The Ramsey Show - App - Stop Doing Stupid With Zero's On The End Of It (Hour 1)

Episode Date: April 19, 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 George Campbell, joined by Dr. John Maloney. That's D-R-DOT, if you're wondering. Two PhDs, best-selling author, talking about relationships and emotional health, host of the Dr. John Deloney Show. He's joining me this hour to help you guys take the right next step for your life and your money. And my most important title, George Camel's Best Friend.

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We will be happy to give you our best advice, and it's our opinion, and we are experts on that at the very least. At the very least. Ted is kicking us off in Des Moines, or as some of my friends call it, Des Moines. What is going on, Ted? Looking for some advice on a potential car move I've got to make. I've got an aged car, about 2010, and I need to either purchase a vehicle

or lease one through my business, which is what both my tax professional and my lawyer were like, hey, that would be a great tax advantage. It's a good idea for you. What should I do? Well, I mean, it comes down to, do you want to listen to your accountant and lawyer or just two guys hosting a financial call-in show?

Well, I know how Dave feels about leases. I mean, that's kind of a given at this point, but I just don't want to do stupid with some zeros on the end of it and just look back at this and go, oh yeah, I should have leased the car or oh yeah, I should have just bought it outright. Do you have a dollar amount on the tax savings? No, I don't. That's one of those phrases that folks throw around. Like you shouldn't pay your house off because you can write the house off.

And people don't lay that up against the monthly mortgage payment and the tax and yada yada they pay, the interest payments they make. This is one of those moments that I would wonder, and I'm making a purely math argument here, and we'll talk about the psychology in a second. I wonder what the actual tax savings would be versus the depreciation of the leased car. Because that's what you're paying when you lease a car. You're prepaying the depreciation plus other fees. You're giving a gift to the car dealership

because you are paying the depreciation of the vehicle they have so they can turn around and sell it as a um as a inspected like super used car that some yahoo just paid our depreciation for us an apartment on wheels right well my my further question is why is your lawyer telling you to lease a car where does that come into play i understand my lawyer keeps me out of jail that comes into play she I understand the counter. Yeah, my lawyer keeps me out of jail. That comes into play. It's my business lawyer, and we have a relationship, and that was kind of an in-passing thing. Okay, you're like, hey, what do you think about this?

Yeah, so it wasn't like, this is your legal advice. It just happened to be four people on my team, and I was like, maybe I'm missing something. What's your business? I'm a photographer. Okay. This is the greatest call I've ever had. What is the gross revs and profits in a year?

Right around $400,000. Is your gross revenue? Yeah. And what do you take home? What's on your tax return? About a quarter of that. Okay. So you're bringing in, let's say...

A quarter? Really? You have 300, like you have 75% expense on a photography business? You have a big team? No, that's just what I pay myself. Okay. So there's more profit. Are you reinvesting that?

What are you doing with all the extra profit? At the moment, I've made a bunch of physical moves in the business, changed locations. I mean, there's just a lot of moving pieces at the moment. Do you have any other debt? I'm just looking at just the house. Okay. Are you married or single? Married. Okay. What does your spouse think about this?

She made that grimace face when I brought up the lease conversation because I wanted her input, of course. I think she's willing to do whatever is most advantageous for us. But at a glance, she was like, well, let's get the estimate on the car first, see if it's worth putting some money into to make it, you know, kick the can down the road so we can buy a car later. What's the necessity of having this new car? Something safe for her and my son to get around in. Okay, so this isn't really for your business anyways.

It's not, but the vehicle that I currently use on a daily, she would take over, and then we could lease it to the business, and I would use it for business. Because you have to use the vehicle 50% of the time in order to even have any tax advantages from that lease. Oh, absolutely. So I just think you're going to make a very different decision if I just said, hey, how much cash do you have on hand to purchase a used reliable car versus, hey, what's the sweetest, shiniest whip you can go lease at the dealership? Those are two very

