The Ramsey Show - App - This Common Mistake Could Cost You Millions of Dollars (Hour 1)

Episode Date: June 21, 2024

from Ramsey Network it's the Ramsey show where we help people build wealth do work that they love and create actual amazing relationships I'm your host Jade Warshaw, joined by George Camel, both bestselling authors. Look at that, George. Look at that. Would you look at that? We're hosting this show for you guys. For the next couple of hours, we'll be taking calls about your life and your money. So chime in.

Give us a call. The number is 888-825-5225, and we'll get you on the line. Who's on the line now? We got John from Long Island, New York. What's going on, John? What's going on, John? What's going on, John? John, are you with us? We're having an issue here.

There we go. Hey, John, how are you? You there, John? Hi, hi. Good afternoon. Can you hear me okay now? We can. It was on us, not on you, dude.

Okay, okay. How can we help? My question is, I made a mistake, and I wanted to not make another mistake. So I wanted to make sure, I want to use my Roth 401k in order to pay off a very high interest HELOC. Okay. And the situation is I'm not going to be able to afford both my primary mortgage and my HELOC. So that's going to put me

in a position. And basically, I ended up using my HELOC, unfortunately, in an investment scam. It was a pump and dump type thing. And I basically lost $150,000. Oh, my gosh. So let me get this straight. You took out a HELOC of $150,000 to invest in some online scam? Well, when you look at it that way, that's not, yeah. What happened was it was an online investment club that I found, and they were teaching me things and giving me different advice, and I was making money along the way, and I used what investment money I had. Then I was lured into using my emergency fund and I was still

making some money. I mean, talking about five to 8% a week. And then there was supposed to be this big VIP tip before they wanted me to become a paid subscriber. So I was encouraged and I got greedy and I said, this could solve a lot of my problems. And yeah, then I invested that. So all in all, I had $250,000 invested in them. And now it's zero. Did they take your money or did you lose it on a risky investment? I lost it on a risky investment that I invested through my own brokerage.

Oh, wow. But they advised you to do this? This is correct. Does this company still exist? Nope, they're gone. Can't find them, can't contact them. They're not a brick and mortar place. They were an online.

Oh, my goodness. I'm so sorry, John. We'll let this be a lesson to everyone listening. If it has the word investment and club after it, just run far, far away. 100%. So you've got this $150,000 HELOC. How much is in the 401k that you're talking about? I've got a total of $400,000 in my 401k, but 120 of it is in a Roth component of it, which I can now remove tax-free, penalty-free. Your contributions. Yeah. And I just want to be able to...

Wait, did you say a 401k or an IRA? A Roth 401k. It's a Roth 401k. I don't think you're going to be able to get this money out tax-free. Oh, no. Well, I'm 63 years old. Okay. And it's been there for... The account's been open for 30 years.

Is this all of your nest egg, this 400k? The 400k, yes, but I do have an $800,000 house that's going to be paid off in three years. Okay. And you're saying, can you use your future income? Because you're saying you can't afford the HELOC payment and your mortgage payment. What does that add up to? I earn $125,000 a year. My current mortgage with taxes and insurance is $3,400, and the HELOC alone is going to be $1,200 in interest payments alone, and then in two years it's going to convert to a payback. Oh, gosh.

Which I don't know what that payback is going to be. Like a lump sum payback. Well, it's going to be a 20-year payback on a 30-year type rate. Okay. So your payment all in, what does that add up to? Interest and the principal? With the current interest the way it is right now? Yes.

