The Ramsey Show - App - It’s Never Too Late To Change Your Life… Start TODAY

Episode Date: August 16, 2024

from the Ramsey Network it's the Ramsey Show I'm Jade Warshaw next to me is George Camel and we help people build wealth do work that they love and create amazing relationships and that's what we're going to do this hour. We're taking your calls live. If you want to call in, the number is 888-825-5225, and we'll get you on. All right, George, let's get into this. You ready? I'm so ready.

I'm very caffeinated. I will warn you. All right, I believe you. Straight to the phone lines where we've got Greg, who's in Nashville, Tennessee. What's going on, Greg? Hey, I'm kind of in a pickle right now. So I've got a baby on the way, and I'm about $113,000 in debt. And I am kind of stuck right now, and I kind of need your expertise.

When's the baby get here? It'll be this December. Oh, wow. Okay, right around the riverbed. I assume this is your first? When's the baby get here? It'll be this December. Oh, wow. Okay. Right around the, just around the riverbed. I assume this is your first? That's correct. Okay.

The fear in your voice tells me, you're like, oh boy. Okay. So you have $113,000 in debt. What is your household income? So I owe about $39,000 left on the house. It's a five-bedroom, three-bath house. The truck, I owe $35,000 left on it. The Razor, I owe $24,000. What's a Razor? It's a side-by-side. Oh, okay. Well, my next question was going to be, what's a side-by-side. Oh, okay. Well, my next question was going to be, what's a side-by-side?

But you guys seem to know, so let's keep rolling. Well, it's one of these, you know, little four-wheeler, little kind of recreational vehicles. Okay, keep going. What else? And then just $10,000 and just personal loans. But when I was thinking about taking all the truck, the Razor, and the personal loans, combining them together, and just pulling out from the house to pay all of them off.

No. Let's run it back. I didn't know. Wait, Greg, wait, Greg. I don't know what kind of Greg math you're trying to pull here, but there's a different way to do this. Why not just sell the Razor, sell the truck? Is it worth more than 35 uh well how but i don't i would have to take um well how do i how would i be able to sell the

truck if i don't have the title to it though why don't you have the finance company yeah well yeah once you sell it you can do this all in one one swoop you go to the bank where that holds the the title the lender and you get the transaction done in one one swoop you go to the bank where that holds the the title the lender and you get the transaction done there they write the check you immediately pay off the loan they get the title do you know what the truck is worth greg um if you were to sell it um i'm not i don't know it's like a 2014 f-350 super duty lariat it's a work truck it's it's not it's probably probably around that's a real nice work. It's a work truck. It's probably around the same price. That's a real nice work truck.

When I hear work truck, I think this thing can be a piece of crap as long as it gets the job done. You're driving a pavement princess. Yeah, I guess so. That's a sweet truck. So here's the deal. You got homework to do. Find out how much the truck is worth.

Do you have anything in savings right now? I've probably got about $6,000 maybe in savings. Perfect. So if you're underwater slightly, let's say the truck's worth $31,000, you owe $35,000, you have the money to cover the difference. Okay. What's the payment on the truck? So they've got me at 19% on... What's the payment on the truck, Greg? $666.

And they didn't get you. You signed the dotted line knowing full well it was a 19% interest rate. Let's talk about the Razor. Do you have any idea what that might be worth if you were to sell it? I'm definitely probably going to get a hit on it. I bought it right before I found out that we were having one. So it was $20,000. I bought it at like $23,000, but it's a 2023.

So I'm probably going to take a hit on it. It's a four-seater. Well, let's do the homework on that too. Like George said, find out about the truck, the truck, I'm pretty sure you're going to sell regardless. Um, even if you're upside down, okay, that you got to get out of that truck. Same thing with the razor. Here's the thing though. Um, I want to run back the whole scenario scenario here, the 113,000,

let's not include the house in that for now. I don't know if you were working hard to pay that off before, but for right now, put a pin in that because that's further along the lines, further down the baby steps. So we don't need to even worry about that. The good news, and I want you to hear this, the good news is the majority of the debt that you have, it's as simple as you selling it off. And that is a blessing in your situation. And then all you have to do is come back in and worry about this $10,000 personal loan. Here's the deal. You've got a baby coming.

And typically when we talk about baby step two and babies coming, we say, hey, put a pause on and let's get the baby here. Let's stack up as much money as you can. Let the baby come. Let everybody be healthy. And then when you feel like kind of that storm is over, then you can push play on everything that George and I just said. But right now you've got $6,000 saved right now. I want you to stack up as much money as you can get your hands on when, by the time, you know, January 30th comes, you're probably going to be ready to push play on this plan here to get rid of the truck, get rid of the

razor. And to George's point, if you look it up and you find out that you're upside down, and it's more than the money you have saved, then you're marching down to the credit union and you're getting a loan for the difference. And that way you have all the money that you need to give the bank for this vehicle. And so that's how that works. So don't take out for the house at all to pay them off. Don't dip into your equity at all. That's not doing anything.

You're just moving debt around at that point. Are you able to make the payments every month or are you behind? No, I've never been late to any payments. What's your household income? In total, because I work three jobs, I can pull in probably about a hundred, probably about a hundred thousand. Wonderful. A year. And is your wife working currently? She is. She does work. She probably pulls in, I would say, about maybe $35,000 or so a year, $35,000, $40,000. Tell us per month. What do your checks look like every month when you bring them in?

In total, I can pull in about $6,000 and her, I would say, probably about $3,000 or $25,000. Are you investing at all right now? I was going to make the house a rental house at first. Are you investing into a 401k or anything like that? No, I don't have any of that set up. Do you want to know what I think happened, Greg? I think that you guys are doing all right. How old are you?

I'm 23. Yeah, I think that you guys are doing all right how old are you um i'm 23 yeah i think that you guys are doing all right for 23 you're making over a hundred thousand dollars a year and you're like ding ding i can drive the truck that i want i can get this little side by side that i want and you kind of got caught up in the fact that you're actually financially like the income you're bringing in you're doing really really well it's just you didn't know better than to make these decisions but now you do know better you see that they're a drain on all that money that you're bringing in, you're doing really, really well. It's just you didn't know better than to make these decisions. But now you do know better. You see that they're a drain on all that money that you're working so hard to pull in. And I hope that you see, you know, I hope this drills in the lesson from here on forward. We don't go into debt for the things we want. If

we want it, we save up, we pay cash for it because it's not worth all this, is it? No, no, not at all it's stressful i know having a baby you're supposed to feel happy and have stars in your eyes and instead you're feeling the stress of a payment of a side by side so lesson learned yeah yeah but that baby's going to be worth all the sacrifice when you bring it into a house with no debt with a great financial future we're looking out for you we want to give you a little gift it's going to be every dollar premium. It's going to help you along this journey,

make a plan for all of your income, every single dollar. So hang on the line. We'll gift that to you as you have the baby on the way. Congratulations, guys. This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down. And if

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experience a medical event. So listen, y'all, there's no better way to take care of health care costs. CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget at chministries.org slash budget. This is The Ramsey Show on The Ramsey Network. I'm Jade Warshaw, joined by George Camel, bestselling author. George, way to go. Thank you. You're welcome. You know, I like to give props where props are due. Hey, selling a house the Ramsey way makes home ownership a blessing instead of a burden. I can attest to that. The Ramsey Trusted Program is the only way that you're going to find an agent that you trust that's going to keep you on track with what we teach here at Ramsey. You can get the best

offer on your house or find the right house for you. And here's the thing. This is how this whole thing works. If you're wondering, Jade, why do I need to do this? The point is there's a lot of teachings here. And if you've been listening to us for a long time or a little while, if you're interested in the way we teach things, you want your real estate agent to understand that. Otherwise, they'll be leading you off track. So you want a Ramsey Trusted Pro. What happens is we're going to send you some of the top agents that are in your area. These are people that we trust, but you get to review them. You get to interview them and you get to decide which one ultimately that you want to work with. So you still have all the power here. Ramsey Trusted Agents, they have years and years of experience. They're going to help you make

wise decisions. And I told you before, I can attest to that. I have a Ramsey Trusted Agent. She's great. Mandy Linfesty. She helped us buy our house and she helped us do it the Ramsey way. That's what this is all about. So when it comes to pricing, marketing your house or choosing the right offer, you need a Ramsey trusted real estate agent. Did I mention guys that it is for free? It's a free service. You can go to ramseysolutions.com slash agent. Love it. Let's go straight to the phone lines. Jacob is in Detroit, Michigan. How you doing, Jacob? I'm doing good.

Yourself? I'm great. How can we help? So I'm been thinking about financing a role. I'm 20. I'm employed, working full-time jobs, plus overtime. Basically, I'm single, so I'm debating on doing it. Interesting.

Why wouldn't you just pay for it? Why would you put on payments? I just don't want to put myself in a bad spot overall. I have a car that I pay for as well and an apartment that I pay for monthly as well. You have a car payment,

you're saying? Yep. So you want to add another payment because that's going to help you win financially? yeah financially and kind of help like lose my credit so the guy i don't know if you heard this the the last hour a guy called in his name was greg and he was really about to come unglued because he felt like he was doing well in life he was a young cat just like you and he started with one purchase and then he went to another purchase.

And before you knew it, he had over $100,000 in debt, and he was calling us ready to tear his hair out. And so what you're about to embark on feels like the beginning of that same series of events. You hear what I'm saying? Yeah. Go ahead, George. I'm just wondering, what caused you to go,

I need a $7,000 watch that I can't afford? Was it friends? Was it you see Instagram? Are you just into watches? Yeah, I'm into watches. Okay, what's the most expensive watch you own right now? Probably my newest Apple watch. Okay, same here, bro.

Same here. That's the most expensive watch I'm willing to pay for right now. Um, how much is this Rolex? Uh, I was looking at one that's roughly around $8,900. Okay. Here's the deal. You are not in a place financially to buy this watch. Even if you had the money, I would tell you not to do this because you have other debt. I assume you have financial goals in life. Do you want to own a

home one day? Yes. Okay. I would rather see that as a priority versus the flex of a Rolex. Are you trying to impress someone? No, not really. I just want to own it for myself. It's my goal one day, like my dream to own one. Well, here's the thing. I love that goal. I just wanted to own it for myself. It's my goal one day, like my dream to own one. Well, here's the thing. I love that goal. I love that there's something that you're into. You like watches. There are certain things that I really like. Jade's into sneakers. I'm into sneakers. But there is part of this, I don't know if you've heard it before,

but we say it all the time. We say that you live like no one else, so later you can live like no one else. And the first live like no one else is all about doing the things in order to set yourself up financially. So in your case, it would be paying off this car debt and deciding, hey, I'm not going to go into debt again. And then from there, it's making all those choices so that at some point it might be when you're 25, you can turn around and buy this Rolex watch in cash. How much money are you making at this point? 40,000 a year.

Say it again. 40,000 a year. Say it again? $40,000 a year, I would say. Okay, $40,000 a year. You're just getting started. And I think that that's the thing that I want you to take away from this call. You're just getting started. The truth is, like George said, you don't make enough to buy this watch. You really don't.

It's too much of your world right now while you're carrying debt. Speak directly on your phone, Jacob. I want to make sure that we can hear you clearly. I want to know how much total debt you have right now. I'd say like $17,000. My card. It's a brand new card. I mean, to do this, I just looked at the numbers.

