of you. Your conservativeness has paid off because you're in an incredible position. I mean, you really are. A plus on your financial 101. Now we just have to graduate into the next course. And you're feeling the pressure of, oh my gosh, this is the big leagues.

That's right. So Taylor's going to pick up and we'll gift you guys Financial Peace University. And yeah, I'm excited for you guys. And congrats on being a new parent. It's an exciting year for you all, Ethan. We're pumped for you. Thanks to everyone in the booth for making this show happen George thanks always for being a great

co-host and thank you America remember to take control of your money and create a life you love I'll see you next time.