Interest only? It would end up being, well, like $4,600 a month. Okay. That's what I've got. And you're bringing in how much? Eight grand a month? I'm bringing in,

well, I'm netting, I'm netting $1,500 a week. Okay. So, why are you only netting $6,000 a month,

but you make 125? That's 72. Are you still investing? No. Well, I'm only putting $50 a week in there. But you're only taking home 57% of your gross income. That's what I'm confused about. So we need to pause investing, number one. Every single cent you've been investing, stop it. We got to get rid of this debt and get to some foundation. Do you have any money in savings that's liquid? I've got $20,000 in liquid. Okay. What's left on the mortgage? $80,000 at a three and a quarter percent. It'll be done in three and a half years. Okay. And are you single? I am single. No dependents? No dependents. Well, you're going to rob your nest egg by almost half,

which worries me. I agree with that. Which means how are you going to retire? Well, I agree with that. And the way I was looking at it was as like a three pal system where one would be the 401k, the other to be my home, which I'm going to sell and downsize when I retire. And the other would be Social Security. Social Security, I've got about $3,600 a month expected coming in. The home is $800,000, which will be paid off when I retire. Well, if you're going to sell it anyways and downsize, can you do that now and use the proceeds? What are you going to make when you sell the house? Well, it'd be the whole $800,000. Minus the $80,000 that you owe. If you sold today, you'd probably walk away with $680,000, $700,000, something like that. Again, we all have our own situation. I have an elderly mom who's living with me and it you know, it's got to take care of her too. And, you know, to just say, turn around and move. But you said you're going to move when you retire.

You know, because then I won't have a job then. My job is here. You know, the downsides on Long Island is, you know, you sell high to buy high. I need to go to a lower cost area of living. And that I can't do until I retire. Got it. Because your employer is there? Yes. I see. Oh man, this is a rock and a hard place, John. You're right. You're right. And the way I was looking at it was, well, you know, and then the alternative then is after I pay it, pay the 120, there's still $30,000 left over, which I wanted to then take a 401k loan. No, no, we're not going to do that.

You called in and said, I don't want to make another mistake. And most of the solutions you've been laying out sound like another mistake. Okay, may I just explain what my thinking was? Because the interest I would be paying back would be paying back to myself rather than me paying it to the bank. Life hack. But you're still robbing all of the future growth of that money, which you're already robbing because you're trying to pay off the HELOC with it. Right. So your first mortgage is, when we're looking at it as a whole, your first mortgage is $3,400 a month.

And then the HELOC portion of it right now is $1,200 per month, right? Correct. What would happen if you paid off the $80,000 in a lump sum and then all you're paying is basically the second mortgage? Freeze up your $3,400. I like that plan. That's a better plan. Well, because I'm giving up a three and a quarter percent. You're not giving up anything, John. It's paid off. Who cares? It's gone. And now you're at a place where you can breathe with your money financially month to month and continue to make some progress.

Okay. I'd still be paying $1,700 for taxes and insurance. Yes, but that's a lot less than what you're... You're always going to pay that. Yeah, that's not going away anyway. Paying up $3,400 means you can stay in the house and pay off the HELOC without murdering your nest egg. That's what I'd do if I were in your shoes. This is The Ramsey Show.

You're listening to The Ramsey Show. I'm Jade Warshaw, joined by George Campbell. And we're going to be your hosts today, taking your calls about your life and money. Give us a call. The number is 888-825-5225. And George, my favorite announcement that we've been doing, the Ramsey Live Like No One Else cruise. It's here.

There you go. I'm working on my ship horn. It's not as good as Jade's. It was a little light. It was a little flimsy. You need a little... Mine was more of a dinghy. Yours was an actual cruise ship.

Yours was the lifeboat. So don't miss your chance to join us. Like I it's called the live like no one else cruise this is a celebration right we're gonna do one of the biggest debt-free screams ever because the folks on this cruise have accomplished something these are folks who are past baby step two and baby step three cruising with us on a seven day cruise through the caribbean it's worth it just for the amazing cruise. Even if we weren't there, I want to go. The stops are amazing. Tell them where we're going.

Turks and Caicos, St. Thomas, Puerto Rico, the Bahamas. And here's the thing. Like I know a lot of you are like, what do we have to do, Jade? How do we get signed up? The good news is all you need to do is a $600 deposit. $600, you got that. You don't have to pay for the whole cruise up front right now.