With tax, you're going to be spending 25% of your yearly income. You make $40,000 a year. This thing's going to cost you $10,000 when it's all said and done. That doesn't make any sense, does it? No, not really. As long as you understand that

going from this call, I've done my job. The goal, Jacob, when I was 20, I get it. I wanted just nice stuff. I thought I deserved it because I did all the things

that my parents told me to do and society told me to do. And I went, all right, I'm an adult now. I got a real bona fide job. I'm going to get me some stuff. I thought I deserved it because I did all the things that my parents told me to do and society told me to do. And I went, all right, I'm an adult now. I got a real bona fide job. I'm going to get me some stuff. The problem is when you make decisions like this, where you finance things, the stuff has you. And so you got to decide, do I want to look wealthy or do I want to be wealthy? And eventually life catches up where you just want to actually be wealthy and have freedom and margin and options. And when you want to look wealthy, you tend to just finance your life away until you have $1,200 in payments, $1,500 in payments on crap going down in value. And so if you can learn this lesson now, Jacob, you're going to be so wealthy you can have multiple Rolexes one day. But that day has not come.

We got to get our financial priorities in order, and that's getting out of debt. We need an emergency fund with three to six months expenses. We need a down payment. That's going to set you up for success. Yeah. Isn't it funny, George, the things that I wanted to buy when I was in debt, when I was around his age, 20, 21, 22, 23, the things that I thought, oh God, I got to have that. You know, it's clothes and it's the newest thing. It's the newest Apple watch, the newest iPhone, the newest whatever. At this stage in my life, it's so funny.

Now that I'm out of debt, I can actually afford many of the things that I want to get. I just don't care. It's like, it just evaporates. This is the superpower, Jacob. If you can stop caring

what other people think, you will win financially. That is the greatest superpower to just stop the comparisons. And I know you're saying this is for me. I want it for me. But guess what? The watch isn't just going to sit. It's going stop the comparisons and i know you're saying this is for me i want it for me but guess what the watch isn't just gonna sit it's gonna be on your wrist while you're out and everyone's go oh bro you're doing well for yourself they don't know

that you got bills to pay you have a car payment a watch payment adding stress to your life and we found that debt does not is not a blessing in anyone's life and it's not worth it to finance a car a watch a four by four razor a polaris whatever it is it's just not worth it yeah it's interesting again going back to that live like no one else so later you can live like no one else i think sometimes and it can be i'm not saying it can't be this but sometimes people walk the steps the baby steps and it's like when i'm done with the baby steps i'll be able to buy the rolex and i'll be able to buy like all these big major things and i'm not saying you can't because like you said i like sneakers and sneakers can be expensive but do you want to know george the things that i love the most guessing it's not sneakers it's not sneakers i love going to the

grocery store and buying expensive like a juice that's kind of like ridiculously expensive i that's my thing i want to load up and i don't even have to think about it whereas before i would have been like i'm never gonna pay 4.99 for that juice and i'm like give me the 4.99 juice give me three of them you ever see give me eight of them like at costco and the cart is like overflowing i'm like dang they're doing well that's my new like you're doing well if you can fill up a card at costco fill up a card at costco you feel you give zero about it you go have a hot dog and it's it's that on that yeah but when you're young i get it like nice stuff is more important to you and as you get older it becomes less and less important because number one you find better you put better people around you who don't care about that stuff but i think you start to have priorities you got responsibilities and yeah you know things

matter less and you want more experiences and meaning and, you know. I think it's too, you come out of your parents' house, right? It's like at that age, you're coming out of college, coming out of your parents' house and you see all the things that they have. And for you, that equals success. Like, I know I felt that it's like, okay, they have a house. They have two decent cars.

They, you know, seemingly they have a house full of furniture. That's nice, you know? And it's like when you strike out on your own, you're trying to get that so fast. Yeah. It took him 25 years to get there, 35 years to get there. And you go, well, I want to shortcut that. Yeah. There are no shortcuts to wealth or meaning or happiness or joy, including the Rolex. I'm not mad at Rolex. It's a beautiful watch. And I hope Jacob gets one one day, but I hope he does it with cash after he's accomplished more important financial goals. That's true. That is so true. Yes, that's right. It's all about temporary sacrifice,

short-term sacrifice for a long-term gain. That's what we're teaching here. This is The Ramsey Show. This is The Ramsey Show. I'm Jade Warshaw. Next to me is George Camel. Hey, if you enjoy this show, we're so glad that you're here, first off. We're so glad that you are listeners. Technically, y'all are the reason that me and George even have employment here. So there you have it.

Because if it wasn't for you, there'd be no show, George. It's all about the people. It's very bleak when you look at it that way, isn't it? Yeah, it's kind of scary. So thank you all for listening and calling in we need you keep listening and hey while you're listening do us a favor and share the show um if you can share it with the people that are in your life you can do that on whatever platform you're on um you could email a show you could text a show that's your favorite i don't it, I don't care. Facts, wow, that's different. The old school. But whatever platform you're on, do be sure to like and subscribe.

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Thank you so much. We'll spare you the telethon if you do it this way. Yes. Remember those old PBS telethons? Oh, yeah. How could I forget? Maybe we should try it one day. I don't know.

I'm open to it. No, I don't want to do that. They had all the phones that they could answer. The booth is saying no, thank you. No telethon. Okay, let's go to Jack. He's in Boise, Idaho. What's going on, Jack?

Hi, Jade. Hi, George. Thank you for having me today. You bet. How can we help? So about a year ago, my wife and I finished the baby steps, paid off everything. I'm 60. She's 60 as well. We're worth about six and a half million dollars. Yeah, yeah. We're crazy blessed. And then five million of that is in paid for income producing real estate. We make about $200,000 a year net. That's for everything. Nice. Just from real estate. Yeah, and we both work some. Yeah, so money is not an issue,

except kind of in our relationship. While we were paying this off i we gave each of each of ourselves a 50 a month budget you know spending money just for fun stuff going out coffee whatever um very tight now that it's done i've got her to loosen that up on my side to a hundred dollars a month oh whoa living on the edge jack i feel this is very tight. Like, no one can breathe in this budget. Your budget's got skinny jeans on it, man. You could copy, like, twice, maybe an outtie with a friend. Jack, Jack, Jack, Jack, why are you not loosening these purse strings? Looser.

Because I'm getting tremendous pushback. Like, tremendous pushback. And, like, my wife still thinks that I'm overspending at $100. She's like, I don't know why you're not happy with $50. And how do we get past this? How do we get from the first no one else to the second no one else? That is a big shift to make. I think I saw her episode of Extreme Cheapskates.

I think she was on that show. Is she that person who's just super frugal and this is how we got here and I like it this way? She is. And now we're banking money for no reason. Yeah. What are you doing with all the extra money? Because you're spending none of it. We're just investing it. It's just going into- For what? And for who? Temporarily. And then that's my question. I don't know.

You've got to give this money a goal. Let's spend some money. Do you take any trips? Or is this just daily spending? She doesn't like to do a lot. We travel a lot. We do a lot of stuff together. But it's kind of like, it's my personal.

It's that personal. It's like, hey, I want to go out for coffee. I want to go out and grab a bite with friends. It's that kind of stuff. Wow. It's the personal, it's that personal. It's like, hey, I want to go out for coffee. I want to go out and grab a bite with friends. It's that kind of stuff. Wow. It's the singular stuff. If you could have it your way, what would that line item be on the budget for Jack? Oh, I mean, it really, four or five hundred bucks.

I mean, it's not, I'm not looking for thousands. I'm just looking for a little more free. So if you said to your wife today, I want to spend $500 a month for fun stuff, what would she say? She would look at me, she couldn't imagine why. Now, okay. So I think this is the conversation that needs to be had. Because what I want to first call out is, I think there's, it is very normal for there to be things that, I mean, my husband is sitting out in the audience. There's things that Sam would spend money on that I'm like, help me understand why you would ever even be interested to spend even a quarter on that. And then there's things that I would buy that he could never

understand why I would spend money on that. So at the end of the day, this is about you guys' interests and being able to value each other's interests. And so she's saying, hey, $400, like that's a lot of turkey sandwiches. How many lunches are you going to? But you clearly are a very relational person. You like going out, you like seeing people, you like to do things over food or lunch or whatever. And that's just who you are. And I don't think that it's not to say that she has to go out and spend that money. But I think having that conversation and saying, hey, we've worked very hard. This is a very small percentage of our world.

I've heard Dave talk about ratios a lot and really kind of looking at it big picture and saying, hey, here's the percentage that we're saving. Here's the percentage that we're giving. We need to be really intentional also on the percentage that we are enjoying and spending for ourselves. And so I think that's the way the conversation has to start to evolve. And if you want to do anything else, you can play her this clip and say,

hey, these two people on the radio agree with me. Well, there's two things here I see, Jack. Number one, you have to get to the root of what's actually causing this, you know, this kind of frustration she has. Is it just, i don't understand why you'd spend that or is it truly a fear of scarcity of we're going to run out of money if you keep spending like you're in congress i think it's a fear thing and i i'm always like you

realize i'm like it i'm sorry the hundred dollars a month i'm like you know do you have any months i could spend a hundred dollars a month and never go through any real amount of money? I mean, we could go 1,000 years at $100 a month. I don't know the math would even impress her if you went, hey, listen, we're never going to run out of money. I've tried that because that's my bent. It's like, well, let's just do the math. That's why I think this is a real – there's some trauma here, maybe from childhood, the way she grew up. We didn't have money growing up, and now we have some. And if we spend it, we're going to go back to how that was.

So I mean, this might need a third party. You might, she might, you know, benefit from going to counseling or therapy and connecting with our friends at BetterHelp to go, I want to get to the root of this because I don't want to live like this. I want to enjoy life and be more open-handed. And the other thing, Jack, I would recommend is as you guys sit down to do the budget, force yourselves to spend more, to save more, and to give more. How does she feel about giving? So we give a lot. Okay.

Way over 10%. Okay, good. We give usually about 20%, maybe a little bit more. And why is she comfortable with that? Well, she's not i make her do it so okay interesting so all she wants to do is save it all right correct yes yeah pretty much travel she wants she likes travel she likes to travel and why is she okay with travel but not coffee i don't know and that's where i'm going is it because it's us versus me i don't i. And that's where I'm going. Is it because it's us versus me? I don't, I am not

sure. It's just where, I think it's where she places her value. It sounds like it. She values experiences, not stuff and things and food. Yeah. This is worth it. That's not worth it. And so I think it's really just, hey, we both have to be, we've both really worked hard. We both have to feel the reward of this. And I love that you feel the reward of traveling and I love traveling with you, but I really feel the reward in day-to-day life. I just like being able to go and pick up lunch, play golf with my buddies, and it's no big deal. And I'd love for it to reflect for both of those things to be reflected on the budget right now, the traveling is reflected. That's great. I would love for, let's just try it. Let's give it a trial period. And I think you'll see, it doesn't really affect our life much.

And so that's probably the, that's the way I'd frame it up. George, what would you say? I would agree on a ratio. Right now, if he spent 500 bucks a month, that's six grand. Out of their 200,000, that's just coming from the real estate. That's 3%. So if they just agreed, hey, we're going to agree to 3% of whatever our yearly income is, which is a tiny, it's not going to make a dent in our income.

It's not going to make a dent in our investments. Would you be okay with 3%? I love that. And you know, a really great way to see that is on every dollar. When you open up every dollar, there's all the line items there, but they're divided by category. And so most of us have like a house category and it's like in that category is your rent or your mortgage, your utilities, everything that has to do with the house. But then you might have a category that

says like leisure or fun. And it might have things like saving for a trip or going to the movies or, you know, anything that you consider fun. And what's really great is every dollar splits it out and it will show you the percentage that you're spending. So if you ever have questions about, oh my gosh, am I spending too much on food or am I spending too much on childcare? You can go over to the right side of the screen and you'll be able to see the percentage. And a lot of times it'll either put you at peace or you'll go, holy moly, I need to make some changes.

