The Ramsey Show - App - Should I Wait for Student Loan Forgiveness (Hour 1)

Episode Date: April 5, 2024

Девочка-пай Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create amazing relationships. I'm Ramsey personality, George Campbell, joined by my good friend, Jade Warshaw. We're taking your calls at 888-825-5225. If you've got that burning question, you find yourself at a crossroads, you're not sure what to do next, you're in a pickle, we're here for you. That's what we do. Whether it's about your money, your life, your relationships, we want to help you take the right next step. So Erin is kicking us off here in Knoxville, Tennessee. Erin, welcome to the show. Hi, thank you for taking my call. Absolutely.

How can we help? Yeah, so I am in a unique situation. I am currently in vet school with about two years left. And through some loan simulators and things like that, I've been able to calculate that I'm going to end school with about $400,000 to $420,000 in student loan debt. So I guess my question is related to how can I set myself up now and in the future for the best financial position to be in? And should I take advantage of situations like the public service loan forgiveness to potentially rely on that for some of this loan debt? Well, I mean, you say you have two years to go. So right now would be the time to start, like stop in your tracks and stop creating more debt because how much do you have at this point so at this point I'm about two forty thousand dollars in debt um but I have two

years remaining in my vet school program and and then your question after that was basically what can I do to have better choices and be on a better financial footing? And the answer to that question is right now, like you've got 240,000 now, you got to turn the faucet off. Like you're just going to, there's no point in letting this get to 400, 425, 450 when you can stop it now. And I think that's the first thing is let's come up with a path to where you can finish these last two years and we're not taking out student loans and going into massive amounts of debt

in order to do that. Is that, I mean, that's fair, right? Yeah, absolutely. So what would that look like? Well, it would likely look like probably finding a job while I'm in school okay like that to pay for some of the pay for some of the tuition and fees that come up perfect then i guess i don't really have any other debts outside of my student loans.

Uh-huh. And so I'm currently renting an apartment. Let's not take solace in the fact that you don't have any other debt outside of your student loans because your student loans are astronomical. So I don't want you leaning on that like, well, it's only my, like, it's just these student loans because it's a lot. So I don't want you to let your mind go there. Are you single? Go ahead, John or George. Are you single? Go ahead,

John or George. Are you single, Erin? Is it just your income? I am single. Yes. Okay. What's your current income? I am currently a full-time student. And as far as in school, it's kind of tough because it is a professional program to have income on the student loans. Okay, so you're putting all of your life's expenses on these student loans, essentially. Yes. What will you earn when you get out of school? So coming out of school, it's going to be dependent on location, but about $100,000 to $150,000 starting out.

And you understand that if you're going to go the student loan forgiveness route, you would have to work for a nonprofit animal welfare organization or shelter. Yes. Or like the Department of Agriculture, which means your income is going to be limited. Yes. You're not going to make as much as if you were in private practice. Yeah, I've looked at some of the average salaries for some of those positions. And again, location dependent, but about $90,000 to $100,000.

Okay, so think about it this way. Let's say you go and you make $90,000. That's a best-case scenario right out of school. Well, making $90,000 and now you still have bills to pay, you're only going to be able to put away, let's say, 30 if you're lucky on your student loans every year, which means you're on a track with interest to maybe pay this off in 15 or 20 years. That plan sucks. And so we're trying to set you on a path to where you're already going to graduate with debt. We know that. We're trying to limit the damage and stop the bleeding so that you can get out in three or four years instead of that.

So if you can go out there in the marketplace and be making $150,000, well, that changes the numbers. And that's why I'm not a fan of these public student loan forgiveness programs. Number one, very hard to qualify. You have to play their game perfectly. You can't have anything wrong on the application or you're denied. And it's abysmal seeing the rates of forgiveness that are actually happening out there. So it's not a plan you should bank on anyways. But the other side is that you're locked into working for these nonprofit agencies, which limits your income. You might be able to make double in a private practice, but you can't because you're handcuffed

to this nonprofit and to this PSLF. So do you see the conundrum here? Yes, I do. And so your best bet is to number one, minimize the damage. Is there a way to transfer and go to a more affordable vet school at this stage? At this point in my education, unfortunately, no, because I would likely have to backtrack just because some of the programs are so different from each other. Do we know that or is that an assumption? Do we know that for real? Yeah, I've looked into it when I was way earlier on in my academic career and I had actually a close friend who did transfer from one program to another and had to backtrack by a year. OK, my next question would be, how old are you?

