The Ramsey Show - App - Should We Really Stop Investing To Pay Off Debt? (Hour 2)

Episode Date: July 8, 2022

Ken Coleman & George Kamel discuss: Is now a good time to sell your home? Stopping investments to pay off debt, Which debts to pay off first, When it makes sense to stop investing. 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

I'm out. Live from the headquarters of Ramsey Solutions, this is The Ramsey Show. It's where we talk about your life, specifically your money, your work, and your relationships. 888-825-5225 is the phone number. 888-825-52-2-2-5. I'm Ken Coleman, joined by George Camel in the studio this hour. We're here for you. Great group of people in the lobby of Ramsey Solutions watching us, George. From all over the country.

Like we're zoo animals, and that's always fun. We go out during the breaks and say hi. And as the hour was beginning there. But please don't pet us. No, yeah, no petting. It makes it awkward. No petting. We do a nice firm handshake.

That's right. But you can bring food. That's true. But, you know, it's like someone bringing food on a plane. Be wary of what you're eating. Oh, yeah. See, now, you'll be wary. If somebody in the lobby comes up with a smile and a snack, I'm going to try it.

You'll do it. You'll take food from a stranger. I'm not a fearful person. I don't think these people are strangers. Look at them. They have trust issues. They look lovely. Well, most of the time, they're eating food from our cafe, which is free, all the baked

goods. Right, right, right. So that's one reason enough to visit. Met a couple from Cincinnati last hour. I naturally asked them, did you bring some Skyline chili? Because if you won't eat it, James, the producer, he never turns down food. But if you offer 14-hour-old room temp chili, you're telling me you'd eat it. I absolutely would try it.

And James knows I'm telling the truth. I absolutely would. When I used to host a YouTube show years ago, people would bring food in the lobby and I would eat it. That's why they call him Iron Stomach Coleman. That's his old nickname in high school. All iron sides. Nobody's ever called me that, but that's fantastic. All right. Shannon is waiting patiently in Seattle, Washington.

Shannon, you're on the Ramsey Show. Hello. Hi. Thank you for taking my call. You bet. My question is, I want to be able to, I'm 51, and I want to be able to own my home free and clear by about 65. I want to be able to increase my Roth IRA contribution and SEP contribution, and also to be able to help my kids with some college expenses. To do so, my question is, do I sell my current home, use the profit, move to a less expensive town, less expensive home, try to do some extra mortgage payments, or do I stay here until my kids are done with school, which would be approximately eight years? They're ages 10 to 14, so they're young still. I mean, relatively young. How much would you stand to make on your house? I would make, after everything, I'd say about $250.

Okay. What about your job? Is that local? Yeah, I'm self-employed, actually. So could you move further out and be okay? I could, yeah. One of the reasons why I'm hesitant or something to consider is this property, the house that I have now, I have a separate ADU that I rent out for about $900 a month. Okay, so you'd lose that.

Which helps offset my mortgage. Yeah. I'd lose that. You'd lose $10,000 a year. I think, George, the question I've got, Shannon, for you is how much does selling the house fast forward? How much does it really add to the goals that you've got? Because there's going to be some downside, obviously losing the rental income. There's the move.

You're not going to be able to pocket all of that $250,000. You're going to have to put some of that into the next house. So I just wonder if you're working through this. Yeah, I want to put the whole amount in. I have six months of emergency fund. I don't have any other debt other than the house. So what's stopping you from just staying in the house, continuing to invest 15%, save for college,

and once the kids are gone, hopefully we have the house close to paid off? What's left on the mortgage? Well, that's kind of the tricky part. I owe $546 on the mortgage. So it's a pretty significant amount. And what's the payment on that? The payment on it is only $2,500. But the reason is about 12 years ago, I adopted a couple of my children and a lot of stuff happened. And that's when the market crashed and I renegotiated my mortgage with the lender to a 40-year loan. And I owe $366,000 at 4%, and then they created a separate account, $180,000 at 0%.

So the challenge is if I make extra payments of any kind, it goes only to the 0% part. It doesn't go to paying off the part that's accruing interest. Yeah, I don't like this. This whole plan sounds wonky. Well, from this standpoint, I kind of like selling and getting out from underneath of it. Yeah, I mean, it sounds like you might be able to refinance, but I want you on a 15-year. It sounds like you're on a 30-year right now, correct? Or a 40-year.