No, no, you do this in installments. Like Jade, have to pay for the whole cruise up front, right? No, no. You do this in installments. Like, Jade, you're telling us the budget. Yeah. If it's in the budget, put the deposit down and pay the rest as we go, as we get closer to the cruise. And you've got a lot of time. The cruise sets sail March 22nd through the 29th of 2025. So put your $600 deposit down today, and then you got all this time to save up for the rest of it. And all of us are going to be there. Dave, all the personalities including myself george campbell john deloney rachel cruz ken coleman we're all going to be special guests and dave's got some some pretty famous cool friends and we're gonna have magicians and musicians and celebrity chefs and all kinds

of experiences and of course the normal entertainment on the cruise that's right excursion so it's going to be well worth your time. The ultimate debt-free celebration. So you've worked hard, you've lived like no one else, and now it's time to celebrate. So make sure you book your cabin now before we sell out because these are going fast.

I can tell you that. Book yours at ramsaysolutions.com slash cruise. There we go. Oh, I can't wait. I'd have some FOMO if I wasn't already going. The love boat. Remember that? Oh yeah, that's before my time but i appreciate the reference yeah you know it was cut is it before your time too you're not that much older than me let's not talk about that george let's take a call

all right we got andrew in jackson mississippi what's going on andrew hey guys um so i'm just trying to call so i i don't really consider myself a business person, so this is probably why I'm asking the question. But my full-time job is an automation engineer, controls engineer. So I do, like, manufacturing automation for a DOD contractor. Okay. And so that's my full-time gig. I make about $100K a year on that.

And so I started doing some side work, doing the same thing, but literally just drove down the street and knocked on the door of another manufacturer and said, hey, you don't need any help like this. So kind of started doing controls work on the side, netted like $8K last year. And then this year I'm expecting to net somewhere around 30k so it's kind of growing a little faster than I thought so kind of the main question is when do I know like when to take that full time because mainly my concern is you know I have a new baby she's seven months old got another kid who's about two. Um, my wife, uh,

is a physical trainer. So she does that kind of just very part-time, but is mostly a mom, which is great. Uh, and she sacrifices a lot for me to do this. But, um, my main concern is just like, how long, how, how can I keep it going? I'm, I'm, I guess I'm really worried that if I did take it full time, it would, it wouldn't be as secure as my full-time. Why? I don't know. Right now, I mean, I don't expect to do it full-time very soon just because 30K is all at one client. Yeah, it's still at 30,000.

It's still on one client, but I've got a lot of interest in leads out there and quotes out there. I'm expecting to hear good things about and expand that. Yeah, I think you're on the right track. I don't know what the threshold is. Do you have any debt? Transition. Yeah, so I've got a car loan that's about $10K. But the contract I'm actually working with aside for that one customer

should just pay that off completely. So that should probably be next month. Okay. Anything else? And then about 17K in student loans, which would probably be paid off either by the end of the year or next year. Well, the good news is right now that $30,000 side hustle is allowing you to move faster on the debt. And if I were you, I think you're on the right track

as far as trying to diversify the clients that you have because you don't want all of your eggs in one basket, especially when you're out there on the debt. And if I were you, I think you're on the right track as far as trying to diversify the clients that you have, because you don't want all of your eggs in one basket, especially when you're out there on your own. It is nice to say, I work with this client, this client, you know, have a long list of wells to draw from. But in your case, I'd be looking to replace my current income. If you're at $100,000 now, that would be the goal. You went from $8,000 to $30,000. Maybe, maybe next year you hit seventy thousand. So maybe this is like a two to three year play. And by then you're kind of able to jump ship and go over, you know, into your own ship there. And so that's that's what I'd be looking for to replace that one hundred K and know that it's steady. How many hours are you putting in to make the 30K on the side hustle?

I would say that I try and limit myself to 15, but to try and get the work done is probably more like 20 hours a week. And then plus the, it's kind of a manufacturing environment, so you kind of never know with my full-time job. But it's anywhere from like 40 to 60 hours a week with a full-time job. You're working. Yeah, I'm wondering what your capacity is to scale a business because you can't just go, well, I'm going to have nine clients and work 90 hours a week. So you've got to figure out how to scale it to where it's not taking more of your time to take on many more clients.