I'm 25. OK, there's not I'm just going to be honest. There's no scenario where I'm going to say, yeah, just go ahead and take these loans and, you know, deal with it when you deal with it. So for me, even if that means like I got to take a break and stack up some money so I can pay for the next semester, I'm going to do whatever it takes to make this happen. Because there is a part of this equation where there's something that we want and we want to have it quickly, right? When you think, oh, this is the career I want. I want it in four years. So I'm going to take this degree and I'm going to take student loans to make it happen. But just like so many of the other things that we talk about with finance, it takes time in order to have what it is that you want. And sometimes with education, it's no different,

right? You want this fancy vet degree. It's expensive. You can't afford it. So there is something to be said for, okay, how much time realistically is it going to take me to get this? And I might not have it by cultural or, or normal standards of time. Does that make sense? Yes, it does. And so yeah, we think, okay, four year degree, maybe five years, but this might take you longer to have that. And you have to decide, is it worth me having it the right way, the way that causes the least amount of risk and friction in my life? Or do I want it now the way I want it and I'm going to go into $500,000 of debt in order to get it and then make $30,000 a year debt payments? I mean, the choice is yours.

So Aaron, you got some homework in front of you. And like we said, your best path is to limit the bleeding here and then make as much money on the back end and pay this off as quickly as possible. But I would not graduate and then hope that 10 years down the line of working in nonprofits that you get these forgiven. That's a bad plan. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Jade Warshaw. Open phones at 888-825-5225. Now, if you've been listening to the show for about 10 minutes,

you know about our world-class budgeting app called EveryDollar that helps you manage money the Ramsey way. It simply works whether you're on iOS, Android, or online. And you can start EveryDollar for free and immediately see where you stand with money. There's a reason we tell people when they call in, have you actually made a budget? Have you actually looked at the reality of your finances and gotten organized and stopped the overspending and save more? So in EveryDollar, there's a new feature in the premium version that will show you a long-term financial roadmap where you can track your net worth, your debt-free date, even your retirement date, your baby step progress, and more. So go download the app on iOS, Android, or just go to everydollar.com.

And speaking of Every Dollar, Jade, we will be doing, you and I, a free budgeting live stream on YouTube, on the Ramsey Show YouTube channel on April 11th. And we're going to be answering your top questions we get around budgeting. Like, how do I get started? I've never budgeted before. Can I budget and still enjoy my life? That's a great one. How do I deal with changes that are coming up throughout the month? How can couples budget together? How do I get my spouse involved? And also answering your questions live from the chat, on the phones. So, it's going to be a good time. And if you want to stay tuned to that, you can also answering your questions live from the chat on the phones. So it's going to be a good time. And if you want to stay tuned to that, you can also ask your budgeting questions at ask at ramseysolutions.com. And be sure to tune in on April 11th for that budgeting live stream.

If you hop over to the YouTube channel, you can hit the little button to be reminded. Yeah. Because I will forget in the grand scheme of the internet. There's a lot going on out there. I'll remind you, George. Thank you. I'll be here. All right, let's get to the internet. There's a lot going on out there. I'll remind you, George. Thank you. I'll be here. All right, let's get to the phone. Savannah is up next in New Orleans.

What's going on, Savannah? Hi, thanks for taking my call. Sure. Yeah, so my question is, I recently read the Total Money Makeover with my husband and we have honestly never budgeted before, have kind of been irresponsible. We currently are homeowners and we have about $10,000 in credit card debt. However, I do have $6,000 in our savings account. I'm really passionate, really want to get this debt paid off. However,

I'm so nervous to use the $6,000 in our savings to pay off debt simply because since we do own our home, we do live in a flood zone. It's very hurricane prone and my deductible on my homeowner's insurance is exactly $6,000. So if a hurricane hits, we need a new roof, our house floods, it's going to cost me $6,000. And that's why I have that in the bank account to begin with. So I guess I'm just wanting to hear your perspective. Should I have that in the bank account to begin with. So I guess I just want to hear your perspective. Should I use that to pay off this debt or just kind of I'm not sure where to go from here? I would.