Well, a 40-year, right? Which I still have 30 years on. But if you refinance to a 15, you couldn't afford it. No. And so that tells me you have too much house and too much you refinance to a 15, you couldn't afford it. No. And so that tells me you have too much house and too much mortgage. And for that reason, I would sell. Yes. And downsize to something more realistic in your area.

Have you looked into that, what that would look like? Do you still need all the space? Well, I do. I have three children. In fact, actually, the house that we're in is a little bit too small for us. I converted part of my garage for my son to use as a bedroom. It sounds like we need to relocate somewhere where cost of living is lower. Is that an option? it is i live in a really um very sought after area i bet kind of an exclusive nice it doesn't matter shannon i know it's sought after and i know it's gonna stink you know pulling up stakes schools are really good yeah but there's good schools in other places there's good schools

in other places this is a reset for you financially that is going to just – I think you have to weigh it. I think this is a good exercise for you to go, okay, oh, I'm in really – my kids are in really good schools. We live in this really nice area. That's all nice, nice, nice. And so that's going to be a negative if we move. But then let's write down the positives for if we sell and what that does for your financial future and the goals that you have for your kids. And for you just mentally and emotionally. I mean, this is a huge weight of debt on your shoulders.

And you told me you want to be debt-free by 65, which is 14 years from now. And that plan could happen if you were on a 15-year fixed and you paid it off early. That's very realistic. But at this juncture, looking 14 years out and you're spinning your wheels, trying to pay off over a half million dollars in debt while trying to increase your investments, while trying to save for the kids' college. It's just too much. And so for that reason, I'm going to downsize. We can find a school in a different area.

And maybe not downsize in house, but downsize in mortgage. Yeah, and again, this is – I understand what I'm about to say doesn't really you know it doesn't go down easily for a lot of people that are in the situation but your kids are adaptable if you got to stick two of them in a room together they'll be fine you know because that's for a short season if you are resetting financially so this oh everybody needs their own room and everybody and she didn't say that but it's like well but i mean kids are adaptable. Yeah. And I think kids in today's world need to be a little bit more uncomfortable, shall we say. I like that. Cranky old man, but it's got some financial.

Such a curmudgeon, Ken. I am a curmudgeon. Great word, by the way. Thank you. During the break, we'll see if you can spell it first time without any kind of aids at all. All right. The curmudgeon and the camel. We'll be back right after this break.

Hey guys, George Camel here, and I'm so excited to tell you about the newest product from Ramsey. It's called Gazelle, and it's a digital banking experience that will help you spend and save the Ramsey way with banking services provided by Pathword NA. You'll get a single spending account with no monthly fees, and it's FDIC insured through Pathword NA. We're offering early access to our beta customers, so you can help us make it the best experience it can be. Just go to ramseysolutions.com slash gazelle to sign up for the waitlist today. Welcome back to The Ramsey Show. I'm Ken Coleman, joined by my colleague George Campbell. And we are here for you.

888-825-5225. We got our money calls. But today I'm in studio. So if you're struggling at work or you're going, Ken, I want to level up. Is now the time to get a raise? What's the best way to do it? I'm thinking about a different career path.

I'm working for a toxic leader who's a complete bonehead and sucking the life out of me. Or I work with gossipy, toxic coworkers. How do I avoid all that? These are things I talk about daily on The Ken Coleman Show. We can take those calls as well because, again, your greatest wealth-building tool is your income. Thank you, George. Ken, can I tell you, i'm going to toot your horn for a second we just met a sweet family out there from north carolina yeah and the young lady

said ken i got a job using your principles thank you george it's true and so you know what she did this was a couple years ago is that right if i remember correctly and she was in the interview process and she asked the manager three questions. We won't reveal those, but I teach people that the interview is just as much for you as it is for them. And the way to stand out in the interview, and this young lady did, was ask very intentional questions. And the manager said to her, wow, nobody's ever asked me those questions. And she stood out because of the questions that she asked.

So that was really cool. I got a little goosebumps when you told me that. That was really fun. And the other, the sister is in town for a dance contest. Nationals. Good to know. Yeah, she's into hip-hop dancing. So I thought you two should do a little.

We should do a collab. You guys should do something on the next commercial break. You only get to see that if you come live, Ramsey Solutions World H. At least once a show, Ken says it calls me the dancing camel, and that you need to tune in for that. Hasn't happened yet. Has not happened. Alright. Michael's up in Tulsa, Oklahoma.

