The Ramsey Show - App - Is It Okay To Rent Instead of Buying a Home? (Hour 3)

Episode Date: May 3, 2024

Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm Ramsey Personality, George Campbell, author of Breaking Free from Broke, joined by best-selling author Rachel Cruz, latest author of I'm Glad for Where I Am. Yes, the new kids book. Thanks, George. You know what? I'm glad for where I am, in the studio with the birthday guy.

It's George Campbell's birthday. Happy birthday, George. Thank you. I heard that you were going to sing for me on air. Oh, you know me. Not the voice of an angel. Don't hide it under a bushel, Rachel. America needs to hear.

Let your light shine. I wish I could. But my birthday was just, yeah, two weeks ago, I guess. And I was asked on air, I think by Ken Coleman, if I'm the youngest Ramsey personality. And I was like, I think I am. And then I realized, no, no, no, George is younger than me. And you'll never be younger than me.

That's how time works. It marches on. It marches on. We keep moving forward. Well, you look younger. You're vibrant, energetic. You're doing fine. So are you, George.

Thank you. The youth is there. I could use a tan, but other than that. You are. You're doing good. Thank you. It doesn't seem real genuine when you laugh through it, but I appreciate that. The number to call is 888-825-5225. Call us and save the sinking ship. Leo is about to do that in Pittsburgh. Leo, welcome to the show. How can Rachel and I help? Hi, Rachel and George.

Thank you very much for taking my call. Sure. What's going on? So a little background for you guys. My wife and I are 27 years old. We don't have any debt outside of our mortgage, but we have a pretty large savings and a decent chunk of money that we add to it every month.

And I've been wanting to get more aggressive with paying off our mortgage. And it's something that my wife is a little worried about doing. I think she likes the security of having the extra money in our savings account. Um, so we've been kind of butting heads on what to do and how to approach that. And I was just hoping to maybe get some advice from you guys so that, you know, I could better communicate a plan to her. Yeah. Does she know that we do, I mean, what we would recommend to you is that you keep an emergency fund, even up to six months of expenses in the bank. So it's

not draining it all the way down. And does that make her uncomfortable yeah and i i think like the big thing that she struggles with is um her birth mother passed away when she's a baby when she was just a little baby and she kind of lives in the way where she doesn't want to necessarily feel like she's constrained or living every single day to pay off our mortgage because you just never know what could happen. And I can understand to that extent, but I'm still trying to help prepare our family for, you know, a great future and financial success. And we have a two-year-old daughter and a daughter on the way. So it's something that like, I know in the back of my head, like what the best move is, but I'm just trying to help lead her to that.

Well, talk us through the actual numbers. What's your household income right now? So we're right around about $190 a year. Amazing. That's with both of you working outside the home? Yes. My wife works part-time, and I'm full-time. Wonderful.

How much do you guys have in savings? So we have $30,000 for our emergency fund and then probably about another $110,000 sitting in a high-yield savings account. Wow. Way to go. That's great. And how much is left on the mortgage? $350,000 on the mortgage. Okay. And is the $30,000, would that be considered three months or six months or somewhere in between? What's the number for how many months that would float you guys for? It would be six months for us. Okay. And that's full expenses,

all the little luxuries, or is that bare bones if we had to go down to the skeleton here to cover the bills? That would be keeping up with our current lifestyle. Nothing would change during that time. Great. And she's comfortable with the 30, but she wants the extra 110 as a just in case life happens. Yeah, pretty much. It's just, I don't know. I think that she almost thinks that if I'm throwing something at the mortgage, it's just disappearing and going away. In reality, it's really not. But I guess it's just a proper thing for her.

It's an emotional thing for her. It's sort of locked away. Yeah. And Leah, do you guys enjoy life? Do you guys go on trips and go to concerts? You're not the kind that's like, oh my gosh, honey, we got to put everything towards the mortgage because there's that intensity that people feel.