If I were in your shoes, I would most definitely use this money saved, all but $1,000 and throw it towards your debt. Is the credit card debt your only debt? Yeah, our cards are paid off. I do have, of course, my mortgage. But other than that, that's it. Yeah, I would do it. I mean, think about it like this. I know this might seem kind of funny, but I'm like, listen, it's not hurricane season yet. So you've got some

time to pay off this debt and start saving up very quickly. And there's a big part of this where I like that pressure of feeling like if I I do this I've got to move quickly because so many people think that they can just kind of patty cake their way through the baby steps and this is a great um incentive for you to move quickly and move at the speed of intensity that we would suggest for people to move do you see what I'm saying I do I even have another three thousand dollars saved up because I started my young children a college fund. So I kind of have my baby step out of order. Hey, there you go.

That's socked away in the kid's college fund. It's already in the 529? It's already invested. Or is that savings? Well, it's not in a, it's just, it's in a separate savings account. Okay. Not in a college fund. It sounds liquid to me.

Should I use that as well? Yes, ma'am. That means you have $8,000 you can throw at 10, which means you have two left. So then the question becomes, how quickly could you pay off $2,000? Next month? Now that we've started budgeting, I think we probably could get it pretty quickly. We've been irresponsible with our budget before, but we downloaded the app and I love it. And we're really focusing on our budget. So

I do think in maybe like two, three months, we probably could get the other $2,000. What's your household income? It's about $100,000. So let's say, do you know what the take-home pay is every month out of that $100,000? Yeah, we bring home just under $8,000 a month. Oh my goodness, that's incredible. That is. So you're telling me out of $8,000, month, you couldn't find two to throw at the debt?

Yeah. But we have two children. Well, how much is your mortgage? My mortgage is $1,200. Okay. That's not bad. And you've got two children. What age? Four and two. And they're both in daycare. Yeah. Okay. So what are you paying 3000 a month for daycare? I actually have a really great local church daycare. So we pay about 1500 a month for both of them. So where's the rest of this money going? Because those are generally the two biggest expenses. You don't have car notes. You don't have any other debt. Where's the rest of the money going? To be honest, we just started budgeting last month and all of our money was just literally going down the so then george george is right george is right that two

thousand dollars is definitely there because yeah because unless you can name off one other major expense that's throwing off our brains right now if it's not the mortgage and it's not daycare and it's not the cars then everything else is tiddlywinks. Okay. So here's your homework, Savannah. You and your husband, you're going to sit down, you're going to make that every dollar budget, and you're going to list out food, utility, shelter,

transportation, insurance, list your minimum payments on the debt, and then see how much money is left over if you just followed that plan. And my guess is you'll go, oh my gosh, if we actually followed this, we would have $2,400 extra this month. And guess what? You knock out the credit card next month, you just freed up the credit card payment. That now becomes another part of the budget to help you get that emergency fund even faster. Okay. That's it.

Okay. No, that definitely makes sense. I think food was our business expense. I was going to say, check that DoorDash, check that Uber Eats. I guarantee you it's somewhere in that category. Yeah, it was, it was, it was a bad, whenever we looked at our budget for last month, it was like $4,000 worth of food. Listen, there it is. And there it is. You're not alone. Like Michael Jackson said, you're definitely not alone in that category, but you can get it on track. Just, you're going to have to cut back and you're going to feel it, said, you're definitely not alone in that category, but you can get it on track. Just you're going to have to cut back and you're going to feel it, especially if you're used to just being able to run out, pick up a meal, you know, call it in and have it delivered.

That's definitely going to be a behavior change, but totally going to be worth it in order to get this $10,000 credit cards paid off and have a three to six month of real emergency funds sitting there for you. This is amazing. I feel really good about this. I'm happy because there's so much hope in the situation. Well, at first I thought she was going to say, oh, it's our mortgage. Like our mortgage is 60% of our, you know, something crazy.