Michael, how can we help? Hey, thanks for taking my call, guys. You bet. What's up? I got to listen to Dave about a month ago, and me and my wife have been talking to her about it. We want to try to get out of debt, and I just want to try to know where to start. Awesome.

We thought about canceling my 401K for a while to use that extra money to start paying off some debt, and I didn't know if that was smart. That is about the smartest thing you can do, and it's very hard for most people to do because it feels counterintuitive because you're getting a match potentially and you feel like, well, this investment is going to pan out. But it's kind of like it's tapping your head and rummaging your stomach at the same time. It can be very difficult to do multiple things at once and wonder why you're not making progress. And what stopping the 401k does, it does two things. Number one, like you said, it actually frees up cash flow for you to attack the debt.

But number two, it lights a fire under you to get rid of the debt faster because you want to get back to that compound growth. And I actually like the second reason better because it changes your behavior. And so pausing, what are you investing right now? How much of your income? It's about 6%, so roughly about $600 a month, something like that. $500 a month. That's a good chunk. Here's the beautiful part.

You're going to pause the 6%. It's going to go down to zero for a short time. But when you come back, you're going to come back swinging at 15%, almost triple what you're investing now. It's beautiful. And that's what gets me excited. So, Michael, you're on the right track. I would absolutely pause the 401K.

How long is it going to take to pay off the debt if you do all these things? You pause the 401K, get a side job, do whatever it takes, sell stuff. It's probably going to take a while because we've got quite a bit on credit card, house, and the truck thing. Well, what's your income? We just sold one. Roughly, I get started on a new job about six months ago, but probably going to be pushing 80. Okay. Is that household income?

No. My wife just went to work and started a job, but hers is going to be contingent on a contract. Give me a rough number. Hopefully, $30,000, $36,000. job, but hers is going to be contingent on a contract. Give me a rough number. So we're not 100. Hopefully 30, 36,000. Okay, so we're talking 115,000 in income. How much debt do you have total, consumer debt? Probably with the house credit card. No house.

Take out the mortgage. No, about 70, 60,000. Okay. I heard there was a truck. There we go. I heard there was a truck in there, George. Uh-oh. What's the truck worth? Ken knows how I feel about trucks.

Yeah. Well, we just sold one. When I started my new job, I got a couple of trucks. We sold one. It's a new one to my wife because of the low mileage. It's probably, I think, about $50,000 on it. And what could you sell it for today? Unfortunately, we got a price on it that we're way upside down on.

But you're telling me that most of your debt is just in this truck? Yes. Listen, Michael, just humor me for a moment. This is all on your behalf. Yes, Michael, just humor me for a moment. This is all on your behalf. Yes, sir. You said that you bought it for $50,000 or you've got debt on it to the degree of $50,000. Sorry, I can't think for a second. And then where did you get the quote from?

Was it a trade-in value from a dealer? A dealer just buying it. Yeah, but they're always going to low-ball try to sell it outright yeah yeah so could you get private sale for it probably over 50 what is the truck tell me what the truck is uh ram 1500 a ram 1500 what year uh 2021 oh my god ken i've It's 2021. Oh, my God. Ken, I've always wanted to ask this. You got a Hemi? Yeah. Yes. Sorry. Michael, George has no idea what he even just said. I've seen the commercials.

He has no idea. Okay. Here's one homework assignment for you, Michael, before you go to bed tonight. I want you to look for private sellers, also Kelly Blue Book, value on your truck as it stands right now in Tulsa, Oklahoma. I want to see what you can get for that because, George, I want you to walk him through, even if he's, let's say he can get $48 for it, or walking through why we want to attack this truck situation. Oh, yeah. Well, number one, the interest, Michael, what's the interest on this thing?

What's your payment? I think my wife said the interest is like 3% or something like that. We're paying like $800 and some a month. Oh, my goodness. $800 a month. That could be going towards your actual goals instead of going towards a depreciating asset. Yes, sir. So I'm thinking we need to get rid of this truck, and we also don't recommend anyone buy new cars unless they're a millionaire, which are you guys net worth millionaires yet? Not even close, sir. I want you to get a lot closer, and part of that is going to be selling this truck. Even if you're upside down on it and you need to go to your local credit union and get a personal loan, that's the only time I'd tell you to do that because of how dire this is. And so if you can scrape up the cash to cover the difference, that's even better. Do you guys have any money in savings?