But once you can kind of do the math and go, all right, I'm putting in 20 hours a week and I'm making 50 a year. Well, if I did 40 hours a week, I can make 100 if I got two more clients. So start doing some math. While you're doing that, aggressively pay down the debt, get six months saved in an emergency fund, and probably a few months of just cushioned save to launch the business. So once you get the boat that close to the dock.

My main question is like the emergency fund, if it's six months is enough or do you think it needs to be more just to cushion? I would do six months in the emergency fund, but then have a is enough or do you think it needs to be more just to cushion i would do six months in the emergency fund but then have a separate savings account where you stock up maybe three months of expenses to float to kind of get this thing launched to get your feet under you what's it cost you to do your work like are you putting out a lot of money in order to make this 30 000 um no i'm i'm kind of pulling a startup move and really just running out of my garage right now. So taking advantage of all the free software licenses I can.

But I'm probably, I'm probably under, I mean, 2K overhead because of software. But most of the time the customer pays for it. So it's, you know, cash flow pretty well. I'm with George. If, you know, there's the three to six months of expenses on your personal side, but if you can kind of create that same thing in retained earnings on your business side, that just gives you that feeling of, okay, I know I've got the money to do the things I need to do. And if you have a slower month, like you've just got that cushion there on both ends,

which I like. Very good question. He's pretty close to this. I would say in another year, maybe two years. Yeah. There's the financial part, which is get debt free, get the emergency fund, get the retained earnings. And there's the business side of, can I scale this up to where I'm not relying on one client? Because I had a friend do that. And it's scary because they lost that one client and there went their business. Oh, yeah. And so you want to have some diversification, just like we talk about with investing, smart to do that with business too. Yeah, really important.

When Sam and I first started working in the cruise industry our only client was carnival cruise line they're a big big fish but it's just like this feeling of okay i i'm dependent on them if they for some reason decide we don't want to work with you anymore if a pandemic happens and no one can cruise anymore there goes our entertainment well listen that happened anyway that happened anyway even though we at that time we were working with all the cruise lines, but cruising in general, I mean, we don't have to say what happened then. It wasn't personal, but it did come back, so that's good. But in general, when it comes to this side hustle, small business, should I go full-time?

You want to make sure it's earning money, number one. Consistently. Consistently. And you want to make sure it'll scale to where if you were doing this at a normal 40-hour rate, you could actually create the same full-time income and replace that. And once your side hustle, small business revenue exceeds your monthly expenses, well, that's a ding ding, let's go. So the lower you get your expenses, the faster you can launch, which is why we tell you don't launch a business while you're struggling with debt and you're

trying to jump ship. Don't do that. It's way too much risk. Well, George, you also made a good point about the fact that because he is working so many hours now, he's probably in the current state, not going to realize the full potential of his side hustle income because there's only so many hours in the day. So there is a moment where you have to kind of sit down and do the math. And there's that kind of leap moment where you're like, okay, I got to make a leap. It's a calculated leap. It's not you just, all right, I'm jumping off a cliff. Let's hope I land on my feet. Yeah, I can't jump very far. I got to get the boat close to the docks where I can just step in. That's right. That's the goal. A calculated risk is what we're talking about here. And I think that our guy is very close

to taking that. So if you have a business venture, you can check out our Entree Leadership Podcast. It's a very, very good one to listen to. Dave Ramsey's the host. This is The Ramsey Show. You're listening to The Ramsey Show. I'm Jade Warshaw. And I get the privilege of sitting next to a best-selling author, George Campbell. The privilege is all mine.

Really? Yeah. But you wrote Breaking Free from Broke. Oh, okay. That's fair. See, there we go. George, you're trying to confuse all mine. Really? Yeah. But you wrote Breaking Free from Broke. Oh, okay. That's fair. See, there we go. George, you're trying to confuse the people. I'm sorry.

We're taking calls all afternoon long. Give us a call, 888-825-5225. We'll discuss all of the things going on within your life and your money, even get into some career stuff. But right now, George, there's a lot popping off when it comes to how people are managing their money. We know things are tight right now. There's a lot of factors out there. There's inflation and there's the housing market and insurance costs are going up.