But listen, DoorDash, it's... That'll get you. Yeah. And she was investing in the kid's college fund, which is a good thing. But the problem, Jade, is a lot of people are doing a lot of good things at once and then they become bad things. That's right. Or out or out of order yeah i'm trying to pay off debt but i also want to invest but i also want to save up for this thing and i also need to cover this thing and there's a method to the madness that is called the baby steps that's right so a thousand dollars

is your starter goal that's baby step one get that baby emergency most people get it in 30 days or less she already had it yeah so you leapf to two. Pay off all consumer debt outside of that $1,000. Any savings you have goes toward it. We're pausing investing, even if it's for the match, because that frees up some serious money that you can use to accelerate your baby steps. And most people are done with that in two years or less. 18 to 24 months for baby step two on average. Very good.

And then baby step three takes another three months, six months. Some people it takes 12 months to get that fully funded emergency fund of three to six months of expenses. And I always say it's basic expenses because a lot of people, it takes them forever to save that up because they're saving up all their bells and whistles budget. Right. And I'm like, no, this is the money that it takes to keep things. This is the crap hit the fan. What do we need to cover? That's right. This is not all the extra luxuries. That's right. And then baby step four is my personal favorite, right?

Four, five and six. You're doing them simultaneously. But I love that initial baby step four of saving 15% of your gross, really, income every month. Yeah. And so that's my favorite. And of course, you're doing that at the same time as baby step five. Saving for the kids college. But even then you do them in order.

So you got to put your own mask on first. I was just on a flight and the flight attendant, we had our baby. Good word. And she said, she went over to my wife Whitney and said, remember to put your mask on first. And I was like, what a great reminder for life and finances. Yes. Like I love that you want to take care of the kids and help them go to college debt free. But if it means you're going to be broke in retirement with debt and nothing saved in the nest egg, that kid's going to have to take care of you. That's facts. Mom and dad are going to be moving back into the house, and that becomes a real burden later on when you're not prepared. So that's the baby steps, and Jade and I both followed them. They work. They still work in 2024. They worked back in 1992 when Dave started this show, and they'll work 30 years from now.

It's God's and Grandma's ways of handling money. That's what we do here. The principles don't change. The methods may change over time, but it works. You get out of debt, you have an emergency fund, you invest for the future, you're going to be okay. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Camel, joined by Jade Warshaw this hour. The number to call is 888-825-5225. You call us up. We'll talk about your life and your money. Jacob is up next in Los Angeles, California. What's going on, Jacob? Hi. Thank you for taking my call. Sure. How can we help?

So I kind of need some, I guess some direction in terms of what to do next in my life financially. Um, my parents recently went through a divorce and so I kind of had to take over, um, as like the main contributor to the household financially. I'm currently living with my mother and my younger sibling. So I'm kind of paying for mortgage, you know, all the insurances. Why is that? Why is mom not working? Oh, no, no, no. She is. She is. So because, you know, cost of living in California is insane. The way we set it up is I pay for, I say, I want to estimate like 60 to 70% of my take-home pay. And then the rest is made up by my younger sibling and my mother. How old are you?

I'm 28 right now. Okay. So when you say 60 to 70% of your income, tell us dollar wise how much how much money is this costing you every month um i would say maybe around 28 to 3 000 okay so you're spending 3 000 bucks kind of paying the the the things that make the house go around and tell me again explain to me again why mom is not contributing no no she is um but But how much is she contributing, if you're contributing that much? Right now, she's contributing maybe like $1,500. And explain to me why that is. Well, she doesn't really make much.

So because I make the most in the household right now, so I wanted to, you know, obviously. So did she ask you to take on the brunt of this? Or was this something you sort of stepped up and went, Mom, here's what I'm going to do? Yeah, no, I definitely stepped up. I mean, it isn't fair for her or for me to force her to try and find a job out of nowhere. The scary part is it's not fair for you to prop up a lifestyle that's not sustainable for them.

Because let's say you go and get married next year you move out you're not still paying all their bills and how old's your sister uh my sister is 25 um i guess to give a little bit more information um so in terms of the unsustainable lifestyle it it more or less is the reason we she got a job is because if me and my sister were to contribute you know a hundred percent of our take-home pay we would be able to afford you know all the groceries and you know everything else to make the to live um but because she as a you know wonderful mother she is she's like oh i don't want you or both of you to you know not have any savings for the future so she said i'm going to get a job to do it but because objection wait a minute let me let me jump in here okay a couple

quick quick questions you guys live in los angeles but it doesn't sound like it's for the reason of a career like nobody's like listen i started my my firm here and now this is where i'm at it sounds like you guys are kind of making ends meet, to use your terminology. Why are you still living in such an unsustainable, to quote you, inexpensive area? Well, my dad's business was here, so we all moved here. And my mom does help with that. Even through the divorce, it wasn't an ugly divorce. You know, now it was one of the situations where, you know, they got married, you know, out of necessity because they needed to help each other.

