The Ramsey Show - App - My Wife and I Disagree on How To Pay Off Debt (Hour 2)

Episode Date: February 8, 2023

Dave Ramsey & George Kamel answer your questions and discuss:   "Should we buy a house if we're moving soon?"  The best way to pull retirement funds, "My wife and I disagree on how to pay off debt", Chuck & Cindy do a powerful & emotional debt-free scream from the hospice bed, "Where does a 401(k) loan go in the debt snowball?" from the blog: How the Debt Snowball Method Works Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the pods, moving, and storage studios, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. George Campbell, Ramsey personality personality is my co-host today. The phone number is 888-825-5225. Brenda starts off this hour in San Diego. Hi, Brenda. How are you? Hi, I'm wonderful. I feel blessed to be able to talk to you today. Well, you too. How can we help? Well, my husband and I are trying to do kind of a

retirement sprint. And so we moved to San Diego to increase our income. We have a home where we, in the Midwest, that's fully paid for. And so we will be out here three to five more years. And we're wondering about the wisdom of buying a condo or something instead of paying rent. I know there's different rules for a second home, but I'm just not sure in that short time period with all the closing costs and everything. I wanted to know what you'd advise. This is your residence for now because you're living there. Exactly.

For another three to five years. We've been renting for about a year. When we moved out here, my husband was a contractor and got a very generous housing allowance. But now as an employee, and I'm also an employee, we have about $14,000 a month after expenses, um, or about income. And then after expenses, um, including fully maxing our, our 401k at work and everything, we have about an extra 8,000 a month. So we could really, really pack on the house payments, but then in about five years, we would want to sell. We wouldn't want to have a rental that far away. And I don't think it makes sense to have a second home that far away. I agree.

So you're going to buy it and you're going to sell it when you leave. If that makes sense. That's the only thing that would make sense. That's the only way it makes sense. You're not going to buy it and keep it. Okay. So that tells us what our math formula is then. Is the house going to go up, or the condo,

going to go up in value during three years enough to pay the expenses when you sell it and still make a profit? And I've looked at the trends, and sometimes it definitely has, and sometimes it stays flat for a few years. And because we're looking at six to $700,000 townhouse, which is a modest, um, in the area we are, and you know, you're looking at quite a bit of closing costs and property tax and insurance and everything. And right now our rent is $3,600 a month, which is in a nice,

safe area. And we are paying a little more than we should, but you know, we've, we've got money in the bank, homes are paid off. So that was one of the things we're doing for ourselves. So, but we would be looking at, you know, around $4,000 to $5,000 a month at least on a 15-year loan. And I just am not sure that it pencils out. And so I, since you guys are such wonderful math whizzes, I thought I would pick your brain. So how much money do you guys have in cash, non-retirement? Right now, about $240. Okay, and that includes your emergency fund?

So you'd put the majority of that as a down payment? Yeah, well, I just put $80,000 the other day in a 4% CD kind of as our emergency fund because we had so much. And that's part of the reason I'm calling now is we're getting an uncomfortably large amount of money, which we never had before in our lives, not doing a whole lot for us. Right. So we would need to invest this somehow. And, of course, the market's down, quote, unquote, and things are on sale. So we could definitely do that.

You know, we've never had this situation before. Good for you. We started out great for 10 years and then kind of fell off the wagon for 10 years. And now we're trying to sprint into retirement. Um, but we are baby step millionaires. And so I feel like we have choices, which is such a great place to be. I don't think you're going to get rich buying this condo. And I don't think you're going to, uh, save enough if you don't buy it to get rich buying this condo and i don't think you're going to uh save enough if you

don't buy it to get rich so it's more of do i want to be an owner oh out there in california during this time because i mean san diego is a great market it's going to do well uh real estate we're predicting nationally is going to go up three to seven percent a year for the next three or four years san diego will probably do more than that, which will be enough for you to break even or make a profit. But you're not going to make a ton of money to where it's like, oh, I'm so happy I did this. It changed my life.