And the truth is Americans are feeling it and they're trying to find ways to squeeze in their budget and make things work. Because this article is how the middle class stays middle class. Here's the headline from Money Wise. Why it's a big problem that 46% of the U.S. middle class are now slashing or completely cutting out contributions to their retirement funds. Yikes. So the survey found that nearly 46% of middle income families, they're cutting back on retirement contributions and they're doing it because of stubbornly high inflation. That's the major culprit that they're saying here. And they're even saying they're pausing them indefinitely. That's either cutting back or

pausing indefinitely, which is a weird thing to say. I'm never contributing again. Well, I know that people probably listening are like, wait a minute, you guys at Ramsey, you're always telling people to pause their retirement. Like, why are you so upset about this? And the difference is we never tell people to pause their retirement indefinitely. We want you to be millionaires. We don't want that, and that way they're protecting their investments so that if there's an emergency, they're not dipping into that emergency fund, or I'm sorry, they're not dipping into those investments to cover everyday

emergencies. The truth is people just don't become debt-free when they're trying to do 17 things at once. So you need that focus intensity to get there. And as of April 2024, the Consumer Price Index, which measures the changes in the cost of consumer services and goods, had risen 3.4% on an annual basis. Within that index, food costs were up 2.2%. Shelter was up 5.5%. They're saying all of this is putting a strain on American households

in that middle income range, 67% of whom say their income is falling behind the cost of living. And they're saying things are so bad that 36% of those surveyed are using credit cards more frequently to keep up with expenses. And that tracks. I found that on the Ramsey show as we've been taking calls. More and more people are turning to credit cards as their emergency savior blankie to get them through, which is a terrible plan. Here's the thing though. Inflation is still high, but it has gone down. And we're seeing it slowly, but surely go down. But it's still higher than it would be or should be. So I do want people to kind of, there's a big part of this, George, that it's like, if we keep saying everything's on fire,

people are like, ah, and they're like running around. But there's part of it where we have to go, okay, things are actually getting better. You know, interest rates are still high. Inflation is starting to come down. So there kind of needs to be that feeling of, OK, we are going to come out of this at some point and we don't want to go to these crazy extremes. Right. And so there's part of this, George, where I look at these people and I think, yes, if

things are too expensive, you're busting your budget. You don't want to use credit cards. I like the fact that they're saying, what can I cut out? I think the problem here is just some people might be cutting out the wrong thing, especially if they're not in debt. If you're not in debt, now is not the time to be pausing retirement. Now's the time to prioritize retirement and maybe cut some other things in your budget if it's feeling tight for some reason.

And let me show you with some math why this will cost you millions. If you follow the middle class plan of just let me, I got to keep up my lifestyle. I'm unwilling to sacrifice and therefore I'm going to stop retirement contributions. Let's say you're 35 years old. You have nothing in retirement and you're part of this group who says, you know what? I'm going to not put anything in retirement. I'm going to stop indefinitely. Well, at 65 years old, if you just invest 300 bucks a month, that's what most people are probably doing. It's a little bit, get the match. That's all I'm going to do. Just that 300 bucks turns into $678,000. George, that's not enough money to do anything with. I'll take 678,000 if you're offering me, Jade. Okay. And here's the deal. People act like it's nothing. I'm like, this is something. Let's say you're 45 and you say, I'm going to pause. Well, pausing that $300 monthly investment

from 45 to 65 would still cost you $227,000. And this is not a lot of money that you're actually contributing, Jade. It says the contributions were 72 grand. And so you can see the more contributions, the longer the time span, the bigger and scarier this number gets of what you're missing out on. That's a really good point, George. But let's even talk about it in terms of what we choose to cut out of our budget. So let's pretend you're just kind of the average, you're average American, you're making $67,000 a year, you know, household income, and you're really feeling it. You're the average person that's maybe got a couple of car loans, you know, you probably underwater on those underwater on your cars, maybe you've got, feeling it. You're the average person that's maybe got a couple of car loans. Probably underwater