And if she's like, whoa, chill, can we please just breathe and have fun with life? Like I didn't know like what the balance was for you guys. Yeah, there's definitely a balance involved. And I think that I could be more intense than she can with a lot of things. But outside of that, I've been trying to reaffirm to her that our monthly budget would not change and we would not necessarily start skipping out on doing things that we enjoy that we typically would want to do. I would just, you know, I was just kind of leading her in a way of anything extra that we had each month would go directly towards the mortgage instead of just, you know, getting thrown into a savings account where it's basically doing nothing for us. Right. For sure. Yeah. How much is your interest on your mortgage? It is five and a half percent. Okay. Yeah. I mean, I could see,

I don't know, George, like, I mean, cause she's got a baby on the way. She went through something pretty traumatic in her life, right? That has put a perspective in her mind that is different than those that probably haven't walked losing a parent that young, right? You can use that same logic to go, well, if anything could happen and we want true security, that would mean owing nobody anything. To where if I lost my job, we don't have to worry about a mortgage payment. So it would actually lower how much you need in the emergency fund. It would limit how much risk you have in your life. So I think if that's her angle,

that I think paying off the mortgage still would make sense. And I think showing her some of the math can help. She may not be math motivated to show her, you know, the interest and what you're paying an interest. And if we paid this down, here's what the balance would be.

Here's how much would be going toward the house every month instead of lenders. Yeah. And maybe you kind of baby step your way into this leo and maybe you're like hey let's just take let's get our mortgage to 290 tonight like what if we could just like throw 60 at it now we keep 50 in the high yield we keep 30 in our emergency funds and let's just see how we feel and then let's And then let's talk again in three months. Start on the shallow end of the pool.

Yeah, I mean, seriously, yeah. Because I mean, it is kind of a whiplash to, and now if you're both on the same page and you're both like, heck yeah, we're going to like throw all this at the mortgage and it's going to be amazing. That's one thing. But if there is that one spouse that is holding back,

then that's when I would say, why don't you just kind of baby step your way into it and just say, let's just have fun and go down to 290. And in the future, as you guys set a goal for when you're going to pay off this mortgage, let's say it's five years from now, that will help to go, hey, we're already budgeting in our budget that $2,000 extra is going to go toward the mortgage. And that way it's not this giant pile of money that's like a scary thing to let go of. Instead, it's just a normal part of your, you're just flexing that muscle. It's a rhythm of your budget, just like giving or anything else would be. So I think that will help for the future instead of just stacking it up and then going, what do we do with it? Instead, make a

plan, pre-decide to make a plan to pay it off early. So maybe the math will help. Maybe showing her that angle of, hey, I want us to have true security. I'm on your team. And the way I see that happening is us getting rid of this mortgage in our early 30s to have total freedom. To where if you want to stay home, you stay home. If something happens, we're going to be okay. We don't have bills. But in the meantime, when's the baby due? October of this year.

Okay. You can have extra money there covered for October, until October, and go, listen, we want to have the max out-of-pocket for insurance. We're going to have a sinking fund for home maintenance. But at the end of the day, there's really no emergency that's going to tank you guys if you have the right insurance in place and you have your emergency fund. And you're still enjoying life, too. Yeah, walk her through the worst-case scenarios and show her how you'd handle it.

That'll give her some peace and confidence. Thanks for the call. This is The Ramsey Show. This is The Ramsey Show. I'm George Campbell, joined by Rachel Cruz. As you're listening or watching, do us a quick favor. The show is free and it's also free to hit the share button, to hit the follow button, to subscribe, to leave a kind review,

and maybe share this show or clip with a friend who may not know us or may benefit from hearing some of these money principles and some of these calls. You never know how it could affect them and how it could affect their future, and we want to spread hope. So thank you all of you who have shared the show. You're our best marketing that we have. No billboard could do better. You guys, word of mouth, that's how we spread this message. Rachel, there was a recent article that gave me some hope because there's a lot of news that doesn't give me hope. And this one is from Business Insider. Here's the headline. Let's get your take. Millennials are suddenly rich. Saw wealth double after the pandemic. Wow. Is that, I'm assuming, housing?

