The Ramsey Show - App - Should I Pull From My 401(k) To Pay Off My House? (Hour 2)

Episode Date: March 30, 2023

Ken Coleman & Rachel Cruze answer your questions and discuss: "Should I pull from my 401(k) to pay off my house?" "Is it financially safe for me to retire?" "Should I stay in the military?" "How big should my emergency fund be?" Support Our Sponsor: PODS Moving & Storage Neighborly Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Take our FREE 3 minute assessment: 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 studio, this is The Ramsey Show. It's where we help you win in your life, specifically your money, and we look at it from a relational and a professional work standpoint as well. I'm Ken Coleman, joined by my colleague Rachel Cruz. The phone number, if you want to jump in on the conversation, is 888-825-5225. That's 888-825-5225.

Let's go to Idaho Falls, Idaho. Merrill is there. Merrill, how can we help? Hi, Ken and Rachel. Thanks for your time. I appreciate it. You bet. Well, kind of had a curveball thrown at me. I turn 61 next month, and I'm being downsized out of a 25-year career. Oh, I'm sorry about that. What's the industry?

Medical sales. Okay. I try to live life without any regret, but I gotta be honest. I've regretted not finding you guys about a decade earlier. I'm new to you guys. And, um, I, you know, I just appreciate what you do, but here's my situation. Life has changed. Obviously. Um, I've not been the best with money throughout my life. We're looking at, you know, massive changes. We just spoke.

My financial situation is this, is we're debt-free other than the house, which is a good thing. How much do you owe on the house? We owe $278,000. What's it worth? $600,000, between $600 $600 and $650. Okay. I've got a 401k.

Last I checked, was it about $540? But $60 of that isn't a 401H. And me not being the numbers guy, I don't think we can touch that. I think that's set aside for healthcare going on, which we need because my wife has issues her entire life. So my initial question is this. Our mortgage is $1,600 a month. Would it be smart and could I do it without getting destroyed by taxes to pay off the home out of the 401k once this is done? It would relieve some stress. It would cut into us substantially, you know, but then the second part of the scenario is, you know, work is on the horizon for sure for longer than I had anticipated. And what do I do next?

I want to focus on that part first because real quickly, and then I want to walk through some money options here, Rachel. You've been in sales for a long time. And just because you've been in medical sales for 25 years, I believe you said, doesn't mean that you can't sell something else. I mean, I think you know this, but it's kind of a mindset thing to go, wait a second, just because I've got a lot of experience in one industry doesn't mean that I can't transfer the skill plus the experience to another industry. True or false?

True. I think what I've found though, even even knowing this was coming, is getting on some of the sites, I don't even know what to search out. I'm just so new to the process. Well, I'll help you with it. I'll help you with it. Here's where I want you to start. I want you to start. Do you want to stay in sales? Presumably, you enjoy sales, and I think it's pretty obvious you're good at sales.

Is that true? Well, I can, to be honest, yes. I love sales as long as it's pretty obvious you're good at sales. Is that true? Well, Ken, to be honest, yes. I love sales as long as it's a specific type. I think you know what I'm talking about. Corporate America, at least in my industry in the last 10 years, has gotten pretty intense. And being an older guy, I want to help people. I would love to have a customer come to me and help them do the right thing. Now we're going somewhere. Now we're going. i want to help people i would love to have a customer come to me and help them do the right thing yes um now we're going somewhere it is now we're going so here's what this is tying right into the exercise i was going to give you you don't have to answer it on the show i don't want to put you on the spot and i want to get to these money options but i want you to think about

the services or the products you think in your general area of idaho falls the small businesses start there because you don't like big corporate. So let's look at small business. Now, in America, I think that's a classification of about 500 employees or less. So what are the products or services in your area that you have a connection to? You like them, you use them, or you know some companies that you hear good things about, and you know that when you sell something, you're selling a product or service that you believe in,

let's start the research there. Let's not just go on some job site and look for sales positions. Let's do some homework. Let's talk to people. You're 61. You know a lot of people. And I'm going to give you my book to get you jump-started. It's called The Proximity Principle.