on those. Underwater on your cars. Maybe you've got some credit cards that you're leaning on here and there. I'm not saying you're balling out with credit cards. I'm saying you might be using them to get gas and things like that. What would it look like to trade in those car notes instead of being so focused on the retirement edge, which again, if you're in debt, we do want you to pause retirement. But what would it look like for you to kind of change your mindset and go, what's really the thing that I need to cut out of my budget that's going to make a big difference? And for a lot of Americans, it is their car payment. Whether you're making a lot of money or a little bit of money, if you're feeling tight, it's probably because you're spending $500, $600, $800 a month on vehicles. And if you can get that under control, then you can pay off your debt quickly. While that retirement is paused, you're paying off debt

quickly so that then you can come back with a vengeance. You can invest 15%. You've got that money cleared up again. And so it's really just- Yeah, it's one of the only types of debt that's somewhat reversible because you do have an asset attached with the liability. So you can sell that car, hopefully get a good portion of that money back, get out of this thing, save up a little bit more

and purchase a used cash car to get around in. That's a big part. And then there's just lifestyle. That's right. And I get housing is expensive. We get calls where people's mortgages 50, 60% of their take-home pay. And I'm going, and you wonder why you have no margin in your life. That's right. And I get housing is expensive. We get calls where people's mortgages 50, 60% of their take home pay. And I'm going, and you wonder why you have no margin in your life. It's big. So you've got to make different decisions when it comes to housing.

And that might be a big one that a lot of people are facing right now. I mean, we're coming off of a crazy, the housing market is still crazy. But there was a time where people were paying so much more than value, right? And they overbought. And now people are kind of feeling that. It's like, oh, man, my mortgage is 40% of my take-home pay. And for those people, you might have to look at figuring out what's a better option for you moving forward. Because if you can't see on the horizon, you earning more money to close that gap,

you're going to be living like this. You got to get out. Yeah, that's house floor. And they have golden handcuffs, Jade. Because they'll call in and say, well, Jade, I have a 3% mortgage interest rate. Why? I can't let that go. And they're just stuck in that position because they're unwilling to let go and rent for a

while. It might be in a season of renting. They're going to have to jump to a much higher interest rate. And so these are real problems on top of, of course, the groceries and eating out and your lifestyle and the subscriptions and all the luxuries that you've come to enjoy that are hard to get rid of because it's hard to cut down your lifestyle. But if you can do this for a season, you never have to worry about cutting out your retirement contributions, which is the last thing you should go to cut out on after you're debt

free. So I hope these people are in the camp of, listen, I'm just broke and I got a lot of payments here and there, and that's why I'm cutting back on retirement. That makes sense. That makes sense. But as long as they're doing it with the intention to go hard on paying off the debt, because again, this is not an indefinite choice that we want you to make. Otherwise, you're going to retire with nothing. And that's definitely, then you'll be calling the show saying, I'm 67 years old and I don't have anything in retirement. Can you help me? We call it social insecurity for a reason. That's right. These payments will get you at the poverty line if

you're lucky. 100%. For most people, they're going, well, I make 1500 bucks in social security. And you're like, okay, if you made 1500 bucks at your job, you would be in the poverty. Yeah. I mean, what is it? 40% of your income is what you hope to gain. You get a portion of your income back. And depending on your life, how long you've been contributing, what your income was, it's not enough to survive on. And so you've got to develop a plan. And I'm telling you, in the millionaire study we did, 80% said the 401k was my ticket to millionaire status.

That's right. That and a paid for home. And so this is not the spot you want to pause on. 15% once you're out of debt consistently, you will become a Baby Steps millionaire. Absolutely. And if you're looking, if you're like, Jade, I don't know where to start. All I know is it's hard for us. We're living paycheck to paycheck. A good place to start is with a good budget. You know, we all the time we talk about every dollar budget because it's the best way to really see what's going on with

your money. It's a monthly habit. You're doing it every single month before the month begins. You're creating and sticking to a plan. And EveryDollar makes it really simple. You can plan spending. You can track transactions. You can save for, honestly, what matters most to you. And all of this is in an easy to use app. It fits into your lifestyle. And this is what we need. This is how we make progress. And when you look at your EveryDollar budget, you can see what you're spending money on and pick the right things to cut back on, not the things that are going to be valuable for you moving forward. So download it. Everydollar.com, every dollar for free at the App Store or Google Play today. You're listening to The Ramsey Show. Thanks for listening. I'm your host, Jade Warshaw, joined by your other host, George Camel. We're chopping it up all hour long. Hey, if you watch this show, you love this show.