It's based on statistics, and I assume, they don't go into it here, but here's what the article says. After years of killing off brands, languishing with student loans, and splurging on avocado toast instead of buying houses,

millennials might finally be emerging on top. Oh, look at us, George. I sent some sarcasm in there. But okay. A new report from the Center for American Progress a left-leaning think tank looked at how wealth changed for different age cohorts from 2019 to 2023.

They analyzed data from the Fed and they found good news that the wealth grew at historic clip from the end of 2019 to end of 2023. So a four year span, the average wealth of households under 40 grew by 49%. Oh, my gosh.

That's pretty wild. That is wild. And wealth gains were higher for just millennials who were 23 to 38 in 2019. Their wealth doubled from the end of 2019 to 2023. And so they go on to say, to be sure, a cohort entering their prime earning years is expected to see a big wealth gain as its members buy houses, begin to invest in earnest. Most surprising finding is that the gains came during and after the pandemic recession, a type of contraction that historically has meant far worse economic outcomes for young girls caught up in its wake.

Okay. Well, it doesn't say it in here, but I would have to assume. That those who are homeowners, that's who saw this. I mean, because what your home is worth today, we obviously all know because the housing market's still crazy. Yes. But I mean, for some people, it doubled, right? So saw wealth double.

I mean, I would say that's a big part. And we see stats a lot with millennials and Gen Z, for that matter, with lower credit card debt even. Like we see sometimes studies come out around that or avoiding personal loans. I mean, there's certain things that age groups maybe have seen from their parents and what they've done, and they're choosing something else. Maybe they're investing more because the market was good at certain points, right? We've had some good years. So if you were in the market investing, if you were in the housing market with home ownership, you're going to see your wealth grow. Your net

worth is going to grow, which is probably the best scoreboard for finances versus a credit score or something else. So I like this and I want to call out that this isn't just about millennials because we know there's broke boomers, there's wealthy boomers. There's broke Gen Zers, there's Gen Zers doing better than us.

And so there's nothing saying that there's a generational curse on any of these people, but it's all about the habits that you form and the earlier you form them the more wealth you're going to build that's how this works in the millennial age group we were interesting you know depending on i mean it's a span of years but you know when we graduated college and we're entering the workforce during the recession of you know that 07 08 09 i mean that that feel know, that was so bad. That's when we entered the workforce, was at that point. And if you were in a position to say, you know, even though everything was so low, we're going to start investing, you buy low. I mean, you look back, you know, 10, 15 years,

and it's amazing what can happen. Yeah, those that were in a financial position to do that, if they didn't have all this debt holding them back. That's right. That's right. And I thought about it for a while, what caused that you're like wait during and after pandemic that's where all this wealth happened think about it everyone's stuck at home so their spending went down their savings went up everyone sort of we saw that yes they looked in the financial mirror went had a no crap moment maybe i should put this free money away the government's giving stimulus checks the student loans are on pause you have a harder time spending money because you can't really go out to eat and go on vacations during the right the pandemic i think all of that on top of record low interest rates caused a lot of people to kind of expedite

their their financial journey in a beautiful way now there's a lot of people who didn't do anything smart during that time and they're still where they were yeah but there's a bunch of people that are in this group that did the right things they actually knocked out their student loans while the payment was yes yes that's right they weren't actually they were putting all their money on principal which was amazing they avoided going into debt and so all of that i think has caused a lot of this and i hope every generation benefited from some of those factors and it's not too late even in 2024 yes and it's good possible y'all i feel like always the headlines it's like it's a negative savings rate or yeah the worst credit

card debt we see or this generation is gonna be broke forever yeah i feel like we just we hear the doom and gloom so much so you guys i'm done with it so we're doing well done with doom done with gloom on your birthday that's right that feels right not on this show not on this show all right let's get to the phones jeff is in Spokane. What's happening, Jeff? Hi, guys. How are you doing? Hey, we're doing well. How can we help? Good. Good. Good. Thanks for having me on. So my question is about building credit for my son. He's 21 years old and he graduates college tomorrow, actually. So that's great. Wow. So fun. Yeah. Oh, wow. So fun.

Yeah. He's leaving college debt-free. He doesn't have any student loans. Hey, Jeff, are you on speakerphone by chance? You're echoing a little bit. Is this better? Yes. Thank you so much.