I'm going to give that to you, and I want you to read it and leverage those relationships. If you want to, you could jump further on into the book and read about the web of connections. You know way more people than you realize. You put the word out about what's going on, the type of sales role you're looking for, the type of culture you want to be in. And Meryl, I've got news for you. In this economy right now, you're going to get hired quickly, but you've to be intentional and you got to put the word out. All right. Now I want to get to the money stuff here because Merrill said something, Rachel, that I wanted you to weigh in on. Instead of using that 401k money to pay off the house,

if it's just you and your wife, and I don't know that it is Merrill, but if it's just you and your wife, and I don't know that it is, Meryl, but if it's just you and your wife, why not sell the house and maybe downsize a little bit and you still take away the debt, but you still have the $540,000, I believe you said, in the 401k. Is that an option? And Rachel, is that a good idea? Yeah. How attached are you guys to this house? We're in a health question. We've been in it 20 years and we still have two older children that are not quite flown the nest yet but are very close how old are they um 19 and 20 okay okay yeah so and you guys are you're 61 is that what you said yes ma'am yeah so you're past the 59 and a half age mark to be pulling from retirement so my my thing could you pull yep could you pull 278 out of retirement that would leave you guys besides the 401h that you have it would leave you around 200,000 left in that 401k if you just did

that today um so my question would be to run the numbers for you guys to say, okay, does your wife have any retirement either? Does she have anything? No, she's been disabled lifelong and we've not pulled from disability for different reasons. Okay. Okay. So I'm going to stay at home mother and did an awesome job. Okay. Wonderful. Nope. That's great. I applaud that for sure. So what I would look at to say, okay, with this $200,000 in retirement, with a new job that I'm going to take and flood as much of that money back into the retirement, what can we live off of? What is our lifestyle? And so that's going to be you guys running some numbers on what your budget looks like, what your lifestyle looks like. But honestly but honestly Mira I probably would not do that no I'd sell the house if it was me because the 19 and 20 year old need to fly the

coop at some point and if we got a downsize that'd be four hundred thousand dollars in equity from the house and you pay cash for something small cash for something for four hundred thousand then then there's no mortgage in the picture you guys have your five hundred you know half a million dollars in your 401k left. And work for five or six more years. And you're good, yeah. So it's basically like, yes. So that, I mean honestly, Meryl, that's probably what I would do. But I know that's so easier said than done. I always hesitate with

the house because I understand. But I would not pull 278 out of your 401k because you guys are going to have to eat. So you want to be able to run some of those numbers. And I would sit down with a smart investor pro for them to look at your entire financial picture for you guys, since you're going to be the sole provider and have been, and just to kind of run some of those numbers to say, okay, how much do I have to make in a job?

But you don't want to work forever either. You want to retire. So looking at those options is going to be important. And you did great, Meryl. People are in a lot worse situation than you guys are. So you said I was bad with money, but you guys are doing great. Doing great. Thank you for the call. Don't move. More Ramsey Show coming up. Welcome back, America.

Thank you for joining us here on the Ramsey Show. The phone number to jump in is 888-825-5225. That's 888-825-5225. That's 888-825-5225. Let's go to Syracuse, New York. Julie is there. Julie, how can we help? Hi, Mr. Ken. Hi, Ms. Rachel.

Thank you for taking my call. You bet. I am 62. I'm single. I have one son. I'm debt-free, and I need and want to retire. I put 18% in my 401K. I have a 9-year-old car with 110,000 miles.

I have my bills. I can get by on approximately 3,200 monthly expenses. A little tight, but I can do it. But I will have to pay for my health insurance on top of that. I want to do some renovations, kitchen cabinets and flooring, and would cash flow this. My question is, should I drop my 401 to 15% and use the extra cash for the renos, or honestly, is it even safe for me to retire? My goal is not to spend my 401.

I have one son, and I want to leave the base of that to him, maybe just pull off some interest if I need it. I have checked into Social Security. I will get approximately $2,000 a month for that. And I have checked into my pension, and I'll get approximately $2,000 for that. My 401 is $266,544.22. And of course course that's really continuing to lose. Well, it's not losing unless you were to pull it out. It's just riding the roller coaster right now,

and the stock market obviously hit hard last year. It's returning. It's doing better. They're expecting it to end up positively this year, so it may take a couple years to get back to previous. How much is in your pension, Julie? They don't give you a number because there is no lump sum payment. I've checked into that.