Thank you so much. Honestly, without you guys, we wouldn't have jobs. There would be no show. There would be no show and we would not be hosts. So thank you so much for watching. Thanks for listening. Thank you for sharing it. Matter of fact, if you want to support this show,

something that you can do that's very easy, not very time consuming uh is you can share the show you can like it on whatever platform you listen to it you can subscribe it uh subscribe to it if you watch it on youtube whether it's the ramsey show even a show like the george camel youtube channel that would be a great one to subscribe to while you're at it and it's going to show up in your feed anyways because the algorithm knows this is what the people need so there's like that convenience factor which is nice because when i go on youtube i don't want to search like i don't want to have to type it in i want it to just pop up and so when you subscribe it does that um and then of course

share it with a friend you know if you hear us talking about something and you're like oh barbara could really use that just send it to barbara you know so that's what you gotta throw barb under the bus you know barbara she takes out, he locks. That is true. She does. She sounds like someone who would be like, it's a good idea. Use my equity. That's right.

So share it with someone who needs it. That helps us out. It helps everybody else out. And it really does help to kind of spread this life change all over the world. And that's what we want. All right, George, straight to the phone lines. We got Jake in Montgomery, Alabama. What's going on, Jake? Hey, Jade.

Hey, George. How are y'all? We're doing great. Okay, so right into my question. So I got married last year. I'm 25. My wife is 23. She just finished her first year of medical school last month.

And I am taking on the challenge of trying to cash flow it. So yeah, luckily in March, we were able to pay off her first year before she finished. Amazing. And luckily we almost have enough to pay off her second year. How much did that cost? Can I ask? Yeah. So because of, yeah. So because of scholarships and her parents had paid into something when she was little, and so about $10,000 goes towards that a year. Okay. But it was still between $26,000 and $27,000, so it's still, you know, a good amount. So you guys paid, you know, almost half.

Yeah. Okay, wow. So, but my wife is miserable with it because med school is hard enough, but she feels like, you know, at this stage of life we're in, she feels like, you know, we never get to do anything. You know, she gets to see all of her friends doing all these fun trips. She doesn't have time to do things. You're right.

Let alone the money. You're right. But any free weekend that she does get, I think it just sort of reminds her that we don't get to do as much because of, you know, and I think she sort of feels responsible for that, which, you know, it's just the stage of life that we're in. And I'm fully on board on doing whatever we can to, you know, to get her ahead. What kind of doctor is she studying to be? Like what kind of, what's the end game? So she would love to be a pediatric pulmonologist or a rheumatologist or anything like that. But, you know, right now it's, it's just so stressful that, you know, as long as I have a doctor in front of it, it's always the joke that I make. She should be happy. She just wants to help people.

Well, I asked that because most people kind of go into that profession knowing it's a lot of school. Like you're going to be learning for a very long time. They know they're not going to have a life for the next six to eight years. And she's only one year in. Yeah. And, you know, so what does that mean? Tell me how we help you. Yeah. So really, I'm trying to figure out right now, um, I'm contributing about 12% of my income to a Roth. And although currently I think we can still do both contribute to the Roth and have her med school fund. Um, but you know, in order to, to have the med school amount at the, you know, and come August, like, you know, everything sort of has to go perfectly.