Well, they got a flat tire because they're saving 90% of their income, but not as much giving, not as much spending. I think we need to loosen up to be more well-rounded. Yes. Mrs. Jack, I don't know your your name but it's time to loosen the purse strings live a little this is the ramsey show you know one of the first things i discovered working in the financial world is how absolutely devastating it is when the breadwinner of a family dies and there's too little life insurance or none at all. Grieving families are suddenly left behind scrambling to pay bills and trying to make ends

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Talk nerdy to me. Okay. If you don't know what the heck jade is talking about we have done a long-running segment now we've done at least two of them which makes it long-running where we talk nerdy to you we explain what could be a complex financial topic and we just hit you straight with exactly what you need to know to simplify it so that you can you know have a little financial prowess at your next dinner party and kind of drop some some stats on them so here's here's the one for today it's compound interest this is something we all like we hear about it we kind of understand it yeah but then

i'll post on facebook and i'll be like hey if you invest this much a month from age this to this you'll have three million dollars and they go what how is that you haven't saved two million dollars i'm like you're right i put in 200 000 and it turned into two million oh so we're gonna explain the sort of science behind that and speaking of science albert einstein i don't know that this is true that he actually said this but he is quoted on the internet a whole lot he is quoted compound interest is the eighth wonder of the world listen i agree with him it's it's when it's working in your favor it them. When it's working in your favor, it's amazing. When it's working against you on a student loan,

like only God can help you. That's right. So this is the secret for building wealth. When we talk about building wealth, baby step four, becoming net worth millionaires, compound growth is a key here. So this is when your money earns more money and then that money earns even more money. So it works like a snowball, but instead of debt, you're collecting more as it goes down the hill. Give it to me in numbers. Okay, so let's say $1,000. Okay. And you earn 10%.

Okay. So 10% of $1,000, 100 bucks. So after one year, you'd have $1,100, your $1,000 plus the extra $100 you made. Got you. But now think about this. You earn 10% the next year, but it's not on the original $1,000 plus the extra $100 you made. Got you. But now think about this. You earn 10% the next year, but it's not on the original $1,000. It's on the new balance. And there's the difference. The balance now is $1,100 and you're going to earn 10% on that. And then it keeps.

Which is another $110. And so you can see how it starts to snowball as not only did your principal make money, but your principal plus interest now made more interest. Wow. So that's the strategy here. And after 10 years, it would almost triple. So an easy way to think about this, it's called the rule of 72. Okay. So if your money is making 10%, every 7.2 years, your money would double. Love it. So 1 million turns into 2 million. Yeah. If you had an average return of 10%. And we tell people that all the time when you have that lump sum sitting there. You know, people call in and they want to know if they're going to have enough in retirement. I love being able to quote that because it's kind of like, oh, man, I never thought of it like that.

Absolutely. So we can walk through a great example of this. And if you're wondering what the rate of return is, where we're getting this number, we're not just – this is not like a wet finger in the air. This is the average return historically of the U.S. stock market is about 10 to 12 percent. You know, this is before inflation. So post-inflation, it's probably closer to 7, 8, you know, 9 percent. And it's worth noting there, a lot of times people make the mistake of looking at the stock market year by year instead of... How are you making 12 percent? Jade, mine's at 4 percent this year. And we're going, that's the average over a long period of time.

Yeah. You're looking for the annualized rate of return. So it's negative 4% and then next year it's plus 20% and then it's 4% the next year. You average all of that out. That's right. All right. So let's look at a chart that really explains the power of this and the power of starting early.

We're going to look at two guys named Ben and Joey. So they both start invest. Ben starts investing at age 21. He's a young whippersnapper. He got out of college debt free. He's crushing it. He invests $2,400 a year. Excellent.

$200 a month. That's not a whole lot, but he stops contributing at age 30. So nine years, he contributes that $2,400. And the total amount he contributed was $21,600. Wow. Okay. Now, what is his total when he turned 67? $2.1 million.

Without ever adding more? Without ever adding more. He stopped at 30. So he turned $21,000 into $2.1 million just by not touching it and let that snowball roll with compound growth. Now, his buddy Joey, well, he didn't make as many wise financial decisions. He finally gets the ball rolling at age 30. Okay.

He starts investing $2,400 a year, but this time he doesn't stop at 30. He keeps investing until he's 67. So 37 years. Wow. Of investing that same $2,400. He ends up contributing $88,000. $88,800 to be exact. You would think, well, he's got to have more than Ben.

He invested way more. No, no, no. Joey ends up with $1.2 million. Ooh, so time. Time was on my friend's side there. Almost a million dollar difference because of that extra nine years Ben had his money compounding. So it's not necessarily about how much you contribute. It's really about how much time you let it sit. Yeah. Each year it's compounding, compounding. In that crock pot.

And that chart, if you're wondering where that came from, that's actually from our foundations and personal finance curriculum that we teach in half of high schools across America. And this is the kind of stuff we wish we learned in school growing up, Jade. And now you can, which is great. I think a lot, this is really important.

I think a lot of people, they forget about compound interest. They're thinking about simple interest. They're thinking, if it's $1,000, you're always going to have interest on the original lump sum. And with compound interest, it's even better than that. It's always growing. So that's wonderful. Well, now to be clear, people go, well, Jade, if it's so important to get started early, then why do you tell people to pause investing until they're out of debt? Well, you know, at the end of the day, that time is usually negligible. And I you tell people to pause investing until they're out of debt? Well, you know, here's at the end of the day, that time is usually negligible.

And I always tell people all the time, if you're if you're messing around and playing around with the baby steps, you're going to screw yourself. Because if you say, yeah, I'm working the baby steps, I'm in baby step two. And then you play patty cake with it for the next seven, eight years. I'm trying to pay off some debt. I'm trying to invest. I'm trying to save for a house. You can't do seven things at once and do it any of it well.

Yeah. And then you mess around and you put your stuff on hold for the next decade. Well, yeah, you just screwed yourself. But if you do it the way we teach, most people are out of debt, George, in two years or less. And so that's really negligible in order to have the full power of your income at your disposal so that you can invest 15%, which is far more. Most people are doing three or four. They're going, I'm going to get the match and I'm going to just put the rest in the back burner. That's right. That's not enough to retire with dignity. That's right. And so the way we teach it, not only are you getting your debt cleared off,

but when you do finally start to invest, you're investing far more than you would have. Therefore, you're going to make up the difference pretty quickly. And so this works at the end of the day. You know, people can question it, but there's 30 years of experience behind this. And I know, you know, I know, George, you work the baby steps. I work the baby steps. And the cool thing is, George, I was the person who had to wait seven and a half years because it took us seven and a half years to pay off our debt. Then we turned around and saved three to six months. Then we turned around and bought a house.

Then we started investing. And I can still tell you on this side of it, it still works. The principles still work so you'll be good and there's still time so if you're hearing this you're going well that'd be nice i'm not 21 jade listen i'm joey joey is right here there's still you know even if you let let's take this example you're 35 and you finally started investing if you invest till 65 500 bucks a month that's six grand a year with an's your car note. With an average 10% return. Exactly. They go, where am I going to find 500 bucks? That car payment looks a whole lot like 500 bucks.

Pay that thing off or sell it. You'll free that money up. Well, from 35 to 65, 500 bucks a month, 10% return, 1.1 million. Wow. How much did you actually contribute? 180 grand. So when you look at that, you go 80 to 90% of the growth was stuff you didn't even do. On that example, a million dollars was growth.

Is that right? Almost. The growth was 950 in this example. Holy moly. And so you just, you know, look at these numbers. I'm using our investment calculator on our website and you guys can punch in your own numbers and start to have some hope that you can retire with dignity and you don't have to wait on the next person in the White House or go, I'm scared of the stock market. I'm more scared of you not investing at all and retiring

broke. So true. Yeah. And back to this, you know, these are all things that some of you are listening. You're like, I never, I just never heard this concept before. That's why it's so important. Foundations and personal finance. I was walking out of the building the other day, leaving work and a guy walked up to me. I think told me his name was jefferson he was like hey jade i just want to tell you we're in baby step seven we paid our house off now i'm looking at this dude i'm like you look extra young so i said how old are you he goes i'm 31 whoa i said 31 i said i have to know more he goes jade uh i had foundations in personal finance as my curriculum in high school and so i knew never to go into debt, never to go into student loan debt. And so when I came out of college, which I paid for in cash,

I saved up three to six months. I did my down payment. I started investing 15%, paid off the mortgage. And at 31, no mortgage. That's insane. Insanity. But that is the power of the things we teach. And here's the thing.

If your kids don't get this through the curriculum, through the Ramsey curriculum, they're going to get it from TikTok. And TikTok and Instagram are not telling them to stay out of debt. They're telling them to get into debt. And somehow that's the key to building wealth. But we've seen in reality the exact opposite to be true. So if you're interested, you can go to ramseyeducation.com and, you know, hassle your schools, your teachers, your administration to go, hey, we got to get this curriculum in the school. What are we teaching these kids? Show them how to budget.

So, so important. Let me tell you, you might be a little late to the game. You might be, Joey, I was late to the game. And even if money didn't come from you, even if you didn't come from money, money can still come from you through your kids and changing your family tree. Do it, do it, do it. This is The Ramsey Show. From The Ramsey Network, you're listening to The Ramsey Show. I'm Jade Warshaw. Next to me is George Camel. And here we help people build wealth, do work that they love, and create amazing relationships.

And we do that with your calls. This is a live show, so be sure to give us a call and we'll talk about your life and your money the number is simple 888-825-5225 that's the number that gets you in all right george let's get to the phone lines game on on and popping all right we got lee she's in columbus ohio what's going on Hi. You guys are like my two favorites here. I'm so excited. I cannot wait to tell Ken and John and Rachel and Dave. That's so kind, Lee.

Thank you. How can we help? Well, I think my question is actually pretty timely. I work in local government, so I'm in a pension. My husband and I are on baby steps four, five, and six newly, but I have always been required to put 10% of my money or my salary into a pension. Okay.

And now that I'm looking into it, I have the opportunity, and I can only do this once, I cannot take it back to switch to a member 401k type of plan. Oh, yeah. 401k type of plan. Um, so I just, you know, I can't roll over what's already in the pension or anything like that, but I'm just, I have, I mean, I've been in service for nine years and I love my job. I, so this isn't a matter of like staying at my job, but if I'm looking at retirement, even 25 years from now, because I'm 35, say at 60, is that enough time to still contribute my 10%? And then I matched it like seven, seven and a half percent. That's awesome. 100%. I would switch over to the 401k.

Instantly. And the good news is, and George is going to go over a bunch of reasons, but for me, you're going to get to choose the investments and you're going to have a better mix. And I think that for me is the thing. And by the way, I just want to call out, I want you investing 15% when the time comes, not 10. Oh, right. We can't contribute more than 10% in this particular plan, even the 401k. But I'm contributing above and beyond in a um deferred compensation okay like a four five seven gotcha so that's where the other money would go but the 10 is like what we're

locked into required for is there a roth option with the 401k or is it just traditional it is just traditional okay because your other option is option is a Roth IRA as long as you're not above the income limits. And that can be a great place to start for some tax-free growth. And then you can do the rest in that traditional 401k. So I would invest up to the match? You said it's, how much is the match? Seven and a half percent. And is that regardless of your investing?