That's not going to happen. And you're not going to lose enough either that it's going to change your goals here, which kind of makes me think I might just rent just because of the hassle. And that's kind of where I'm at because even if we just make a little bit, when you're looking at 6% closing costs and taxes, because we've already taken our, what is that one time when you sell a house and you get a certain allowance? No, you get that every two years.

Oh, you do? Okay, well, we could take that. If it's your personal residence, you can make up to a half million dollars filing jointly if you've owned the house two years. Even if it's not your only residence? It is your permanent residence. This is where you live. But it's not because, well, our permanent residence that we'll move back to to retire in is still back there paid off. No, you live there.

In another state. You live there full time. You live there. This is your residence. You establish residence. So there's no question about that. That'll pass the smell test on the taxes. All of that said, though, you're probably going to take on a bigger payment and the hassle of homeownership and the hassle of having to divest the condo, get rid of it when you

move again, and all of this for 50 or 60 grand or something. And I'm just not going to fool with it. If I were you, I'd just stay there and rent and just enjoy this. Life is simple when you're a renter. Yes, I'm enjoying that part. And i think that five years of a couple hundred thousand dollars in investments would be more than that 50 grand yeah yeah i think you're gonna do just fine the market goes down i think it will go up higher than that yeah and if you if you if you enjoy real estate and you want to buy some real estate back home after you get back there you're gonna have some money to do that with so you know after you after you get back there, you're going to have some money to do that with. So, you know, after you finish the San Diego adventure, you're on. But for now, I mean, I'd park that money. I don't love the idea of the CD as your emergency fund because it's locked up in the CD. And if

you take that money out early, there's going to be some penalties. But you could invest the money, like Dave said, into the market and take $200 of that. And you could make some money off of that. You could park it in a high-yield savings account and make, you know, 4% right now, but I wouldn't just let it sit in the account either. So do something. Make a move either way. Absolutely. Absolutely. So, hey, good question. Good discussion. Thank you for calling in. Open phones here at 888-825-5225. That's 888-825-5225. You jump in. We'll talk to you about your life and your money. It's a free call.

Hey, Financial Peace University is up and running. If you want to get into a class, now is the time to do it. If your resolution needs to be re-solutioned, well, we can help you with that. We'll get you out of debt, help you build some wealth. Go to ramsaysolutions.com slash FPU class and get into a Financial Peace University class right now. This is the class that's helped 10 million people really do this. ramsaysolutions.com slash FPU class. Georgia Camel Ramsey personality is my co-host today.

Welcome to the Ramsey Show. Let's face it, taxes are confusing. And if you buy what some of the tax services out there say, you think you never get a grasp on taxes. You have to have somebody do it for you because you're too stupid. Well, we don't think that. Today's tax tip, we think you can do it. We think you're smarter than that, and you deserve the truth. Most tax software exists for one reason to take your money

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RamseySolutions.com slash smart tax. It's easy, and you're smart enough to do it. RamseySolutions.com slash smart tax. Vic's in St. Louis. Hi, Vic. Welcome to the Ramsey Show hey good afternoon i hope your wednesday's going well it is brother how can we help so i am a government employee working for the air force nearby i'm invested in the thrift savings plan and i'm also familiar with with your

mutual fund investing strategy and across equally across the four types of funds. I'm looking to retire in about four years and tell direct transfer equally into those funds. But my question pertains to when it comes to taking the distributions, how do I do that? Do I equal withdrawals or is there a situation where maybe I don't want to take as much out of, say, the growth in income or the international. I was just wondering if you could speak to that a little bit. I didn't really see anything on your website about that. The truth is it doesn't matter much. What you need to do is just figure out how much money you need coming home

and just have that amount come out of whichever funds you want to pick. You can have it done equally across them. I'm retired Air Force, so it's probably not going to be a lot. It'll just be whatever the required minimum distribution happens to be. Yeah, and you won't have that until 73. Right. So even then, when you get there, how much would you take, or what are you going to take? You're going to set your required minimums or set an amount or percentage,

whichever one you want to do, and you can have it come across all of them equally or you can have it come from one until it's gone and leave all the others in place. Like if you have a fund that's really cooking and you like it, maybe you leave it alone and you drain off some of the others. Right. You know, that's okay. You can sit down with your smart investor pro at that time and they'll help you develop a strategy but there's not a right or wrong thing here it's not like oh

well you absolutely need to go ahead and you know drain that dog fund off and you know let that one that's cooking real good let it keep going that's not a bad plan it's not the end of the world but you've already made it by then so you're in good shape you're making money you've you know you've built some wealth now it's just a matter of maximizing it and uh and so forth so you're right you're you're probably not actually going to be taking anything until you're forced to that's a good problem to have yeah that's a great problem to have and thank you for your service absolutely tyler is with us tyler is in chicago hey ty, welcome to the Ramsey Show. Hey, guys.