Yep. Okay. Sure, sure, sure, sure. Okay. He's leaving college debt-free. Doesn't have any credit cards. And he has a reliable car that's fully paid for, and he won't be needing a car anytime soon.

Wonderful. He's good there. Yeah, yeah, yeah. He has already accepted a job in Nashville at a hospital, and he'll be relocating in July. Wonderful. Yeah, yeah. The issue we're having is the apartment complexes that he's looked at,

that he's all considering, they want a positive credit history, along with an offer letter complexes that he's looked at, that he's all considering, they want a positive credit history, along with an offer letter showing that he's agreed upon salary. He doesn't have any credit history because he doesn't have any credit cards. So I'm hoping you guys have some tips on building positive credit quickly or any other suggestions on how to secure housing without a credit history. Absolutely, we do. Yeah, we're not the place to talk about positive credit history

jeff but we can tell you oh i understand that i understand that yes but we can tell you that it is still possible to rent an apartment uh without a credit score so it is so so the places that he may have looked may not right so depending on the complex they will have different rules and regulations but actually one of who used to be a ramsey personality anthony o'neill do you remember May have looked, may not, right? So depending on the complex, they will have different rules and regulations. But actually one of, who used to be a Ramsey personality, Anthony O'Neill. Do you remember this? He called.

Oh yeah. How many did he call? He called like 12 apartment complexes. And I've done this twice since then. Okay, okay. So I wanted to see for myself. Okay, what'd you find, George? And let me tell you, Jeff, a lot of good news. I did this on the Fine Print, my podcast.

I did this on my YouTube channel recently. I put the transcript of these conversations in my book, Breaking Free from Broke. And so here's the good news. The big takeaway is that you do need to be employed. So does he have the offer letter? Yes, he does. Great. He'll need to pass a background check.

Is he a criminal? Not even close, no. Great. Does he have enough to potentially cover a slightly higher deposit that he would get back when he moves out yes he's already has a signing bonus wonderful those are literally all the factors that matter and i tell you this as a person who has rented multiple apartments without a credit score that they truly they say did you call that said no how many said yes do you remember i only think one and that was in new york city but it was more about them requiring like five or

six times the income because i think anthony called nashville once and now i will be honest jeff i think this was a few years ago yeah but i think he called 12 to 15 and i think locally yes and i want to say it was like eight of them said sure and he was denied sometimes truthfully the person on the phone they don't even know they don't have control they don't know the back-end software and system and all of that but jeff what they're looking for is a bad credit score so when they say well we have to run a credit check what they're looking for is delinquencies people who didn't pay their bills who have a bad credit score having no credit score all they're going to say is yeah you might

we might require the first month up front or instead of a $500 deposit it's going to be a $1,000 deposit yeah and I would talk to the manager of the apartment complex because if you just call the front desk they're going to just probably just give you the script that they were told and I've also called just straight up landlords so people that just you know they own a house they're doing a rental I called them and they say well are you employed will you pass a background check yep and they And they went, oh, okay. Doesn't matter. So I think it's all in our heads. It's not as doom and gloom as you probably think. Yeah. Don't go sign him up for a credit card because he needs to build credit.

He's going to be just fine. In fact, he's doing so much better than his peers and a lot of that is thanks to you. You raised a great kid. All right. Congratulations. Appreciate y'all. Yeah. I'm going to send you a copy of my book, Breaking Free from Broke, that'll outline a lot of this. A grad gift. A little grad gift for him. He's already done a great job, so this will just be a reminder that he's on the right path. So hang on the line,

and we'll send it to him. It's called Breaking Free from Broke, and I know he'll enjoy it. It's fun, witty, and very Gen Z millennial. And very George. And very George. We appreciate that about you, George. For better and for worse. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Rachel Cruz. As you've been listening to the show, you've probably heard us mention EveryDollar. That is our world-class budgeting app. It's the best way to make the most of your money, creating and sticking to a monthly budget. EveryDollar helps you do that. You can plan spending, track your expenses, use sinking funds, save for your goals. And it's an easy to use app that fits into your busy lifestyle. Both spouses can be logged into the same budget. And it really is just an intentional spending plan. You keep a pulse on what's actually happening with your money