different conversations. And that's really the heart of this is you're going to make a much more, just put it bluntly, a stupid decision if you lease that car versus buying one with cash that you actually have. Okay. Usually people say they want to lease a car for business. They want to drive something super flashy that's going to attract clients or buy like a 9,000-pound thing they can depreciate and write off on the taxes and get a G-Wagon. And it's generally stupid decisions pumped up by instagram gurus so we are not yeah we are definitely not no i'm not looking for that you're a guy who wants a reliable car for his family and we've we've both been there and every time regardless of our business and tax advantages we just go what is the car we can afford in cash and you made four hundred thousand dollars last year

you've got 40 grand to buy a car right i agree yeah you have the cash doing that doing that today if i needed to is that i'm not worried about that if we needed to do that today so here's what i'm going to tell you as a guy who's not nearly as sophisticated as George is when it comes to the math and all this. If I own a small business, which is what you have, you're very successful at what you do. I mean, you're in the 1% of the 1% of photographers. Everybody wants to get into it and very few people make it. And you are out of this world successful. I would still be haunted by how many outstanding liabilities I have as the only guy with the line in the water. And I don't care what the tax savings would be. I would pay it

as a sole tax. That is my car and my business can go in the toilet, the economy can tank and my business can go from 400 grand to 35 grand in one year as a photographer and nobody can come take that car from me. Whereas I just signed a three-year lease agreement and those payments are coming out automatic withdrawal, no matter how much money I'm bringing in. And the tax savings simply is not worth the sleep tax it would cost me. I don't disagree with you. Maybe my question should be, do I need a new tax person? No, I think your tax person has given you tax advice and the tax accountant is going to say, here's all the things you could take advantage of.

That's right. And because you probably sat down as a small business owner and said, all right, help me. And they're trying to cut your tax bill. Here's a way to cut your tax bill. Here's a way. And I think you look at your tax account and say, I don't borrow money ever, period. And if they bring it up, cool. And maybe then if they're trying to get you to do something outside of your wheelhouse or outside of your values, then yeah. But no, I don't blame, I mean, George, I don't blame the tax. I don't think they're a bad person. They're doing their job. And if you want to get a second opinion, reach out to a tax pro that's Ramsey trusted. Go to ramseysolutions.com slash tax and say, hey, what do you think about this? And I'm curious if you'd get a different opinion.

But I don't think this is going to bless your life in the way you think it does. There's other ways to get deductions, better ways to skin this cat. That's my final take, John. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Dr. John Deloney. If you guys missed it, we have a big announcement this week. The Live Like No One Else cruise is back. Don't call it a comeback, but it kind of is because five years later, we're bringing it back. Don't call it a comeback, but it kind of is because five years later we're bringing it back. Join Dave and all of the Ramsey personalities, John and I included, for seven days at sea, March 22nd through the 29th of 2025. So we're less than a year out. On top of all the Ramsey personalities,

we have some amazing musicians, magicians, comedians, you name it. Songwriters, they're all going to be with us. Stephen Curtis Chapman, Manin Chauhan, Dina Carter, Stephen Bargatze, Nate Bargatze's dad, amazing and hilarious magician will be there. So here's the thing. This is not for everyone. This is for those of you who have

been working the Ramsey plan. You've gotten out of debt. You've got the emergency fund. You're in baby step four and beyond. That's who this is for. This is the ultimate debt-free celebration. We're going to be taking over the entire cruise ship. Imagine that, John. All Ramsey fans. It's going to be electric. It's a lot of Ramsey in one place. It's a lot of Ramsey. It's going to be a hot time. Literally, it's going to be hot, I think. Turks and Caicos, St. Thomas, San Juan, the Bahamas, and it's going to sell out because the last one sold out in just a couple of weeks.

So VIP upgrades already sold out. You can join a wait list to see if a spot opens up, but you can book your cabin now at ramsaysolutions.com slash cruise. And I've been getting DMs about this. People want to know, are kids invited? And so I found out from our live events team, they are in fact invited. No kidding? Yeah. I did not know that. So it's kid-friendly. If you want to bring your teenager, you know, your toddler, whatever, they're welcome aboard too. So tell your friends. I think I'm going to bring my kids. Make some friends if you have to. Join us for the Ramsey Cruise. Ramseysolutions.com slash cruise. All right. Seb is on the line in Atlanta, Georgia. Seb, what is going on? Hey, so I am trying to find out if right now is the right time for me to finish my bachelor's degree in engineering. I got my two-year

degree and got into the workforce to work as an engineering technician. I'm married, have a one and a half year old. We have a very, very low cost mortgage in rural Georgia. And my employer is encouraging me to use the $5,000 tuition reimbursement plan to get back to finishing what's left of my bachelor's degree for that promotion and moving up in the company. What that would look like is probably taking out some federal aid and having that reimbursed every year at the federal tax limit that my company offers. I just don't know if right now is a good time because I am paying back some current student loans, but I would like to finish my degree sooner rather than later. I think everything you said for me is an all steam ahead, except I don't think you have to take out the federal loans.