Very little. Very little. Okay. Well, I want you to change your whole financial picture. And part of that is getting rid of this truck, and then you'll have very little debt left to tackle. Then we're going to get our three to six months of expenses. Then we can get back to investing. Michael, what kind of work do you do? I am a surgical instrument tech. Interesting. Are you a handy guy outside of the surgical tech work? You're pretty handy? Oh, yeah. I'm trying to work a job and everything else, but I'm not going to lie, the last four years, I've traveled so much, I kind of want to see my family a little bit.

I get it. I know I need to do it, but, you know, I've missed so much, I kind of want to make up time if I can. And I'm all for that. And I'm not actually suggesting what I think you think I'm suggesting. I'm saying for a short term, let's say that you're upside down in this truck. We figure out maybe it's five grand. Could you do some side hustle, handyman work to come up with that extra five so you don't have to go get a loan? And now we're – and we scrapped together $5,000, $10,000 for a minivan or something that's old.

So you're with the family, but we get out of this debt faster. I mean, this truck is a huge part of your debt situation. And then with you slowing down, stopping the payments of the 401K, you could really get on top of this pretty quick, right, George? I feel the progress already. I'm excited for them. Yeah, so this is an urgency for a season. I don't think you have to trade being with your family to get rid of this truck. But I look at this and this economy, a guy like him, George,

who's got some services to offer, can make some side money pretty quick. And one of the best things, the only probably good things about car debt, is it's a little bit of a reversible problem. It is. I can't go sell my student loans. That's true. I can go sell that car and get out today. That's exactly right.

And so I kind of like when we dig in and ask what kind of debt, it's partially for that reason to figure out what can we get rid of here to clean this up faster. Yeah. Fun little question, Michael, for you and your wife, I think, over dinner tonight is what would it feel like if we didn't have the debt we have? What would it feel like if we weren't paying $800 a month?

How much sooner could we retire? What kind of truck could we buy with cash later on? It's a fun little game, but it is a way to kind of see what the future could look like and what does that feel like. And it'll change your perspective, change your context. Great, great, great call.

Thank you, Michael, for trusting us. And the best is yet to be, I promise. More Ramsey Show coming up. Welcome back, America. You are joining the conversation here on the Ramsey Show. I'm Ken Coleman. George Campbell is joining me this hour. It's a free phone call to jump in. We'll talk about your money.

We'll talk about your work issues. Those do tend to coincide, George, from time to time. They do. 888-825-5225. 888-825-5225. If you've been engaging the show for any amount of time, you've heard us talk about how important it is to have a will. Everybody needs a will.

There's more to estate planning than just a will. Estate planning covers all the documents, plans, and conversations you need to have in case something happens to you. You don't have to be an eccentric millionaire with an offshore account to have an estate plan. You need an estate plan. You need an estate plan. Start by checking out our estate planning checklist. This easy-to-use tool will help you keep track of everything you need.

Walking you through documents to get conversations to have and where you can go to get more information so you can get this done. Give yourself and your loved ones peace of mind by taking care of this stuff ahead of time. Download your estate planning checklist for free at RamseySolutions.com slash estate checklist. That's RamseySolutions.com slash estate checklist. Alex joins us in Austin, Texas. Alex, how can we help? Good afternoon, gentlemen. How are you doing? We are living the dream. What are you doing? Same here. Hope you're both well. Good. What's up? So I've got about $28,000 in student loans and have $14,000 to throw at it.

Their loans are broken up into six individual loans. The smallest four are $14,000, and the largest two are $14,000. I've been listening to the show for quite a while, and I've heard previously that you guys have advised against debt consolidation. This isn't a debt consolidation question, but in part you advise that because the momentum you can build through the debt consolidation. And this isn't a debt consolidation question, but in part, you advise that because the momentum you can build through the debt snowball. So I was wondering if I should, I know the baby steps would be to pay smallest to largest, but I'm wondering if I knock out the two largest with my 14K, I can utilize that momentum to pay off the other 14K. It feels like a wash to me because you're going to free up the same amount of payments, right?

Yeah, exactly. It's more just, I guess, the non-mathematical part of the debt payoff process that I'm wondering about. The non-mathematical part. You're saying you're going to feel more progress by paying off the highest loans first? Well, once I pay those off and I start to work the dead snowball with my income, I would make more progress.