There's not an option for lump sum for you? No. Okay. So the pension and Social Security is going to get you $4,000 a month. So that's – and do you owe anything on the home? And that's before taxes. I own my home. Okay.

So you're completely debt-free. Completely debt-free. So your question is, should you... My son, bless his heart, paid off the base of my home. Now, what he doesn't know is I have the money in the bank paid for him, but... So how much is in the bank besides retirement? What else do you have to your name?

Okay. I just put $42,000 into a CD because it was in my money market and it wasn't making anything and I'm getting 4% on that. And I only did it for six months because the market's so volatile that if the interest rates went up, I wanted to be able to change it. Other than that, I have at least $26,000 in there. $42,000 or $26,000? I have $42,000 that I just moved from a money market into a CD. Into a CD. For six months. And I have $26,000 in the bank on top of that.

Oh, on top of that. I'm sorry. Okay, perfect. Okay. And Julie, your question is, should you take, you've been funding 18%. Should you take it down to 15%? Yes, they match me 2%. And you're asking if you should take it down to 15%. And you're 62. Is that correct? Yes. And what's your plan for retirement? Do you have a date? Do you look out there and say? I'm thinking October of this year.

I really wanted to go, and my son wanted me to go in January. But with the market, it's just not feasible. But it's becoming harder and harder after four years in this. Yep, I hear you. I hear you. Well, the positive thing, Julie, if your numbers are all correct, I mean, you're going to have $4,000 a month

from the pension and Social Security. So that's going to take care of all of your expenses. You don't have any debt. You have no payments. So anything extra that you would take for renovations or do things you want to do will be interest off that 401k. And that will just continue to grow. I know that it looks bleak right now. But the market is returning. And over time,

you're 62. So by the time you're 82, that's going to continue to grow. And you can even take how much of the renovations because even taking some of the money that you have in your CD, you could take a few thousand dollars for that and get some new cabinets too. How much will that cost, the renovation? I'm hoping to keep it at $30 for flooring throughout the house and then maybe some cabinets for the kitchen. But on that $4,000 that I get a month, that's before taxes. Plus, if I quit now, I don't have my health insurance

that's already taken out of my paycheck. So I'm going to have that on top of it. Makes me very nervous. Yes. Well, so let's look at this. Let's say that you could walk away today. Nothing to be nervous about. Let's say you could walk away today. What does retirement look like for you? What do you think your day looks like? And I'm serious, like through the week, are you, are there hobbies? Are you doing anything? Are you sitting around watching The Price is Right? I mean, what does it look like for you? Just lunch and a movie with the girls and maybe go visit my son. I love it. Yeah. Here's one thing I would recommend. I've been studying this because I think retirement's overrated. And what I mean by retirement is this idea that I work for a long time, let's call it

40 years, and all of a sudden I just stop one day and now I'm just recreational. And there is a lot of data out there about how that really begins a physical, a cognitive, emotional decline. And so I'm going to challenge you to say that part of the fix for this could be you could walk away from your current job and retire, but you could pick up a part-time job that's fun and, you know, in a great environment, you're doing something you enjoy, no stress, and that's how you fund projects like the renovation. I just don't like the idea of pulling a large sum of money to do a renovation to a home at this stage in your life. Now I'm talking to you as though I would be talking to my mom and I'd say,

this is what I would, I wouldn't do it that way. I would find a way to save up the money and cash flow it. I'd work a little bit longer on the health care issue. I would take care of those things and not be in a hurry for traditional retirement. I just think I'd take a little bit more time, be a little bit more patient, maybe a little bit more aggressive. Or if I'm going to retire, I'm going to find a way to still make some money. Okay. Julie, how much will the health care be? Have you run any numbers on that, what it will be for you?

I have looked in for a moderate, and that means if anything were to happen, you've got at least $10,000 out of pocket, which really terrifies me. It's going to be about $400 to $500 a month. $400 to $500 a month, okay. So, yeah, I mean, if I were you with the renovation stuff, I would go slow. I mean, they're not going to be pulling any money out. No, I would not pull out any money from the 401 for renovations. That's just not enough.