Or is it up, you invest seven and a half? 7.5%. Is that regardless of your investing? Or is it up, you invest 7.5%? I have to do 10% no matter what. They just happen to match up to 7.5%. Okay, awesome. Now the 457, do you have to go to that next or can you go to a Roth IRA next? Oh, I can, yeah, I can switch it to a Roth IRA. That was just something I was contributing to

in addition a while ago, but now that we're in four or five, six, I'm like, we have to look back at this. So are on into retirement age and they most of what they have are traditional accounts and they have these required minimum distributions and everything. And it's like, oh, my gosh, they just wish that they had rolled it over into Roth style accounts earlier. And so I think it's important to have the right mix of that going in. And if you can start that earlier, I think it's a great thing. OK, and then one more question. I'm basically with building up. So I will be required to take, you know, once I retire, I think retirement age, it would be full benefits at 62 for the pension. It is a payout per month since I have done nine years of service at like 700 a month. If I were to wait till 67, it's up to 1300 a month. And I'm just like, there would be the option with the account value,

which is about a hundred thousand. You can take a lump sum over. So the lump sum is 44,000 out the door, but I could roll it over. Like if I ever left public service, which I don't intend to, but if I did, I could roll over the full account value, which is about a hundred thousand into an IRA at that point. So I don't know if I have that chance at retirement, but I'd rather do that. Yeah. As long as there's no penalty when you, you know, the age is right where you can do this without penalty. I would take the lump sum and invest that on your own. And that way, again, you have more control over it. It can pass down to your heirs because the problem with pensions is they die with you. And so way, again, you have more control over it. It can pass down to your heirs. Because the problem with pensions is they die with you. And so there's one big benefit to moving it over.

And the other reason, Lee, the average return on pensions is not great comparatively to what you could get in a 401k where you have the options. So a pension plan might be 7%. With the 401k, it might be 12% or more. And then, again, when you die, you can pass it down to your heirs with the 401k, it might be 12 percent or more. And then again, when you die, you can pass it down to your heirs with the 401k. With the pension, it'll die with you or maybe your spouse at a lower amount, you know, survivor benefits. And again, you own the 401k, the company owns the pension. And how long does the money last? Well, it's your lifetime with the pension. And with the 401k, it's until the money is gone as you keep passing it down generationally. Oh, yeah. So if

the health of the business starts to go down, that could definitely affect your pension in a major way. Which with the government, it'll be here to stay. So I'm not as worried with a government pension just disappearing, but I do like the idea of you doing better on your own with more control and more say. Very good. Very good. End of story. Good, good call. Thank you so much for that call. That was great. I didn't mean, I kind of cut her off a little bit. Sorry, Lee. She was probably saying something really cool. Lee, I love you. That was a mistake. That was a user error. Well, she can always call back for more. We love Lee. She's like, I'm not coming back. She hung up on me. It was an accident. We love you. I love that. George,

we get those calls all the time about pensions versus 401ks versus roth iras versus iras versus there's so many abbreviations it's exhausting okay so let's let's talk nerdy to the people and let's explain the best way to invest their money when they hit baby step four oh that's good because we kind of talked around it we talked around it so the the easiest way is remember five words, match beats Roth beats traditional. So that's the strategy here. So if you have a match with your employer retirement plan, let's take that first because it's a 100% return. You put in 4%, they put in 4%. Yes. That's a win. Free money. Beyond that, Roth, that's just a tax treatment on the account. And it just means simply that you're paying taxes now, so you don't have to pay the taxes later in retirement. Exactly. And then lastly, you have traditional, which means we're going to, you know, might get a tax advantage now,

but we're going to pay taxes on that money later. That's right. It lowers your taxable income now, but later on when you're in your retirement years, when you go to pull that money out, it's income. So you're paying taxes. And there's a big discussion and debate in the financial community amongst the nerds about well roth versus traditional and should you be doing roth now versus the truth is if taxes stay the same and income stay the same it would be an exact wash but we're kind of hedging our bets going my guess is taxes might be higher now than they are today and we don't know what your income will be everyone says well jay in retirement your income will go down maybe but i don't want to have to limit how much I'm enjoying my

investments because of tax reasons. So I love the idea. When you look up at 62, you've got a Roth IRA with $2 million. That's $2 million of after-tax net money that you get to use without Uncle Sam ever getting his grubby hands up. I know that's right. I know that's right. And with all of that, you haven't actually invested yet. Those are just types of accounts and investing strategies. So how do we invest it, George? Well, mutual funds or index funds outside of retirement, that's a great way to do it. Giant groups of stocks. Yeah. George, I like the electronically traded funds. ETFs.

Yeah. Exchange trade. Yeah, they're kind of like mutual funds that trade like stocks, which I don't love for that reason. Kind of gets you a little bit, ooh, should I jump in? Should I jump out? Yes. Not a whole lot of reasons. Me saying that was me being them. Thank you for being them, Jade.

You're just like the rest of the trolls. I thought you were so much better. Oh, my goodness. Thank you, George, for the crash course on investing. This is The Ramsey Show. There's a time in your life and in the baby steps for renting, but you don't want to do it forever because when you rent, you're still paying for a mortgage just somebody else's.

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1749 Mallory Lane, Suite 100. Brentwood, Tennessee 37027. You're listening to The Ramsey Show. Thanks for being here. I'm Jade Warshaw. Next to me is bestselling author George Camel. Today's question of the day is brought to you by Y Refi. If you're in over your head with

private student loans and tired of getting calls from collection agencies, I know how that feels. You need Y Refi. Y Refi refinances defaulted private student loans that other places won't touch. And they give you a low fixed rate loan that's built for you. So go to YRefi.com slash Ramsey today. That's the letter Y-R-E-F-Y dot com slash Ramsey. It may not be it destroyed the relationship. I think it was well-intended and a very sweet thing to do, but the problem is they didn't seem to ever ask for your help or your opinion in these matters. And it all has to do with how you explained it. Were you like, look at what you did.

You guys never should have been, you know, like that's different than explaining it in a better way. No, he seems like a wonderful person i think it's i think it's on them yeah you know they reacted this way because he said before telling my wife that they were in trouble so he came to him yeah 10 10 days before foreclosing this had clearly been going on for months this foreclosure doesn't happen after one month of missing a payment and he goes hey we're in trouble so clearly he was looking for help by going to the parents letting them know about this problem and so i think truthfully there's a lot of shame and

guilt here i think you're right and now it's it makes the relationship kind of like a business transaction where you you come across like a lender and now it's awkward because i need a daddy to swoop in and fix my mess well they, they don't say. There is an interesting piece missing from this on whether or not the kids owe the $35,000 back to mom and dad. It doesn't sound like he wants or needs the money. So yeah, if he said, well, when I asked for the money, they stopped talking to me. That would make more sense versus a gift of like,

hey, listen, I'm going to get you guys out of this bind, but you kind of please follow this plan. I bet it was a well-intended situation. But my worry is if you didn't save them, like they're going to be right back in this mess. And so while I would love for them to follow the plan, I think they clearly could not afford the mortgage. And so even getting them current on the loan doesn't solve their problem. That's why he's saying you guys need to sell the house, get the equity out, do this the right way. So my fear is they end up right back here and go, dad, I'm in a bind again.

We're behind three months on payments because they didn't actually change their habits. Yeah, I agree with you, George. Matter of fact, James, I think we need to add a segment where we show up at the people's door who did the question of the day and we can ask them more questions about their question. Yeah, Peter, if you hear this, call into the show and maybe we can talk more through it. It's a very interesting situation. It is. But did I do the right thing

in helping them out? I think it was a noble thing to do. It's what, you know, personally, I love my daughter. If she was in a bind, I would do anything for her. 100%, yeah. But again, if she didn't ask for it,

I don't know. But they asked. He came to them with a problem. My daughter knocks on my door and says, hey, we're on the brink of foreclosure. I'm going to do whatever I can to help them out and then steer them to the plan. So I don't know that I could have done anything differently. Yeah. I mean, it's different.

There's one thing. It's kind of like you don't want to be an enabler. Like if it was a situation where this has been going on for a long time and helping them would be, in a sense, giving a drunk a drink. Or it's very possible that they just had you know a slurry of really tough things happen and it just resulted in this you know foreclosure situation and mom and dad were like listen we can help you know so more details are needed but george i think you're exactly right i would have been like hey i'll give

you the 35 but you guys are going to go through financial peace university tomorrow yeah matter of fact you're going to go through every lesson. If we can send that to Peter to send to the son and daughter, that'd be great. We probably have his email, right, Producer James? Yeah, we'll try to. We'll give that to them as a gift and see if we can get them on track, because I want to help them for the rest of their life, not one

time in a bind. Yeah, that's good. Alright, we've got Ann in St. Cloud, Minnesota. What's going on, Ann? Hi, this is Ann. Thanks for taking the call today. Sure. What's up? So my question for you is basically, should I quit my job? So a little bit of background, my husband and I, we got married, had a baby and bought a house all in one year. I hear that baby hooting and hollering. Yeah, he is going to be a little bit whiny in the background, so my apologies. Did you say you got married, bought a house, and had a baby all in how long? One year.

Mama, okay. And what's your current job? Yeah, so I work as an administrator for a ministry. And the problem is there is morally corrupt stuff going on with the leadership. Yeah. It's so unfortunate. It was like a dream job when I took it. And so good for our family. But now it's like, i kind of have no choice but to leave yeah so what's next we know you're leaving we need to line something up i don't want you just quitting and going well i'll just figure it out over the next four months yeah what what's the income you need to try to make up here well bare bones budget my husband and i will be able to make it by without even dipping into our emergency fund. So that's the good thing. So living off of his income? Yes, he can take overtime, which is super,

super helpful, but it's not a way to live. Yeah. So what were you making? I was making about $3,800 a month. Okay. So we need to make up that income or at least most of it. And that's kind of the thing. My husband's really supportive, but I don't know what my next step is. And I don't want to put my child in daycare. So I might look for some at-home admin work, but I'm really just not even sure where to start. Well, let's kind of start by looking at the financial picture so we can know what needs to be done. What baby step are you guys in? Do you have debt?

Luckily, we're in baby steps four, five, and six. Good. Okay. How much is in the emergency fund? We have about $36,000. Wow. That's a big old emergency fund. Is that too much? Well, it sounds like it's a lot more than six months based on what you've told me.

Yeah. Both of our take-home pay is about $7,500 a month. Okay. All together. Okay. Good. So you're looking more for help on the career side of what to do next for a job? I'm looking for that and just if I can afford to stay home with him too. So could I afford to be part-time? Well, you just told us on a bare-bones budget you can get by, but that's if he works overtime. And you said that's no way to live. Right.

So we need to get his income up or you need to work part-time in order for this to make sense. So what would it look like? You were doing the job in the ministry. Is that something that you would want to do again at another ministry? Tell us more about what you feel like you're qualified to do and the work that you would want to do. I put her on hold with the baby yelling.

You can get her back, Jade. Let's see. Where is she? Line two. Sorry about that, Ann. There it is. That baby's got pipes i know she's rolling in here's what i think i'll just kind of give you the synopsis of what i think i think you guys need to get onto every dollar do you have every dollar we do okay then i think you guys need to get on there and figure out okay what what amount of money because it may not be a full 3800

but what amount of money would take you out of that a full $3,800, but what amount of money would take you out of that unsustainable place to where it's like, okay, we're not on bare bones. Husband's not having to work overtime all the time. And we can kind of live a life like this. And maybe it is $3,800. But then after that, it's all about you sitting down and going, okay, what can I do? What would I like to do? And then I'm getting on all the sites. I'm getting on Glassdoor. I'm looking to see what's available. I'm looking for work from home options. I'm looking for part-time options. And I think at this point, you're just kind of pounding the pavement, as they say, and knocking on doors to get another job. And we can help you with that. Ken Coleman has a great book called Find the Work You're Wired to

Do, because maybe this is the career path in the administrative space. Maybe it's not. So we're going to send you this resource. With that, you're going to get the Get Clear Career Assessment. Take that and then start talking to your friends and say, hey, does this line up all of this assessment stuff? Does this line up with who you know me to be, my personality, what I'm wired to do? And that might be a work from home admin job. It might be something else. And maybe you go make some crazy money and you go, I want to get a full-time nanny in-house because I want to do daycare. You have the options, but we do have to figure out the financial piece. Yeah. But the good news in this is because you guys did the right thing,

it frees you up to now for you to be able to do the right thing with this job. You don't have to stay in a job where morality is being questioned or negative things are happening or even illegal things. I don't know what's going on over there, but you've got the emergency fund and you can get out and you can get another job hopefully that pays more this is the ramsey show you're listening to the ramsey show thanks for listening listen guys you need cash i know that you need cash and so i've got just the solution for you the ramsey cash giveaway is here we're trying to give you money yes dave's money which is my favorite type of money and it's a lot ten thousand dollars cash that's the grand prize wow ten thousand it used to be like three thousand ten thousand dollars is a lot of money this is one of our biggest giveaways the giveaway too

like we gotta up it that's right that's right accounted for inflation i love that thank you dave all right if i had ten thousand dollars i can already tell you right now that's a vacation for some of you that is paying off a student loan for some of you that is you know going towards your three to six months of expenses all i know is ten thousand dollars is a bag george and if you get that it's it has the potential to really change where you are right now that's several full tanks of gas. I mean, there's a lot you could do with 10,000. That's at least four Stanley tumblers. At least four.