Okay. Either A, as your family, I'll figure it out. If it's reimbursable within one paycheck cycle, if that's how they roll, and I know some companies do. The other way around it is I think you sit down and ask your boss, say, hey, you know how much I make. You know I've got a one-year-old. Can we prepay this if I hand you the bill, right? Versus getting all tangled up in the finance mess, because here's what's going to happen. You're going to take out a loan. They're going to send you $7,500. You're going to put $5,000 down, and then they're going to say, it'd be cool if you had this program, and you'll be like, oh, I'll just buy that program.

And then your transmission will fall out of your car and your boss will reimburse you five thousand bucks and you use thirty five hundred dollars of that on your transmission and i know this because that exact thing happened to me sounded personal it was very personal so i would not trust myself with federal aid money just floating around because it's real easy for all that to just to go away but an engineering degree you have a boss you have a boss looking at you saying, this is going to help you move up in this company. It's going to help you. And I'm willing to put some skin in the game and contribute to this.

I would pause. George, tell me if I'm wrong, but I would pause paying back my student loans and knock this bachelor's degree out once and for all and let that be a rocket ship for you professionally. What is your total debt loan, McClyde? Currently, I have $23,000 in student loans over the course of the three years and some change. I was working. I ended up working full time.

I got married while I was in college and got into the workforce because experience in engineering matters. And I wanted to have some experience while I was in school. So now I'm trying to just round it out and get to that accredited engineering position. So what do you make now? Right now I make about $68,000 to $69,000 a year, right in that range. Cool. And you have no other debt other than the student loans? We have a mortgage of about $1,200 a month, all inclusive. And your wife is at home with the one and a half year old? That's right. Mom's staying at home and I'm working

a second job to pay off the student loans. So would you continue working full time while doing this program nights and weekends? Yes, I would actually be a fully remote student to finish out the work that's left because all of that is actually available for me as a remote student. So there'll be no dip in income? No dip in income apart from figuring out how to pay in advance the coursework required. Yeah. I mean, I would figure that out ASAP. How much do you lack? I'm about 70% there, 75% there. So how much total is this going to cost you? Probably around $15,000, given the estimation that the university provided me.

So 15 grand, and they're going to reimburse five total? My company will cover 100% of tuition year on year, up to the federal tax limit, which is $5,500 a year approximately. Okay. So what if you covered the difference with cash and you were able to still do this? How quickly could you save up the difference to get through this first year and then save up the difference for the next year and be done? I could probably keep rolling it in at the rate that they will reimburse it. Okay. So how quickly would this all happen? Without dipping into the red.

This would probably happen within a year, year and a half. And you'd be done? Completely done. And this would increase your income exponentially? What's on the other side of this for your career? I would move to holding a position as a project engineer, which is a project lead position, a more senior role, and a range of about $20,000 annually increase. So you could be making 90 if you finish this thing. That's correct. Yeah, this is as no brainer as they come. But here's the key. You have to do

all this aggressively and you're not touching debt. That's the agreement. Because the faster you do this, the faster you save up cash, the faster you get through the program, the faster you make more money, the faster you get out of the rest of your debt, and you're home free. But we don't want to look up and have 15 more grand on top of the 23. And there's going to be no lifestyle creep. You're going to keep living the same way even when you get that raise. Right. I mean, we're staying in the green right now, and I'm working a second job to pay off those student loans. So it'd be nice to go back into school, and everything goes into forbearance once you become a student again as it stands.