Yeah, and you have a good cushion. I mean, you have 88,000 liquid. And so that's a great emergency fund, probably way more than what you need, because we even talk about it's three to six months of expenses. I would invest that. I would sit down with a smart investor pro, and I would invest a good chunk of that. Make that start working for you now, because now's a good time to buy into this market. It's going to go up.

Historical trends just lay this out. This is not some crystal ball, Ken's got a prediction. I would sit with one of our smart investor pros, Julie, and I'd take some of that cash and I would invest that and let that grow. Yeah, keep maybe 20 in a, you know, you have it in a CD, yeah, or high yield savings and all of that. They're getting great rates of return like what you're seeing, which is awesome. But keep maybe 20 in that, that you don't touch. It's just there for, God forbid, you just need it one day. Just don't even think about that.

And then everything else to just say, what can I put my money in that's going to make a large, because the market right now, you'll get a better return still with a CD. So turn off the news too, Julie, because I think sometimes we can get in our heads about how scary everything is and it feels like the world is crashing down. But sitting down with somebody and running these numbers out extensively of your lifestyle, what you need to pay and get some of these facts down, I think is really going to help you make that decision. But your lifestyle is low. So I feel like you're at a point that retirement's not too far off, that it really is doable for you

with these numbers. So I would not be as fearful as what you're feeling, but get some more numbers with your health care and all that and look to sit down with a SmartVestor Pro and see how much interest can I just live off of these investments by investing even more into it. Julie, thank you so much for the call. You're going to figure this out. Facts are good. Get as many facts as possible. I'd love you to sit with one of our smart investor pros in your area as well, ramsaysolutions.com for that. Don't move. More Ramsey Show coming up. Welcome back, America. Thrilled to have you here listening and watching the Ramsey Show. I'm Ken Coleman. I'm joined by my colleague Rachel Cruz this hour.

We're here for you. The phone number to jump in for your money questions, your work questions today. 888-825-5225. That's 888-825-5225. I'll tell you what I think would be fun. I'd love somebody who's really struggling in your occupation because you're in a really nasty or maybe toxic environment or you got a real doofus of a boss or maybe some gossipy coworkers. I'd like Rachel to weigh in on some of that because you're so nice. And I could give them some tactical stuff on work, but I would like maybe a pretty juicy situation for you to weigh in on. Just like a terrible boss situation. Or maybe they're just feeling like,

I feel stuck because I've got to pay off debt, and we can get you out. But if you're dealing with a tough situation, let's take one of those calls. I'd like to bring Rachel into that. I think she'd give some really, really interesting advice. I really do. Well, thank you, Ken.

I think I'd like to see a little sass. Let's see. A little sass coming out of you. The sass only comes when it's natural. We're not going to. No, I know. We're not going to. I think you're like to see a little sass. Let's see. A little sass coming out of you. The sass only comes when it's natural. We're not going to. Oh, I know. I think you're a fighter for people. You hear a negative situation, you get a little fired up.

So I'm hoping for that. We'll see. 888-825-5225. All right. Charlotte, North Carolina is where we go. Phil is there. Phil, how can we help? Hi.

Thank you so much for taking my call. I'm sorry. I don't have a toxic situation, but I do have a question, just bottom line up front. Great. No problem. What's going on? Trying to figure out if I should stay in the military or not. I'm in nine years now, and I just feel like I'm professionally stagnating. What branch? I'd rather not say, just keep it kind of service anonymous.

I appreciate that. Well, thank you for serving our country. You're a great American, Phil, and so we're grateful for that. So why do you feel like you're languishing? What's going on? So it's kind of a long story. I'll try to keep it short. I have two approaches. I have a logical approach and an emotional approach. The logical approach says I should stay in this

practically recession proof job to provide securities benefits, a house for my, for my wife and my family. Um, and at the end of 11, at the end of 11 more years, we get a pension, and now my wife doesn't have to work. She could want to work, but she doesn't have to. It makes logical sense, but it comes at a cost of mental exhaustion, professionally stagnating, and when I get out, I would be behind my peers in the corporate realm as far as what they're doing in corporate America. That's one side. The emotional side is,

I know I can get out, and I know I can make six figures. I've had multiple offers, but it's not as stable, and I'm essentially walking away from what could potentially be probably a multi-million dollar pension and taking away that security from something that's more dependable. Yeah, I think you've created it. And then there's logic and then there's emotion. I'm wondering if there is a spiritual or other answer that can sort of provide some guidance in that realm. I'm so glad you took us there. I probably would not have gone there, but since you took us there, I'll step right in there.