Well, life isn't perfect. And so I'm trying to decide, do I still contribute to my Roth while I have this fund in place? Or, you know, like at what time can I sort of, you know, relax the strings a little bit? Because my wife, you know, she's pretty tired of being on rice and beans, even though. Well, do you guys have any other debt? Tell us more. Do you have debt? We do not. So no debt. Do you have an emergency fund? Well, we have a mortgage. So we have a $200,000 mortgage. We have about $100,000 equity in our house. We bought it last year. I paid off my truck in December. So we have no consumer debt. Do you have savings? Yes. So I have an emergency fund of about $30,000. I think it's a little over

where it needs to be. Okay. That's fine. What are you guys making? So I make right now maybe $125 or so, and I expect it, you know, I'll have yearly raises. Okay, good. That'll probably help with cash flowing. So assuming nothing changes, I think we're okay. But, you know, I'm just trying to decide if, you know, if I quit contributing to my Roth temporarily. I wouldn't. Is it worth it?

Technically, at this phase, you would want to try to get as close to 15% as you can. For you, it's almost like school is taking the place of like a do because you guys are sitting around funding you know ten thousand dollars or more a year for something that it sounds like she's already burnt out on and there's a long road ahead i mean i know that you're the one saying i don't care what it is it just needs to end in doctor but i mean george what do you think yeah she she needs to create a life that's sustainable. And that doesn't mean she needs to go on crazy vacations every year, but she can find some fun things to do on the weekends that don't cost a whole lot of money. So I don't know what friends she's watching and where they're going. She needs to realize her life looks different in this season. And that season might

be five or six years of schooling and fun might look like we go for walks, we go on bike rides, we find free activities in Montgomery, we do the free concerts, whatever it is. And maybe you include a little bit of fun money. Let's put 200 bucks in the fun money line item. And that's what we have and get creative with how we use it. And so if I was in your shoes, you know, if you were down to the wire and you're like, oh my gosh, we're not going to be able to fund this year's school because I'm investing. That's when I would go, okay, let's pause for the next three months and make sure we're back on track, restart. And if your emergency fund is overfunded, you could always bring that down to let's say three months in order to use some of that to cover the remaining

expenses for school. I actually wanted to take a moment and interview you a little bit, Jake, because we have people all the time who call in about med school and it's like there's no way to pay for it. I want to know more about how this is working. Tell me what the school costs a year. Tell me where she's going. I feel like people would want to hear that. So everything together is about $36,000 a year. So luckily with the scholarships and what her parents had paid in when she was younger, we only have to pay $27,000, which I say only. But luckily, I've always been

a saver. So when we got married, I had about $80,000 in savings. And so we found a great deal on a house. We found something off market. So whenever we got in um whenever we purchased the house i put about 50 something down um and it lucked out that we ended up getting about 40 something thousand in equity you know even before we put anything down because the people really i'm talking about with this with this school i want to hang out on that because people don't know there's even med schools that are 36 grand a year right and your parents. And your parents are only contributing $10,000 a year for this. And then between scholarships and cash flow, you guys are doing the rest. What college is she in?

What school is she at? So she's at the University of Mississippi. Is that online? So we're from Montgomery is why I said that. Okay. But you guys are living in Mississippi currently yes um and so and so she can take that degree and go into rheumatology she can go into pediatrics all the things that she was wanting to do and it's costing you guys 36k a year like a residency fellowship all that type of thing and how long is this program

so she's there for four years and then depending on what she goes into, that's where, you know, it's sort of unknown as how much, you know, depending on what program she gets into is how much longer after four years. Makes sense. And what do you think that'll cost? Sorry, George. So once she gets through the four years, to my understanding, she starts getting paid a little bit, but it shouldn't cost us anything extra. Oh, good. So just the first four years. So, you know, we're looking at a hundred, hundred something thousand total. We've already paid 27.

So I'm just trying to figure out, you know, at what point do I need to, you know, after we pay for this year, because in her med school fund, I've got currently around $20,000 in it. And then I have $5,000 in our checking. I think what you're doing here is exactly right. You guys are planning ahead. You're trying to get that money saved up so that you're already ahead when the year comes. You've got a little bit from the parents. I think you keep walking down this road. You've made smart choices by paying off debt.

And I think that she's going to graduate completely debt-free Yeah, call us back with the update and make sure you're parking that money in a high yield savings account. Let it grow a little bit for you along the way. I love that. Medical school with no debt. Only on The Ramsey Show. We'll see you next time.