Yeah, I think this is a good plan if you do it without debt and you move as quickly as possible. You don't want to drag this out because we want to see all of that debt gone on top of not accumulating any. And John, this is a big thing people grapple with. Should I go back to school? How do I do it? How do I cash flow it? What would you say to people coming from that world? There's a couple of things. One is if you are 70% done, finish your degree. I've never, I haven't met somebody yet. And of course I worked in higher ed for 20 years. I've obviously got a bias here. I've never met somebody who went back and finished and said, I shouldn't have done that. I've never met that person. I've met people who said, I shouldn't have got this graduate degree. I shouldn't have gone to college, period. I've never met somebody who's 70% done that's like,

I shouldn't have done that. The second thing I always want people to do is go ask your employer if they'll help out. And this guy's employer will cover all of it. And that makes it a no brainer for me. And when people say, well, I can't do this. I can't do this outside of med school and law school, maybe one or two other programs. I worked a full-time job. I had a part-time job. I was a full-time associate dean. I was a part-time professor, an adjunct professor, and the father, not a great one, of two small kids, a husband, and a full-time PhD student. You can figure it out for a few years. And is it awful? Yes.

Does it pay off on the back end? If you are getting the right degrees, absolutely it does. And so it's just like the gazelle intensity. There's a few years of misery for an entirely new family legacy on the back end. It's when you start taking out federal loans just because I'm just going to go do this right now because it'll be easier and then we'll settle up on the back

end. You get laid off. Something else happens. You need the cash in your house. You don't finish. You're still stuck. They don't want to forgive the debt just because you didn't finish the degree yet. That's right. That's where people find themselves. Your company has to lay people off until they cut this program out. No debt.

Just knock it out, knock it out, knock it out. But yes, I'm always a fan of going back and finishing that degree. Even if you move slower, it's still a better path long term. It gives more peace to your family, especially if you've got a stay-at-home spouse. So we don't want to see a dip in income, and we don't want to see any more debt accumulated. That's the key. Thanks for the call, Seb. This is The Ramsey Show.

Welcome back to The Ramsey Show. I'm George Campbell, joined by Dr. John Deloney. Open phones at 888-825-5225. You call in, and we'll help you take the right next step for your life and your money. And, hey, while you're listening to the show, it's a free show, may I remind you. There's one thing that you could do for us that's also free. It would only take you a moment, and that is to share the show, to consider subscribing, hitting the follow button, leaving a kind review, telling people about it.

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How do you sabotage yourself? I make that budget. I am on it every day, checking, making sure I'm tracking my expenses. And then one of the family members that I have have a need or I personally will be like, well, I guess I can go out of town and go and do that. And so then I have to recalculate everything. And then I push my... So you're getting stuck on the meticulous numbers and one thing throws a

wrench in the plans and you go oh my gosh I failed again oh no I think it's deeper than that I think the budget's like uh it's like a toy it's like something it's just something for you to fiddle with it's almost like a fidget spinner but your real identity is if any family member calls for any reason, I'm the hero and I'll save that. Or I'm only going to live once, and so I'm just going to go do whatever I want to do. I'm going to take care of right now me and forget about next year, Maureen. I guess, well, if the family calls and they need something,

I'm going to cut from my budget line that I have assigned for me and mind you it's like minimal for my personal expenses for the month Why are you putting your oxygen mask on them before you? You're not in a place to be giving right now

When you say family are these your children? Is this a spouse? Who's calling you up going, hey, we need to spend this? Yeah, adult children. Ah. How old are we talking? 30. Oh, boy.

Maureen. I can count on zero fingers how many times I have called my parents for money since I was, I don't know, 20 years old. So this seems to be the systemic problem where they go, well, mom is going to be sweet and send us some money because we're struggling. What do they need at 30 that something they can't provide for themselves? Well, I'm providing quite a bit for them already. Why? Wait, why? Maureen why what do you marine what do you feel guilty about yeah it just seems difficult for them to make that step into

independence it does because because their mom won't let them go i wouldn't leave either this sounds like a brilliant plan i get to live at home for free mom pays for all my expenses and then when i run out of money i call mom and she cuts herself off at the knees to keep my lifestyle budget going. Okay. Well, I have made some steps. Listen, she's like, all right, I'm done with you two. Yeah. You need some problems. Yeah. You need some problems is what I've heard and listened to. And so I implemented like, okay, you've got to pay me rent. And so apartment one, you give me 300

and apartment two, you give me 750 is what I tell them. And it doesn't come with any concierge services. So I'm trying to like implement those steps. How old are you, Maureen?