Thanks for taking my call. Sure. What's up? So me and my wife are having some disagreements on how we want to go about paying off our debts. You know, I'm a heavy Dave Ramsey listener. I listen to you guys all the time, and I follow the baby steps. Whereas she's been raised her whole life to believe, you know, just pay the minimum payment until it's all paid off that way. So I'm wondering a way forward on how we can agree on how to attack our debt.

This is a fun one. So how much debt do you guys have? So currently I have a truck loan with about $1,300 left on it, and we both have student loans at about $8,000 apiece. And that's everything? That's everything. Okay. What's your income? What's your household income? So I'm active duty Navy, so I made around $46,000 last year. And is she working outside the home? No, she's a stay-at-home mom. We have a four-month-old daughter. Okay. So we're looking at $17,000 in debt with a $46,000 income.

Correct. This feels like a solvable problem, but it sounds like she doesn't want to get out of debt. If you're just making the minimum payments, you're talking about a 10, 20-year payoff plan. With the interest causing the loan to balloon. Exactly. I've laid every bit of evidence and piece of information out. I made a debt payoff tracker. I made a very detailed budget for us to go off of. But this isn't a disagreement on how to get out of debt. It's a disagreement on should we get out of debt? Exactly. So does she feel, are you feeling the pressure? Is she feeling the pressure of this debt in your life? Are you guys living your best life?

I mean, yeah, we save a lot of money. I mean, we, we have about 30,000 in our savings account right now. So you can pay it off today. We're not hurting at all, but she's, she's more concerned about investing now because she's, she's, uh, she's really big on investing. She's been doing it for a long time. She's more worried about getting money and investments now and paying off debts later rather than vice versa, like how I believe. How old are you guys?

I am 26, and she's 24. Okay. So here's the thing. She's broke and 24 years old. So her plan's not working. And she's not big on investing. She's not old enough to have been big on investing very long, a maximum of a few years. And so you got $30,000 in savings. It's not about Dave Ramsey, and it's not just about getting out of debt, and it's not about the Ramsey way or something like that. The question on the table should be, that the two of you need to consider, is what is the shortest right way to build wealth and what is the data to back that up

okay there is zero research that indicates her process is going to work there's zero evidence that rich people do it the way she's talking about none none so it's not going to do with me or you or is my way right your ways right it's a matter of the data when you when you study millionaires you don't find any of them became millionaires doing what she's talking about doing. Instead, they almost unanimously agree. And, you know, 79%, 84%, 92% agree that the way we got wealthy is we got out of debt, so we had more money to invest. Absolutely. And, you know, that's the point that I've been trying to make for the longest time.

Yeah, and so her theory is just that. It's a theory, and there's no data to back up that she's right. So I'm not sure where all this arrogance is coming from at 24 years old. I mean, how much are you guys investing right now? So I currently do, so I have TSP through the military. I do 10% with the 5% match. And she recently rolled over her retirement from her last job into a Roth IRA, and we're investing in that, and that has about $2,000 in it.