and it helps people win regardless of where they're at in their financial journey. So you can download EveryDollar for free in the App Store or on Google Play today. Be sure to check that out, especially as we begin a new month. My wife and I, we did our budget. It was May 1st and we were a little late because we already started the month. We saved it before the month begins. Yes. But you know, we have a baby. He's a little crazy. Yeah, a little grace. And it was wonderful. We both just talked through it. Hey, what's coming up this month? What do have how much you know blow money you're gonna need this month oh yeah she needs to buy some new dresses yada yada and i know you posted that may is an expensive month it's a lot happening expensive month life blossoms in may i mean i don't know what it is and i think

it's i don't know age of kids but i mean it's everything there's so many fees and gifts that you give in may you know into the school year i mean there's all of that people are venmo with can you venmo this or venmo that you know for this person or that person and there's a lot summer camps you know sometimes some of the deposits are due in may um yeah it's a very expensive month and time wise george there's a lot of money there's a lot two finite resources so you better make the most of the money at least with every dollar and then then that lowers the stress because like here's what we planned you know a teacher's gifts i have that in the line item this month and i went today actually and did some shopping online for them which was so fun because i do

love giving them gifts and i'm like great and we know i know how much i have to spend and on each teacher and it makes the process more enjoyable. I don't know. I love it all. Well, instead of being this last minute thing we didn't budget for, we don't have the money for it. When you budget for it, it just gives you the freedom and permission. So I love that. And if you're not doing a budget, what are you doing? You're going to put it on a credit card because you didn't think about it. And one more reason to not have a card and one more reason to do a budget. Love it. Brianna's in Chicago up next.

What's going on, Brianna? Hi. Thanks for taking my call, George and Rachel. Happy birthday, George. Oh, thank you. Happy belated birthday, Rachel. Oh, thanks. She really cares.

I was back a few weeks ago. Awesome. So good. So my question, I've been using the baby steps for a long time, and I have no real estate, and I just haven't been in a position to be able to buy anything. So I feel like I'm not really using the baby steps, but I'm trying to do everything else. So I guess my question is, what should I do? I'm happy to share.

Well, when you say you're not using the baby steps, you're doing all of the steps, but you're just skipping 3B, which is safe for a home down payment. Yeah, yeah. Well, I know, but I have a lot of cash and I have retirement funds and I have a self-managed brokerage account and emergency fund and no debt. And I'm 47, so I'm getting older and older and older. And then I know, like Dave Ramsey says, that real estate's an inflation hedge. So it's absolutely one right now. And you're in the Chicago area?

Yeah. Ish? So I'm not, yes. I'm not in a place where I can buy a place easily. I mean, the only thing I know to do is just try to stack up cash and watch everything get more expensive and watch my cash get less valuable. Well, we'll try to help you set a more concrete goal instead of just hope and pile up cash. So how much money do you have that is in non-retirement? Like count up the brokerage and count up everything that's not your emergency fund.

How much could you liquidate? $190. Okay. And you're saying $190 is not enough to put down on a property for you to live in? Because it feels like enough for me, even if it was a condo or townhome in your area well i'm in a weird position too because i i um i've worked very hard i have a pension and uh i'm i'm starting another a new career and i have no kids no spouse i froze my eggs so so what does this have to do with your home ownership journey?

I'm working very hard. I don't know where I'm going to be in the next couple of years. I mean, I kind of know. Has your career been in this area? Is it an in-office job? No, it's a very, I mean, didn't you write the book about doing what you love or something? Ken Coleman. That's Ken Coleman.