But that money is not filtering into your lifestyle now because they're now divorced and the two children are grown. So my question stands. It sounds like if this is an unsustainable situation for your mom and I'm saying your mom because the two kids are grown like you're grown. So my question stands, it sounds like if this is an unsustainable situation for your mom, and I'm saying your mom because the two kids are grown, like you're grown. It sounds like she's got to decide where can she live that's not Los Angeles, California and afford her lifestyle. Because here's my second part of this. You're 28, your sister's 25. Typically, the reason that somebody would say, somebody your age would say, hey, I'm living at home

is typically because they've got student loans, they've got bills, and it's cheaper for them to live at home than it is for them to maybe do something on their own. And in your case, that's not really the case because you're paying for your mom's life. And I understand that there's been something traumatic here with the divorce,

but it still doesn't place that ball in your court do you see what i'm saying and so i think all three of you have to go what does my life look like where can i live where i can afford to be an independent person because do you have debt no i have no debt you have no debt there's nothing that stops you from saying hey i'm gonna go a further radius out from, you know, Los Angeles, California, wherever that is. And I'm going to figure out where I can live to do a job that I can make more money doing and support my lifestyle. What are you earning now? And what is your job now? I'm an analyst for a film studio and I earn gross is around $80,000. Okay. So that's great. To me, $80,000, you're doing good. Like there's got to be a life that you can have on $80,000. Is that fair enough? Yeah. Okay.

There, Jacob, on my screen here, it says, how do I make enough to take care of my mom? Is that the ultimate question? Are you wanting to make more so she can stop working? Yeah. She's working right now to help contribute, but obviously, you know, she's kind of getting up there. I don't know how to put that delicately, but because she... How old is she? She's turning 60, but she does have some health issues. So what is her plan for retirement? Because right now you just, you're just going to stunt your growth as an independent person to just, well, I got to take care of mom for the rest of my life. I'm going to live at home. What if she lives to be 90? Now you're 58 and still

propping up her life because she didn't prepare. Yeah. That's because that's the kind of situation I'm in. Like she does kind of have like a very loose retirement plan I don't think it's as structured as I would like personally what is it but lay it out so she so she said that her plan is to um well we'll still live in this house that we or this condo that we have and you know she did you say we'll like all of you will still be living together for her retirement no my sister is um planning to move out and so they'll just be me and my mother but this is not good this is not good this is not good yeah and i know it just is not good but um but yeah once she is old enough

to get social security she says she plans on finding like one of those um like i guess like apartments or whatever that is like income based or like low income something like that and um kind of live there but i guess another piece of information is my parents do have a second property that's paid off and that's they're getting like rental income but because of the divorce they were debating whether or not selling it or just do you know income. Do you know what it's worth? If they were to sell it, what would they take to have to split? I think collectively, if they sold it, they'd get maybe around a million. Okay, so she'd get $500,000 and then have to take out fees and whatnot, right? Yeah.

Is she getting rental income right now from this property? Yeah, right now. It's already been paid off for years, and they've been of- How much is she making from that? Now that it's split, she'll make around a thousand. And then what is she making from her job? Right now, she's in elderly care, so I guess it's based off how many people she takes care of. She's only taking care of one person. So she earns around $1,500 net. But she says she is planning on assisting another person that would bring her income to maybe three times. Listen, I don't mean any harm. You got to separate yourself from the situation. This is going to pull you under, dude.