Well, show her on paper. Here's what it's going to cost us in interest to pay off this debt over the next 20 years, and here's how much we could make in the market if we paid off the debt today, invested that payment, and still had $13,000 left over in savings. Yeah. If she wants to argue with math, that's the way to do it. But I think it's beyond math. Tyler, at the point that the two of you on any issue as a married couple

cannot find some common ground off of actual data that indicates the behavior you're engaging in, raising kids or being married or building wealth or having a career. You can't come into agreement on that. At some point, you've got to sit down with a marriage counselor if you can't get past that. What you should do today is write a check and pay off everything. George Campbell Ramsey personality is my co-host today. Chuck and Cindy are on the line for a very special debt-free scream uh cindy are you with us yep chuck and i are both right here hey chuck i know you're not speaking to me right now

but i just want to tell you hello so uh cindy reached out to our uh Ramsey concierge team, and so did Chuck's hospice nurse, asking to, as a hospice wish, to do their debt-free scream. And that's how we got introduced to Chuck and Cindy over the last couple of weeks here around Ramsey, and then got it set up with Austin, our associate producer, to do your all's debt-free scream today. So Cindy, let's start off with how much debt you've paid. So we've paid off $120,000, and it was mostly just mortgage stuff. We had paid off some other stuff after Chuck, while Chuck was in Afghanistan. But we had paid off, when we started the Ramsey plan, we paid off our mortgage. You paid off your mortgage, $120,000.

How long did that take? About 75 months. Excellent, excellent. And Chuck was in Afghanistan with the military? He was. He was what they call a dirt sailor. He was a Navy guy in the Afghanistan arena as basically a middle manager because they didn't have enough apparently so well thank you thank you for your service chuck we love you we appreciate you all

right now tell us your story of how we get to this call today and what's been going on with you and Oh, I'll try and do it without crying. So in June, Chuck was diagnosed with terminal brain cancer called a glioblastoma. And prior to that, we had, you know, we had been debt free and we're living our lives and we're so happy enjoying our lives. And when he got sick, one of the things that I was so grateful for was that we were definitely on the Ramsey plan because I didn't have a mortgage that I had to stress about paying off or paying at all, like no mortgage payment. We had no consumer debt and we had six months worth of expenses set aside. And when he first got sick, I sold my car and our little pop-up camper in order to move that to 10 months worth of expenses, of our normal expenses. So that has, what a relief. So let me get my timeline right.

So you were debt-free mortgage and everything before June of last year? Yes. Okay, so you're a little late to do your debt-free scream here, but of course we got you on the phone anyway, right? Yes. So you're 100% debt-free house and everything, and how old are you? We are 55 and 56. Okay, and that all happened happened and then he gets this diagnosis

yep in june yep okay yep and uh and so since june we've been fighting terminal brain cancer yep wow yep one day at a time and filled with gratitude amen amen uh but he he uh expressed to his hospice nurse that he didn't ever do his debt-free scream when he paid off the mortgage and that was one of the things he wanted to do yep yeah he's nodding his head so what was this process like for you guys as you attacked the mortgage? So we were probably a little different than most other people because we did all of ours with, I'll say budgeting. You know, we were just really way more attentive to the budget. We had taught Financial Peace University six times. And each time we were able to kind of look at our budget a little bit differently with a slightly different perspective. And so we,

you know, we used our income to pay down the mortgage. And, you know, it was basically an extra thousand dollars a month, or if there was, you know, something else left in the budget at the end of the month, we're like, okay, well, let's throw that to the mortgage too. You know, because every dollar's got to have its name. So, you know, we just kept throwing any extra money that we had in the budget towards the mortgage. Okay. People often say, I don't want to work this get-out-of-debt plan. I need to live my life because life's short. And today we're talking about life being short. And yet you all sacrificed to be debt-free. Do you regret doing that instead of spending all that money doing something else? So, no, because we really lived our life a lot. I mean, we went, I mean, we may have gone camping instead of a four-star hotel, but we went places, we traveled, we lived our lives. We probably spent more time doing some

of those things that people say, oh, I can't wait until I retire and I can do whatever. We really focused on living our lives before he got sick. Yeah, and before you got the house paid off even, but then you're still intentional with the budget and dialed it in a little more every time he taught FPU and still got the house paid off. Yeah, I just want, because sometimes it's, I have never talked to anyone in 30 years of doing this that regretted the sacrifice of getting out of debt, like they missed something because they did that. You know what I'm saying?