From Paycheck to Purpose. Yes, so I'm living purpose now. And so I've worked my butt off to be able to live purposeful. Okay, but you're saying, hey, I don't know where I'll end up. I might move in the foreseeable future. Are we talking two years, three years, or is this like seven years? It's very industry, whatever the industry wants is where i'll go um so i i'm saying probably i'll be i'll probably be in this area for the next couple of years um but i don't know about three to five to seven i'm not really sure okay well if it's at

least three years i think it's a wise thing to buy and you don't have to go get a giant single family home just because you can get a condo or townhome and that'll still be a great hedge it'll still appreciate in value um and i think it's a wise thing to do instead of having you know to have a fixed expense instead of you know paying rent every month especially you've done such a great job all across the board yeah yeah and rent's going to continue to go up as well so you you can either choose to pay yourself, you know, in a way you're, you know, to build equity or you're paying someone else. And again, renting for a season is a really smart idea if you don't have the money. But you're in a great position to have the money and to build some equity and all of that. And I know, you know,

even we have some friends, a couple of families that we know that have moved from Chicago and it's, and almost they're saying it's not even as much as the house price anymore. It's the taxes, how expensive property taxes there. It's wild. So yeah, you do want to be wise with it and know, but yeah, I mean, I would be putting something into an asset like that, Brianna. I mean, I think it's, I think it's a great place to put your money. And so the parameters Brianna to help you kind of just go, okay, I'm ready or I'm not ready is can I do this on a 15 year fixed rate mortgage where it's 25% of my take-home pay, which means after taxes but before other deductions like 15% investing, your healthcare premium. So if you do that math, how much do you make a year gross?

Oh, well, it's weird to say gross because I could just say I bring home eight a month. So that's after you invest and pay healthcare. Well, it's weird to say gross because it's, I mean, I could just say I bring home eight a month. So that's after you invest and pay health care. Well, that's net with that before investing. Before, because you're not, you don't have an employer investment plan? Well, I already have about 700 in retirement. Okay. Let's go with the eight number and then go, okay, we want 25% of that going toward mortgage.

That means you want to spend about two grand and that includes principal, interest, taxes, insurance. So now you have an actual ballpark of what kind of home you can afford. And that might be, okay, I can afford a $400,000 townhome in this area based on putting 190 down and taking the rest out in a mortgage. And that's what this payment would end up being. And then you go, all right, let's shop. I'm going to get in touch with a Ramsey-trusted real estate agent and start shopping the market and find something in my budget. Okay. But I don't want you to sit on the sidelines for years

because you don't have enough to pay cash and the market's a moving target. Buy it when you're ready under those parameters. Okay. And if that means, you know, I'm going to move a little further out, I'm going to do a condo instead of single family, it's okay to adjust expectations and, you know, it's not settling. You're just going, here's the reality of what I can afford. Right. So I hope that helps with just putting some bones on it. It feels like it's been a lot

of emotion and here's what I think I should be doing and I'm not doing enough. Well, I was in the great housing crisis of 2008 and I was a victim of that. You've seen some things. That's when I found Dave Ramsey. And so, I mean, it took me four years to sell a condo at half the price. So I went through that. Totally. I'm very, very traumatized about buying a place.

Yeah, totally. And rightfully so. You've been burned by it, right? But all the indicators that we can see is that it's just going to continue to slowly go up. What's your rent right now? Sorry? What's your rent right now? Oh, it's 28.

Okay. So you're already paying $2,800. So it's not like, you know, switching over to a mortgage with your income and finding something even cheaper with a mortgage I think is very reasonable. Okay. And it's also not going to go up next year. Stick to a 15-year fixed rate conventional.

Okay. So I hope that helps and gives you some hope. I'm going to send you a copy of Dave's new quick read called Real Estate the Ramsey Way. I hope it gives you some confidence and peace as you enter this home ownership process. And I'll also gift you my new homebuyers course that's inside of Ramsey Plus. I'll gift you a Ramsey Plus membership to go watch that as well. So hang on the line to Kelly will pick up. We'll gift you both of those. Hope it helps you along the journey. This is the Ramsey Show. Welcome back to The Ramsey Show, our scripture of the day, Luke 14, 28.

Suppose one of you wants to build a tower. Won't you first sit down and estimate the cost to see if you have enough money to complete it? Love that one. Look at that. Luke talking about budgeting. Look at that. To know if you have the money. Before you start something.

Ahead of his time, that Luke. He was a doctor, right? Yeah, I think that's what they said. Very process numbers focused. I like that guy. Not a disciple. Oh, is this your fun fact? Right? Not a disciple.