It's amazing. Those things are so expensive. So if you need $10,000, if you could really use it, you can enter. Go to ramseysolutions.com slash giveaway. And here's the thing. You can enter every single day. And the more you enter, the more it increases your chances at winning. So do that now through August 31st.

Not only that, George, but we're also having our $12 sale. So now's your chance to not only enter this cash giveaway, but you can also grab one of our best-selling books at a lower price. So whether you're trying to do better with your money, whether you're trying to deal with your anxiety, whether you're trying to get your job your money, whether you're trying to deal with your anxiety, whether you're trying to get your job to and your career to the next level,

we've got books and products that will give you a plan, that will give you hope, and they're at a discount, $12. So guys, look no further. This is the assignment. Go to ramseysolutions.com slash store, and then go to ramseysolutions.com slash giveaway to get your $10,000 entry.

That's how this works. Any other announcements, Jade, before we keep going? I got another announcement. All right. This is for the good of the group. This is for the good of the group. Listen, you guys who like to listen to the Ramsey Show, I want you to know that after this segment, the next two segments, we're going on to the app.

So if you want to keep listening and finish the show for the day, then you need to head over to the Ramsey Network app. You can do that by going into the app store and downloading Ramsey Network app. You just search it in the little tab and it'll pop up there. But if you're used to watching the entire show, that's where you go if you want to finish the show. And I'd really recommend that you do that because there's a lot of really cool things within that app that you can discover while you're there. And if you're listening on radio, you keep doing you. The show is going to continue on radio.

This is for YouTube and podcast folks. That's right. And so, again, there's two ways to get the app. You can click the show notes. They'll have it there if you just like to click a link. Or if you're savvy, like I said, just go into the app store and Google Ramsey Network. If you're extra savvy and you're watching right now, there's a QR code on the screen. If you know how to take a picture of that

and go to the link. That's right, George. That's good. For the extra tech folks. Yeah. And also, let me just say, for those of you who have submitted feedback on the app, we've heard you and we are working

to make the experience even better. We're always working to make things better for you. But really, we're just getting started with this app and all the time we're adding more cool features to it. this is just like rock with us on this keep rolling with us on this you know it's all going to be good don't miss what's coming up next go to the app so you can watch the full show okay i'm off my soapbox jay's gonna bring it in the next hour listen that's a tease right there the calls coming up they're bangers is all i'm saying you don't want to miss it all right let's go to the phone lines.

We've got Matthew in Dallas, Texas. What's going on, Matthew? Hey, how are you guys? Doing good. How are you? Doing well. Thank you. Hey, so I just recently sold my business.

Nice. It was a commercial landscaping company. How much? It was $300,000. Hey. That's a good payday yeah there's there's some business debt involved oh so where are we at now it's not what i netted oh would you net yeah so after paying off the business debt paying off my uh some personal debt um i netted around $105,000. Okay. And so I still have the truck.

I still have a truck that's in my name, but the new owner, because I'm going back to work for the same company that I had, that I owned. Oh, wow. So you'll be an employee now instead of the owner. Exactly. Okay. Exactly. What's out on the truck?

Yeah, so I owe $28, out on the truck so yeah so i owe 28 000 on the truck um but he has given me a stipend of uh five hundred dollars a month to pay for the truck so it it doesn't fully offset the cost of the payment but it almost does it's about three three-fourths and would he would he pay you that 500 a month until the truck was paid, or was there a limit on how long that would last? As long as I stay with the company, basically. But if you paid off the truck today, would you still get $500 a month for a stipend? I would. Okay. Absolutely. Great. Pay it off, man. Yeah, I would. Yeah, so that's my question, I guess. So that's all we really owe. So I owe my truck. My wife's car is paid off. Our house is not paid off.

Okay. But we have a ton of equity in our house. What do you owe on it? Just curious. $385,000 on our house. Okay. Any other debt? No, ma'am.

Nope. Awesome. So you pay off the truck. You're left with $77,000. How much do you have in savings? That's all our money. My wife has about $28,000 in her 401k. So no other debt.

That is our savings, but there's no other debt, correct. Great. So what I would do is I would put away six months of expenses out of that $77,000, and the rest you can start attacking the mortgage. If you have kids, you can start putting away some for college. That really sets you up. Yeah, and I guess my other question too that is, though, is that I'm going to have some long-term capital gains,

and that's my fear. So I'm like, well, if I pay off the truck, like I said, I owe $28,000 on it. If I pay it off, and then I have to pay the capital gains, but I'm actually paying the capital gains on almost $300,000, and then plus whatever our income is. Are you working with a tax pro on this? Yes, I am. So you'll know exactly what the number is,

and so come tax time, you'll need to have that money set aside. I'm guessing the $77,000 is going to cover it. Yeah. You think I should wait to pay it off until I find out what that number is on the tax? I mean, I'd pay it off ASAP if it's due, but if it's just part of your April taxes... When will you know? Well, I won't know until they do our taxes, so probably next year. So that'll be part of our 24 taxes.

Okay. Yeah. So I won't know until she starts doing the taxes for us. I wonder if they could do an estimate. I'm sure you can get an estimate from your tax pro now to go, I want to make sure I have enough set aside because I know there's going to be a big bill this year. Yeah. I'd look into that.

But you all wouldn't have a problem paying off the duty? You're not doing it. I mean, you're following to the letter of the law. Yeah. Yeah. Okay. So that's why we're working with your tax pro to make sure. That's awesome. Welcome to the letter of the law. Yeah. Yeah. Okay. So that's why I would work with your tax credit to make sure. That's awesome.

Welcome to the crew, man. You're doing great. What's your new income now as an employee? Well, it's $1,400 net per week is what I'm making. Okay. And is that similar to what you were making before as the owner, or is that a lot less? It's actually a little more because he owed me some commissions

that I had sold before I sold the company. Can I just ask, what made you sell the company? Did you sell it just to clear debt, or what was your... To get out of debt. Yeah. Yep, that's exactly right, to get out of debt. Cool. Well, here's the good news.

You know how to do it, and you could do it again debt-free one day if you wanted to. That's right. Yeah, at this time, I would have a different plan for sure. Well, very, very good. Hopefully we helped you out.

Thank you so much for the call. And George, you bring up a really good point. When it comes to things like this, if you need help with taxes, we have tax pros here. You can go to ramseysolutions.com slash trusted. And there's all the services that we provide, but amongst those are tax pros. And they follow the Ramsey plan. Yes. They're not going to steer you into go, well, you really should go buy this $100,000 truck for a write-off. They don't say that kind

of crap. They're going to make sure that you're following the Ramsey plan, helping you stay out of debt, helping you avoid IRS back taxes. And that's a big one, especially for business owners. We tell them, hey, file quarterly estimated taxes. That's right. Make your payments, set money aside every month, set 25% aside, whatever it is for you to make sure that you're covering that because IRS debt, we put it at the top of the debt snowball when we hear about it because the IRS can screw up your life. They can garnish your wages. They can sue you. They can put you in prison. So we don't mess with that. That's so, so true. And you're right, George. The big point is those Ramsey trusted folks they do follow it our way

because before I worked here you know I was just out I'm out in the world I'm looking for a tax pro it's hard to find people who will align with your value the way that we teach and the values that you've said okay yeah this is the way I want to live my life but once we started using those pros it made it so much easier because I don't have to explain it I don't have to explain to them the baby steps I don't have to explain to them why I care about getting out of debt, why I don't want to utilize that. It's just, it makes it so much simpler. So again, ramseysolutions.com slash trusted. That's where you want to go to get the help that you need with taxes, real estate, and more. This is The Ramsey Show.

You are listening to The Ramsey Show. I'm Jade warshaw next to me is george camel we're taking your calls but not this segment this segment we have something fun planned um it's a budget review all the time we talk about every dollar it's the best budgeting app out there and so many of you utilize every dollar but you still have questions you do it and then you're like jade something's still not math and right with my money. Can you help me out? Maybe there's an area that I'm overlooking. And so that's what George and I are going to do this segment. I had a basically it's a Google Doc, George. And I went on to social media and I said, hey, if you want me to review your budget, just fill out this Google Doc and with all the right

information and I'll pick one of your budgets. And so we've got janai and skyler i'll give you a quick synopsis and really cool they're actually on the phone line today so it's janai and skyler uh 35 36 years old a stay-at-home mom and an electrician they're from utah uh they make 69 000 per year but they bring home about 5600 per month. Did I get that right, Skylar? I've got... Oh, okay. I don't think that's me.

What are... Okay, got it. What are the odds that there's another Skylar on the line? I know, right. Which is super confusing. That's crazy, yeah. Janai, hello. Welcome.

Hi. Thanks for putting your business out there for the good of others to learn and grow. Yeah. That's great. Thanks for having me on. Did I get the numbers right? You're bringing home about $5,600 per month. Let's see if we can pull it up on the budget to see if we got it.

I'm confused because you make $6,900 a year. That's about take-home pay because $5,600 is $67,000 a year, that's about take-home pay. Because $5,600 is $67,000 a year. Yeah, so we budget based on... It's kind of a tricky situation, which is why I'm so interested in talking to you guys. We budget for him working a 50-hour week, which is right about $1,400 a week, which is the $5,600 take-home a month. So I don't know what it all is like before taxes and stuff. Oh, got it. Okay. Cool, cool, cool.

But we end up making more because he works extra overtime when it's available, and his job, because he's in construction and they're so desperate for men. So the $5,600 is the lowest that you would bring in? The lowest, yeah. Okay. Can we bring the budget up on the screen and take a look at it with you? Yeah. Let's do it.

All right. So you may not be able to see this in real time, but you can go back and watch it. We've got your every dollar budget here. We plugged it all in. And we have your income at the top, $5,600, $1,400 a week. Yep. As we move down, we're going to go to giving. You're giving your income at the top, $5,600, $1,400 a week. As we move down, we're going to go to giving. You're giving a little to the church, $201.

Savings, we have school savings of $200. Tell me about that. Yeah, so he's still in trade school, and so we are just putting $50 every week, basically a sinking fund. To cash flow. To pay pay tuition every semester, yeah. Love that. What about the emergency fund? I think you told me that you had $1,000, but you had to dig into it recently.