Oh, I'm 48. What are your financial goals? To be debt free. So you still have debt. I'm going to get are your financial goals? To be debt-free. So you still have debt? And to pay off the mortgage as soon as possible. Okay. So you have consumer debt? I have $15,000.

I have $15,000 in debt, yes. And I have $187,000 on my mortgage. Okay. Hold on. I just got... Sorry, George. No concierge service? As though you'll show them.

Yeah. What are you talking about? That I'm going to check the mail for them. I'm not going to go run and grab food for them on my way home. How would that even be in your mind that you had to say that out loud? They're 30. Because that's what they asked for. I think we need a hard boundary conversation to say,

listen, I love you guys, and I have loved you too hard. And I have stunted your growth, and that part is on me. But there's a part that's your responsibility, and that is going to live your freaking life. So you have six months to get a plan and get out of this house and find an apartment. And if you need seven roommates and a third job, I'm just saying we need a game plan to get out. Maureen, have you ever gone to a gym and worked out? Yes, I hate it. Okay. Yes, I have. Here's what a game plan to get out. Maureen, have you ever gone to a gym and worked out? Yes, I hate it. Okay.

Yes, I have. Here's what you're doing for your kids. They're going to the gym, and they're looking at you saying, Mom, I've got to get stronger. I've got to. I can't live my life like this. I've got to get stronger. And you said, okay, I'll go with you.

And you walk into the gym, and when they lay down on the bench to lift some weights, you run over there and take all the weight off the bar. And they push the bar up with no weight on it, and they're now 30, and they're wondering why they can't navigate the world. They're not strong enough. And it's because you keep using them to make yourself feel like you're being a good mom. And that's not their job. Why do you feel this need to keep, there's got to be some guilt you're trying to wipe. I mean, I don't know, what are you trying to solve or accomplish by giving 30-year-olds this much support and care?

Do they have special needs or they just don't want to work? What's the deal? No, no, no, no, no. Yeah, I just, they're, they're working. They're one, he just finished school and he took a pause for a bit and then his fiance is finishing going back to school. And I just, I told them a few months back when I gave them their rent notice that they were going to have to start paying rent that, you know, let's revisit this in June because if it's working until June and then, you know, then we'll see where we go from there. But if it's not working, then. How far below is $300? How far below is that

market rent? Oh gosh. I mean, that's nothing. Exactly. And that's for the youngest one who, who will pay me whatever I want. And this is the thing. I tell them, I don't need your money. I just need you to do your thing. But they need your money. They need your money. And I can focus on me. Yeah.

So my word, there's a lot of problems here. Number one is that you haven't put your own mask on first. You're going to remain broke while sacrificing for your kids that can't start their adult life so that's problem number one and the other problem here is that their growth will continue to be stunted as long as they still have this sweet scenario and so your job is not to be cruel but to be honest on both sides and say i haven't done a great job of doing this you guys need to step it up i'm going to give you three months to find a place to live and i will help you leave gracefully you don't need to kick them out on the street and evict them but this is

a problem that's gone far too long i literally thought you were calling to be like my eight year old needs saxophone reeds for band yeah this is a 30 year old grown adult or a 21 year old yeah or someone about to be married. No, my youngest is married. And this is where I say I self-sabotage myself, right? I have my plan. My youngest is married. And I said, well, instead of you guys carrying that burden of going, her finishing nursing school one semester,

why don't you just stay here for a year and then after that, then go ahead and get your place. And they are. They're looking to buy. But that's going to take them at least and they are they're looking to buy but that's going to take them like at least another six months they need to rent give them saving they can go sign a six-month lease tell them this and get used to paying their own bills i want to be your mom and not your landlord i want to be your mom and not your bank and i can't do both and if they choose well we wanted you to be our bank,

then y'all need to have that conversation. Can I ask a hard question, Maureen? What happened to Dad? Oh, that's a whole other call. But I think a lot of this stems from the fact that... Yeah, no, he's there. He's here. He's here, but... Is he? I don't.