At least it would feel like more progress. But I agree with you mathematically. It doesn't matter. Well, I just think paying off the smallest ones, leaving you with just two loans at that point? Yeah, exactly. I would be able to pay off the smallest four. Yeah.

I mean, I think knocking out four, leaving you with two would feel better emotionally if we're just talking about emotions. No question. Instead of looking at six debts, now I'm looking at two. And I have half left. I've already done this before. I know how this is going to work. Now, how much money will you have left over after you throw the $14,000 at it?

$1,000. I? $1,000. I have $15,000 in savings. Cool. What's your income? About $66,000. Nice. So how quickly can we pay off the rest of the debt? I used your calculator online.

It said about two years, but I feel like it would be... I get bonuses and stuff. So I imagine by the middle of next year. Yeah, absolutely. Making 66, paying off 14, you can do that in probably six months. And if you had to, if you were in an emergency situation and you had to make an additional two to three grand a month, you got a couple of ideas how you would do that? Definitely been thinking about getting a second job.

Haven't really given it too much thought into what I could do. Start thinking about it. But it's definitely on. Think about it. Yeah. And listen, not just a side job. I want you to start thinking, okay, if I wanted to make, if I had to, now this is a little bit of a mental game here,

but if I had to make an additional two to three a month how would I do that I had to work a full-time job but I had to come up with two to three gram more per month I had to do it how would I go about doing it I think that's the question you start answering because I think you're going to be surprised at how possible that is for you to do and all of a sudden you've cut that two-year maybe into six months, eight months, ten months, a year. I mean, you really could do it. Yeah. Alex, are you getting a tax refund every year?

So I did two years ago, and then I adjusted that the past year. Okay. Yeah. I'm looking for any other area we can fund money. 401K? Are you investing at all? No, so I paused that as well. The holdup in my budget is that I have a daughter.

I mean, I know a lot of people pay for daycare, but daycare is almost more than rent. Oh, yeah. Isn't that something? I'm going to be able to do it quickly. It's just some additional expenses. Yeah. Well, you got it, man. It's just some additional expenses. Yeah. Well, you got it, man. You really do.

Just follow the plan. I don't think you're special in this case. I would just pay it off smallest to largest, be done with it, and move forward. Yeah. Thanks for the call, Alex. Appreciate it. You got this. Dana is up next in New York City.

Dana, how can we help? Hi. How are you guys? We are having a blast. What's going on? All right, so I have a dilemma that just happened this morning. The manager that I work with is quitting today, so they already told him that they're most likely thinking about giving me the position,

which would be a $20,000 raise from what I'm getting now. It'll be $50,000 and I'm getting around like $34,000. And my dilemma is that in September, I'm scheduled to move to Canada, Toronto for school. I'm 23 years old. I went to school pretty late. I took a while because I did not know what I wanted to do and I did not want to spend money if I did not know 100% what I wanted to do. Good for you. So yeah. Why are we going to Toronto to study what? I'm presuming you now know what it is you want to do. Yeah, it's digital experience design and the only reason I have to go to Toronto is because they are the first ones in the world to make that career a major.

It's a very new career, a product designer. So they're the first ones to make it a major that I can even go to school for. Tell me a little bit more. Tell me a little bit more about what they're going to train you to do. When you say product designer, what's that end result for you? You want to be doing what every day so we basically design interfaces for companies so like google has a product designer for their google site their fitbit like the product for example like if you're a product designer for fitbit you're the one going out

and researching the people who will be using the Fitbit, how they interact with apps and what button should go where. You're basically doing the psychology of the design and then designing it. Oh, I'm very familiar. This is a little bit of a leading question there because I don't think that you need a degree to do that work. No, some people do certificates. Right, so here's my question. Why, I mean, you know this to be true,

and it's so true that this school in Toronto is the only place to even do a major for it. That's not necessarily a good thing. That feels like, oh, we're just going to throw this out there because there's a lot of these jobs already, and we'll see if we can get some people in to pay for it. But the fact of the matter is you can work your way into that position, and certainly online training and certificates can get you there.

So what would that cost you to move to Toronto to do this? Because you're not working, presumably. So it's $15,000 a year. Yeah. I've got to tell you, Dana, I'd take the promotion and I would then find a much more affordable online option. I'm going to give you a copy of my number one bestselling book called The Proximity Principle, which says this, in order to do what Dana wants to do, she's got to be around

people that are doing it and in places where it is happening. You need to start hanging around a lot of product designers and product managers and people like that in your spare time and online and through social. And you get the certification that you need.