You're going the opposite direction by saying, I'm going to work more so mom doesn't have to work. Yeah. Because that becomes enabling. And you're going to have to keep that up for the rest of your life. Because mom's not going to up and keep that up for the rest of your life because mom's not going to up and get a job 10 years from now if you decide to move out. Right. And right now you're paying,

like to your point, you're paying 60 to 70% of the household expenses. She has no reason. And in her mind, the plan is your sister can go on along, but you're going to live with me until I'm done. And that really puts you in a bad position. If I were your mom, I would be talking to ex-husband. I'd say, we need to sell this property because I need this $500,000 and

I need it in my nest egg so it can grow for me for the next 10 years. And she still has to work for the next 10 years. That's right. Oh my goodness. So Jacob, we're basically telling you to do everything opposite the way you're headed right now and it's because we care for you we care for your mom we want her to have a great life and currently her loose retirement plan is going to end up stunting your growth for the next decade or two or three and so we need to end this codependence right now otherwise it's going to hurt both of you in the long run so So sorry to hear that, man. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Jade Warshaw.

The number to call is 888-825-5225. This is your friendly reminder as things warm up, people are traveling, it's springtime, to come visit us at the Ramsey Solutions headquarters just south of Nashville, Tennessee. We were just out there greeting people from all over the country, sometimes the world. That's right. And we love to have you guys.

So come by. You get free coffee, free baked goods, a lot of happy faces out there. We come out every twice an hour, and we'll take pictures, we'll sign a book if you want to do that, and it's a great time getting to meet people and hear a snippet of their story uh it's a fun pit stop if you're coming through tennessee love it amanda's up next in honolulu hawaii amanda what is going on aloha aloha thank you so much for taking my call sure how can we help i uh my husband and I just got out of Baby Step 2, so we're debt-free. Woo-hoo!

And we're looking into the next step, which is the three- to six-month expenses saved up. My husband's in the military, so he gets a housing allowance, but we don't see it since we live in privatized military housing. I'm wondering if I should be including that number in our three to six month expenses or just go based off what comes out every month. How much longer will you be in this scenario where you have that stipend? His contract ends in 2027. So you could look at it a couple of ways. I definitely would want the emergency fund to be based on your life. But if you know that that's going to be changing here very quickly, then I would base it on what you know your life is about to be. In this case, you've got three

years. And so you might consider saying, okay, we're going to do six months or three months as is. And then just know when that time comes and you no longer get that benefit, we're going to do six months or three months as is, and then just know when that time comes and you no longer get that benefit that you're going to have to up, you know, you're going to have to up your emergency fund based on what your new mortgage or rent payment is. Okay, that's, what are your current expenses? They're between $1,200 and $1,500 a month. Okay. So let's say we went on the high end of six months, $1,500. So we're talking about $9,000 for a fully funded emergency fund.

Yes. And so I would just aim for that six months. And as your life changes, that may become three or four months of your new emergency fund, which still gives you a good buffer. So I like that sort of you're kind of playing both sides there, and it puts you in a good spot, especially as you think about, you know, deductibles for all your insurances. It just, I'd rather have you closer to the 10,000 mark regardless. Absolutely. And can I ask a follow-up question real quick? Sure.

So we're on, you know, we live in Oahu, Hawaii right now. All our family is in the mainland. Should I be putting like flight expenses into that emergency fund or a separate savings account just in case some family emergency happens? That would be, I would call that separate savings because emergency fund is for emergencies. So if something out of the blue took place and you had to deal with it, you've got the emergency fund. But if you know, hey, my family, they live a plane ride away and I'm going to have to see them from time to time, I would have that a separate account. That's basically just a sinking fund to know,

okay, how often do we plan on visiting them? Three times a year, it's going to be 500 bucks a pop. Well, that's going to be,500 we should have set aside. Okay. So you can build that in. I'm going to put $100 a month away for the next 15 months, and we'll get there. And worst case, you can still dip into that emergency fund if there is a true family emergency. Absolutely. Awesome. Well, thanks for the call, and tell your husband thank you for his service.

That's huge. I mean, people moving around all over the country. Now there's worse places to be than Hawaii. Absolutely. If you're going to go somewhere. It's a good discussion on that three to six months of expenses. You know, I think that people don't know, should they have three months or should they have six months? And so, you know, we always filter it through things like, if you're married, are both spouses working? Are they stable jobs? I mean, what job really is?

But you know what I'm saying? Like, it's different if you have two jobs. That's like a teacher and a postal service worker. Right. Pretty stable versus commission something where it's a, you know, startup. Right. Some of that tech world where there's layoffs all the time. Right.