No. I agree wholeheartedly. It has been the biggest gift through all of this. I actually – I sent an email a while ago to you guys and it went through, you know, all the different filters and said, fill out this form. And I was like, eh, too much work. I was a little lazy, but basically the title of my email was, thank you for saving our bacon. Because truly, if it hadn't been for the Ramsey program, I am not certain, you know, that I would have

been able to literally, I just, I walked out of work on Thursday afternoon and, um, he had a seizure on Friday morning and I never went back, never looked back, was knew that we'd be okay. Yeah. Because, because of the FPU program. And he, he's a uh he's a good man and he knows that you're going to be okay that is one of his biggest concerns was he just wanted to make sure i would be okay yeah and you are yep yep other than a broken heart which i got with you and i'm trying to get through this without crying too sorry so we're going to be a blubbering mess here together, Chuck. I'm just saying, buddy. Oh, man.

What's your financial situation look like now with him being in hospice and you not working? So the VA has stepped up. There's a whole lot of behind the scenes, and if anybody wants that information, I will be very happy. But between his work disability, Social Security disability, and the VA disability, as well as the VA paying me to be his caregiver, we are fine. We are fine we are absolutely fine yeah good good i'm glad to hear that hon well chuck you're a hero man you served your country you served your wife and uh we are honored to do a debt-free scream with you today um pretty stinking incredible all right cindy you guys ready are you ready chuck yeah all right chuck and cindy raleigh north carolina 120 000 paid off house and everything count it down let's hear a debt-free scream three two one we're debt-free we're a little quiet

as it should be that's how it's done man oh man oh man oh man wow thank you both so much what a special call honor to be a part of it amen wow this is the Ramsey Show ស្រូវានប់ពីប្រូវានប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ព� George Campbell Ramsey personality is my co-host today.

Thank you for joining us, America. Open phones at 888-825-5225 sometimes one of you will say dave how can we say thank you well i'll tell you how you want to say thank you for the show and for the information and the inspiration that comes from these microphones there's an easy way to do that subscribe to the show hit follow or subscribe on your youtube button your spotify your apple button whatever it is share the show share the link to the podcast share the radio station you listen to us on tell your friends about it uh and you know leave a review a five-star review mama said if you ain't got nothing nice to say don't say nothing at all

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Samantha is with us in Atlanta, Georgia. Hi, Samantha. Welcome to the Ramsey Show. Hi, Dave. How are you? Better than I deserve. How can we help? So me and my husband got married a couple months ago, and we are working the baby steps.

We are on baby step four, where we're trying to invest and make sure our retirement's all set up and going good. But we're running into a little bit of a debate, I guess, between the two of us of trying to manage investing the amount we need to for retirement, but also saving cash for a house in the next couple of years is our real goal to have a good house down payment and get into a home. So we're trying to prioritize saving for a house down payment versus following the investing advice we need to as far as retirement. So that's what I wanted to talk to you about. Cool. So what's your down payment goal?

So when we did the calculation with a couple of different calculators and you guys, we feel like we have got, especially within this market, it needs to be below 300K as far as like the total for the house. So we're trying to save up, I mean, 5% of that would obviously be the minimum, but we want to do more if we can. Okay. So 15,000 minimum. And if you continue investing your 15%, how long would it take you to get $15,000 on top of that? That's what we're trying to figure out. We actually just started financial peace. So we're trying to get together a budget. But I guess built into this question is like for my company, I have a 401k that I'm already

investing 15% into. But for him, he just got a new job where he doesn't have a 401k offered. And so he was offered a stock option. And we didn't know if he should be investing into that or what we should do to make sure we're still investing what we need to. Well, he'll also have the option for an IRA, which will be outside of his employer, that you guys can max out to get to that 15%. And it's just 15% of household income. And so if it needs to be weighted towards your 401k plus your two IRAs, you can do it that way. But the discussion here is really about how soon are you really wanting to be homeowners.