Because it sounds like you've taken on the brunt of all of this, and maybe part of it is because of what's happening with Dad, and you feel like you need to be the savior and hold this family together. Well, no, he's here. We're married. I just financially don't do anything with him. I do nothing financially with him. That seems to be part of this problem. We can't align. I would start there. Yeah, we can't align. Yeah. And I wonder if you're trying to

buy a continued relationship with your kids and you want to ask about why you can't keep a budget because you got a lot of stuff going on. The budget's not the problem, Maureen. We have to have a lot of hard conversations really soon. I'm so sorry. This is The Ramsey Show. Welcome back to The Ramsey Show. I'm George Campbell, joined by Dr. John Deloney. The number to call is 888-825-5225. Carmen is up next in Cincinnati. What is happening, Carmen? Hi. Thank you so much for taking my call. I appreciate everything you all do to help people. Thank you. So I'm looking for guidance for how best to contribute for retirement. My husband and I are self-employed small business owners and this is new as of 2024. In 2023, we had kind of a hybrid

year where he had a W-2 job and then we had a side business that was a house renovation. And so our income from 2023 was quite a bit higher than we're used to. But now that the ship got close to the dock, we are going to try to take that ship and make our own income higher. Awesome. So you're going full-time with a small business, both of you? Yes. What kind of business is this? It's a high-end property maintenance and renovation business. Wonderful. What do you think you'll make this year doing that between the two of you? I'm hopeful that we will net $100,000 to $120,000 for our household income. Cool. And your question today is about retirement? Yes. So I understand that match beats Roth beats traditional.

And I'm curious if we should just jump straight to the Roth or if there's a different, I don't know how to match myself, I guess. Oh, sure. Yeah, that's generally for if you're working for an employer that has the match, that may be you guys one day, who knows. But for now, there's one option for anyone with earned income, and that is a Roth IRA. And so both of you can fund a Roth IRA to the max. I believe it's $7,000 for this year. And so both of you can do that. Your other option, a lot of self-employed folks and small business owners don't realize that just because they don't have a big employer, there's still some really cool retirement options where they can put away even more money than a traditional employee. And one of the most popular ones, this one might be

for you guys, is the solo 401k, sometimes called the individual 401k. So as long as just you and your spouse and you have no other employees, you should be eligible to contribute to this. Okay. And as the boss, you can contribute an additional percentage of your net income to that 401k up to $61,000 if you're under 50. Are you guys under 50? Yes. Okay. And it's even more if you're 50 or older. So to reach the 15%, where does that number come from? Is that what we pay ourselves? That's from your gross income for the year. So whatever's on your taxes, that's what the number you want to be basing it off of. So as a self-employed couple,

is our gross income our business income this year? Yeah, any profit. I mean, if you're working with your tax pro and you go, hey, our income minus our deductions and all of that, this is really what we took home. They don't care how much you took home. It's still profit from a business perspective. And so you're going to have to pay taxes on that. Okay. So 15% of whatever the number is that we pay taxes. So let's say it's 120 grand, like you mentioned, you guys should be putting away 18 grand. And so maybe you both fully fund a Roth IRA that's 14 and you put another four in a solo 401k. Okay. And then, so because this is also like new to us, should I just park money in like a high yield savings

quarterly or till the end of the year, just so I don't step in anything. For taxes? A big number. Taxes or retirement, both. Well, high-yield savings is for your short-term goals, not for investing and for retirement. So it's a great place to store your money for tax reasons. And so I would do quarterly estimated payments to the IRS if I were you. Make sure you stay on top of that. And so whatever money you get, put away 25%, 30% in a high-yield savings account and then file those taxes every quarter.

And you might – do you have a bookkeeper right now or are you guys doing it all yourself? I am the bookkeeper. Wonderful. And you're the best one we got. All right, Carmen, I want to ask George a question on your behalf, okay? So, George, you're talking about 18% of the net of the business at 120. If like some small business owners, they kick off a small business and they're not going to take home a draw, they're going to pay themselves $10,000 a year for the first two years while this thing gets up and they're going to scratch and claw.