I'm just all the guys. Matthew, Mark, Luke. Yeah, John. Yeah. All right. There's a biblical fact. Take me back to Awana. I got some learning to do, Rachel.

All right. The quote of the day comes from Graham Norton. A good rule to remember for life is that when it comes to plastic surgery and sushi, never be attracted by a bargain. I've always told Rachel that. And, you know, she's a big fan of both. And it's hard. You get tempted by the price. I'm kidding.

She hates sushi. She hates sushi. Oh, my gosh. I'm having fun. It's my She hates sushi. Oh my gosh. I'm having fun. It's my birthday. Am I allowed to make a joke? Unbelievable. It's my American right.

At my expense. It's my First Amendment right, Rachel. Give me a facelift and a spicy tuna and call it a day. Here's a hundred bucks. Go get you something nice. Oh my God. All right. Let's get to the phones.

Todd is in Baltimore. God, how is it going? God, solve us from this crotchety old man. Man. Todd can't help. Todd, can you help us? Can we help you at least? Can you help us, Todd?

I hope you can. So my 20-year-old son is under contract to purchase a house for $45,000. And the house is probably worth about twice that much, which is why he's trying to buy it. But anyway, he's a part-time student, part-time working. He probably only brings in about $1,000 a month. I'm thinking I'd have to co-sign on the mortgage. But I'm wondering if I even need to do that because my thought is,

what if I take money out of my line of credit, we go to settlement with cash, we avoid the whole mortgage process and the costs with that, and then he gets his deed or whatever, and then he just turns around and gets his own line of credit and then pays me back. This sounds like two broke people just moving money around. If you both need a line of credit, this might not be a good move.

He may not be in a position to buy a house, even if it is $45,000. I'm curious, why are they selling at half price? Oh, it's a friend of ours and they're trying to help him get on his feet. Yeah, he's broke. He's a college student. Part-time student.

Right, right. So they're willing to basically gift him $45,000. Yeah. What kind of home is this, by the way? We'd be doing a juggling... Is this...

Yeah, we'd be doing a juggling act for two years until he can get himself a job that is a more steady income so he can actually be paying things down. And then he's going to get into this house and things are going to start breaking. They're going to have to replace things. Yeah, I'm guessing this house is not like a wonderful house in perfect condition. No, it's ready to

go there he'd have to where do you guys live i'm just curious for an eighty thousand dollar house i mean i've heard of like a hundred and eighty is this a manufactured home but i'm like no no this is a row home in southwest baltimore i'm just shocked that there is any quality real estate at that price in the northeast it worries me that there could be something why are they selling this that's kind of one of the questions I have oh well it's a friend of mine who she's got several homes um a handful of homes and so she was going to just put it on the market and sell it. Yeah, Todd, I would say... So she went to my son. Even though it's a deal, he can't afford it. Yeah, he can't afford it. Now, Todd, if you had $45,000 and you were like,

you know what? Yeah, I'm going to buy this and I'm going to let my son rent it from me. But then you're a lender and a landlord to your own son. That's awkward. No, not a lender. I'm just saying if Todd said, hey, there's a house... Oh, if he had the cash.

Yeah, if he had the money and said, oh yeah, $45,000, I'll buy the house. landlord to your own son that's not a lender i'm just saying if todd said hey there's a house yeah if he had the money and said oh yeah 45 000 bucks i'll buy the house son for two years you can rent it maybe i'll turn around and sell it to you when you're in a position or maybe not you know whatever like but you both don't have 45 000 do you in cash no, so you can't afford the house. Do you have any debt, Todd, personally? No. The only debt I have is the line of credit on my house that, you know, I've got a little bit drawn down on it. What's the balance on that?

So it's an $80,000. Yeah, let me see. The available credit right now is $42,000. And how much have you used of that? Is this like a home equity loan or are you saying a HELOC, a home equity line of credit? Yeah, it's a home equity line of credit. So the credit limit is $80,000 and my available credit is around $42,000 right now. So that's the only debt. So how much do you owe, $42,000? No, I owe about 37. Okay.