Yes, we had some dental. I had to get a crown last week. So we'll be able to rebuild that by the end of the month back to the $1,000. Okay, excellent. Because you also told me that your biggest debt, your biggest goal is to pay off your debt. So you guys are baby step two people. So we'll kind of filter all of the information we give you through that idea of you'll at the end of 30 days, you'll have the emergency fund back and then it's game on on paying off the debt. So George, let's keep looking here. Car maintenance. You got some car

maintenance, a hundred bucks a month. That's good. I'm happy with that. And then we have the mortgage at $1,650. Yeah. The first thing I thought is it's a little bit more than what we'd say the 25% rule. I think that it's, you know, it's $250 more. So I think that for you guys. It's not on fire. It's not on fire, but just being aware of that will change the way you spend going forward. So utilities, everything like that, looking good on here, George. Natural gas, electricity, internet, nothing crazy here. Gas, fuel for the car. Now we have groceries at $750. Is this just for you two? So we have a two-year-old and a nine-month-old. Yes. Interesting plot twist. We didn't know that. Okay, great. So $750 for groceries, I'm not mad at. I will say with the restaurants i try to

cut that down you know you've got kids it's inevitable you're going to pop through a drive through or order a pizza some night so maybe pop it down to 40 and make that like your emergency scenario crap hits the fan but try to limit it to nothing try to go can we avoid eating out while we're trying to get out of this debt george can you change it to 40 let's see if it adjusts this is fun yeah let me change it to 40 because as's see if it adjusts. Oh, this is fun. Yeah, let me change it to 40. Because as you see at the top of the budget, they've got $103.80 left over if they follow this budget to a T.

That's the margin right now. So the goal here, since you're trying to pay off debt, the goal is to get the margin higher. And look, already, I can't see it from here, George. We're at $243 now in margin because we brought the restaurant category down. So if we keep going, we have phone at $221. Let's talk about that. Are you guys trying to pay off a phone within that?

I think mine is on there. And then our streaming services are bundled in there as well. Okay. So if there's a phone payment in there, figure out what it is and pay it off this month. Like knock that out so that that that bill becomes lower and you can then switch carriers i'm guessing you're with a like a name brand carrier right now okay i would switch to affordable carrier like i have i've got a tello partner with me on my youtube channel it's 25 bucks a month janay for for janai for all of the unlimited everything plan

so my wife is on that plan and she loves it for 25 bucks a month. So that could shave a lot off of this category. And then of course, I'm going to personal. I love that you guys are thinking about fund money for the two of you, but in baby step two, I don't think this is the phase for that. So if I were you, I'd knock that down to 50 bucks between the two of you during this phase, as much as I, it pains me to say you guys are using the same shampoo. You're using the same body wash. Like that's what my husband and I did. And that pains me to say you guys are using the same shampoo, you're using the same body wash. That's what my husband and I did. And that's going to save you what? Look at this now.

We have now a $493 in margin. That's excellent. So see what we're doing here, Janiya? We're trying to go, where can we find more margin? And it becomes a fun game. So I think your phone, you could do better there. That'll come down later. Let's keep going down to lifestyle.

We've got union dues. I'm assuming we have to pay the union dues yes i see a big one though that i'm i got questions on and that's xbox live who's playing xbox uh that one's non-negotiable uh-oh who's that for uh that's for skyler okay that is his that is his decompress can i ask a real question as a man with a baby? How does any father have time to play video games with a nine-month-old and a two-year-old? Well, they go to bed early enough, and he is a night owl. He doesn't sleep, really, but that's his decompressed. Okay, it's an $18 difference.

In the grand scheme of things, singularly, it doesn't make a huge deal. But if you have a lot of these little things, they do add up. So we'll say, we'll call this your one freebie. Because again, they do add up. Which means we're cutting Spotify, Janae. That's right. Spotify, then we're dropping down. Can we cut it? Can we go Spotify free, Pandora?

Can we sing in the shower? I would say probably yes. But we also pay for, it's the family plan, so we have siblings on it. Who cares? Tell them you're getting out of debt. Say, hey, guys. If it's the family plan, then they should be paying their fair share. Uh-huh.

Just talk to your family. Say, hey, guys, we're going down to bare bones. We're trying to pay off this debt for this season. We got to get out of this. We're listening to our music on YouTube. So let's move past that one right quick okay um george before we go to the debt one thing i did notice here um janai is there's nothing for a cushion or miscellaneous the catch-all category and i kind of think that just to save your sanity i'm gonna add it just let's just add that on there because there's always something that pops up, right? It's like, you know, grandma's birthday.

Put another 50 bucks in there. So we'll add that. I like that. So here's right now margin for the debt. We're at $443. And of course, now here's the debt. We looked at this and I. Three cards, a timeshare, a car loan, a student loan.

I mean, this is eating up $1,108 per month. And that's with a $10 student loan payment, which tells me you're on a program where you're paying nothing. Yep. Which is probably good for now. This is where our income, I kind of referenced earlier, is kind of funky because he works anywhere between 50 and 60 hours a week but his um the contractor that he works for it pays an incentive bonus of a hundred dollars a day okay for showing up for work that's amazing

i want that that's excellent yeah so before we run out of time i do want to tell you this before we run out of time right now your margin is at 443. If he keeps getting these incentives and these bonuses, I want you to see if you can get that up to around $1,000 a month between the two of you combined. Because I ran out the numbers on you guys' debt snowball. If you do it with the margin you have now, it's going to take you 35 months. But if you can find $1,000 in bonuses, side hustles, and anything extra to add to that, it cuts it by 13 months. So down to what? Less than two years? Yeah, 22 months. You can be completely debt-free. And so, Janai, thank you for letting us share this budget. I'm sorry we got, you know, busted on the time here. But the key here is side hustle, get it up $1,000,

and you're going to be on the debt-free screen in 22 months. This is The Ramsey Show. From The Ramsey Network, this is The Ramsey Show. I'm Jade Warshaw. Next to me is George Camel. And we're going to help you build wealth, do work that you love, and create amazing relationships. That's what we do here on this show.

We do it through your calls. This is a live show, so you call in, you ask us questions about your life, your money, your career, and we do our best to provide you with solutions. So if you do want to call in, the number is 888-825-5225. Our nice phone screener, Eboo, over there will pick up and see if you are fit to come on the lines. Ooh. You know, we got to check for the challenge to make it through. It's a gauntlet. It's not that hard.

Just don't make it weird. And usually you get through. So that's right. All right. Let's go straight to the phone lines, George, because I've got Skylar here. Who's in San Diego,

California. What's going on Skylar? Hey there. How are you doing? Doing good. How are you? Good. How you doing? Doing good. How are you? Good, thank you. So my question is, well, let me just give context.

I've been working really hard, although maybe not hard enough, at paying off my student loan for the past couple of years. And it started out at around $52,000, and I got it down now to $15,500. Wow. Nice. Is it a private loan? Yeah. Okay.

How can we help? My question is, should I refinance that loan to help pay off the other debt I have right now? What's the interest rate? Right now it's 4.5. And what do you think you're going to get it down to? I'm pretty qualified for around 6.5. And this would help how? Why would you make it higher? help how? It would help me start a snowball method for the other.

But you would be raising your interest rate, which means your payment would go up. The only time you want to refinance your student loan, Skylar, is if it's 100% free to do so. You can get a lower rate, you can keep a fixed rate or trade a variable one for a fixed, and you don't have to sign up for a longer repayment period. So unless you check all those boxes, this does not make sense and it's not going to move you forward. Yeah, and just to be clear, you said that you would go from an existing rate of 4.5 to a, quote, pre-approved rate of 6.5 that's that's not helping anybody that's putting you in a worse situation that's causing you to pay more interest every month um which means your

payment won't go as far and so the answer to that would be no but i do want to applaud the fact that you have paid down you know a 52 000 loan down to 50 15 000 how'd you do that? You got your income up? I did. I got a new job and I just used all my extra cash for a solid year or so to pay off the largest loan I had. So in your debt snowball, if you list out every debt separately, all the separate little loans in there, what's the next one to pay off? Well, $3,100 balance transfer at 0%.

Okay. So did I hear you right? Did you say you started with the biggest debt that you had? Yes. Interesting. Why'd you do that? That's the reverse snowball. The reverse snowball. Were you trying the avalanche method with highest interest first?

It probably at the time when I started was the highest interest. Okay. Here's what we teach. And you know, you're going to go off this call and you seem like you're in a little bit of a flow of what you're doing. But let me tell you what we teach and what we would say is the fastest what we know is the fastest and what we know works every time you list you list all of your debts from smallest to largest so whatever anything from a 3100 little bill to a 75 parking ticket the lowest one first and you pay that one off, clear that money out. Not only does it free up money, it frees up mental space, right? Because you go from having, I don't know, 11 debts down to having 10 debts. So it just feels better. And then that's the way

you do it. Smallest to largest, you may make minimum payments on everything and throw all of the money at the smallest debt. And you ignore the interest rates at this point. So that's what we would say from this point on. You know, if you want to shake things up and say, OK, let me see if I can do this in a more efficient way. That's the way to do that. I also just want to circle back and make sure. Did you flip your numbers? Are you currently paying 6.5 and they're offering you 4.5?

I just want to get clarity on that. No. Or did you say it right? When I looked at what I was pre-qualified for, it said I would have a $361 back, but it would raise the interest rate of the loan. Oh, so you were just trying to get the cash back? Yeah. Okay. Yeah, definitely no. Okay. Thanks for sharing that. Yeah, definitely. No, I wouldn't do that. It's not, it's never going to be worth it for you to raise the interest rate, but certainly not for, you know, 350 or 60 bucks. I would just do the debt snowball. Like Jay just mentioned,

it's going to get you out of debt fast. You don't have to do any mental gymnastics to get there. Yeah. Thanks for the call. Yeah. George, you know, when it comes to student loans, there's a couple of ways that you can tackle it. Obviously, with personal loans, any type of like personal student loan or private student loan, I should say, you know, you're with that interest rate and you can have the opportunity to refinance it. But it's not always a good idea. And you talked about that really quickly. Go over that real quick. Then we'll also talk about the federal loans when it's a good time to consolidate those. Yeah. So here's the checklist. If you're wondering, should I refinance my student loans? Number one, it's 100% free to refinance. Number two, you can get a lower interest rate. Number three, you can keep a fixed rate if you already have one, or you can trade a variable one for a fixed one. And number four, you don't have to sign up for a longer repayment period. So if they go, hey, this was a five year, now it's going to be a seven year. No, we're not doing that. And so if you can check those boxes off, it could make sense. And you've heard us mention on the show, why refi? If you have private student loans that

you've defaulted on, they can be a great option to help you on that side. That's right. And if you have federal loans, you might be thinking, well, should I consolidate them? And consolidation is not always the answer because sometimes you're taking, when we're talking about the debt snowball, it's nice to have those individual loans that you can take and pay off and take them one bite at a time. Now, if you had crazy interest rates and you were able to consolidate them at a lower interest rate and it made a substantial difference, you might want to consider it, but just know that you only have one time to consolidate so if you do it you better do it right you don't want to jack yourself on that um but yeah this was the

other problem is people think well i'm gonna do a consolidation loan and i'll feel like i did something about my problems oh you're talking about when they consolidate all of their debt yeah yeah or even refinance and you think well i did something i'm good yeah you're just moving debt around and that's why it's it's rarely life-changing to do a refinance or consolidation. And the other thing is it makes you think you did something when really you just move debt around. That's the problem with balance transfers. Same thing. Well, I'm just going to move the balance over here because that's going to help with the interest. Yeah. I actually think it kind of plays a mind trick on you because you think, okay, I went from having, you know, if you consolidate your debt,

I went from having eight debts down to one debt. And so your brain thinks, oh, we did something great. Maybe we'll go out and get a little bit more debt. Now it's less chaotic, except now you have a mountain to stare at instead of knocking those debts out with a snowball method. So I actually like keeping them separate for that reason. You can actually make more progress, free up the payments along the way. It helps the snowball roll. The good thing is if you have already consolidated your federal loans, you should still be able to see them with individual account numbers. Yeah. And you can break them out and you can still go in there and pay, you know, dedicated payments on the principle of that specific loan. So that's

one of the good things. Like it takes a little bit more work, but you can do it. But good question. You know, and student loans are not good debt. If it was such good debt, we wouldn't be begging for forgiveness from the government and politicians. So let's let's stop this madness. Stop telling your kids that this is good debt. Let's get out of our life and end the student loan crisis. This is The Ramsey Show. You're listening to The Ramsey Show. I'm Jade warshaw next to me is george camel if you have questions about your life and your money give us a call triple eight eight two five five two two five let's go to pete in pittsburgh pennsylvania what's going on pete hey how's it going guys

thanks for taking my call you bet how can we? Okay, so we just are moving in together for the first time. This is the first time we're actually out of our childhood homes as well. You and your girlfriend? I guess it's kind of, correct. Okay. So yeah, it's just, I guess there's kind of like a two-fold question here. One, I'm just a little nervous to make sure that we're not going to be putting ourselves under. And then the second half of this is to make sure that my girlfriend's on board with the Ramsey way, let's put it that way. Why would she have to be on board with the Ramsey way? Just for the paying debt and prioritizing getting that paid off.