If I was single, though, and I had one of those, quote, stable jobs, I'd still do six months. Oh, yeah. Of course, you want to consider the health of your family, the health of yourself, like the likelihood. There's chronic health conditions in the family. You got to worry about that. Yeah. So there's some things that you can filter through to figure out what really is most suitable for you. And then there might be a situation like this is the way Sam and I are. I'm like, we both have stable jobs. There's two of us working. We don't have health concerns. I just like having six months of it. I just want as much as possible. So there's that. And then there's a whole idea what you said, George, which maybe you have just a low cost lifestyle. You always want to make sure that

your emergency fund is at least enough to cover your home insurance deductible, the car insurance deductible, all that can add up. Yeah. So it's good to think about that. Good questions. Thank you. All right. Tracy is up next in Sioux Falls. What's going on, Tracy? Hey, guys.

How you doing? Doing great. How can we help? Yeah. So here's our situation. It's a real estate question. About a year ago, we sold our home under a contract for deed and purchased a different home. Well, two months into the contract for deed, it fell apart. They defaulted and we ended up having

to dissolve that. So we went to plan B and we quickly got a renter and the renters have been doing a great job. And we kind of bought that house at the right time for the right price in the sense that the renter is actually paying us about $1,100 more than what our mortgage is on that home. But we're coming up on a year and at the end of their one-year lease, we'll have an opportunity if we want to, to sell that home and put that equity towards our current house. Just wondering if you guys could weigh in for me, if that would be a wise choice. The little caveat here is that my husband is actually a pastor. And so with the higher mortgage that we have right now, we have been able to kind of capitalize on a higher mortgage payment. and it's actually reduced our insurance premiums

because we pay for those through the marketplace. So just kind of wondering what your thoughts are now that we're at a point where we could sell or we could just continue on with the venture. Okay. What's left on your current primary home mortgage? So on the house that we live in right now, we have a mortgage of $340,000. Okay. And on the rental? I'm sorry. No, no, no. I'm going to back up here. So on the house we're living in, that is $440,000. Sorry, you broke up with us. Speak directly on the phone. See if that helps. Okay. On the house that we're living in right now, we have a mortgage of $440,000. Okay.

And on the rental home, we have a mortgage of $65,000. Okay. What other debt do you have? Zero. Okay. And you guys have a fully funded emergency fund? We do, yep. Do you have one for the rental home as well? Um, we did, we upped emergency fund, um, after we kind of chatted with our financial advisor, we upped that. So we're at like a 30,000, we have it funded for the two if we needed it. Cool. And what's the rental worth if you sold

it after the year was up? Um, right now it's about420,000. Okay. So you probably net around, I don't know, $320,000 out of the deal? Yeah. If you sold it? Right around $350,000 is what we figured because we actually have somebody who's interested in purchasing it. So we wouldn't need to pay for real estate fees or anything like that. Okay. So what would this do? Just help pay down your current mortgage? Is that the goal here? Yeah, exactly. So when we bought our home a year ago, we're at like a 6.1% interest rate. So kind of like our nature is that it makes us feel a little bit itchy to have a high balance on our mortgage with a kind of high interest rate. But our long-term goal has always been to have a rental property kind of in

our portfolio, but it just sort of feels like a question of timing. Like, is it prudent for us to keep this right now? I think you're asking yourself the right question. If I were in your shoes, it would be really important for me to live in a paid-off residence before I had a rental property, especially a rental property that would be paid off soon. I mean, you only have $65,000 to go, if I heard you correctly. And so if I were you, I'd sell it. I'd take the $350,000, I'd put it on your mortgage, and that leaves you with less than $100,000 to pay off. And how quickly could you pay off a $90,000 mortgage with you guys' income is the question.

That's how I'd be formulating this thing. And my thought is you'd be debt-free, mortgage included, very quickly. So thanks for the call, Tracy. Sure. Hope that helps. And the other option is you aggressively pay down the rental that frees up that payment.

And now we start attacking the mortgage and you hang on to the rental. I'm okay with both of those plans, but if you want to be debt-free sooner, sell the rental. I don't think you'll regret it. That puts this hour of the Ramsey Show in the books. We'll be back with you before you know it. Take care.