Would they pay 15% of that 10 grand as their quote unquote salary? Well, I think it's whatever the actual profits were from the business so you can say i paid myself zero dollars the government doesn't care because what they see is john brought in 200 grand well you got to pay taxes on that but you want as far as investing your 15 correct yeah that would be based off of the gross income that you took home off the off your draw of whatever you made so if you took 120 grand before taxes that's what you want to be investing from okay but if you if your business made 120 total and after let's say you grossed 120 like your total expenses your total net was 200 000 it took 80 grand to run that business you

you have 120 grand you're going to pay taxes on that. You're going to pay yourself. Still invest before the taxes are out. Husband is 10. Wife is 10. That's what your take home is. You're going to pay taxes. You're going to take 15% of 20 grand. Exactly. Okay. And that's the way to do it. And as the business grows, you'll invest more. And I think that Solo 401k is a great option for you. And I would contact one of a SmartVestor Pro, and these folks can help you navigate what the best option is for you. There I would contact one of a SmartVestor Pro, and these folks can help you navigate what

the best option is for you. There's a lot of different options. There's simple IRAs and SEP IRAs. But from my experience, I found that most business owners that are solo or have a spouse working with them, the Solo 401k is the best option they found. So you can go to ramseysolutions.com and click on SmartVestor, and they can help you get that all set up and help you with the right strategy. But I hope that at least helps you take the right next step. Yeah, great. Thank you so much. Awesome. Thank you for the call, Carmen. Way to go. That's a scary moment, stepping into small business full-time,

but what an exciting time, and you guys have done it the right way, getting that boat close to the dock. It's not a leap of faith. It's just a step. All right, let's go to Terry in Houston, H-Town, John's favorite place. What's going on, Terry? Hey, guys. How are you doing? Thank you for taking my call.

Sure. How can John and I help? My question is, should I use the money that I have in savings to pay off debt to start cleaning up my credit in preparation to try and buy a new home. Okay. Tell us about your situation. How much debt do you have? Oh, combined, my wife and I have about $110,000 in debt. That's consumer debt? Correct. Okay.

Well, actually, part of that is, well, part of that's a home, part is student loan, and then $17,000 of the debt is mine. So what do you mean it's in a home? Because you're living in a home right now, and you're going to sell it and buy a new one? Yeah, we're living in a home. We have a home equity loan that we have right now, and we're down to about $58,000 on the loan left. Okay. She's got $33,000 in student loan. And then, like I said, I have, under my name, $17,000 in debt. $15,000, that is really stupid debt that's already been charged

off. And I'm not sure the best way to fix this. Okay. How long ago was that? How long it's been in collections for? A lot of this has been a long time. Okay. You might be able to negotiate that for some pennies on the dollar at this point and see if they'll take a lump sum and call it paid in full and get that all in writing. But as far as buying a house, it sounds like you guys are not... How much do you have in savings? Do you have enough to pay all this off? Not to pay all of it. I've got about $40,000 in savings right now. Okay. That's all the cash to your name, and that would get your debt down to $70,000?

Correct. Okay. Yeah, I mean, if you're following the baby steps, $1,000 starter emergency fund is what you're aiming for, and then anything beyond that needs to go toward your debt snowball. And so if you want to leave, you know, take 39 of that and leave 1,000 in there and start crushing down that debt, I think that's a great move. And start paying them smallest to largest balance. So I'm guessing your 17 is the smaller of the balances, followed by her student loans, and then the HELOC is the big one at the end. Yes, sir. What's your household income? Right now, we bring home monthly right at about $6,200. Okay, good.

So the question becomes... That's going to change before now at the end of the year. For me, it's going to increase. Okay. I just don't know when yet. You're not sure when. Well, every single cent that you can muster up beyond your normal expenses, food, utility, shelter, transportation, throw at the debt.

And knocking out, you know, 39 of that today is going to feel really good and free up some payments and get you out of this debt faster. But I don't think you're ready to buy a house until you're at that spot. No debt at all. Emergency fund in place, three to six months. Then we start saving up a down payment, and your credit will probably have solved itself by then. Thanks for the call, Terry. That puts this hour of The Ramsey Show in the books. Thank you to my co-host, Dr. John Deloney,

all the guys in the booth keeping the show afloat, and you, America, will be back before you know it. Take care.