I think she has just under $20,000 in student loans left. And what is the benefit of moving in together before marriage? So we've actually been together for two, three-ish years. And, I mean, honestly, I was looking to kind of get engaged probably within the next year. What's taking so long? This year coming up. Well, I'm saving up for it right now. Saving up for what? The ring.

How much are you trying to save? I'm just saying this has been two to three years in the ring. How much are you trying to save? I'm just saying this has been two to three years in the making. I feel like just a priority order. I go, all right, let's get engaged, and then we'll figure out moving in together. But it feels like if you're ready to move in together, then we're ready for marriage because you're playing house. Right, right.

So what is the ring going to cost? I'm looking around $8,000. Okay. That's a big old ring, man. What's your household income? Don't hate, George. So me alone, I think I'm bringing home, I guess, it would be around like $68,000, $70,000.

That's a lot of ring for a guy making $68,000. Do you have anything saved towards it yet? Yes. How much? Just about 4,000. 4,000? Interesting. Now, you know, you know that you can always upgrade later on. That is true. Here's, here's what George and I are getting at. And then we'll kind of work it around to where you're at. What George and I would propose to you, pardon the pun, is that you first say, okay, first things first. I love this girl. I want to marry her. Let me get a ring on her finger and let's set a date to get married.

Now, the next thing we would propose to you is to say, hey, if you're eager to move in together and you have a bunch of plans set you could easily go to a courthouse get a piece of paper get nice and legal and then have a party later on so that that way you can fully follow through with the plan that you have of moving into a house but now you're moving in as man and wife and because you really do care about it sounds like you care about working this Ramsey plan together. Now, legally, it makes sense for you guys to combine finances. And you also have the footing because you have the title of husband and you can actually say,

okay, here's what we want to do. And here's why I care about her being on the Ramsey way and doing this Ramsey plan with me. And so it kind of, in many ways, it also gives you the foundation that you need to be able to talk to her in this way because i know if it's me i'm like you don't even put a ring on my finger so we're not talking about how i'm managing my money right and so this kind of gives you permission

to really come together fully and not kind of in a kind of halfway sort of way okay uh. Do you think it would be worth trying to go through the Finance Peace University together before we got engaged? Yes. I think it's a great premarital counseling tool. We'll give it to you for free.

You think she'll go through it? Oh, I'd probably have to try and sit her down and convince her, but I would be hopeful. Well, does she know this is heading towards marriage? Does she feel this? Say that again? Does does she know this is heading towards marriage? Does she feel this?

Say that again? Does she feel like this is heading toward marriage? She does. Okay, then I would say, hey, I want us to get on the right foot financially. This is a great program that will help us get on the same page and set a vision for our life because I don't want us to just flounder and just kind of wander through our life when it comes to money. I want us to have a plan to hit our financial goals. I think any

woman would respect that. 100%. What part of the plan do you think that she would struggle with most? I think, well, honestly, I'm pretty sure she has the money to pay off all of her debt right now, but she's trying to save it up to basically, it's like a comfort thing for her. Got it. And I'm just trying to convince her, or not convince her, but more or less let her know that it's probably a good decision to get that paid off sooner than later. But these are student loans? Then the money will all, yeah, student loans, correct. Nothing says comfort like a debt that you can't even bankrupt on.

So comfy. Well, let us be the bad guy and explain that to her. And Financial Peace kind of lets you do that. It takes the weight off of you to explain it and to kind of convince her. And let Dave do it. Let Dave yell through the TV. He's a great salesman. Perfect.

Awesome. Well, thanks for the call. Hang on the line. We'll send you guys Financial Peace University. And I hope you take the advice. It's not because we're like old school boomers. We just have heard too many calls where people play house and they're not married, but their finances are kind of intertwined, but kind of not.

And they're not really on the same page. And they've been together for six years. And now it's kind of what's the point of even kind of getting married? And so I just I don't want that for you guys. I want a better life for you, a better quality of life, and a better chance of success and wealth in this marriage. I like it. Let's take another call.

We got Lonnie in Cleveland, Ohio. What's going on, Lonnie? Well, hi, guys. It's a pleasure to talk to you. You too. How can we help today? Hey, I called in, and I need some advice. My wife and I have been saving money for 25 years.

We've got roughly a half a million dollars in our savings. Wow. What are you saving for? Well, we didn't know. We didn't know. So we, we found this as rental property that's for sale and we can pay cash for it, but it's making us really nervous. Like we, you know, we've been doing this for 25 years and, you know, it's just pretty nerve-wracking to say we want to take all our money out of our investment and own this rental property. Do you have other investments? Like, do you have 401k or IRAs or anything like that? What do you have over there? We do have 401k. We probably have close to $600,000 in our 401k. Okay, great.

You have a primary home that's paid for? We do. We own our house. I read the total money makeover about 10 years ago. It changed my life, and it empowered me to be at this point in my life today. So your baby step seven home is paid for. What's the home worth? Well, our house is probably worth about $400,000 to $450,000. So you guys

have a net worth of about $1.5 million? I would guess that, yes. Okay. Way to go, Marty. And you said, I don't want to let go of this investment. What good is money other than a tool to do something? Well, that's what I needed to hear, George. That's what I needed to hear. You could take that $500,000 and invest it into an index fund in the stock market and it could produce 10%. And there's your 50 grand. You could put it into a rental property that could produce 50 grand. So it's up to you guys what you want to do. If you, it sounds like you guys are excited about the idea of real estate investing and being landlords and having this, you know, kind of quote unquote passive income. Cause we know it's not really passive. It takes active work, but you're excited about the idea. Yeah. Here's the deal. The $500,000 doesn't disappear.

You didn't burn it on a kitchen table. You have it in equity in this home. Now, if you do it the right way, this property is not going to go down in value, right? Right. It's in a good area. You've done your research. You're working with a pro. You know what it could rent for? Yep. What could it rent for? Well, close to $6,000 a month. Wow. That's incredible. It's a six-unit building that kind of fell in our laps, and we're pretty excited about it,

but my wife, she's a little nervous about getting rid of it, but the way you explained it, George, is perfect. We're not giving it away. It's still there. It's not disappearing. It's not a depreciating asset. And here's the other thing. If you guys don't like it a year from now, you could sell it, maybe even for more than you paid for it. And so I don't think there's as much risk as you think, but you should be nervous. You guys work, you work your tails off to save up half a million dollars in cash. And so I think it's wise to walk very carefully and do this the right way

and not get starry-eyed and just throw it at something. Did you say it's several units? Is that what worries her, is the fact that it's several units as opposed to just a single-family home? No, I just think what makes her nervous, Jade, is the fact that everything we have would be going to that gone, but not the way, you know, the way George explained it.

It's not gone. It's right there. That's right. Make sure you still have a six month emergency fund, have a separate emergency fund for all the maintenance and repairs for the rental property. Do it the right way and do this with peace. And pretty soon you'll go, oh, I don't know why we were so scared of this. This is awesome.

Yeah, because we're doing it the right way. No debt. Wow. That's exciting. I'm excited for you, Lonnie. I'm pumped for you. Call us back. I want to be you when I grow up.

Very, very good. This is The Ramsey Show. You're listening to The Ramsey Show. I'm Jade Warshaw. Next to me is best-selling author and host of The George Camel Show on YouTube, George Camel himself, in the flesh. Wow.

Yeah. It sounds big when you say it like that. How's the YouTube going, George? Oh, it's so fun. So fun. We are growing like a weed over there, Jade, and the audience is, they're having a good time. And I fly in the face of much of financial YouTube.

You know, they're all going like, here's the five best credit cards to get. And I'm like, hey, how about if we cut up the credit card? So the comment section alone is worth your time. I like it. I like it a lot. Very good. All right. Well, if you want to talk to George or I today, you can call in. The number is 888-825-5225. We'll try to get you on the line. Let's go to Kathy. She's in Atlanta, Georgia. ATL, Shawty. What's going on, Kathy? Hi. Okay, so I am seven months pregnant.

Okay. And my fiance asked me to sign a prenup. Our attorneys, yeah. Our attorneys are already in contact with each other. I was just wondering if there's anything I should be thinking about considering for the future, not just me, but also for our child. Why do you think he asked you to sign the prenup? Is he wealthy? Yeah, there's a major difference there. Okay. And it's family wealth? Is it his wealth or his parents also? Is it coming from them?

Oh, it's his. Interesting. interesting okay how did it make you feel um it made me it made me feel curious it made me feel kind of excited in a way because we could like work through this together okay um you know i know he works really hard for his money so you, you know, it's something that... What are your fears with this? My fears are that I'm not really considering certain... I'm not really taking some things into consideration for the future, like certain terms or, you know, just, you know, I'm learning that, you know, prenups aren't very black and white. That's right. A lot of things could come up.

So I think that's the if I were in your shoes, I'm not an attorney and I'm not going to pretend to be one. So it's not like I know the ins and outs of what's going to be on this document. But if I were in your shoes, I can understand why this person like you said if there's a huge discrepancy in in money how long have you guys been together about two years okay and you know two years is a is a long time but it's not seven years right so I could understand this person being like I just you know want to do this prenup so if I were in your shoes I would be looking for things that um change over. Do you know what I'm saying? Like whatever the splits are, whatever you're entitled to or not entitled to, I'd be looking for

things that show, listen, once we've been in this for a certain number of years, I want to know that I'm considered an equal partner. And I could maybe consider, understand how maybe at two years in, he might not feel that way because he's amassed this wealth and you were not a part of it. And I don't know, whatever his reasons are. But after a certain while, I want to be viewed as an equal partner and I want to be viewed as an equal share. And I want to know that I'm going to be taken care of in this relationship because I'm having your baby. And so there's a part of that that I'd be looking for. And it sounds like you guys are able to have these conversations in an open and honest way. And so, yeah, if he's open and honest, I want you to be 100% open and honest about also what you

need. So, Kathy, I would be going, hey, how are we going to build our own wealth together? Obviously, he's already amassed his own, but I want you guys to have your own personal goals. I want it to be a we conversation and I don't want him to weaponize his wealth. That's the fear in one of these. It doesn't sound like he's a bad guy, but that's the part that he could hang it over you and go, well, I've got all the money. And so especially, are you going to be staying home with the baby? Yeah. At this time, that would be the plan. Okay. So the key here is you're kind of planning for the worst with a prenup

and you're hoping for the best. And so what you're looking at is, hey, what is spousal support going to look like? If things did go south, what's going to happen with alimony and child support? And obviously you're going to have marital rights in your state. I'm sure your attorney will walk you through what that looks like and how long you need to be married for and all of that. But I want to know that you guys are going to build something together. How wealthy is he?

What's he got? Is this $20 million or $2? Less than $20. Less than $20? More than $10? Yeah, I don't have the exact numbers right this second. Would you say between 10 and 20? No.