I'd take the promotion if it were me and I'd find the path to get where I want to go. And it does not involve sitting in a classroom in Toronto, being taught to do something that it's already happening out there in the real world. You do not need a degree for this. We've got lots of product designers here and none of them have a digital experience degree from this university in Toronto.

Illustrious Toronto University. Hang on the line. The proximity principle is all you need. We'll give it to you. All right, don't move. More of the Ramsey Show. I'm Ken Coleman, joined by George Campbell. We're taking your questions about your money, your work.

Those two categories are clearly connected, and we'd love to help you if you are feeling stuck or you're feeling like, hey, which direction do I need to go? We'll take those calls today as well. 888-825-5225 is the phone number. 888-825-5225 is the phone number. 888-825-5225. Let's go to Lydia, who joins us on the line in Cincinnati, Ohio. Lydia, how can we help?

Hi. Thank you so much for taking my call today. You bet. And for doing what you guys do. So my husband and I have started to seriously work the baby steps here just as of a couple months ago. And we've come across two major questions or concerns while trying to pay down a significant amount of student debt. So those questions are, for our current situation, is $1,000 enough for the initial emergency fund? And then also, can our retirement fund withstand no contributions for the time we're doing this?

And kind of what ramifications will we have by not doing so. It makes me nervous. There's a lot of pressure from my family to not cut it back, and it just made me and my husband kind of nervous to stop contributing to that. How much debt do you guys have? So it's down to $241,000 of student debt only okay that's all student debt what do you guys do uh yeah so i'm a medical science liaison and my husband is a chemist cool and what's your household income uh yeah so with bonuses somewhere between between $240 and $270 a year. Awesome. Okay, so back to your initial question, is $1,000 enough for you guys?

The answer is yes and no, because the truth is $1,000 was never meant to be a full emergency fund. But yes, it's enough for Baby Step 1, and many, many people have done it. I know it's scary, but that's kind of part of the point, isn't it? Because you know what's scarier to me? It's terrifying. That pile of $241,000 of debt that you owe. That's a whole lot scarier than having a $1,000 starter emergency fund. How much do you have in savings now? So I haven't refinanced my student loans, so they're still sitting interest-free by the grace of God at the moment.

We have about $28,000 that we're going to dump into this before interest restart. Okay. And then that leaves you with $1,000 to your name? That leaves us with about $3,000. So I can cut it back more, I guess. it just makes us and it has made us so nervous we have two small kids and we feel like we keep falling into the caveats as we've listened to the podcast of oh you might want a little more than that what's the caveats for you well like the having the young kids we've had some health issues with the kiddos where um it seems like we've kind of had

medical bills back to back, which we pay cash for as we go. That's the key. But that's the key. But you could cash flow things as they come up, right? If something happened, you could pause the debt snowball and with your income, you'd have an extra five, $10,000 sitting there to cover those emergencies. So really the, $1,000 emergency fund, it's really more of like the nuisance fund. It's like something stupid happens to the car, and it's an $800 expense. We don't want to jack with the budget.

Boom, we're going to go there. And then you refill it. And then you refill it. It's not, as George said, a true three- to six-month emergency fund. It's a nuisance fund. It's an emergency, but it's more nuisance level. Anything more serious than nuisance, you guys are going to do what George said you've already done and what you have done and you're going to cash flow it.

I mean, there's a reason why you've been able to save $28,000 because you guys have figured out margin in your monthly budget. True? So I want you to change the narrative on this. You have the income and the ability to deal with the true emergency situation for the kids listen i live this stuff out and uh four years ago my youngest uh went through some incredibly difficult stuff with her ear um had to have multiple nights of stay in the hospital and then reconstructive ear surgery. Well, let me just tell you something. Like, we paid for that, but we didn't, we paid it, right?

But we paid it, we cash flowed it. You know, we called the hospitals and said, here's the deal. We aren't going to go into a fine. We're going to pay this, and here's what we're going to pay monthly, and we cash flowed our way through that. We didn't necessarily, you know, have to say, oh, we have no money left. And so kids' medical expenses, you're not stuck with you got to pay all of that up front. And if you cash flow it, it's just like any other expense.