Yeah, I would pay the C-Lock off and then get rid of it. It is not a blessing to you. And going backwards further by taking out more of the available credit, it's just like a credit card attached to your house. It's putting your home at risk. It's going to put you in a bad financial spot. So I think we pass on this. We say thank you to the friends.

If they want to rent it to him, let's do that for a while until he can afford to buy it. Yeah, with an option to buy. A purchase agreement. Yeah, with a purchase agreement. I mean, they could totally do that. It sounds like they don't need this money anyways

if they're willing to forfeit $45,000. So rent it to him for 500 bucks a month until he gets on his feet and then one day he'll be in a spot to buy it. And if he wants to buy it or he lives in it for two years and he's like, this is a crappy house. Honestly, Todd, at 20,

I didn't know what the heck I wanted in life. And so the chances of him wanting to be a long-term homeowner in the spot, I don't think is going to be the case. He's figuring out his life. His brain is still developing. Truly. I think your brain's fully developed at 24.

There's a lot to take on at 20 years old as a part-time student, to take on the task of home ownership. And so for those reasons, I'm out on this. You sound like Shark Tank. That was my goal. And for those reasons, I'm out. It's called a reference, Rachel, when you reference something else that exists. Right. But Todd, does that help you at all? Yeah. Yeah. Well, okay. now he he signed a contract with the person already i mean it's a friend yeah yeah he yeah i would see if the friend is is kind enough if they're real a friend to just cut it up and go listen this was a mistake you guys are so kind but we need to back out of this it's not going to be financially viable right now. It's an okay thing to say. Yeah. But I would not just go through this

and put yourself in a financial hole where you become the lender and the landlord. Because if something goes wrong, it's on you. And at the end of the day, you're going to expect him to buy it. And what if he doesn't want to? He turns 22 and then you're stuck with it and still the debt and everything and you're going to have to sell it. And if he doesn't want to he turns 22 and then you're stuck with it and

still the debt and everything and you're gonna have to sell it and it's just yeah my friends have feelings about you buying it instead of him i don't know this whole thing basically it just makes my stomach turn in a weird way but that's our take yep it's your life you live it should we take one rachel it's dicey uh go real quick all All right. John and Waco, can you get right to it? We're up against the clock. Hey, how's it going? Good. What's the question today?

Good question. I have a pretty large car note, and I'm a traveling employee with a company based out of Wisconsin. Just kind of focused on setting my life up fresh out of college. Should I be throwing all my money at this car loan, or should I be putting more towards savings? It's kind of special circumstances where I'm at. Why is it special? I move around every couple of years.

I'm still trying to have a home base in Wisconsin, but I still need to support myself on the road. Okay. So what's left on the car loan? $60,000. Holy crap. What do you make? $60,000. Holy crap. What do you make? $170 a year.

That gives me a little bit more peace. Okay. Why did you have to buy a $60,000 car for work that you're going to just thrash? Wanted something reliable to take across the country and tow stuff around. I guarantee you my 09 Honda Civic would have outrun that vehicle. That thing will last 30 years and it cost me six grand. So I don't buy that. The problem with you using this for business, you're going to depreciate that vehicle so fast.

You're literally throwing away hundreds of dollars out the window every day as you drive it. Understood. So I would either sell it and get something cheaper or pay this off as aggressively as possible. Do you have $1,000 in the bank? What's that? I'm sorry. Do you have $1,000 in the bank?

Oh, yeah. Okay. Outside of that, I'm attacking this vehicle. Is that all you're dead? Yeah, that's all I'm dead. I have no student loans, no personal loans, no credit cards. Good for you. That's great. I would sell it.

John, you don't need a $60,000 car. You don't need a $60,000 car. I'd sell it. You'll be lucky to sell it for $40,000 at this point, depending on how many miles you put on it. So that's the worst part about buying these brand new cars and then wearing them down instantly. So I hope that helps. A lot of joy on your birthday, George. That's how we do it right here.

Happy birthday. Thank you, Rachel. Thanks to the booth. Thanks to all of you, America. It's been a great birthday, Rachel. This is The Ramsey Show. ...