I do believe there's a spiritual answer, and I think it corrects the false narrative that you've created. I think you've created a false choice. But I will tell you that the spiritual answer first is that you were created to work. The Bible says you are uniquely and wonderfully made, and part of that isn't just the skill. The other part of that is what you desire to do. There are just certain things. Have you ever met somebody that's just doing a job, and they've got a bounce in their step, and they love it, and you talk to them about it, and you go, I just love this.

That's unique to them, because somebody else could do that job and be miserable within 30 minutes. And so to acknowledge your creator and your unique creation and how you're wired, that's the spiritual answer. I will also go one step further. There's a soul craving to make a mark, to make a difference. Rachel's soul craving is different than mine. Yours is different than ours. We all have this craving to make our unique contribution. And once we start getting a sense that what we're doing isn't it, and I think that's where you stand right now. You may not know what it is. You might, but what you feel right now is a meaninglessness to what you're

doing, even though that what you're doing is not meaningless. It's a, it's a missing soul connection. And so that's the spiritual answer. Now, real quick on this false narrative, this idea that if I go make six figures in the corporate world, I'm so glad you acknowledge that you can because you can, but that I go do that and yet it's not stable because corporate America, we lay people off, recessions happen. I get it that you've got the fixed income and the pension with the military, but at what cost of your soul dying and you having to fight that battle to not let that affect your marriage to not let it affect your mental health your physical health your emotional health me the data says that that people that are unhappy at work i

just shared this on my show rachel this week people that are unhappy at work live on average 10 years less than people are happy this This is science here. This isn't my opinion. So, Phil, I think that you got to go make more money, invest that money wisely. Your wife won't have to work. And I think you can make more over time using our investment principles. And you can get another job if you get laid off. How old are you, Phil? 31. Oh my gosh. You can out-earn that military pension by just going to work in the real world. So I don't think you have to worry about it. So what if you get laid off? I was laid off at 32. I made more money the year after I got laid off than the two years prior. So this idea that I'll have to stay in the

military, that's stable. And if I go to the private sector, even though I can make more money, it's super risky. I don't think you're risking anything. Does that make sense? It does. I wouldn't say, and maybe I misspoke, I wouldn't say super risky just relative to the other decision. 100%. Then it would be riskier. I acknowledge that, but that's a calculated risk. You see the difference?

I'm curious. I've read the book. I'm curious just on your all's opinion. I understand your views on pensions and how they're less in control of, they're more in control of the companies than of the individuals. Does that same rule apply to the government pensions? Well, you tell me. I haven't served in the military.

Do you have any control over your investment strategy within that pension fund? Yes. How much? Well, with the TSP, we can do whatever we want with it. Exactly. But with the pension at the end of it, it gains around, and I don't know this, I just know what I read on charts, but it gains over time with cost of living. Sure.

But let's do the flip side, though. Let's flip this, though. How much money are you making right now? Based on what the website says, including everything, $87,000. No, I'm asking you your salary. That's what you make? Yes. Okay. So that threw me off how you answered that. Okay. You make $87,000. What if you're making $187,000 and you're investing wisely and you have no debt? How much more ground are you going to make? Have you run those numbers? I mean, I think you really have to because you're aware of what you could make.

What if you lived financially frugally and you walked the baby steps out and you're investing that money? How much further are you going to be head after all those years? Because here's the deal. I think those are lofty goals for 187, but sure, I'll play. Sure. Well, Phil, I mean, what I would say to you is you're 31. The point that Ken is making is that you can go, even if it's not 137, maybe it's 120, right? But you're making great money out in the private sector.