What would you say? Give us a range. I would say less than 10. Less than 10. Okay. Yeah. Less than five? No.

Okay. Okay. We got it. That was a fun little guess who game. I like that. I don't know why I didn't just ask you in a different type of way no it's fine but the key here Kathy prenups aren't always this thing of like I don't trust you the the times we talk about it making sense is when one person

is coming to the table with a significant level of wealth and that's exactly what you're saying here and that's why we're not batting an eyelash a lot of the times people call in and it's some broke dude who's like she's I'm not she's gonna take me to the cleaners man I gotta get a prenup and I'm like bro you got nothing to worry about yeah and I think the other thing to to spell out here here's I'm not against a prenup in some situations if you told me this cat has two million dollars I'd be like he needs to stop tripping you're married I get it like there's part of me that gets it at the level of wealth that he has but I what I really want to make sure is that this doesn't play out in the balance of power in your relationship. Like you still need to go into the relationship as equals as much as you can.

And I don't want this to play out in the day to day finances. Does that make sense? Like it's still there still has to be a we here, right? Because if you, just because you sign a prenup doesn't mean, okay, but our budget now is his and mine. It's just, does that make sense? This is, this prenup is for- I don't want you getting an allowance in the budget. Yeah.

That's how I've heard some people describe it when I go, what happens if she stays at home? Well, she'll get an allowance. Yeah, I don't like that. You're not a child. I don't, I don't want that. I want you to be treated like an adult and as a peer in this and as a partner so that's the heart of all of this and the prenup just acts like an insurance policy you hope you never need it but

it's for if you do you'll be glad dissolves not for the day-to-day workings of the finances which i think is worth did you have plans to stay at home? Yeah. Okay. So this is not like a, oh, my gosh, this throws off everything. Right. Okay. And when's the wedding? After the prenup. Okay.

So this is very soon then? Before you have the baby or after? Hopefully before. Wow. Well, time is of the essence. You've got two months. Yeah. Wow. Yeah. Tell me about it. Have you guys aligned on money and values and all of that? Yeah, we actually are. Good. Which is kind of, which is refreshing. It's just really getting this out of the way and, you know, being able to, uh, sift through everything, you know, once you, especially once you get attorneys involved. It is weird.

It's like nothing says love as we begin this journey. Like, our attorneys are in touch, you know, so I understand. It's just weird. It's awkward. Kathy, what's your net worth? Do you have debt? What's going to happen? Tell me more.

I just want to make sure you're all right. Say the last part again? I just want to make sure you're all right. Do you last part again? I just want to make sure you're all right. Do you have debt? No. Not that much. Okay. Not that much.

Uh-oh, Kathy. Well, what do you have? I just want to know what the plan is when you get married. Is it like, hey, you're on your own with your debt, or is it our money and we're paying off whatever debt there is together? I just want to ask about that part. Well, my debt is less than seven thousand okay but that's with student loans but um besides for that nothing so is the plan

we come back from the honeymoon student loans are paid off instantly uh i don't know about that yet i think that would be included in there well i would you know you don't want to make assumptions. So I'd make sure we're clear on this and make sure he goes, oh, absolutely. As soon as we're married, I'm going to knock out this debt or we're going to knock out this debt with our savings or have a plan. Because that would be the case for anybody, whether you have millions or whether you make $30,000 a year. And that's the part on this that I really want to drill down on is I don't want this to be that

we're separate people financially. I understand you wanting to protect yourself if the worst were to happen. However, if a couple called in here and they both made, you know, if she hadn't graduated from school and he made $40,000 but she had student loan debt, if he had the money to pony up to pay off her student loan debt once they're married, he would do that. And so that's the part of this that I want to make sure that you're also being protected and you're also still seeing the money that you have on a month-to-month basis or a yearly basis as yours. And that big lump sum of 6 million or whatever it is over there, I get it. That's what he did. But month-to-month, you should feel like equal partners and your debt should be his debt and in many ways vice versa.

So that's what we're getting to. I hope that makes sense. This is The Ramsey Show. You're listening to The Ramsey Show, our scripture and quote of the day. Matthew 11, 28 says, Come to me, all who are weary and burdened, and I will give you rest. Marvin Phillips said this, The difference between try and triumph is just a little oomph. Oh, that's good. Listen, I like that. That's a bar. All right.

This has been a good show today, George. I've enjoyed it. I've enjoyed it. I hope America has. We're getting one applause from the audience. A singular, that's good. Yeah, that's good. All right. Good job, George. Let's go to the phones. We've got Evan. He's in St. Louis, Missouri. What's going on, Evan? Yeah. Thanks for taking my call. You bet. How can we help? Yeah. So my wife and I bought a piece of land in a subdivision a couple years ago

and we got that completely paid off. And then we bought a house recently. I owe somewhere in the $90,000, $95,000 range on that property with 14 years left on the mortgage. And I was wondering, since it's going to be a while before we can build on that property, is it better to go ahead and sell and then just get debt-free faster? So you're wanting to build on the land you bought in the subdivision? Correct, but it might be a decade or so before I can pull the trigger. That's a long time to sit on that land. That's not producing anything. How quickly could you just pay off your current mortgage just by attacking it?

With selling the property, probably three years. How much is the property worth? $65,000. Huh. That feels real low. That's your current residence? No, the land is worth $65,000. My current residence, no the the land is worth 65 my current residence i owe i owe 95 where where is it that you what do you prefer to have most do you prefer to live on the land that you bought or do you prefer to have a paid for house that you're living in now

help me understand that i i prefer to be debt-free just for the peace of mind. And we had a smaller house that we were living in, and so the land was a more feasible goal. But now this house that I'm currently in is, I could see it as being more of a long-term solution. And so I'm less attached to the idea of keeping it, but it just scares me to throw away a dream, if that makes sense. What does your wife think? What's she want to do? Because you kind of seem like you're more being driven a little bit more by it, maybe the math right now. What does she say about all this? She thinks we should sell. I kind of am holding on to the idea that... Sell the land or sell the house? Sell the land. I'm holding on to the idea that,

well, if I have two pieces of property that are both appreciating, then I'll be better off. But I don't know if that's just a scare. I don't know that it's a binary A or B here. I mean, let's walk through both scenarios. You sell the land for $65,000. You put that all in your mortgage. That brings your mortgage down to $25,000? Yeah, around there.

Then you could knock that out within a few years, I assume? Right. Yeah, what's your income? Can we have that to the equation? Yeah, like $. And then I get bonuses that will bring me up to like 67, 68 a year. And there's no other debt? No. Okay. Is your wife working outside the home? No, she stays home with our two kids. Okay. So what is it going to cost to build on that land? Probably $250,000. Okay.

What is your current house worth? $130,000. So I'm just wondering if we do it the other way. Let's say you sell your house and you owe $90,000. That leaves you with $40,000. We'll take out some fees and all that, probably closer to $30,000, plus savings. What if you just took out a mortgage for that property on the land? Yeah, I don't... You said that's the dream. I think a 10-year dream is just not... I don't like that. That's just too far away for something that's very attainable now. Could you get the

payment to 25% of your take-home pay if you sold your house that you're in, once you have enough savings, you put those two together, now we can build on this land? Yeah, that's possible. You told me that was your goal. That's why I'm asking. You said that's the ultimate goal is we want to build on the land we bought in that subdivision. Right. So if you can get a mortgage for, let's say, $150,000, and you put $100,000 down, and that was 25% of your take-home pay, now we're talking. Right. And then we just work on paying that down.

How old are you two? She's 29, and I'm 24. Okay, so if we do it on a 15-year fixed, before she's 40, this thing's done and paid for. Yeah. And that's if nothing changes which i assume your income is going to go up over time so that would be my personal plan if this was our dream as a couple to build on this land that we bought i'm not waiting 10 years i'm going to make

some sacrifices get the income up you know put some savings aside sell our current home and put all that money towards the down payment and then take out the rest as a reasonable mortgage on a 15 year fixed. Let me paint an opposite picture. None of the neither of these is necessarily right or wrong. We're just spitballing. So can I ask how long ago did you guys purchase that land? Like three years ago. About three years.

Okay. I'm going to tell you another side of this that I might be picking up. I think that you're kind of getting close to the idea of what it might feel like to be completely debt-free. And so maybe the idea of picking up another mortgage that's more than the $90,000 that you have now feels a little bit like, oh man, now I got to pay that off. There's part of this that, you know, three years ago, this land was the dream. It might not be the dream now. We're now three years later. And maybe the dream now is the house you have now being paid off, selling that land. And to George's point, to only have $25,000 to go to be completely free and clear, then

you're complete. I do believe that something happens when you're completely debt free. Your mind opens up in another way to where it's like oh now what are the possibilities and i'm pretty sure your brain wouldn't have been thinking the same way maybe three years ago i don't know that that's just a jade thought and you can take that with a grain of salt but it might be cool to see what your dream would be once you have a paid for a mortgage. What say you? Yeah. And, and, and that's, I'm kind of, that's why I'm leaning towards, um, selling a little bit, but I, I just kind of wanted some outside ideas, um, just because I, I really want to start giving. I really want to, um, we're going to homeschool our kids.

And so part of that, I want them to be able to go experience things and that all costs money. And so having the extra, say a thousand dollars a month that I wouldn't be throwing in a mortgage to feel like I can have the peace and live and give. And at 27, 28 years old would be kind of incredible. I think it's awesome too. The key is you got to make peace with whatever decision you make. I don't want you going, oh my gosh, but remember that dream we had and so much regret. You just got to be okay with whatever decision you made and go, this was the right one for this season.

Right. And, you know, maybe the dream changes and later on down the road, you do build a dream home, but it's 10 years from now. You guys are so young, so much life ahead of you. I don't want you to get just hung up on this and stay paralyzed by it. Neither is wrong or right, but it sounds like you might be leaning towards the sell the line. There was no joy in your voice when I gave you the option of building on the land. Yeah. Zero. You're like, I guess we could do that.

And I mean, you did say, again, I'm not trying to make the decision for you, but you also said your wife was leaning towards selling the land. So I think there's a couple of indicators that are pointing in that direction. In my 20s, Jade, my dreams changed 17 times, truthfully. Tell me one of them, George. Oh, my goodness. Tell me your hopes and dreams. Too many.

I thought I was going to be like a rock star. I was going to be like an indie musician. I'm going to be in a band. It's going to be awesome. I thought I was going to work at the Apple store for the rest of my life. Got fired. And I was like, well, okay, guess that wasn't it. And so there's a lot of things that, you know, I had dreams of launching an online magazine

when I was in college and it was going to be awesome. And so there's a lot of things that change and I have zero regrets. I'm like, well, man, that could have been, I just move. I look forward. The windshield's bigger than the rear view mirror for a reason. That's so true. That's a good point. I remember when Sam and I first got married,

we were so buried in debt. I don't even know why we were looking at houses, but there was this house in a subdivision called Jackson Valley. And we just thought if we could get a house in Jackson Valley, life would be perfect. Our life would be perfect. And it's funny because, you know,

time happened. We got ahold of Ramsey. We paid off our debt. You know, we went back to Jackson Valley just to look. And it's funny because, you know, time happened. We got a hold of Ramsey. We paid off our debt. You know, we went back to Jackson Valley just to look. And I'm like, what was I thinking? Why did I think this house was the bee's knees? All these folks living in Jackson Valley right now listening to like torches. Not cool, Jade.

It's a great place to raise a family. I'm sure it is. But it wasn't. It was no longer the dream. That's all I'm saying. That's right. All right. For the Warshaws. That's right. All right.

That does it for today. Thanks for hanging out with us. Don't forget, if you want to listen to the full show, you can listen to it on the Ramsey Network app. This is The Ramsey Show. Thank you.