And if you want to take down your investing a little bit to do that, to speed up the down payment process, you can do that. I would rather find other ways to do it, like increase income to get there personally. But there's no right or wrong here, as long as you're not pausing investing for a period of longer than two years. Okay, so if I'm having my 15% and my company for O and K... If you stop all retirement temporarily for two years and pile up money for your down payment,

that's what we call baby step 3B, and that fits within our plan. It's a temporary thing because you've got plenty of time. How old are you guys? 26 and 27. Okay, and so you're 28 and 29 and you start investing 15 of your household income into retirement and you have a fully funded emergency fund and no debt except the house and now you're a homeowner this is two years from now you're going to be very very wealthy you'll be just fine or you can say you know we're going to continue to put less than 15% of household income

in, but we're going to put something in to retirement, and that's going to slow down or limit the amount of our down payment in our three, what we call 3B. In other words, after baby step three of the emergency fund, then we start saving for a house, and what people do during that time is they put zero to 15 percent of their household income into retirement anywhere between zero and 15 percent for that two-year period of time is fine and then then you get the house bought and you put a solid 15 percent in there you start working kids college if you've got kids on the way by then and um and you start working to pay off that mortgage then is maybe step six as you have already discovered so the truth is you're not really ready to answer this question because you haven't even done your budget yet and you

haven't looked at how long it's going to take all you did is you pick out a house range of 300,000 and you've still got you know you got retirement accounts kind of lingering back from before you were married and he just got a new job and we just started FPU and we're trying to learn all this. So it's okay. Just breathe. Just sit right there, do your budget together, and then decide, okay, we're going to put nothing into retirement for a short period of time, build up our down payment really fast, or we're going to put 10% or 8%,

and we're going to build it up a little slower, or we're going to put the full 15% in, and like George said, we're going to take a side hustle of some kind or something and get the income up to build the down payment that way. Any of that is okay. Any of that's okay. You just don't want to have nothing going into retirement for 20 years. You don't want to have nothing going into retirement for 20 years. You don't want to have everything going into retirement, 25% going into retirement,

or 30% of your income going into retirement, and never save up a down payment for a house. So you've just gotten married. Now we're getting a house. Now we're getting a new job. You got a lot going on. You're going to get there. Just breathe a little bit. By this time next year, you're going to be really in stride. You're going to have a rhythm to this, and you're going to get there just just breathe a little bit by this time next year you're going to be really in stride you're going to have a rhythm to this and you're going to be

able to lay these goals out very clearly from financial peace university you're doing really really good really good start there tyler's in fresno hey tyler welcome to the ramsey show hey how's it going better than we deserve how can we help? Hey, so I just got involved with the whole Ramsey experience, and I guess my biggest question to you is, so right now I'm $70,000 in debt. $29,000 of that is through a 401k loan that I've taken out on myself, and I'm wondering, since I'm paying that back to myself, is that still part of the snowball? Or how should I classify that?

Yes, all consumer debt, which we would classify that 401k loan as consumer debt, would fall into the debt snowball. The only thing that wouldn't is your mortgage, and sometimes a HELOC if it's a huge, huge, huge number. So what other debt do you have and how much is it? Sorry, we lost you on the line there. Okay, try again. All right. Nope.

How much debt is it? You got me? So total, I have $70,000 in debt, and that comes from 29 of it, like I said, being the 401k loan. And then the other debt, I have $11,000 for my truck loan. I have a dirt bike, which is $13,000. And I have my wife's 4Runner, which is also $16,000. What's your household income? So total, my annual is 142 500 and that's without overtime i'm mostly make overtime and my wife um is around 10 grand okay so you probably make 160 a year between overtime and

her 10 grand give or take um and you've got $70,000 in debt. So how fast does 70 go away making 160? Pretty fast. Yeah. You guys have any money in the bank? They should. You got any money saved? I do, yeah.

Right now we have $22,000 saved. Perfect. You're going to apply that to your debt snowball. You just knocked out a truck payment right there, man. Yeah, got rid of the $11,000 and got well on your way on the next one down. So, yeah, just get in gear, man. Let's get after it. You're going to be debt-free by Christmas if you'll load this up and get after it.

That's plus or minus keeping the dirt bike. $13,000 dirt bike? That's a nice one. This is the Ramsey Show. Hey, it's George Camel. If you like what you heard in this episode and want to know more about getting started on the Ramsey Baby Steps, go to ramseysolutions.com and click on the Get Started button.

We'll help you figure out the best next step for you based on your specific situation. That's ramseysolutions.com and click Get Started.