You start investing. You retire a multimillionaire because you would do that if you start investing 15% of your income into retirement. So regardless of whether it's huge millions, medium millions, the quality of life between now and retirement, you can't put a price on that. And I would rather enjoy my life and retire with, I'm just throwing out numbers, $2 million than 3.2 million and have actually enjoyed what I'm doing. So that's where you can't put a cost on it, Phil.

So I think that you have a lot to offer. And I think that, yes, yes, relatively there's risk, but honestly out there, I'm like, there's so much to be had and so much opportunity that you're gonna continue to make more than what you're going to make the first year into working. So I think that you're spot on. Yeah.

Don't live a life that you regret. You got this. Welcome back to The Ramsey Show. I'm Ken Coleman. I'm joined by my colleague, Rachel Cruz. We're here for you this hour, taking your money questions. And if you've got some job-related junk that affects the money, meaning you want to get out but you're worried about the money,

I'll take those questions today with Rachel as well. The phone number is 888-825-5225. 888-825-5225. Well, it is that time of year where I spit nails, and that's when I think about taxes. If you've got questions about taxes, we get it. Taxes are confusing. It's scary. And we want to unpack a question, Rachel, from one of our listeners regarding taxes.

The question is, I'm really nervous about trying to do our taxes ourselves. Believe me, I get it. But it's almost $300 to get them done with a tax pro. What should I do? Well, if your tax situation is simple, you can definitely try using a tax software like Ramsey SmartTax. Ours is the best. It's going to guide you through the online filing process step-by-step, and you don't pay until you file. So you've got a chance to figure out, did I get it right? Do I feel good about this? Before you submit. Now, the federal classic version of Ramsey smart tax comes with built-in support. That helps. So you do it all yourself, but if you're a little bit unsure, you got that little chat bubble, I'm guessing, you know, that we all love. Hey, help!

You know, one of those deals. And there's a premium version that gives you priority level support for your questions. So if you still feel uncomfortable filing taxes on your own, it's worth connecting with a tax pro. We've got you covered there as well. Go to ramseysolutions.com slash tax. That's ramseysolutions.com slash tax. That's ramseysolutions.com slash tax to learn more about Ramsey Smart Tax or our Ramsey Trusted Tax Pros, like one of our endorsed local

providers. That's ramseysolutions.com slash tax. Now, I would be the person who just does not trust my ability with details or, quite frankly, to be focused long enough to do it right to do it like i've been there and all of a sudden i'm like squirrel and i'm looking at the latest news story or something and so for years we've used a ramsey trusted tax pro an endorsed local provider and and yes i gotta pay for it but the peace of mind uh does not worry about it so there you go i hear that all right triple eight eight two five25-5225 is the number. Let's go to Austin, Texas. Teresa is there. Teresa, how can we help? Hi. Hi. Thanks so much for taking my call today. I am getting ready to pay off the rest of my student loan. And after

that, I will be debt free except for my mortgage, which is $260,000. Congratulations. Thank you. Thank you. I'm a sole parent of a 10-year-old, and I really want to attack this $260,000 mortgage, but I'm feeling anxious or like I need maybe you know, maybe an extra big emergency fund bigger than the next person kind of thing. And I just wanted to get some guidance on that. I am driving a 12 year old car that has 200,000 miles. My mechanic does think it will make it three more years, but I do have that in my head that, you know, it might not. And I do have a very stable

income, but I still am, you know, like a little bit worried about going gung-ho in the 260 without a big enough emergency fund. Yeah, absolutely. How much do you make a year? I'm self-employed and I have two sources of income and it's around 216. Well done. And how much, if you've done, if you did a budget today, how much do you think your monthly expenses are out of that? I should have a better answer to this question. My son, my mortgage is around $3,500 and my son goes to a private school, which is about $15,000 a year. And I am, you know, I have, I have been putting money in retirement, even though I know that you guys don't teach that way. I've been doing that. And so, and after my student loan is paid, then the rest of the way that frees up an additional $500 a month.

For sure. Okay, so with your mortgage, private school, all of that, that's $4,500. And then cost of living, everything else on top of that. So what I would do, Teresa, is I would do a very detailed budget. And if you stay on the line, Austin will pick up and we'll get you a subscription to EveryDollarPlus because I do want you to know it's going to help answer this question for you. Say, hey, what does every month look like?