Well, and the truth is $3,000 isn't enough either. I mean, that's not going to cover a new HVAC. And so at either way, you're going to have to cash flow any big emergencies that come your way. So I would bring it back down to $1,000. To your second question regarding investing, the ramifications. How long would we have to pause investing in order to do this? We're talking you're making – your income is only going to go up, right? You're making at least $250, $270 a year?

Yeah, $240 to $270 pre-tax. So the question is, how little can we live on so that we can create so much margin and throw $100, $120, maybe more at this debt, and it's gone in two years? So I'm glad you're saying that, because that was kind of one of my questions also, is we're looking at like two and a half-ish years based on what our current expenses leftover are. How old are you two? I am 29 and my husband's 31. Okay, you're 29, 31, which means let's just say two years. You guys go hard at this thing. You're now 31, he's 33. You both have a good 25, 30 years plus in your careers left to now invest way more than you were. Because let me remind you, you just freed up $241,000 worth of payments that you now

have back into your bank account. Which means now we're not just able to invest some, we're maxing things out. We're doing backdoor Roth IRAs. We're getting real wild over here building wealth. And so that's what I want for you guys. Which is what we have been doing, actually. Good. Well, I would pause all of that because that will give you the progress and momentum you need because, hey, those student loan payments are coming back in full swing this summer. It's like the worst movie trailer ever.

This summer. That's right. Student loans are back. Isn't that true? It's like that monster truck thing. Lydia, don't worry about your family. Of course, they want to pressure you. They love you guys.

They want to see you build wealth. But right now, they don't know what it feels like to have $241,000 of debt looming in their life. So you guys control your finances. Follow this plan. I'm telling you it works. People have paid off this debt and more that have come our way and done this plan. You know, George, this is a really good call. Lydia, we really appreciate you calling in.

Great questions. Because there's real psychology involved in this. You know, she thinks, well, $3,000 is better than $1,000. And I think it's important that we help people understand you're going to have to cash flow the big things. You're just going to have to deal with it. The reason we say $1,000 in baby step one is because we want to free up as much cash as possible to get that snowball truly rolling

downhill. But it does freak people out, and I get that. But I have taken, I can count on zero fingers how many times someone has called in and said, listen, we had a giant emergency, $1,000 didn't cut it, and now our life is over. You figure it out. You get creative. That's right. You go, what can we sell? What side jobs could we do? What can we get on a payment plan with the hospital? What are the types of things we can do so that we don't have to either go into debt or save up 20 grand before we even start the debt snowball, which again, psychologically, you'll never get there. Yeah, it's true. And yet, the things we worry about the most rarely happen.

That's true. And yet, you know, the things we worry about the most rarely happen. That's true. You know, and so it is, there's a difference between vigilance and worry. You know, be vigilant. You know, what do we need to pay attention to here? But then, you know what, we've got a plan. We have common sense. You know, we'll figure out a way if something, if a lightning strike happens, if something serious happens, well, we've got bigger issues anyway. Exactly. And the money part is just something we'll have to deal with after the fact. And I've found a lot of those, well, what if, what if, what if? It comes down to a lot of justification on our part going, I don't want to change.

I like to sit here in this dirty diaper that I've created for myself because it's comfortable and it's mine. Instead of going, you know what, I'm going to light a fire under my belly and I'm going to go after it. I'm going to change my family tree. You know, I was worried you were going to mix metaphors there and say light a fire under the dirty diaper. That wouldn't be good for anybody. That's not a good time.

You know what, but people do that. Do they? Huh? Who are these people? They make bad financial decisions. Oh. You go, okay. I thought you were saying people light fires under dirty diapers.

That's a brand new sentence for me, Ken. I thought you were saying people light fires under dirty diapers. That's a brand new sentence for me, Ken. Well, you had two wonderful metaphors there that I felt the audience was going there with me. They were like, oh, what would happen

if you lit a fire under? See where we're going there? Listen, it's Friday. That's where you compound bad decisions. We're just warm bodies at this point. Here's the point of that one.

Don't compound bad financial decisions. You're going to have to be disciplined and sacrifice and dig your way up. I'm glad there was a point. Thank you. There he is. He found one. There it is.

Get out the wet wipes. All right. Good show. Good hour, George. Thanks to everybody in the booth. Thanks to you, America, for listening. This is The Ramsey Show. Do you love a good day, friend?

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