And you're going to list out all of your expenses. You're going to understand a budget. Live on that for probably two, three months to really understand this is a realistic budget for me. And then if I were in your shoes and hearing kind of you're a little risk averse, you're wanting a lot of safety, which I totally understand. We say anywhere from three to six months of expenses, but being self-employed, being a single mom, having a child, all of that,

I would probably err on the side of the six months just to give you extra peace. It's not going to hurt anything. And I would put that. And I would even pause your investing to speed that up to get that amount of cash in the bank. Do you have any cash besides what you're going to use to pay off your student loan? Do you have anything else? Yeah. After the student loan is paid, I'll have $20,000 in my emergency. Oh, my gosh. Okay.

Well done. That's amazing. So you've already jump-started that. So I would look at your expenses for your month. Because the way I look at the emergency fund, people kind of do these numbers differently depending on what they want. But when Winston and I looked at our emergency fund number, I said, I want to know that if we had no income coming in, we would not have to majorly change our life. So what is our day-to-day life? What does a monthly budget look like for our life? And multiply that by six. For some people, they say, just look at my needs. I would cut everything out

and that's great too. I'm like, I just like the extra, extra cushion. It just feels good for me. And so run those numbers how you want to say, hey, if something were to happen and I wasn't making any income, how much do I want to have saved? And look at that monthly budget that's going to help you. And I would multiply that by six, start saving towards that. And put that in a high yield savings account, a money market account.

Have it accessible though to be able to get to it if you needed it. And then after that, Teresa, with your car, I mean, I would put, you're making great money. You're going to be able to cash flow some stuff. But if you even want to, you know, have another savings account that you put a few thousand away for a car and make that a sinking fund where you save up a little bit over time. And then, you know, in two years when you're like, okay, I'm going to sell this junkie car.

I've saved up this over time and I'm going to apply this to the car. You can do that as well. So, but the great thing here is your income and you're going to be able to do a lot with that. You're going to be able to invest and get that emergency fund really quick. And yeah, you're in a really great position and cheers to you for being a single mom. I own single parents out there. We have a lot of respect for you because I know there's a lot riding on your shoulders. So well done. Oh, thank you so much. Yeah. I had a little, you know, in 2020, my income had some, one of my contracts was not stable. And then I got the second one and the second one is lower paying, but it's very stable, and I can work as many hours as I want. So part of me is like you don't have to be as risk-averse as you are,

but I still am feeling really cautious. Yeah, and I get that. That's fine. That's okay. That's not going to hurt you in any way. And I've got to say this, beyond being a single mom, you're a solopreneur. And, I mean, you've got two businesses. I mean, you are a superwoman. You really are. And a credit to you, a solopreneur. And I mean, you got two businesses. I mean, you're our superwoman.

You really are. And a credit to you, there's no stopping you. The reason I'm putting that out is it's tough enough being a single mom, but then you're running your businesses, you're crushing it. As Rachel said, you've done a wonderful job. So I hope you're encouraged that it's okay to be cautious, but now be bold because you've got a good strategy. And listen, you're going to get where you want to get. There's no stopping you. You got me? Thank you.

Thank you. I really appreciate the kind words. Thank you so much. You bet. I mean, you're absolutely amazing. You know, Rachel, there's something about that mama bear, these deadbeat dads, spineless, gutless. I know they're in pain, but they're still spineless and gutless because she's in pain. And she shows up, takes care of the babies, starts one business, somewhere along the line, another one, has gotten herself a good financial

position. And it just needs to be called out that it is hard to stop a mama bear. I know. I love it. She's killing it. Absolutely incredible. Absolutely incredible. Really awesome. Thank you so much, Teresa, for the call and for sharing a little bit of your story. You're a rock star. And you know what? Let's come around these single moms, shall we? If there's one in your community, let's come around them. Whatever that looks like, let's help them out. They deserve it. Great hour, Rachel Cruz. Thank you so much for hanging out. As always, I want to thank James Childs and the illustrious crew behind the glass

that keep us on the air, and you, America, for listening. Thank you. This is The Ramsey Show. Hey, it's Rachel Cruz. 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 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.